LONDON MARKET CLOSE: FTSE 100 Sinks As Sterling Rises On Positive Data

Tue, 01st Sep 2020 17:11

(Alliance News) - Stocks in London closed mixed on Tuesday, with the blue-chip index hurt by the gains of the pound against the greenback, amid positive UK manufacturing data.

The FTSE 100 index closed down 101.52 points, or 1.7%, at 5,862.05 on Tuesday. The FTSE 250 ended down 183.73 points, or 1.0%, at 17,604.60, and the AIM All-Share closed up 0.68 of a point, or 0.1%, at 964.72.

The Cboe UK 100 ended down 1.9% at 582.71, the Cboe UK 250 closed down 1.4% at 14,950.58, and the Cboe Small Companies ended down 0.8% at 9,503.89.

London's stocks were closed for late summer bank holiday on Monday.

In European equities on Tuesday, the CAC 40 in Paris ended down 0.2%, while the DAX 30 in Frankfurt ended up 0.2%.

The pound was quoted at USD1.3414 at the London equities close Tuesday, higher compared to USD1.3347 at the close on Friday.

"GBP/USD hit its highest mark since December 2019. The move was largely dollar driven but the UK manufacturing PMI helped too," said CMC Markets UK analyst David Madden.

UK manufacturing sector activity continued to improve in August with businesses restarting operations as lockdown measures eased, IHS Markit said on Tuesday.

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 has 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.

The euro stood at USD1.1946 at the European equities close Tuesday, higher than USD1.1900 at the same time on Friday. Against the yen, the dollar was trading at JPY106.00, higher compared to JPY105.26 late Friday.

On the LSE, gold miner Fresnillo closed as the best blue-chip performer, up 4.6%, tracking spot gold prices higher.

Gold was quoted at USD1,974.90 an ounce at the London equities close Tuesday against up from USD1,968.01 late Friday.

Miners BHP, Glencore, Antofagasta, and Anglo American closed up 2.3%, 2.2%, 1.3% and 1.3%, 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 ended as the worst performer, down 14%. 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.

Vodafone closed 3.8% lower on Tuesday after saying that it has agreed with Bharti Airtel to forge ahead with the merger of Indus Towers and Bharti Infratel.

The merger - first agreed in April 2018 - will see Vodafone merge its Indian mobile tower joint venture with a local rival to create the world's second largest tower mobile company.

Bharti Infratel is owned by Indian telecoms company Bharti Airtel and Vodafone Idea - which holds an 11.15% stake in Indus Towers - and is operated by Vodafone alongside Bharti Airtel.

Vodafone currently owns a 42% stake in Indus Towers, with the remaining stake owned by Bharti Infratel, Vodafone Idea and Providence Equity Partners LLC.

Vodafone expects to issue 760 million new shares for its 42% stake in Indus Towers.

At current market values, Vodafone's stake is valued at EUR1.7 billion, and Vodafone Idea will net EUR464 million from the deal.

On Tuesday, Vodafone Idea also agreed to a "security package" should it be "unable to satisfy certain payment obligations under its master services agreement". This includes a EUR276 million cash prepayment, and a primary pledge of shares by Vodafone with a value of EUR464 million.

In January of this year, Fitch Ratings said a court ruling in India could leave Vodafone's Indian business facing "severe" liquidity problems.

The Indian Supreme Court rejected an appeal by Vodafone Idea, against a decision to make it pay USD4 billion in fees.

Vodafone Idea and other firms in the beleaguered Indian telecom sector were ordered in November 2019 to pay a combined USD13 billion in past spectrum and licence fees.

The UK corporate calendar for Wednesday has full-year results from Barratt Developments, Mattioli Woods and Creightons. Uniphar, Johnson Service Group and Concurrent Technologies will report their half-year results.

Stocks in New York were in the green at the London equities close, with the Dow Jones up 0.3%, the S&P 500 index up 0.3%, and the Nasdaq Composite up 0.9%.

The major indices are a litter higher as the US posted encouraging manufacturing data.

August's purchasing managers' index data from IHS Markit and the the Institute for Supply Management on Tuesday signalled a solid improvement in operating conditions across the US manufacturing sector, with overall growth accelerating to the strongest since early 2019.

The seasonally adjusted IHS Markit final US manufacturing PMI posted 53.1 in August, down slightly from the previously released flash estimate of 53.6, but up from 50.9 at the start of the third quarter.

Overall growth was solid and the sharpest since January 2019. Contributing to the overall expansion was a faster increase in new order inflows in August.

Separately, figures from the latest manufacturing ISM report on business showed August PMI at 56%, up 1.8 percentage points from the July reading of 54.2%. This figure indicates expansion in the overall economy for the fourth month in a row after a contraction in April, which ended a period of 131 consecutive months of growth.

Of the 18 manufacturing industries, 15 reported growth in August, ISM said.

In Wednesday's economic calendar, there is the UK Nationwide house price index at 0700 BST and US ADP national employment report at 1315 BST.

Brent oil was quoted at USD45.86 a barrel at the London equities close Tuesday from USD45.78 late Friday.

By Evelina Grecenko; evelinagrecenko@alliancenews.com