LONDON MARKET MIDDAY: China Data Spark Mining Rally, Boosting FTSE 100

(Alliance News) - Forecast-beating economic data from China helped to boost London-listed miners on Tuesday, while Ocado rose to the top of the FTSE 100 as online grocer got off to a good start with its new retail partnership with Marks & Spencer.

The FTSE 100 index was up 50.65 points, or 0.9%, at 6,076.90 midday Tuesday. The mid-cap FTSE 250 index was up 67.33 points, or 0.4%, at 17,744.59. The AIM All-Share index was up 0.4% at 964.55.

The Cboe UK 100 index was up 0.7% at 604.93. The Cboe 250 was up 0.4% at 15,107.43, and the Cboe Small Companies up 0.2% at 9,492.88.

"A solid set of numbers from China has produced the usual strong reaction from the FTSE's mining contingent, helping the index to make decent gains so far today. The continued rebound of that economy is the index's best hope of playing catch-up with its better-performing peers," commented Chris Beauchamp, chief market analyst at IG.

Blue-chip miners such as Glencore, Rio Tinto and BHP Group were up 3.0%, 2.9% and 2.1% respectively.

Retail sales in China have grown for the first time since the coronavirus pandemic began, official data showed Tuesday, as the world's second-largest economy promotes domestic spending as part of its recovery.

The key indicator of consumer sentiment rose 0.5% year-on-year in August – better than the flat growth that analysts polled by Bloomberg had anticipated. The figure is up from a drop of 1.1% in the month before and follows a plunge of 21% in the January to February period.

Industrial output, which has recovered more quickly than retail sales, strengthened further last month. It grew 5.6% from a year ago, better than economists expected and more than the 4.8% increase in July.

In economic data from the UK, the unemployment rate edged up in July, official figures showed, as the Covid-19 pandemic continues to throttle the labour market.

The UK unemployment rate was 4.1% for the May to July period, up 0.2 of a percentage point from the three months to May. Estimates for the three-month period showed 1.4 million people out of work, up 104,000 on a year ago and 62,000 more than the prior quarter.

More worryingly, early indicators for August suggest that the number of employees in the UK on payrolls was down around 695,000, or 2.4%, compared with March, the Office for National Statistics said.

Sterling was quoted at USD1.2901 midday Tuesday in the wake of the data, up from USD1.2888 at the London equities close on Monday.

Michael Hewson, chief market analyst at CMC Markets, said: "It's important to remember that the governments emergency measures are masking the worst of the economic damage, and in the absence of an extension of the furlough in key areas in October the line of least resistance for the unemployment numbers is still skewed towards the upside."

UK Prime Minister Boris Johnson's controversial plan to override key elements of the Brexit deal he signed with Brussels cleared its first Commons hurdle on Monday despite deep misgivings by some senior Tories.

Members of Parliament voted to give the UK Internal Market Bill a second reading by 340 to 263 – a government majority of 77.

MPs will begin detailed line-by-line scrutiny of the Bill on Tuesday, with votes expected next week on amendments to the Northern Ireland provisions which some Tories may back.

EU leaders have warned Johnson to uphold commitments he himself made in the Brexit treaty last year, demanding he withdraw the offending parts of the new bill by the end of September. The row threatens to disrupt already tough post-Brexit trade negotiations.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both 0.2% higher Tuesday afternoon.

The euro traded at USD1.1892 on Tuesday, firm against USD1.1884 late Monday. Against the yen, the dollar was flat at JPY105.66 versus JPY105.64.

Wall Street is on course for a bright start on Tuesday, with the Dow Industrials called up 0.6%, the S&P 500 up 0.7%, and the Nasdaq Composite up 0.9%.

Gold was quoted at USD1,967.65 an ounce on Tuesday, higher than USD1,961.00 on Monday. Brent oil was trading at USD40.15 a barrel, unchanged on USD39.56 late Monday.

On the London Stock Exchange, Ocado was heading up the blue-chip gainers as it reported a promising start to its retail tie-up with Marks & Spencer.

Ocado shares were up 5.3% at midday.

The FTSE 100-listed online grocer said that for the 13 weeks to August 30, Ocado Retail revenue rose by 52% to GBP587.3 million, compared to GBP386.4 million in the 13 weeks to September 1, 2019.

Average orders per week also rose 9.6% to GBP345,000. Ocado highlighted that while the average order size has continued to normalise from Covid-related peaks to GBP141, it remains above pre-crisis levels.

Shoppers have responded favourably to the switchover to M&S products on September 1, Ocado said, adding that the weighting of M&S products in the average Ocado basket is higher than for Waitrose products prior to the switchover.

FTSE 250 constituent M&S was 3.7% higher.

Also rising in the mid-cap index was FirstGroup, up 6.6% after the transport operator touted stronger-than-expected trading.

Adjusted operating profit and cash from operations were ahead of internal expectations in the period between April 1 and August 31.

The company now expects a "small adjusted operating profit for the seasonally weaker first half of the financial year", ahead of its forecasts from earlier this summer. For the six months ended September 30, 2019, FirstGroup had posted adjusted operating profit of GBP97.7 million.

FirstGroup added that it is "resolutely focused" on selling its North American businesses and noted it has already seen "significant interest from potential buyers".

Defense systems manufacturer Chemring was up 5.4% after guiding to an outturn for its current financial year towards the top end of market expectations.

For the year ending October 31, adjusted operating profit is expected to be at the upper end of consensus expectations, which is in the range of GBP47 million to GBP53 million. For the year before, adjusted operating profit was GBP44.0 million.

Order intake to August 31 was up 4% from the same period a year before, with the order book on the same date being GBP452 million, compared to GBP449 million at the end of October 2019.

"This has been a busy period in which the resilience of the group has been demonstrated as we continue to make good progress despite the challenges presented by Covid-19. Our expectations for FY20 are towards the upper end of current analyst expectations," said Chief Executive Michael Ord.

Watches of Switzerland slipped 5.8%. US-based investment manager Apollo Global Management sold 33.0 million shares in the luxury watch retailer at 310 pence each, raising GBP102.3 million.

The shares, representing an about 14% stake in Watches of Switzerland, were sold by Jewel Holdco, a company owned and controlled by AIF VII Euro Holdings, an affiliate of investment funds managed by an affiliate of Apollo Global. Following the completion of the share sale, Apollo Global will continue to own 67.7 million shares in Watches of Switzerland, or a 28% stake.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.