London midday: Stocks extend gains ahead of payrolls report

by | Sep 4, 2023

(Sharecast News) – London stocks had extended gains by midday on Friday ahead of the latest non-farm payrolls release, as investors mulled better-than-expected Chinese manufacturing data, but uninspiring UK manufacturing and house price figures.
The FTSE 100 was 0.6% firmer at 7,482.78.

Joshua Mahony, chief market analyst at Scope Markets, said: “With markets already looking for a lower non-farm payrolls figure between 170-180k, a goldilocks scenario for equity markets would be a steeper decline in payrolls alongside a weak average earnings figure.”

The payrolls, unemployment rate and average earnings are all due at 1330 BST.

There was some good news from China, where the latest data from Caixin revealed a return to growth in the manufacturing sector.

The purchasing managers’ index rose to 51.0 from 49.2 the month before, coming in above the 50.0 that separates contraction from expansion. This was also comfortably above analysts’ expectations of 49.3 and marked the highest reading since February.

Wang Zhe, senior economist at Caixin Insight Group, said: “In August, the manufacturing sector showed overall improvement. Apart from sluggish exports, the gauges for supply, total demand, and employment were all in expansionary territory.”

On home turf, the releases were more disappointing, however, with a survey showing the contraction in manufacturing activity reached its worst level in more than three years in August. Demand was hit by weaker domestic and export conditions.

The S&P Global/CIPS manufacturing purchasing managers’ index slumped to 43 last month from 45.3 in July.

This was its lowest level since May 2020 and one of the steepest contractions in the survey’s history. It was also the sixth straight month of a reading below 50.

S&P Global/CIPS said that constant inflationary pressures and systemic weakness in the UK and abroad drove the biggest fall in new orders since the financial crisis, excluding pandemic years.

Market conditions weakened at home and abroad, with key markets such as the US, Europe, China and South America cutting order volumes.

“August saw a further deepening of the UK manufacturing downturn,” said Rob Dobson, director at S&P Global Market Intelligence.

“The PMI sank to a 39-month low as output and new orders contracted at rates rarely seen outside of major periods of economic stress such as the global financial crisis of 2008/09 and the pandemic lockdowns.”

Meanwhile, Nationwide data showed that house prices suffered their sharpest year-on-year decline in 14 years in August, amid rising borrowing costs.

House prices fell 5.3% on the year following a 3.8% decline in July and versus expectations of a 3.9% drop. On the month, they were down 0.8% in August following a 0.3% dip the month before. Analysts were expecting a more modest 0.4% fall.

The average price of a home stood at £259,153, down from £260,828.

Nationwide chief economist Robert Gardner said: “The softening is not surprising, given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below pre-pandemic levels. For example, mortgage approvals have been around 20% below the 2019 average in recent months and mortgage application data suggests the weakness has been maintained more recently.

“Nevertheless, a relatively soft landing is still achievable, providing broader economic conditions evolve in line with our (and most other forecasters’) expectations.”

In equity markets, Johnson Matthey surged to the top of the FTSE 100 after Standard Industries nearly doubled its shareholding in the specialty chemicals group to over 10%.

Miners were doing well after the China data, with Glencore and Rio Tinto among the top performers. Capital Economics said: “While doom and gloom builds around China’s growth, PMIs for August provided some encouragement this week, even if they didn’t paint a picture of booming commodities demand.

“They suggest infrastructure spending has begun to support metals demand and that activity in the oil-intensive transport sector remains robust.”

Diversified Energy gained after it reported increased half-year profits as its hedging policy and higher production offset weaker oil and gas prices.

Direct Line lost ground after the insurer said it was reviewing cases where it charged existing motor and home insurance customers higher prices for policy renewal than for new customers, in a move that could cost it £30m. Admiral also fell.

Elsewhere, Mike Ashley’s Frasers Group was busy buying up more shares in fashion retailers Boohoo and Asos, lifting its stake in the former to 10.4% from 9.1% and in the latter to 19.8% from 19.3%.

Market Movers

FTSE 100 (UKX) 7,482.78 0.59%
FTSE 250 (MCX) 18,646.82 0.22%
techMARK (TASX) 4,312.59 0.26%

FTSE 100 – Risers

Johnson Matthey (JMAT) 1,803.50p 10.64%
BP (BP.) 500.90p 2.75%
Standard Chartered (STAN) 724.40p 1.80%
Shell (SHEL) 2,453.00p 1.72%
Glencore (GLEN) 427.90p 1.53%
Rio Tinto (RIO) 4,941.00p 1.41%
Airtel Africa (AAF) 115.60p 1.40%
Whitbread (WTB) 3,488.00p 1.40%
NATWEST GROUP (NWG) 233.50p 1.35%
Barclays (BARC) 149.30p 1.32%

FTSE 100 – Fallers

Admiral Group (ADM) 2,449.00p -1.65%
Unite Group (UTG) 933.00p -0.80%
Smurfit Kappa Group (CDI) (SKG) 3,306.00p -0.54%
Rolls-Royce Holdings (RR.) 221.20p -0.49%
Pershing Square Holdings Ltd NPV (PSH) 2,974.00p -0.47%
Land Securities Group (LAND) 599.80p -0.46%
Relx plc (REL) 2,568.00p -0.39%
Coca-Cola HBC AG (CDI) (CCH) 2,270.00p -0.35%
Fresnillo (FRES) 573.60p -0.31%
Haleon (HLN) 321.60p -0.28%

FTSE 250 – Risers

Harbour Energy (HBR) 259.80p 3.92%
QinetiQ Group (QQ.) 345.20p 3.54%
Target Healthcare Reit Ltd (THRL) 75.00p 3.02%
Future (FUTR) 797.00p 2.64%
Ascential (ASCL) 205.20p 2.29%
Energean (ENOG) 1,164.00p 2.28%
W.A.G Payment Solutions (WPS) 92.00p 2.22%
Ashmore Group (ASHM) 198.20p 2.16%
Baltic Classifieds Group (BCG) 215.00p 2.14%
Vanquis Banking Group 20 (VANQ) 105.80p 2.12%

FTSE 250 – Fallers

TUI AG Reg Shs (DI) (TUI) 460.40p -2.13%
Capita (CPI) 17.72p -1.77%
Polar Capital Technology Trust (PCT) 2,220.00p -1.77%
Direct Line Insurance Group (DLG) 159.70p -1.51%
Renishaw (RSW) 3,584.00p -1.48%
Great Portland Estates (GPE) 415.40p -1.14%
Auction Technology Group (ATG) 700.00p -1.13%
Aston Martin Lagonda Global Holdings (AML) 352.40p -1.12%
The Global Smaller Companies Trust (GSCT) 141.20p -1.12%
NextEnergy Solar Fund Limited Red (NESF) 87.85p -1.07%

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