LONDON MARKET MIDDAY: Solid Factory Orders As UK Set For 'Hard Brexit'

LONDON (Alliance News) - Stock prices in London were higher at midday Monday, boosted by some progress at hard-pressed Deutsche Bank and a better-than-expected UK manufacturing Purchasing Manager's Index reading, while the pound was in the doldrums after UK Prime Minister Theresa May put Britain on the path of a 'hard Brexit'.

The FTSE 100 index was up 1.2%, or 83.94 points, at 6,983.27. The blue-chip index touched a high of 6,986.74, its highest level since June 2015. The FTSE 250 index was 1.3% higher at 18,096.06 and the AIM All-Share was up 0.7% at 824.39.

The UK BATS 100 index was 1.2% higher at 11,831.80, the BATS 250 up 1.3% at 16,512.91, and the BATS Small Companies index up 0.3% at 11,172.58.

"A slump in sterling made life easier for UK markets, with price action so far this morning seeing high-quality international firms receiving a flood of buyers," said IG analyst Chris Beauchamp.

The pound took a hit on Monday morning, coinciding with the news that May effectively has decided the UK will follow a 'hard Brexit' path by the spring of 2019, as she insisted she will not accept any limits on the UK's ability to control its own borders.

The prime minister's remarks that the UK will "make our own decisions" on immigration put her on collision course with the Brussels institutions and the 27 remaining member states, ahead of two-year withdrawal talks due to be triggered by the end of March 2017. May said Article 50 will be invoked "soon", and no later than the end of March next year.

Sterling was quoted at USD1.2885, against USD1.3013 at the London equities close on Friday. The UK currency touched a low of USD1.2846, nearing the USD1.2797 level hit in the aftermath of the Brexit vote in June.

The pound recovered from its low after the UK manufacturing PMI reading. The Markit/Chartered Institute of Procurement & Supply Purchasing Managers' Index rose unexpectedly to 55.4 in September from 53.4 in August. This was the highest score since June 2014. The reading was expected to fall to 52.1. A reading above 50 indicates expansion in the sector.

"This month, manufacturing made up lost ground since the EU referendum, with a robust rise in new orders and production expanding at a pace not seen for over two years," said David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply.

"It was largely domestic orders that fuelled the rise in overall activity, although the weaker pound also bolstered export orders," noted Noble.

IG's Beauchamp said the bullish activity in markets this morning has been helped "in no small measure" by the closure of the Frankfurt market for the Day of German Unity holiday, "which has had the beneficial effect of sparing us any Deutsche Bank headlines".

On Friday, Deutsche Bank shares took back some of the losses seen of late, following reports that it has neared a USD5.4 billion settlement with the US Justice Department, significantly lower than the USD14.0 billion initial bill.

The German lender may reach an agreement this week with labour representatives to eliminate about 1,000 jobs in its home market as part of Chief Executive Officer John Cryan's cost cuts announced last year, Bloomberg reported on Monday, citing people with knowledge of the matter.

In Paris, the CAC 40 index was up 0.3%.

The eurozone manufacturing PMI rose to 52.6 in September, in line with expectations, from 51.7 in August. Growth of output, new orders, new export business and employment all improved.

Still in the economic calendar, Markit US manufacturing PMI is at 1445 BST. The ISM manufacturing PMI for the US is at 1500 BST, at the same time as US construction spending.

Stocks in New York were called for a firm open, with the Dow Industrials, the S&P 500 index and the Nasdaq 100 all pointed up 0.1%.

In Asia on Monday, the Japanese Nikkei 225 index in Tokyo ended up 0.9%. Japan's Nikkei manufacturing PMI rose to 50.4 in September from 49.5 in August.

The Hang Seng index in Hong Kong rose 1.2%. The Shanghai market will be closed the whole week for the National Day celebrations.

On the London Stock Exchange, Royal Dutch Shell 'A' shares were up 2.9%. Cruise operator Carnival announced it has signed a framework agreement with Shell Western LNG, a unit of the oil & gas major, to be its supplier of marine liquefied natural gas to power the fully LNG-powered cruise ships. Carnival was up 0.3%.

Shell was also benefiting from a rise in crude prices, as well did BP, up 1.8%. Brent was quoted at USD50.66 a barrel at midday Monday, compared to USD49.81 a barrel on Friday. Investors remain bullish after the Organization of Petroleum Exporting Countries agreed last week to limit production at 32.5 million barrels per day. Expectations are now for further agreements to be reached at a meeting set for November 30 in Vienna.

In the FTSE 250, Henderson Group was the biggest mid-cap gainer, up 13%. The asset manager and New-York listed Janus Capital Group announced plans for an all-stock merger, in a deal which will take Henderson off the London Stock Exchange, as the combined company lists in New York but places its two co-chief executives in London.

The pair said the combined company, to be named Janus Henderson Global Investors, will have more than USD320.00 billion in assets under management and a market capitalisation of approximately USD6.00 billion, making it a top 50 global asset manager.

"On the face of it, the deal makes a lot of sense and the groups complement each other. Scale can help keep costs down for fund groups, allowing them to offer more competitive fund pricing, while still delivering good active performance," said Mark Dampier, head of investment research at Hargreaves Lansdown.

By Daniel Ruiz; danielruiz@alliancenews.com

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