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(Alliance News) - Stocks in London were mostly lower at midday on Tuesday following the long UK bank holiday weekend, with the blue-chip FTSE 100 index hurt by the rampant pound.
In London, the FTSE 100 index of large-caps was down 67.26 points, or 1.3%, at 5,896.31. The mid-cap FTSE 250 index was down 174.44, or 1.1%, at 17,614.11. The AIM All-Share index was up 0.3% at 967.47.
The Cboe UK 100 index was down 1.2% at 586.69. The Cboe 250 was down 1.1% at 14,976.68, and the Cboe Small Companies was down 0.7% at 9,428.65.
In mainland Europe, the CAC 40 index in Paris was up 0.2%, while the DAX 30 in Frankfurt was up 0.6%.
AJ Bell's Russ Mould commented: "The FTSE 100 was nursing a hangover after the Bank Holiday as it caught up with yesterday's downbeat sentiment in the US and Europe and fell further from the 6,000 level it held for much of the summer.
"Not helping the FTSE's cause was strength in sterling relative to the dollar, a currency move which impacts the relative weight of the overseas earnings which dominate the index."
The pound surged to USD1.3464 Tuesday midday from USD1.3347 at the London equities close Friday. Sterling was trading at its highest levels since mid-December amid sustained dollar weakness.
In addition, the pound found further support from positive domestic economic data which showed UK manufacturing sector activity continued to improve in August.
The seasonally adjusted IHS Markit/CIPS purchasing managers' manufacturing index rose to a 30-month high of 55.2 in August, up from 53.3 in July, but slightly below the earlier flash estimate of 55.3.
The PMI score posted above the neutral 50.0 mark for three consecutive months, Markit noted.
Markit said August saw UK manufacturing output expand at the fastest rate for over six years, as companies and their clients restarted operations following coronavirus lockdowns.
In addition, Markit said manufacturing production rose at the fastest pace since May 2014, reflecting solid expansions across the consumer, intermediate and investment goods sub-sectors.
On the London Stock Exchange, gold miners Fresnillo and Polymetal International were the best blue-chip performers, up 6.0% and 2.1% respectively, tracking spot gold prices higher.
Gold was quoted at USD1,989.44 an ounce Tuesday midday, up from USD1,968.01 late Friday.
"The future looks glittering for gold as the fundamental bullish factors continue falling into place beyond 20220 as the Federal Reserve will remain mute to lower unemployment levels or higher inflation. Hence, there is a tremendous potential for broad-based dollar weakness and higher gold prices well into 2022, suggesting we will be talking gold up for an exceptionally long time," said AxiCorp's Stephen Innes.
Miners Glencore, Antofagasta, Anglo American, BHP and Rio Tinto were up 2.1%, 2.0%, 1.8%, 1,1% and 1.0% respectively after positive Chinese economic data.
China's manufacturing conditions improved in August, helped by the sharpest increases in output and new orders since the start of 2011, according to data from Caixin. The headline seasonally adjusted purchasing managers' index climbed to 53.1 in August, from 52.8 in July. A number above 50.0 denotes expansion.
At the other end of the large caps, Rolls-Royce was worst performer down 9.8%. Shares were in freefall after the jet engine maker said last week it was looking to sell assets, amid a gaping loss and a warning of "material uncertainties" caused by the coronavirus pandemic. The stock is down 17% over the past week alone.
International Consolidated Airlines Group was down 7.0% after JPMorgan downgraded the British Airways parent to Neutral from Overweight.
The euro stood at USD1.1973, up from USD1.1900. Against the yen, the dollar was trading at JPY105.75 by midday in London, up from JPY105.26.
In economic news from the continent, the eurozone manufacturing economy's recovery from Covid-19 lockdowns continued in August with confidence climbing to the highest level in over two years, data from Markit showed.
The IHS Markit eurozone manufacturing purchasing managers' index did register a slight monthly decline, however, slipping to 51.7 in August from 51.8 in July, though it still remained above the 50.0 mark which separates growth from decline. The final August print was also in line with the 51.7 flash estimate.
August was the second month on the bounce that the PMI print remained above the 50.0 mark, this was helped by a rise in both output and new orders, Markit noted.
Elsewhere, the euro area's unemployment rate ticked up slightly in July, data from Eurostat showed, despite Covid-19 lockdowns being eased across the continent.
The unemployment rate in the euro area edged up to 7.9% in July, from 7.7% in June, Eurostat said. The July figure came in just below market forecasts, cited by FXStreet, of 8.0%.
In addition, eurozone inflation turned negative in August for the first time since May 2016 according to figures from Eurostat, raising the prospect of the European Central Bank having to inject more stimulus.
Annual inflation fell 0.2% in August from a rise of 0.4% in July. Core inflation, which is closely watched by the ECB, fell to 0.6% year-on-year in August from 1.3% in July.
Analysts at ING said: "Slowly but surely the effects of the historic economic shock caused by Covid-19 are finding their way to unemployment and inflation. Massive stimulus has successfully suppressed the usual passthrough of the downturn to the labour market, but nevertheless unemployment is creeping up.
"As short-time work schemes are being extended at the moment, it is likely that the unemployment rate will continue to creep up at a very subdued pace for quite some time. This provides a comfortable cushion against income declines and negative second-round effects on the economy but still, the direction of unemployment is up. For the European Central Bank, which meets later in the month, these numbers are more a confirmation of what they already know: this crisis is deflationary despite some of the novel elements to it."
Elsewhere in commodities, Brent oil was trading at USD45.80 a barrel Tuesday midday, flat from USD45.78 late Friday.
New York is set to open mostly higher with hopes for positive US manufacturing PMI readings later on Tuesday following upbeat sector surveys from China and Europe.
The Dow Jones Industrial Average was called flat, the S&P 500 up 0.3%, and the Nasdaq Composite was called up 1.0%, based on futures trading.
Meanwhile, Apple shares were up 2.7% to USD132.50 in pre-market trade following the tech giant's 4-for-1 stock split which took effect on Monday. The split quadrupled the number of shares to about 17 billion.
Tesla's own 5-for-1 stock split also took effect on Monday, sending Chief Executive Elon Musk's net worth to around USD115 billion. According to Bloomberg, the electric carmaker's eccentric co-founder has now overtaken Facebook CEO Mark Zuckerberg to become the world's third-richest man.
Tesla shares were up 7.0% to USD498.32 in pre-market trade.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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