London midday: Early gains erased as stocks drop by lunchtime

(Sharecast News) - The initial New Year's optimism that led to early-morning gains in London quickly faded, with the FTSE 100 sinking into the red by lunchtime. After rising to a daily high of 7,764.37, the UK benchmark index had fallen to the 7,700 level by midday, down 0.4% on the day, pulling back after settling at a seventh-month high last week.

Markets across Europe had pared early gains, with Frankfurt's Dax even falling into negative territory after registering an early surge of 1.2%.

"Markets got off to a cautious start on the first trading day of 2024, perhaps setting the tone for what could be a volatile year jam packed with political jostling ahead of crunch elections," said Russ Mould, investment director at AJ Bell.

A barrage of weak economic data may have soured sentiment on the first trading session of 2024, with manufacturing purchasing managers' indices (PMIs) from across the eurozone and UK confirming that the industrial downturn continued in December. Meanwhile, two closely watched surveys covering China's manufacturing sector showed conflicting results, with official government figures pointing to a continued contraction and a Caixin Global report indicating a pick-up in growth.

The private Caixin China manufacturing PMI expanded with a reading of 50.8, slightly up from November's 50.7. However, the official PMI from the National Bureau of Statistics painted a different picture, reporting a contraction with a reading of 49.0, down from November's 49.4. The official data was the third consecutive month of contraction in China's manufacturing, raising the possibility of increased policy support to stimulate the economy.

Investors will likely keep a close eye on rising tensions in the Middle East, after an Iranian warship entered the Red Sea, a channel that handles around one eighth of global commerce, as nations continue to take action against Yemen's Houthi rebels who have attacked ships bound for Israel. Brent crude futures were up 2.1% at $78.67 a barrel by midday in London.

Meanwhile, leading indicators from the US will be in focus over the coming days, with minutes of the latest Federal Open Market Committee meeting due on Wednesday, the ADP Employment Report on Thursday and the all-important non-farm payrolls figure on Friday.

Retail stocks rise

Retailers were on the rise in London, with M&S, B&M, Next and Tesco among the best performers. The corporate earnings calendar will be relatively quiet again for the whole week, but trading updates from UK high street retailers Next and B&M will be monitored on Thursday for signs of consumer buying behaviour over the key festive shopping season.

Diversified Energy Company was higher after completing the sale of producing assets in Appalachia to a special purpose vehicle, DP Lion Equity Holdco, while retaining a 20% minority interest and operational control. The transaction generated around $200m in proceeds, allowing the company to reduce its debt by 12%.

Travel stocks were also in demand, with airlines IAG and Wizz Air, travel agent TUI and hotels giant IHG all putting in decent gains.

Leading the fallers on the FTSE 100 were stocks heavily exposed to China, such as insurance group Prudential and banking giant HSBC, along with miners Antofagasta, Anglo American and Fresnillo.

FTSE 100 - Risers

Marks & Spencer Group (MKS) 278.80p 2.35% Land Securities Group (LAND) 717.20p 1.76% Vodafone Group (VOD) 69.52p 1.40% B&M European Value Retail S.A. (DI) (BME) 567.60p 1.32% BAE Systems (BA.) 1,124.50p 1.26% International Consolidated Airlines Group SA (CDI) (IAG) 156.95p 1.26% Weir Group (WEIR) 1,906.00p 1.17% Endeavour Mining (EDV) 1,777.00p 1.14% BT Group (BT.A) 124.95p 1.09% GSK (GSK) 1,465.60p 1.06%

FTSE 100 - Fallers

Prudential (PRU) 864.40p -2.39% Diploma (DPLM) 3,498.00p -2.35% 3i Group (III) 2,376.00p -1.86% Halma (HLMA) 2,248.00p -1.58% Auto Trader Group (AUTO) 710.60p -1.50% St James's Place (STJ) 673.40p -1.49% Frasers Group (FRAS) 897.00p -1.48% Scottish Mortgage Inv Trust (SMT) 796.60p -1.41% Smurfit Kappa Group (CDI) (SKG) 3,076.00p -1.41% Antofagasta (ANTO) 1,656.00p -1.40%

FTSE 250 - Risers

Diversified Energy Company (DEC) 1,151.00p 3.23% Babcock International Group (BAB) 406.60p 2.94% Wizz Air Holdings (WIZZ) 2,274.00p 2.85% Harbour Energy (HBR) 316.20p 2.46% Bakkavor Group (BAKK) 82.60p 1.98% Direct Line Insurance Group (DLG) 185.50p 1.95% TUI AG Reg Shs (DI) (TUI) 623.50p 1.71% Baltic Classifieds Group (BCG) 240.50p 1.69% Empiric Student Property (ESP) 96.10p 1.37% Balfour Beatty (BBY) 335.20p 1.21%

FTSE 250 - Fallers

AO World (AO.) 93.95p -4.47% Darktrace (DARK) 354.00p -3.46% Aston Martin Lagonda Global Holdings (AML) 219.60p -2.66% Trustpilot Group (TRST) 144.60p -2.63% Mobico Group (MCG) 82.40p -2.60% Asia Dragon Trust (DGN) 344.00p -2.55% Watches of Switzerland Group (WOSG) 690.50p -2.54% Rathbones Group (RAT) 1,698.00p -2.53% PPHE Hotel Group Ltd (PPH) 1,170.00p -2.50% Abrdn Private Equity Opportunities Trust (APEO) 453.50p -2.47%