MARKET COMMENT: Miners Lead UK Stocks Higher Amid Deluge Of Data

LONDON (Alliance News) - UK and European stocks have started July on the front foot, with stocks trading firmly higher Tuesday, following the release of a raft of macro-economic data from Asia, Europe, and the UK.

Meanwhile, the pound has jumped against its major rivals on the back of a stronger-than-expected reading of the UK manufacturing purchasing managers index for June.

By mid-morning, the FTSE 100 is up 0.4% at 6,773.03, the FTSE 250 is up 0.3% at 15,765.52, and the AIM All-Share index is up 0.2% at 787.25.

Mining companies are leading London's blue-chip index higher on the back of some strong PMI readings from China overnight.

The results of a survey by the China Federation Of Logistics And Purchasing and the National Bureau of Statistics revealed that Chinese manufacturing PMI rose to 51 in June from 50.8 in May, coming in in-line with economists' expectations. Meanwhile, revised estimates released by Markit and HSBC bank confirmed that manufacturing activity rebounded in June. The HSBC manufacturing PMI rose to 50.7 in June from May's 49.4, marking the first signs of improvement since December 2013.

BHP Billiton, up 1.9%, Anglo American, up 1.6%, Glencore, up 1%, and Antofagasta, up 0.6%, are all among the leading gainers in the blue-chip index. Rio Tinto, up 2.6%, is the biggest winner in the FTSE 100, however, as it benefits from both the data and Bank of America Merrill Lynch's decision to raise its recommendation on the company to Buy from Neutral, increasing its price target to 4,000 pence from 3,400p.

Overall, the FTSE 350 mining sector index is currently up 1.8%.

"Good news from China is always an ideal way to shake the FTSE 100 into life, thanks to the heavy mining component in the index," said Alastair McCaig, a market analyst at IG. "The tiny rise in the manufacturing PMI was hardly a major improvement, but it has been eagerly seized upon by traders evidently desperate for a positive news story," he added.

In data recently released, UK manufacturing PMI data came in much higher-than-expected Tuesday. Data from Markit economics showed that the UK manufacturing PMI rose to a 7-month high of 57.5 in June, compared to 57 in May. Economists expected the index to rise to 56.8.

"Manufacturing employment is booming, incoming new business is rising at one of the fastest rates in 20 years and new export orders are picking up," said Robert Wood, chief UK economist at Berenberg. "There is no nuance to the message," he said.

Conversely, data from Europe has been largely disappointing, with German and Italian manufacturing PMI readings coming in lower-than-expected, while the French equivalent beat forecasts.

While French manufacturing PMI came in above the preliminary estimate of 47.8, it still fell sharply to 48.2 in June from 49.6 in May, signalling the fastest deterioration in manufacturing activity so far this year. The German reading dropped to an eight-month low of 52.0 in June from 52.4 in May, missing expectations for an unchanged reading. The Italian reading dropped to 52.6 in June from 53.2 in May.

For the wider eurozone area, the manufacturing PMI for June dipped to a seven-month low of 51.8, down from May's reading of 52.2.

"The slowdown will put pressure on policymakers at the ECB (European Central Bank) to do more to prevent the recovery from stalling, and we will no doubt see more calls for full-scale quantitative easing to be implemented," said Chris Williamson, chief economist at Markit.

Major European bourses are higher following the data. The CAC 40 in Paris is up 0.5% at 4,444.8, while the DAX 30 in Frankfurt is up 0.2% at 9,853.84.

At the individual equity level, and away from the miners, Vodafone, up 1%, is among the leading gainers in the FTSE 100. The company said that its subsidiary Vodafone International Holdings BV has sold its entire shareholding in Vodafone Fiji Ltd for a cash consideration of GBP51 million. The subsidiary has sold its 49% stake in the company to the Fiji National Provident Fund.

St Modwen Properties is one of the biggest risers in the FTSE 250, up 4.2%. The company, which specialises in regenerating brownfield land across the UK, reported an increase in profit and revenue for the first-half, underpinned by recovery in the UK property market. It posted pretax profit of GBP61.0 million for the six months to end-May, up from GB45.6 million a year earlier. Profit was boosted by a GBP27.7 million valuation gain on investment properties compared with a GBP16.7 million gain a year earlier. Revenue, meanwhile, rose to GBP110.1 million from GBP63.8 million a year earlier.

Meanwhile, food retailers are among the heaviest fallers in the FTSE 100 Tuesday as they continue to struggle to keep hold of their market share and sales, as the pressure from German discounters Aldi and Lidl mounts, according to the latest grocery share figures from Kantar Worldpanel.

Among the UK's four biggest supermarket chains, Tesco and Wm Morrison Supermarkets saw drops in both market share and sales in the 12 weeks ended June 22, Kantar said, while US Walmart-owned Asda and J Sainsbury increased both market share and sales.

Morrisons and Tesco recorded sales drops of 3.8% and 1.9%, respectively, in the period from a year earlier, and also saw a dip in their market share. Morrisons' market share fell to 10.9% from 11.7% last year, while Tesco's market share declined to 28.9% from 30.3%. In contrast, both Sainsbury's and Asda posted growth in share and sales in the 12 week period. Sainsbury's sales rose 3.0% year-on-year, while its market share edged up to 16.7% from 16.6%.

Still, Morrisons, Tesco, and Sainsbury's are all big losers, down 1.5%, 1%, and 1%, respectively.

In the forex market, the pound has risen sharply against its major rivals after the release UK manufacturing data showed an expansion in UK manufacturing activity in June.

The pound currently trades at USD1.7142, its highest level since October 2008, EUR1.2525, CHF1.5212, and JPY174.032.

Still ahead in the data calendar, the latest reading of US Markit manufacturing PMI is released at 1445 BST, with construction spending and ISM manufacturing PMI data from the world's largest economy released shortly after at 1500 BST.

US Treasury Secretary Jacob Lew gives a speech at 1300 BST.

US futures trading currently indicates that US equities will follow their UK and European counterparts slightly higher Tuesday. The DJIA, S&P 500, and NASDAQ Composite are all called to open up around 0.2%.

By James Kemp; jameskemp@alliancenews.com; @jamespkemp

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