FTSE 100 closes up 64 points
UK manufacturing PMI unexpectedly falls in June
Sterling slightly lower versus dollar
Miners lifted by Caixin manufacturing data
FTSE 100 closed up 64 points with miners making gains and US benchmark making headway but new doubts over UK growth surfaced with new manufacturing data.
The UK’s blue-chip benchmark added 64 to finish at 7,377, while the FTSE 250 shed 0.10% to 19,320.
That index is more focused towards UK companies.
The UK manufacturing sector slowed last month (June) and growth hit a three month low. Economists blamed political worries and fears over Brexit, and even the weaker pound, which has fallen since the vote, did not prevent the lag on the export side.
The biggest gainer was Glencore (LON:GLEN), the commodities giant, which added over 5% to 301. 60p, while Rio Tinto (LON:RIO) gained over 4% to 3,374p.
On the losing front, Provident Financial (LON:PFG) shed 2.67% to stand at 2,368p.
David Madden, at CMC Markets, said: “Equity markets in Europe have started the week on a positive note. The pullback in the pound and the euro made stocks more appealing as last week the UK and eurozone equity markets paid the price for having strong domestic currencies.
“European stock markets are been broadly moving lower over the past month, and this rally would have to be extended before traders can be more confidence that the wider upward trend will continue.”
4.05pm: Mining and energy shares lead gains on FTSE 100
Mining and energy shares have held onto gains as the closing bell approaches. Glencore, Anglo American and Antofagasta are among the biggest risers on the FTSE 100, boosted by data showing a return to expansion in Chinese manufacturing activity.
Energy shares, BHP Billion and Royal Dutch Shell, have been lifted by an increase in oil prices.
3.37pm: Oil prices rise as US output moderates
Oil prices have risen for an eighth consecutive day, marking the longest rally in more than five years. West Texas Intermediate increased 1.2% to US$46.64 per barrel while Brent crude gained 1.07% to US$49.30 per barrel.
The growth came as data showed drilling activity for new oil production in the US declined for the first time since January,falling by two rigs. US government data also showed crude output fell in April for the first time this year.
"There may be more upside to come in days ahead, despite sentiment having previously been extremely bearish," said Oanda analyst Craig Erlam.
2.50pm: US manufacturing PMI weakens in June
US manufacturing activity growth slowed in June due to weaker rates of output and new business. The Markit PMI for US manufacturing fell to 52.0 in June form 52.7 in May, revised down from a previous estimate of 52.1.
Analysts had expected no change to the reading.
Chris Williamson, chief business economist at Markit said: “Manufacturers reported a disappointing end to the second quarter, with few signs of growth picking up any time soon. The PMI has been sliding lower since the peak seen in January and the June reading points to a stagnation – at best – in the official manufacturing output data."
1.35pm: Mark Carney warns G20 leaders of economic risks
Bank of England Governor, Mark Carney, has warned that G20 leaders risk driving up financing costs and hurting the economy if they fail to complete their overhaul the world's banking system triggered by the financial crisis.
In a letter to G20 leaders ahead of a meeting later this week in Germany, Carney said: "In particular, giving into reform fatigue could erode the willingness of G20 members to rely on each other’s systems and institutions and, in the process, fragment pools of funding and liquidity."
Carney, who is FSB chair, said this could lead to less and more expensive financing and a slowdown in economic growth.
However, he said reforms undertaken since the financial crisis meant the world's biggest banks were stronger and misconduct was being tackled.
“A decade after the start of the global financial crisis, G20 reforms are building a safer, simpler and fairer financial system," he said. "The largest banks are considerably stronger, more liquid and more focused.”
1.11pm: BoE hit by first labour strike in 50 years
Bank of England workers have decided to hold to a four-day strike starting on 31 July to push for an increase in pay, the Unite union said.
Unite said about 95% of its members voted in favour of industrial action, the first strike to hit the BoE in 50 years, after the central bank offered staff a below-inflation increase in earnings.
“The result of the bank’s unwillingness to negotiate fair pay will be that the bank’s sites, including the iconic Threadneedle Street in the city of London will effectively be inoperable without the maintenance, parlours and security staff,” said union official Mercedes Sanchez.
“Mark Carney needs to get his own house in order. It is nothing short of shameful that the iconic symbol of financial services in the UK is choosing to ride roughshod over the concerns of its dedicated and hardworking staff and impose this derisory pay deal.”
The BoE said it has been made aware of the strike and said ith as plans in place so that all sites can continue to operate effectively. !We will continue to have discussions with Unite and hope that there will be a positive outcome," the Bank said.
Bank of England workers are to stage a four-day strike from July 31 in a
dispute over pay, Unite said.
— Chris Mason (@ChrisMasonBBC) 3 July 2017
12.44pm: Pound faces more headwinds despite possibility of 'softer' Brexit, says FXTM
Brexit officials have reportedly abandoned the government's vow for a "cake and eat it" Brexit deal to enjoy full trade access without conceding over immigration, courts and payments.
FXTM research analyst, Lukman Otunuga, said this suggests the possibility of a "softer Brexit".
"While Sterling could receive some minor support by Theresa May changing her hard Brexit stance, I feel the growing uncertainty over the UK’s future relationship with the EU post-Brexit is likely to create serious headwinds for bulls," he said.
12.10pm: FTSE edges higher as pound drops
The FTSE 100 rose 23 points to 7,336.17 as the pound dropped against the dollar after weak UK manufacturing data.
Sterling fell 0.53% versus the dollar to US$1.2956 and edged down 0.05% against the euro to €1.1392 after the Markit/CIPS PMI for manufacturing unexpectedly fell to 54.3 in June from 56.3 in May.
"That doesn’t bode well for the country’s second quarter growth – though in regards to that Wednesday’s services PMI will likely be more important – and suggests that there was a significant drop in momentum in the aftermath of the election," said Connor Campbell, financial analyst at Spreadex.
On the company front, mining shares were buoyed by stronger-than-expected Chinese manufacturing data. The Caixin PMI rose to 50.4 from 49.6, above the 50 level that separates a contraction from an expansion. Glencore, Anglo American and Antofagasta rallied.
SuperGroup, the owner of Superdry, gained after it hiked its full year dividend and posted growth in profit and revenue, as its international expansion shielded the retailer from a weak UK consumer spending.
In contrast, Severn Trent shares dropped as it sold its North American business for $62mln to focus on its core UK division.
Provident Financial slipped as analysts at Liberum said that another profit warning for the home credit division was likely.
11.30am: House prices grow in London's prime central market, Land Registry reveals
The average price of homes in central London's prime real estate market rose a quarterly 4.6% in the first quarter to an all-time high of £1.9mln, according the Land Registry.
The growth was boosted by international buyers taking advantage of the weaker pound following last June's Brexit vote.
However, annual sales volumes fell 21% to 3,406 units.
"The increase in average prices is more likely to reflect a greater proportion of higher value properties being sold, rather than any real underlying price growth," the Land Resigtry explained.
"Transaction data shows that the £2m to £5m price bracket was particularly active last year, reflecting the only annual increase in sales (8.5%). This can, in part, be attributed to
international homebuyers taking advantage of price discounts offered on top-end properties and beneficial currency exchange rates. Prices are now 13% cheaper for dollar
denominated investors than at the beginning of 2015."
10.38am: Eurozone jobless rate unchanged in May
The Eurozone unemployment rate for the single currency region came to 9.3% in May, unchanged from April, and the lowest level since March 2009.
In the European Union, the jobless rate was also unchanged at 7.8%, the lowest since December 2008.
“While this is the weakest month in terms of unemployment declines this year, the outlook remains very favourable for the labour market and further declines are to be expected for the summer,” said ING’s senior economist, Bert Colijn.
“Given the strength in survey data on employment expectations from businesses in both industry and services, there is no reason to assume that job growth will slow over coming months.
Colijn added that he does not expect the “disappointing” unemployment rate to sway the European Central Bank in its next policy decision.
“In fact, even recent recovery in employment has not been enough to make a compelling case for tightening,” he said.
“This means that a possible upcoming tapering decision will not be motivated by price pressures from the job market, but more by the faded deflationary risks and strength in the economy. If anything, May’s disappointing unemployment declines stress that normalisation of monetary policy is still far away as it will be a long time before the job market starts to show the long-awaited price pressures that ECB hawks are hoping for.”
09.48am: UK manufacturing PMI shows economy not doing well, says Think Markets analyst
Naeem Aslam, chief market analyst at Think Markets UK, said the latest UK manufacturing PMI “clearly shows the economy is not doing well at all”.
“The weaker sterling is not helping the manufacturing sector because consumers have tightened their belt and the wage growth is awful,” Aslam said.
“The focus will be on the services PMI data which is due on Wednesday and if we do see a similar picture, it could bring some devastating outcome for sterling. “
The pound fell 0.38% versus the dollar to US$1.2975 and was flat against the euro at €1.1398.
09.37am: UK manufacturing activity slows in June
UK manufacturing activity reached a three-month low in June as growth rates of output and new orders slowed.
The Markit/CIPS PMI for manufacturing fell to 54.3 in June from 56.3 in May, missing forecasts of 56.3.
However, the average PMI over the second quarter was 55.9, the best reading in three years.
“The main factor driving the broad slowdown in June was a steep easing in the rate of increase in new order intakes,” said Rob Dobson, senior economist at Markit.
“New business rose at the weakest pace for nearly a year and growth was down sharply from April’s near three-year high. This slowdown was largely centred on the domestic market, where increased business uncertainty appears to have led to some delays in placing new contracts.”
Dobson added that export orders remained “disappointingly lacklustre” despite the ongoing competitiveness boost of the weak sterling exchange rate.
“While the survey data add to signs that the economy is likely to have shown stronger growth in the second quarter, further doubts are raised as to whether this performance can be sustained into the second half of the year.”
UK PMI price pressure lowest since the Brexit vote. Time to raise rates, surely. pic.twitter.com/aaEUi3CX1F
— Frederik Ducrozet (@fwred) 3 July 2017
09.20am: Eurozone manufacturing PMI revised higher
Eurozone manufacturing activity in June grew at its fastest rate since 2011, according to Markit.
The purchasing managers’ index was revised up to 57.4 in June from a previous estimate of 57.3, compared to 57.0 in May, driven by growth in Germany and France.
Analysts had been expecting the reading to remain unchanged. A reading above 50 signals an expansion in sector activity.
Eurozone #manufacturing PMI hits 74-month high in June (up slightly on flash reading) https://t.co/QSyUV15voM pic.twitter.com/dSkgiqQ7Sr
— Chris Williamson (@WilliamsonChris) 3 July 2017
8.45am: Footsie finds gains
The FTSE 100 made a positive start to the new week and a new month, pushing higher as miners gained thanks to some positive data from top metals consumer China.
In early trading, the UK blue chip index was up around 34 points at 7,346, recovering after a dull end to last week as thoughts of possible UK interest rate hikes boosted the pound.
On currency markets today, sterling slipped 0.1% lower versus the dollar to US$1.3007, but edged up 0.1% against the euro at €1.1413.
Craig Erlam, senior market analyst at Oanda said: “Sterling and the euro were two of last week’s standout performers as the heads of both central banks delivered quite hawkish speeches – intentional or not – that went against their previously dovish stance.
“While we’ve known for some weeks now that policy makers at both the Bank of England and the ECB have become increasingly open to tighter monetary policy, this shift from Mark Carney and Mario Draghi was a sign that even the more dovish policy makers may be reluctantly accepting the possibility that monetary policy will become less accommodative.”
Will #PMI's Aid #EUR and #GBP Rallies? - MarketPulse https://t.co/81ITLGW7YE #Eurozone #UK #EURUSD #GBPUSD #US #Japan #China pic.twitter.com/QXHZEPobRU
— Craig Erlam (@craig_forex) 3 July 2017
Among equities, miners got a lift after China’s latest Caixin survey showed manufacturing bosses were more optimistic about prospects than thought.
Miner and commodities trader Glencore PLC (LON:GLEN) was one of the biggest blue chip gainers, up 2.1% at 239.25p, while Anglo American PLC (LON:AAL) added 1.9% at 1,043.5p, and Rio Tinto PLC (LON:RIO) rose 1.4% at 3,287.5p.
Lenders were also on the front foot again, helped by last week’s US bank stress test boost and hopes for higher interest rates, with HSBC Holdings PLC (LON:HSBA) up 1.8% at 724.4p.
Utilities shunned
On the downside, however, utilities were shunned, with Severn Trent PLC (LON:SVT) the top FTSE 100 faller, down 2% at 2,138p as the water firm disposed of its North American business and was hit by a downgrade in rating from US broker Bernstein.
United Utilities PLC (LON:UU), off 1.6% at 853.5p was also blighted by a downgrade in rating from the same broker.
On the second line, a bullish trading helped Raspberry Pi mini-computer group Electrocomponents PLC (LON:ECM) take on 1.9% at 588.0p, while fashion firm SuperGroup PLC (LON:SGP) gained 2.5% at 1,533p after confirming solid full-year results which had been pre-released last week following a leak.
Among the small caps, Premier Oil PLC (LON:PMO) rose 7% to 53.5p after agreeing to increase its stake in Britain’s biggest onshore oil field, acquiring 3.75% of Wytch Farm on the South Coast.
The deal with Danish firm Maersk sees Premier paying £11.7mln for the additional .interest in the 15,000 barrel per day field, bringing its stake to 33.8%.
7.00am: Poitive start predicted
The FTSE 100 looks set to open the week on the front foot, taking its cue from Asia, where a double dose of positive data buoyed sentiment.
China’s Caixin survey showed manufacturing bosses were more optimistic about prospects than thought, while Japanese Tankan data for the manufacturing and non-manufacturing sectors exceeded estimates.
This gave a boost to the regional stocks indexes, which is likely to have a knock-on effect on the Footsie. It’s set to rise 24 points to 7,336.12, according to the spread betting firms.
Later we’ll see how British companies have performed in the wake of the snap election which left us with a hung parliament as the market research firm Markit delivers its June purchasing managers’ index.
It looks set to be a busy week at home for corporate news with updates from Sainsbury, Tesco, Ocado and Imagination technology, while the major macro-economic update comes Friday from the US in the form of non-farm payrolls.
Market data:
- Pound worth US$1.2956, down 0.53%
- Brent crude flat at US$48.77 a barrel
- Gold at US$1,233.40 an ounce, down 0.72%
Business Headlines
- Financial Times
- A consortium led by France’s Total is set to sign a US$.48bn gas deal with Iran, the Islamic republic’s first major energy contract with a European oil company in more than a decade as transatlantic differences over relations with the country deepen.
- Europe’s small and mid-sized companies will be among the biggest losers if banks are hit by tens of billions of restructuring costs and extra capital requirements in a “hard Brexit” scenario, warns a study to be published on Monday.
- The UK’s financial watchdog has already been shut out from certain Brexit-related discussions with its European counterparts.
- US bank bosses have been paid an average of three times as much as peers around the world since 2004, according to a study by analysts at Bernstein that concludes that running an American bank “can’t be much more complicated”.
- Daily Telegraph
- Virgin Media’s £3bln network expansion plan is running badly behind schedule, threatening the growth targets of its parent company, the pan-European cable giant Liberty Global.
- The UK’s ageing population will force the Government to raise taxes, borrow more or cut back on healthcare spending even if Britons are forced to work until they are 75, according to Legal & General.
- Losses at Pizza Express reached £17mln in the period before the departure of chief executive Richard Hodgson, new documents reveal.
- Times
- Britons could soon be traveling non-stop to Bordeaux by train after the opening of a 200-mile high-speed rail link from Tours this weekend. The initiative breaks new ground in France because it is the first high-speed line to be privately operated.
- Guardian
- More small energy firms could go bust this winter because of increasing price volatility driven by green energy growth and the closure of Britain’s largest gas storage plant, one of the challenger suppliers has warned.
- Daily Mail
- City lenders made profits of £13.1bln in 2016, according to research by The Banker magazine, down 32% on the previous 12 months. By contrast, France’s financiers pocketed £30.1bln – more than double what was earned by their UK rivals.
- Internet takeaway firm Deliveroo on brink of becoming Britain’s latest tech unicorn in deal valuing it at more than £1bln.