LONDON MARKET MIDDAY: Stocks Slip After Weak Set Of European Data

(Alliance News) - The FTSE 100 was lower at midday on Tuesday in the wake of lacklustre European economic reports, fuelling fears of a slowdown across the continent.

The FTSE 100 index was down 21.58 points, or 0.3%, at 7,386.63 on Tuesday at midday. The FTSE 250 was up 33.68 points, or 0.2%, at 19,970.35. The AIM All-Share was up 0.1% at 874.18.

The Cboe UK 100 index was down 0.5% at 12,532.14. The Cboe UK 250 was up 0.2% at 17,867.13 and the Cboe UK Small Companies up 0.4% at 10,931.23.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both 0.1% lower in early afternoon trade.

"European markets have failed to follow the optimism seen overnight, with both UK and mainland indices trading largely flat amid growth fears sparked by ongoing manufacturing weakness," said Joshua Mahony, senior market analyst at IG.

In the UK, manufacturing sector trends in September staged a slight improvement on the previous month, but conditions remain subdued.

The headline IHS Markit-Chartered Institute of Procurement & Supply purchasing managers' index rose slightly to 48.3 in September from August's six-and-a-half year low of 47.4. But this still indicates shrinkage.

The latest reading means the index has remained below the no-change mark of 50 for five successive months. Consensus, according to FXStreet, was for September's reading to worsen to 47.0, however.

"On the face of it the latest figures from the manufacturing sector suggest an improvement for the month of September, but if you dig a little deeper it is readily apparent that this is a somewhat misleading view and underlying activity remains subdued at best," said David Cheetham, chief market analyst at XTB.

"Worryingly, several key indicators such as new orders, output and employment all fell further and any improvement in the headline reading can be explained away as a one-off Brexit related quirk rather than any real improvement in the sector," he added.

Things were worse in mainland Europe, with the bloc's manufacturers also struggling in September.

The final September eurozone manufacturing PMI was 45.7, slightly higher than the flash PMI of 45.6, but behind August's final PMI of 47.0. September's reading was the lowest since October 2012.

Germany's "rapidly deteriorating operating conditions" were blamed for the slip in eurozone PMI.

The headline BME German PMI registered 41.7 in September, down from 43.5 in August and its lowest reading since June 2009. The seasonally adjusted France manufacturing PMI fell to 50.1 in September, from 51.1 in August.

Still to come Tuesday, there is the Markit manufacturing PMI from the US at 1445 BST.

Ahead of this, New York stocks are pointed to a higher start with the Dow Jones called up 0.3%, the S&P up 0.2% and the Nasdaq on course to rise 0.3%.

Among the stocks dragging London's FTSE 100 into the red on Tuesday was Hargreaves Lansdown, down 2.9% after Credit Suisse initiated the fund supermarket with an Underperform rating.

Meanwhile, Hong Kong-exposed Burberry and Standard Chartered were 1.5% and 1.3% lower, respectively, as tensions once again ramped up in the city on a holiday for the 70th anniversary of Communist China's founding.

Thousands marched through the streets of Hong Kong island on Tuesday afternoon, despite authorities rejecting an application to hold a rally there as police warned people "to leave the scene as soon as possible".

The protests came as lavish celebrations were taking place in Beijing, including a huge military parade through Tiananmen Square under the gaze of China's strongman President Xi Jinping.

Leading the FTSE 100 was Ferguson, up 3.7% as the plumbing and heating supplies firm posted a strong annual performance, particularly in its US business.

Trading profit, which excludes exceptional items and the amortisation of acquired intangible assets, increased by 7.5% year-on-year to USD1.60 billion from USD1.49 billion. This was on revenue that grew 6.1% to USD22.01 billion from USD20.75 billion.

Consensus expectations for Ferguson's 2019 financial year had trading profit at USD1.58 billion, on revenue of USD21.87 billion.

Regionally, Ferguson's US business continued to perform well, with trading profit rising by 7.3% to USD1.40 billion on revenue increasing by 10% to USD18.36 billion, making up 83% of group revenue.

International Consolidated Airlines was 1.3% higher after Bank of America reinitiated the British Airways parents with a Buy rating. Bank of America also restarted easyJet at Neutral and Wizz Air at Buy, with the stocks both up 2.1%.

Elsewhere, the FTSE 250, Greggs shares went slightly stale after bakery shop chain reported moderating sales growth.

For the 13 weeks ended September 28, total sales rose by 12%, while like-for-like sales in company-managed shops increased by 7.4%. For the same period a year before, total sales grew by 7.3%, and like-for-like sales by 3.2%.

For the nine months ended September 28, total sales rose by 14%, and like-for-like sales by 9.4%, implying a slower third quarter.

Looking ahead, Greggs expects annual sales growth in the balance of the year to reflect "strengthening comparatives" from 2018, though forecasts for the full-year remain unchanged.

Greggs was the worst mid-cap performer, down 6.9%.

"Today's trading update was always going to be a tough one for Greggs. The publicity around its vegan sausage roll earlier this year was so effective that it drove more people to visit its stores and that had such a positive impact on earnings. Sales continued to beat expectations as the year went on, leading to a sharp rise in its share price," said AJ Bell investment director Russ Mould.

"The new trading update shows that the rate of sales growth has now moderated," Mould said, "partially because the comparative trading period a year ago was fairly strong".

By Lucy Heming; lucyheming@alliancenews.com

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