LONDON MARKET CLOSE: Stocks Rise Shrugging Off Weak UK PMI Data

(Alliance News) - Stocks in London ended higher on Wednesday despite disappointing economic data ...

Alliance News 23 September, 2020 | 5:03PM
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(Alliance News) - Stocks in London ended higher on Wednesday despite disappointing economic data from the UK and Europe as investors were given a repreive from harsh UK lockdown restrictions.

UK Prime Minister Boris Johnson on Tuesday unveiled new measures meanwhile that will force English pubs and other hospitality venues to close at 2200 BST, and halted a planned phased return of fans to live sporting events. However, the PM stopped short of announcing a nationwide lockdown as many had feared.

"Regardless of whether or not it's the right decision, Boris Johnson's decision to implement the lightest fresh lockdown restrictions possible has given the FTSE a – potentially temporary – reprieve from its covid-19 concerns," said Spreadex analyst Connor Campbell.

The FTSE 100 index closed up 69.80 points, or 1.2%, at 5,899.26. The large-cap index hit an intraday high of 5,974.88 in early trade.

The mid-cap FTSE 250 index gained 171.33 points, or 1.0%, closing at 16,992.99. The AIM All-Share index ended up 4.86 points or 0.5% at 949.04.

The Cboe UK 100 index closed up 1.0% at 587.55. The Cboe 250 ended up 0.5% at 14,392.16, while the Cboe Small Companies closed down 0.3% at 8,967.51.

In Paris the CAC 40 ended 0.6% higher, while the DAX 30 in Frankfurt gained 0.4%.

IG Group's Chris Beauchamp commented: "The [large cap] index may have trimmed its gains but it is an overwhelmingly-positive day for the FTSE 100. Almost all the constituents are in positive territory, but the continued slump in gold and silver has hurt Polymetal and Fresnillo. Overall however the gains are solid and broad-based, with a variety of sectors represented in the top gainers for the day, including retailers and financial names.

"Such broad strength is exactly the kind of development needed for the index to recover its footing, having been on a downward path since the June highs. But as Brexit takes a new turn with the news of lorries requiring passes to enter Kent, the political clouds hanging over UK assets remain in place."

In the FTSE 100, retailer JD Sports Fashion ended up 3.8% following strong results from US sportswear maker Nike on Tuesday.

Nike shares were trading at record highs on Wall Street after the Oregon-based company reported blowout quarterly earnings on strong digital sales and its chief executive cheered the return of pro US sports. The athletic apparel giant notched an 82% increase in digital sales.

"In the territories of most interest to us as JD/Frasers watchers, growth beat hopes in the US, where sales were down 1% (footwear strong, apparel weak), and in EMEA, sales grew 5% (vice versa). As usual Nike talked a lot about Direct-To-Consumer, but also about the importance of key partners. Never has being 'inside the tent' with the big brands been more important, and JD is well placed," said analysts at Peel Hunt.

At the other end of the large caps, gold miners Fresnillo and Polymetal International ended the worst performers down 5.8% and 1.5% respectively, tracking spot gold prices lower.

In the FTSE 250, Diploma ended the standout performer, up 27% after the technical products supplier raised GBP194 million through a previously announced share placing, subscription and retail offer.

The company on Tuesday had announced the equity raise to fund the proposed GBP357 million acquisition of Chicago-based Windy City Wire Cable & Technology Products. Diploma placed 11.1 million new ordinary shares at 1,711 pence per share, raising GBP190 million.

In addition, JPMorgan raised the stock to Overweight from Neutral.

Gold was quoted at USD1,868.00 an ounce at the London equities close, sharply lower against USD1,904.86 late Tuesday.

The pound was quoted at USD1.2755 at the London equities close, up from USD1.2717 at the same time on Tuesday, recovering from earlier losses in the wake of weak UK purchasing managers' index data.

Sterling fell to an intraday low of USD1.2674 in morning trade after 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.

"The drop in the UK composite IHS Markit/CIPS Flash PMI suggests that the recovery has already started to flatten out in September. And reinstating restrictions on business opening hours and encouraging people to work from home again could cause the recovery to stall completely in the fourth quarter," said analysts at Capital Economics.

The euro stood at USD1.1685 at the European equities close, down from USD1.1702 late Tuesday, following disappointing data from the continent.

Business activity across the eurozone just barely remained in expansion in September due to a drag from the services sector, data from IHS Markit revealed on Wednesday.

The flash Eurozone purchasing managers' composite output index declined to 50.1 points in September, compared to August's final reading of 51.9, as a drop in the services sector more than offset a gain in manufacturing. In July, the flash eurozone PMI had a reading of 54.9, so September represents a second month of fall back.

The flash Eurozone services purchasing managers' index 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.

Rupert Thompson, chief investment officer at asset manager Kingswood said: "Today's business confidence data showed that the economic recovery is losing momentum in September in both the UK and the Eurozone.

"With this decline happening even before the latest tightening of social distancing measures, these numbers highlight the fact that the easiest and strongest part of the economic recovery is now behind us. Pressure on [chancellor] Rishi Sunak to extend the furlough scheme beyond October in some more limited and targeted form can only continue to mount."

Against the yen, the dollar was trading at JPY105.30, up from JPY105.00 late Tuesday.

Stocks in New York were mostly lower at the London equities close, surrendering earlier gains following positive vaccine developments.

The DJIA was up 0.1%, but the S&P 500 index was down 0.4% and the Nasdaq Composite down 0.8%.

After strong gains in August, stocks have been under pressure much of September amid worries about excessive valuations and a resurgence of coronavirus cases.

On the economic front, US business activity edged a touch lower in September, with strength in manufacturing offset by a fall in the services sector, data from IHS Markit showed on Wednesday.

The flash US services purchasing managers' index reading was 54.6 in September, down from 55.0 in August, just shy of market consensus cited by FXStreet of 54.7. The September print was a two-month low, according to Markit.

The flash US manufacturing PMI score was 53.5 in September, up from 53.1 in August. The figure beat the consensus estimate of 53.2. The September reading was a 20-month high.

The flash US composite PMI print was 54.4 in September, down from 54.6 in August.

Markit said companies signalled a further solid rise in business activity during September, albeit one that was slightly weaker than seen in August. Manufacturers and service providers noted strong expansions in output, with goods producers registering a faster rise in production.

Meanwhile, House lawmakers adopted a budget bill on Tuesday to extend funding through early December, removing the risk of an imminent government shutdown. But Democrats and Republicans remain far apart on a stimulus package to address the flailing US economy amid intensifying partisanship in Washington.

Brent oil was quoted at USD42.16 a barrel at the equities close, up from USD41.60 at the close Tuesday.

The economic events calendar on Thursday has the latest US jobless claims figures at 1330 BST.

The UK corporate calendar on Thursday has annual results from engineer Smiths Group and transport provider Go-Ahead Group. There are also interim results from multiplex chain Cineworld Group.

By Arvind Bhunjun;

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Diploma PLC 2,302.00 GBX 0.44 -
JD Sports Fashion PLC 822.40 GBX 2.34 -
Fresnillo PLC 1,218.50 GBX -0.81 -
Polymetal International PLC 1,760.00 GBX -0.85 -
Nike Inc B 129.99 USD -0.02

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