London open: Stocks rise on US debt deal hopes, after China data

(Sharecast News) - London stocks rose in early trade on Thursday after the US House of Representatives overwhelmingly passed the debt ceiling bill agreed last weekend, and as investors mulled encouraging Chinese data. At 0915 BST, the FTSE 100 was up 0.5% at 7,486.19.

The bill still needs to get through the Senate and be signed by President Joe Biden ahead of the 5 June deadline to avert debt default.

Investors were also digesting the latest data out of China, which showed that factory activity unexpectedly jumped to growth in May as demand and production improved.

The Caixin/S&P Global manufacturing purchasing managers' index (PMI) rose to 50.9 in May from 49.5 in April, beating consensus expectations of 49.5.

A reading above 50 indicates growth. The print is a sharp contrast to an official PMI released on Wednesday that showed a fall in factory activity, suggesting that China's recovery was stalling.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "As the US takes another step away from avoiding a disastrous default, risk sentiment has improved on financial markets with European indices up in early trade. The House of Representatives passed the budget legislation, thrashed out over long talks, despite opposition from more hardline Republicans who were pressing for much deeper spending limits.

"China's better-than-expected manufacturing reading measured by the Caixin purchasing managers index was welcomed, showing supply and demand both picked up after a contraction the previous month. However, it underlines the patchiness of the recovery in the world's second largest economy. Output may have risen the most in 11 months, as supply chain problems eased, but selling prices dropped sharply and sentiment fell to a 7-month low amid uncertain demand from overseas."

On home shores, figures from Nationwide showed that house prices fell in May and are set to decline further amid rising mortgage rates.

House prices slumped 3.4% on the year in May, following a 2.7% in April. On the month, prices dipped 0.1% after a 0.4% increase in April, with the average price now standing at £260,736.

Nationwide's chief economist, Robert Gardner, said headwinds to the housing market look set to strengthen in the near term.

"While consumer price inflation did slow in April, it was a much smaller decline than most analysts had expected. As a result, investors' expectations for the future path of Bank Rate increased noticeably in late May, suggesting it could peak at circa 5.5%, well above the c4.5% peak that was priced in around late March. Furthermore, rates are also projected to remain higher for longer," he said.

"If maintained, this is likely to exert renewed upward pressure on mortgage rates, which had been trending down after spiking in the wake of the mini-Budget in September last year.

"Nevertheless, in our view a relatively soft landing remains the most likely outcome since labour market conditions remain solid and household balance sheets appear in relatively good shape."

In equity markets, bootmaker Dr Martens tumbled as it said it expects lower core margins in 2024 after extra costs caused by errors at its Los Angeles distribution centre and extra investment spending.

Pre-tax profit for the year to March fell 26% to £159.m. Revenue jumped 10% to hit £1bn for the first time.

Pennon was also in the red as it swung to a full-year loss as higher costs and the long hot summer weighed heavily.

Auto Trader lost ground as it posted a dip in full-year pre-tax profits.

National Grid, Severn Trent, Sage, Keller, Marshalls and Great Portland all fell as they traded without entitlement to the dividend.

Market Movers

FTSE 100 (UKX) 7,486.19 0.54% FTSE 250 (MCX) 18,772.24 0.26% techMARK (TASX) 4,555.75 0.08%

FTSE 100 - Risers

Convatec Group (CTEC) 209.20p 3.16% Prudential (PRU) 1,085.00p 2.75% B&M European Value Retail S.A. (DI) (BME) 521.00p 2.20% Antofagasta (ANTO) 1,366.00p 2.13% Anglo American (AAL) 2,264.50p 1.84% NATWEST GROUP (NWG) 263.60p 1.54% Scottish Mortgage Inv Trust (SMT) 676.00p 1.53% Fresnillo (FRES) 657.60p 1.48% Lloyds Banking Group (LLOY) 44.81p 1.45% InterContinental Hotels Group (IHG) 5,344.00p 1.44%

FTSE 100 - Fallers

National Grid (NG.) 1,058.50p -4.29% Severn Trent (SVT) 2,686.00p -3.14% Auto Trader Group (AUTO) 615.40p -2.32% Unite Group (UTG) 883.00p -1.34% SSE (SSE) 1,861.50p -1.06% Admiral Group (ADM) 2,307.00p -0.77% Vodafone Group (VOD) 75.82p -0.72% Sage Group (SGE) 864.80p -0.71% BT Group (BT.A) 146.10p -0.51% Ocado Group (OCDO) 367.20p -0.49%

FTSE 250 - Risers

Bakkavor Group (BAKK) 95.00p 5.56% Investec (INVP) 431.60p 5.53% NCC Group (NCC) 95.00p 4.51% Liontrust Asset Management (LIO) 781.50p 3.58% Drax Group (DRX) 569.00p 2.82% Rathbones Group (RAT) 2,050.00p 2.81% Future (FUTR) 741.50p 2.70% TBC Bank Group (TBCG) 2,360.00p 2.61% Syncona Limited NPV (SYNC) 155.00p 2.51% Harbour Energy (HBR) 230.10p 2.36%

FTSE 250 - Fallers

Dr. Martens (DOCS) 138.00p -11.71% C&C Group (CDI) (CCR) 140.00p -3.71% Keller Group (KLR) 655.00p -3.53% Marshalls (MSLH) 292.40p -3.50% Hilton Food Group (HFG) 709.00p -2.74% Aston Martin Lagonda Global Holdings (AML) 277.40p -2.32% Tullow Oil (TLW) 24.30p -2.17% Great Portland Estates (GPE) 474.40p -1.86% Wetherspoon (J.D.) (JDW) 721.50p -1.64% LondonMetric Property (LMP) 177.10p -1.61%