LONDON MARKET MIDDAY: Sterling rises after strong UK PMI reading

(Alliance News) - Stock prices in London were mixed at midday on Friday as the internationally exposed FTSE 100 was hindered by an appreciating pound which rose after robust UK PMI data.

The FTSE 100 index was down 7.37 points, or 0.1%, at 7,012.31, but is on track to end the week up 0.8%.

The mid-cap FTSE 250 index was up 21.18 points, or 0.1%, at 22,413.35. The AIM All-Share index was flat at 1,247.06.

The Cboe UK 100 index was down 0.1% at 699.10. The Cboe 250 was up 0.1% at 20,156.59, and the Cboe Small Companies down 0.1% at 14,850.60.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were up 0.5% and 0.2% respectively.

IG Group's Josh Mahony commented: "After a week of high volatility, today has all the markings of a more controlled approach into the weekend. The lack of major volatility overnight has carried through into Europe, with UK stocks the one area of weakness on an otherwise positive start to the day.

"The declines seen in the FTSE 100 come off the back of a sharp appreciation for the pound, with EURGBP heading south and GBPUSD heading north. That sterling strength has been driven largely by an impressive batch of retail sales and PMI figures."

The pound was quoted at USD1.4231 Friday at midday, up sharply from USD1.4163 at the London equities close on Thursday.

UK business activity expanded at a rapid pace in May on strong contributions from both manufacturing and services, survey results from IHS Markit showed.

The IHS Markit-CIPS flash UK services purchasing managers' index print was 61.8 points in May, up slightly from 61.0 in April. The latest reading was just shy of the market forecast, cited by FXStreet, of 62.0, but remains above the 50.0 mark which separates expansion from contraction.

The UK manufacturing PMI score was 66.1 points in May, up sharply from 60.9 in April and soundly beating the market estimate of 60.0. Further, May's reading was the highest since the survey began in January 1992, Markit said.

The UK composite PMI reading increased to 62.0 points in May from 60.70 in April. The latest figure was a fresh record high.

Earlier on Friday, the Office for National Statistics said UK retail sales saw a sharp increase in April as shoppers returned to high streets following the re-opening of all non-essential stores.

On an annual basis, UK retail sales surged 42% in April, having increased 7.2% in March. The latest figure was well above the market forecast, cited by FXStreet, for a 37% rise. On a monthly basis, retail sales grew 9.2% in April, following a 5.4% rise in March. The month-on-month print also beat market consensus of a 4.5% increase.

In the FTSE 100, Kingfisher was still the worst performer at midday, down 2.1%, a day after raising its profit guidance as the pandemic-spurred demand for home-improvement projects continued. The stock had slipped 0.6% on Thursday.

Hargreaves Lansdown was 1.2% lower after Citigroup downgraded the fund supermarket to Sell from Neutral. The US bank acknowledged Hargreaves is the market leader in its sector, but risks to the investment case outweigh the positives.

In the FTSE 250, Biffa was the best performer, up 8.3%. The waste management firm said it has entered into an agreement to acquire the Collections business and some Recycling assets from Viridor Waste Management for GBP126 million.

Travis Perkins was up 1.1%. The builders merchant late Thursday said it will sell its plumbing and heating distribution unit and give the proceeds to its shareholders.

HIG Capital will buy the unit for GBP325 million. The deal is expected to close in the next three months. The sale follows the company's separation of its Wickes Group DIY retailing arm as a separate London-listed company in April.

Travis said it will return the cash to shareholders through a 35 pence per share special payout and a buyback programme.

At the other end of the mid-caps, Diversified Energy was the worst performer, down 8.8% at 111.40 pence. The Birmingham, Alabama-based energy producer said it has raised USD225 million via a share placing and retail offer to fund an acquisition announced on Thursday.

The fundraise was priced at 112 pence per share, a 8.3% discount to Thursday's closing price of 122.2p and comprised 135.4 million placing shares and 6.1 million retail offer shares.

The Birmingham, Alabama-based energy producer and distributor on Thursday said it has agreed to buy some upstream assets, and related infrastructure, in its newly identified "central regional focus area" from Blackbeard Operating LLC for initial gross aggregate consideration of USD180 million.

Elsewhere in London, Electra Private Equity was up 4.7% after the private equity investor unveiled plans to demerge and list portfolio company TGI Fridays on the London Main Market this year.

In addition, portfolio business Hotter Shoes will be floated on the junior AIM market by way of the reclassification of Electra, so that it becomes the listing vehicle for the footwear retailer.

Card Factory was down 8.3%. The greeting card retailer reported a marginal drop in like-for-like store sales, compared with 2019, after the UK began reopening non-essential stores and eased restrictions in April. In addition, Card Factory said it completed a GBP225 million refinancing deal.

"Numbers from greetings card seller Card Factory offered a snapshot in microcosm of what retailers can likely expect in the coming months with shoppers visiting less frequently but buying more when they are there," said AJ Bell's Russ Mould. "This probably reflects some continuing nervousness about being in crowds too frequently, a degree of pent-up demand and the fact some people have lockdown savings to spend."

The euro was priced at USD1.2233 at midday, higher from USD1.2210 late Thursday, after PMI data.

Eurozone business activity grew at a significantly faster rate in May, according to survey results, as economies continued to open up from virus restrictions.

The headline IHS Markit eurozone composite PMI print rose to 56.9 points in May from from 53.8 in April. The latest reading was the highest since February 2018 and indicated a third successive month of output growth.

The flash eurozone services PMI activity index stood at 55.1 points in May versus 50.5 in April, while the flash manufacturing PMI slipped to 62.8 points from 62.9.

Against the yen, the dollar was trading at JPY108.68, down from JPY108.84.

Brent oil was quoted at USD65.85 a barrel Friday at midday, down from USD66.20 late Thursday. Gold was trading at USD1,878.22 an ounce, little changed from USD1,878.30.

US stock market futures were pointed higher, looking to build on Thursday's gains, ahead of the latest PMI readings for May at 1445 BST.

The Dow Jones Industrial Average was called up 0.4%, the S&P 500 index up 0.3%, and the Nasdaq Composite up 0.4%.

On Thursday, Wall Street shrugged off three straight down sessions to end solidly higher following data showing a drop in US jobless claims.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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