LONDON MARKET MIDDAY: FTSE 100 Makes Strides, Shaking Off UK PMI Data

(Alliance News) - The FTSE 100 raced ahead on Wednesday, with some of this week's hard-hit travel ...

Alliance News 23 September, 2020 | 12:41PM
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(Alliance News) - The FTSE 100 raced ahead on Wednesday, with some of this week's hard-hit travel and leisure stocks seeing some respite, after the UK avoided a second total lockdown for now.

"Investors seemed to breathe a sigh of relief that the coronavirus restrictions (in England at least) aren't as severe as back in March," said AJ Bell investment director Russ Mould.

The pound, meanwhile, rose despite data showing the pace of the UK's economic recovery slowed in September.

The FTSE 100 surged 132.70 points, or 2.3%, to 5,962.16 at midday on Wednesday - though the blue-chip index is still down 0.8% since the week began.

The mid-cap FTSE 250 index was up 264.55 points, or 1.6%, at 17,086.21. The AIM All-Share index was 0.6% higher at 949.92.

The Cboe UK 100 index was 1.9% higher at 593.12. The Cboe 250 was up 1.1% at 14,488.10, and the Cboe Small Companies up 0.3% at 9,021.65.

Sterling was changing hands at USD1.2731 at midday, having traded below the USD1.27 mark early Wednesday morning. The pound was quoted at USD1.2717 at the London equities close on Tuesday

The strength of the UK private sector's rebound moderated in September, figures showed, with growth in the services sector slowing notably.

The IHS Markit/Chartered Institute of Procurement & Supply flash composite purchasing managers' index reading fell to 55.7 points in September from 59.1 in August. Remaining above the no-change line of 50 indicates the private sector continued to expand in September, though at a slower pace than seen in August.

September's print was the lowest since June, IHS Markit noted.

Dragging on the composite reading was the UK's dominant services sector, with the PMI slipping to a three-month low of 55.1 from 58.8 in August. The manufacturing sector also recorded a slowdown in growth, though more moderately, with a reading of 54.3 in September - a two-month low - versus August's 55.2.

September's data came a day after the UK government warned that Britain could face much tougher measures if new rules to curb coronavirus fail to get the infection rate under control.

On Tuesday evening, Prime Minister Boris Johnson said the nation faces an "unquestionably difficult" winter and warned the latest restrictions - including staff once again working from home, the wider use of face masks and a 10pm curfew on pubs and restaurants - could last the next six months.

"The [UK] economic recovery decelerated in September and is set to stall in Q4, in response to rising Covid-19 infections. As in the first wave of the virus, eurozone data provide a guide to the economy's likely position in a few weeks' time, given that UK infection numbers are tracking those in France and Spain, with a short lag," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

As such, the eurozone PMI registering 50.1 in September from 51.9 is "a concerning sign", Tombs said.

The flash eurozone services PMI activity index fell into contraction by dropping to 47.6 points from 50.5 in August, while the flash eurozone manufacturing PMI index was 53.7 compared to 51.7 the month before.

IHS Markit said that after rebound in July and August, the PMI has indicated a near stalling of the eurozone economy at the end of the third quarter of 2020, as ongoing social distancing measures and a rise in Covid-19 infection rates stunted demand, most notably for consumer facing services.

In mainland Europe, markets were shrugging off the weaker economic readings. The CAC 40 index in Paris was up 1.8% while the DAX 30 in Frankfurt was 1.6% higher Wednesday afternoon.

The euro traded at USD1.1704 in the wake of the PMI data, flat on USD1.1702 late Tuesday.

Elsewhere in currency markets, the dollar was quoted at JPY105.02, flat on JPY105.00 on Tuesday.

Wall Street is on course to follow Europe higher, with the Dow Jones seen up 0.8%, the S&P 500 up 0.6% and the Nasdaq also pointed 0.6% higher.

In London, travel and leisure stocks gained on relief that the latest government virus restrictions for England were not as stringent as feared. Rolls-Royce, deeply exposed to the air travel industry, rose 7.3%, while Premier Inn-owner Whitbread rallied 4.6% and British Airways parent International Consolidated Airlines was up 4.1%.

At the bottom of the blue-chips - in fact, the only two stocks in the red in the FTSE 100 at midday - were Fresnillo, down 4.0%, and Polymetal International, down 1.4%.

The gold miners were tracking the price of the precious metal lower amid Wednesday's equity market rally. Gold was quoted at USD1,889.37 an ounce midday Wednesday, lower than USD1,904.86 late Tuesday in London.

Brent oil was trading at USD41.79 a barrel, up on USD41.60 late Tuesday.

Sat atop the FTSE 250 was Diploma, surging 27% after raising USD194 million for its Windy City buy.

The company on Tuesday had announced an equity raise to fund the proposed GBP357 million acquisition of Chicago-based Windy City Wire Cable & Technology Products.

Diploma, which manufactures medical diagnostic instruments, seals and cables, on Wednesday said it has placed 11.1 million new ordinary shares at 1,711 pence per share, raising GBP190 million. Diploma said each of its directors subscribed 15,484 shares in total under a subscription agreement, raising GBP265,000. In addition, retail investors subscribed 222,200 shares, raising GBP4 million.

SSP rose 15%, despite guiding to a sharp fall in second half sales, though noting that operating losses would be at the midpoint of its guidance range due to the implementation of cost-cutting measures.

The FTSE 250-listed owner of Upper Crust, Camden Food Co and Caffe Ritazza said current weekly sales are running at around 76% below last year, representing an improvement from the third quarter, when sales were 95% lower in April and May and 90% lower in June.

SSP has reopened just over a third of its units, ahead of previous expectations.

Overall sales in the second half of the year are expected to be down 86%, resulting in a reduction in revenue of around GBP1.3 billion compared to the second half of 2019. Underlying earnings before interest, tax, depreciation, and amortization is expected to be between a GBP120 million loss and earnings of GBP190 million, while operating loss is expected to fall broadly in the middle of the GBP180 million to GBP250 million range forecast by the company in June.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Diploma PLC 2,294.00 GBX 0.44 -
SSP Group PLC 186.20 GBX 3.22 -
Rolls-Royce Holdings PLC 227.00 GBX 3.18
Fresnillo PLC 1,333.00 GBX 0.08 -
Whitbread PLC 2,314.00 GBX 2.62 -
Polymetal International PLC 1,761.50 GBX -1.04 -
International Consolidated Airlines Group SA 106.85 GBX 6.85 -

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