logo-loader

London shares end lower as PMI data reveals business costs rising

Published: 17:35 01 Sep 2016 BST

shutterstock_448441312

London shares ended lower on Thursday as a robust manufacturing survey was interpreted as adding to production costs, rather than boosting exports in the wake of Britain’s vote to leave the European Union.

The Purchasing Managers’ Index survey scaled its highest levels in 10 months as exports surged when sterling dropped following the June 23 “Brexit” referendum vote. But it also added to output costs which will linger for a while after any rally in sterling. The pound certainly lapped up the buoyant data, for now.

The blue-chip FTSE 100 index closed down 0.5% at 6,745 after a session narrowly jobbing either side of the previous close.

Hikma Pharmaceuticals (LON:HIK) was the biggest blue-chip decliner of 2.9% to 2078p while Vodafone Group (LON:VOD) shed 2.8% to 223.35p and GlaxoSmithKline (LON:GSK) was down 2.4% at 1599.5p.

But the UK-centric mid-cap FTSE 250 fared better. Despite being an immediate casualty of the Brexit vote as sterling fell and the ticker with it, it has steadily climbed and become resistant to many of the day falls of the blue-chip index.

The FTSE 250 index closed up 0.7% at 17,849 – handsomely above the 17,333 it closed on the eve of the Brexit vote result more than two months ago.

The largest riser on the FTSE 250 was Diploma PLC (LON:DPLM) up 7% to 889p. ON Wednesday Diploma printed its full year earnings and said underlying sales grew 2% in the year to September, with acquisitions and the weak pound helping lift statutory revenues by 14%.

But smaller caps didn’t fare so well. The FTSE AIM 100 Index closed down 0.1% at 3,742 and the FTSE AIM All-Share Index was similarly down 0.1% at 791.

Across all London stocks, gainers numbered 35%, losers 29% and unchanged 37%.

London’s biggest gainer was Cluff Natural Resources (LON:CLNR) up 41% at 2.325p on no fresh news.

London’s biggest decline of 46% to 0.375p was Zincox (LON:ZOX) as the group decided against using the ISDX market as a further platform to trade the company's shares.

Meanwhile, Premier Oil (LON:PMO), the North Sea explorer in the process of renegotiating banking terms with its lenders, has announced a new 12 month test of its covenants.

In a statement on Thursday, Premier said progress was going “well” on its attempts to rejig relations terms with its lenders and said a test of its covenants for the 12 months to the end of August had been waived and will be replaced by another for the 12 months to September 30.

Premier shares closed down 3.6% at 70.12p.


Midsession

The FTSE 100 Index teetered in positive territory on Thursday despite a stronger pound and more pressure on commodities.

The Footsie pared earlier gains to stand about eight points up at 6790, although the UK-focused FTSE 250 rebounded about 153 points on upbeat manufacturing data. Small-cap indices were also in the black.

The sharp rise in UK manufacturing purchasing manager's index figures for August surprised many given EU referendum jitters, boosting the pound.

But Pantheon Macroeconomics urged caution, saying exports would have benefited disproportionately from the fall in sterling after the June 23 vote.

It added: “We would caution against concluding that the dominant services sector also has experienced a sudden transformation.”

With Chinese manufacturing creeping out of contraction territory, mining stocks got a boost, but it failed to last.

BHP Billiton plc (LON:BLT) backtracked 1.5% to 974.7p, Randgold Resources was 0.9% down at 7085p and Fresnillo PLC (LON:FRES) lost 0.75% to 1594p.

Among small-caps, shares in Ceres Power Holdings plc (LON:CWR) revved up 11.4% to 10.25p on news of a deal with Cummins to develop fuel cells to power data centres.

ECR Minerals PLC (LON:ECR) appointed Craig Brown, who joined the board on May 3 as part-time finance chief, as chief executive with immediate effect. Its shares rose 36% to 0.01p.

Shares in Alumasc Group plc (LON:ALU) advanced 6.3% to 174.4p as the building products group posted higher orders, revenue, profit and dividends.

And Stratex International plc (LON:STI) powered up 11.3% to 1.98p after the West Africa and Turkey-focused miner said long-serving chief executive Bob Foster was stepping down to be replaced by Marcus Engelbrecht, the former managing director of Archipelago Resources plc.

But ZincOx Resources plc (LON:ZOX) plunged by 43% to 0.4p as the group decided against using the ISDX market as a further platform to trade the company's shares.

African Potash Ltd (LON:AFPO) was also in the red as the group said it was raising £500,000 before costs in a share subscription. Its shares dropped 31% to 0.23p.

Back in the top flight, the biggest riser was Lloyds Banking Group PLC (LON:LLOY) with a 4.2% gain to 61.84p.

At the other end of the scale, Hikma Pharmaceuticals Plc (LON:HIK) was on its sick bed with a 2.7% fall to 2082p.

News

Eurasia Mining expects first production at West Kytlim next week

Latest assay results beef up W Resources' La Parilla project

Premier Oil says debt talks are going well

Preview at 6.55am

London’s FTSE 100 Index is expected to open in positive territory on Thursday, albeit not by much, as investors keep an eye on macroeconomics and monetary policy.

As they watch and wait for news from central bankers, tomorrow’s influential US employment statistics will come sharply into focus.

The monthly non-farm payroll numbers are a gauge of the job market, which is itself a priority for the Federal Reserve.

The stats, released tomorrow, will as always provide a feature for trading in the coming days.

They will likely draw more attention due to the scrutiny on September’s scheduled Fed policy meeting, a get-together that some now expect will bring a tightening of monetary conditions.

“Having seen European stock markets post some decent August gains, investor attention is now set to return to the potential next steps of central bank policymakers in the coming days and weeks, in the wake of some rather disappointing economic reports from both sides of the Atlantic in the past few days,” said Michael Hewson, analyst at CMC Markets.

“This concern about future central bank policy may well have been the reason why the S&P500 slipped back to post its first negative month since January, though a slide in oil prices didn’t exactly help either.”

Wall Street closed negatively on Wednesday. The Dow Jones gave up just over 53 points, 0.29%, to end the day at 18,400. The S&P 500 and Nasdaq also moved lower, down 0.24% and 0.19% to 2,170 and 5,213 respectively.

Asian stock trading was mixed. Japan’s Nikkei edged slightly higher to 16,901, while Hong Kong’s Hang Seng added 0.58% to 23,109. The Shanghai Composite, meanwhile, dipped 0.22% to 3,078.

Australia’s ASX 200 was down 0.29% to change hands at 5,418.

In London, IG Markets sees the FTSE 100 about 20 points higher as the spreadbetting and CFD group is calling the benchmark at 6,804 to 6,808 about an hour before trading kicks off.

Anticipated company news

Investors will be watching nervously for any sign of a ‘Brexit’-linked hiring slowdown in the UK when recruitment firm Hays plc (LON:HAS) reports final results on Thursday.

Hays could get a boost from the plunge in sterling since the EU vote, with management saying in an earlier trading update that annual earnings would rise £22mln if exchange rates stayed at their level on July 12.

But analysts at Numis Securities said the impact of the referendum outcome remained the key factor.

Investors in building products group Alumasc Group Plc (LON:ALU) are hoping it may unveil news of windfalls when it reports full year results.

Analysts at Peel Hunt said its balance sheet was in good shape and would allow it “to make choices with regards to investment, acquisitions or cash returns.”

Elsewhere, self-storage group Safestore Holdings Plc (LON:SAFE) was being tipped to give a positive trading update despite uncertainty caused by the EU referendum.

Caledonia Mining tackles 2023 challenges with optimism for 2024 as it...

Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL) chief executive Mark Learmonth tells Proactive's Stephen Gunnion the company faced a challenging 2023, primarily due to poor production in the first half of the year at its core asset, the Blanket Mine in Zimbabwe, and an underperformance...

2 hours, 16 minutes ago