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LONDON (Alliance News) - Stocks in London have recovered slightly from their heavy fall at the open Friday, but still trade deeply in the red at mid-morning, with disappointing Chinese manufacturing data offsetting subsequent upbeat purchasing managers' index readings from Europe.
The FTSE 100 index trades down 0.5% at 6,334.35, having fallen to a low of 6,286.95 at the open. The FTSE 250 is down 0.5% as well at 17,154.41 and the AIM All-Share is down 1.0% at 736.36.
In Europe, the French CAC 40 index is down 0.4%, and the German DAX 30 is down 0.3%.
Eurozone private sector activity growth improved in August largely reflecting an acceleration in Germany, preliminary data from Markit Economics showed. At 54.1, the flash purchasing managers' index ticked higher from July's final reading of 53.9 and remained at an expansionary level for the twenty-sixth successive month.
The pace of increase was one of the fastest seen over the past four years and stayed above the expected level of 53.7.
The eurozone services PMI rose to 54.3 in August from 54 in July. It was expected to remain at 54. Meanwhile, the manufacturing PMI remained unchanged at 52.4. Economists had forecast a score of 52.2 for August.
Germany's private sector grew at the fastest pace in four months in August, flash survey data from Markit revealed. The flash composite output index rose to 54 in August from 53.7 in July. The reading reached a 4-month high in August. Manufacturers reported the sharpest rise in output for five months, while activity growth at service providers was little-changed from July.
However, stock markets are being dragged lower by Chinese manufacturing PMI, released earlier in the day. A preliminary survey from Caixin showed the PMI score fell to 47.1, which is down from 47.8 in July and missed expectations of a slight fall to 47.7. It also moves further beneath the line of 50 that separates expansion from contraction.
"China's transition from dirty industrial growth to a cleaner more-service-based economy is not going quite according to plan," says Holger Schmieding, chief economist at Berenberg. "If confirmed by other data, this raises the likelihood of a more forceful policy response to stabilise demand growth. If the economic slowdown threatens to affect the labour market, China may resort to some more traditional fiscal or credit stimuli again for a while despite the waste which such measures often entail."
Also weighing on investor sentiment is a snap election called in Greece. Prime Minister Alexis Tsipras tendered his resignation on Thursday, paving the way for elections next month. Tsipras, who was elected only in January on pledge to renegotiate austerity measures, said he felt "a moral obligation to place this deal in front of the people, to allow them to judge...both what I have achieved, and my mistakes".
The election date is yet to be set, but government officials said the aim was to hold the election on September 20.
The UK logged its first July budget surplus since 2012, the Office for National Statistics showed. Public sector net borrowing excluding public sector banks decreased by GBP1.4 billion to a surplus of GBP1.3 billion. Economists had forecast a surplus of GBP1.1 billion.
On the London Stock Exchange, ARM Holdings is the worst FTSE 100 performer, down 1.8%. Liberum cut its price target on the stock, reiterating its Sell recommendation, saying the smartphone market is slowing sharply and ARM remains a smartphone play.
Gold miner Fresnillo, up 0.9%, is amongst the best FTSE 100 performers as the gold price continues its recent run of gains. The metal trades at USD1,150.40 an ounce.
Spire Healthcare Group is the biggest faller in the FTSE 250, down 12% after it cut its revenue guidance for 2015 due to short-term challenges it expects to face in National Health Service activity in the second half, as it reported a rise in pretax profit and revenue for the first half.
The private health company now expects flat revenue in the second half of 2015, compared to previous guidance of low single-digit growth, due to a slowdown in the flow of cases from the NHS to the independent sector in recent weeks. The cut to the revenue guidance means the group now expects its revenue and earnings before interest, taxation, depreciation and amortisation growth to be 4% to 6% for the full year.
Spire highlighted that whilst there is increasing demand for healthcare services in the UK, there is a general acceptance amongst major political parties and market commentators that the NHS is "on track to experience a significant and growing funding gap over the next five years, which is likely to be only partly alleviated by productivity improvements and cost efficiencies."
SIG is one of the best midcap performers, up 3.2% after Liberum upgraded it to Buy from Hold. The broker said it is pleased that the building-products company is targeting gross margin recovery in the face of competition in Europe.
Still ahead in the economic calendar is US Markit manufacturing PMI is due at 1445 BST.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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