London midday: FTSE maintains gains after manufacturing data

(Sharecast News) - London stocks were still in the black by midday as investors continued to cheer an easing in US inflation and mulled the latest UK manufacturing figures. The FTSE 100 was up 0.7% at 7,680.28.

Richard Hunter, head of markets at Interactive Investor, said: "The personal consumption expenditures price index is the Federal Reserve's preferred inflation measure and revealed the slowest annual increase for almost three years in January. The core monthly increase of 0.4% led to an annual rate of 2.8%, down from a previous 2.9% and excluding food and energy prices. Meanwhile, the headline numbers were both in line with estimates, rising by 0.3% and 2.4% respectively.

"The figures were met with some relief, especially given recent CPI and PPI readings which came in hotter than expected, thus igniting fears of a reacceleration of inflation. The news provides the potential for an interest rate cut in June to still be on the table, even if at the broadest level there are few signs of a weakening US economy, let alone one which is veering towards recession. The situation therefore remains finely balanced, and the Fed's previous mantra of 'higher for longer' looks increasingly prescient given the current showings from economic data."

On home shores, a survey showed the downturn in the manufacturing sector continued in February amid disruption from the Red Sea crisis.

The S&P Global manufacturing purchasing managers' index ticked up to 47.5 from 47.0 in January. It came in above the flash estimate of 47.1 but still below the 50.0 mark that separates contraction from expansion for the 19th month in a row.

The survey found that the ongoing crisis in the Red Sea caused disruptions to both production and vendor delivery schedules. In several cases, manufacturers mentioned that these disruptions were driving up costs as they attempted to find alternative suppliers from more expensive markets closer to home.

Demand also remained weak, with new order intakes falling at the fastest rate since last October.

Rob Dobson, director at S&P Global Market Intelligence, said: "UK manufacturers faced challenging circumstances in February, as the ongoing impact of the Red Sea crisis delayed raw material deliveries, inflated purchase prices and impacted production capabilities. There were also knock-on effects for demand, as new export orders were hit by both supply disruptions and higher shipping costs. Production volumes subsequently contracted for the twelfth successive month while total new orders fell at the sharpest rate since October.

"The impacts were felt particularly hard on the price and supply fronts. Input cost inflation hit an 11-month high, leading to a further increase in selling prices. Average supplier lead times meanwhile lengthened to the greatest extent since mid-2022. Several manufacturers noted that they faced the difficult choice between accepting delays from re-routed shipping or facing the prospect of paying higher prices to source from closer to home. This comes at a time of already heightened cost caution at manufacturers in response to weak demand, as highlighted by further cuts to employment, purchasing and inventories in February.

"Although the supply impact and effect of prices is muted by standards seen at the height of the pandemic, any upward pressure on inflation will be a concern to policymakers and may add to calls that it is too early to be confident on the timing of interest rate cuts."

Data released earlier by Nationwide showed that annual house prices returned to growth in February for the first time in more than a year following a dip in borrowing costs.

House prices rose by 1.2% on the year following a 0.2% decline in January. On the month, prices were up 0.7%, the same as in January, with the average price of a home standing at £260,420, versus £257,656.

Nationwide said house prices are now around 3% below the all-time highs recorded in the summer of 2022, after taking account of seasonal effects.

Nationwide chief economist Robert Gardner said: "The decline in borrowing costs around the turn of the year appears to have prompted an uptick in the housing market. Indeed, industry data sources point to a noticeable increase in mortgage applications at the start of the year, while surveyors also reported a rise in new buyer enquiries.

"Nevertheless, near-term prospects remain highly uncertain, in part due to ongoing uncertainty about the future path of interest rates. After falling sharply in late December, swap rates, which underpin fixed rate mortgage pricing, have drifted back up."

Separate figures showed that retail footfall plunged last month as the unusually wet weather kept shoppers at home.

In equity markets, education publisher Pearson rallied as it said it expected 2024 earnings to be in line with expectations after reporting a rise in annual profits driven by strong demand for its English language courses and extending its share buyback by £200m.

ITV surged to the top of the FTSE 250 after the broadcaster said it had sold its entire 50% stake in streaming service BritBox International to its joint venture partner BBC Studios for £255m in cash.

On the downside, Rightmove slumped as it warned that customer numbers were likely to decline this year amid uncertainty about interest rates and mortgage borrowing costs.

Specialist engineer IMI lost ground even as it reported a 12% jump in 2023 profits and forecast higher earnings this year, driven by a strong order book.

Market Movers

FTSE 100 (UKX) 7,680.28 0.66% FTSE 250 (MCX) 19,225.65 0.90% techMARK (TASX) 4,371.16 0.05%

FTSE 100 - Risers

Barclays (BARC) 170.96p 3.95% Pearson (PSON) 993.40p 3.41% SEGRO (SGRO) 872.40p 3.19% Vodafone Group (VOD) 70.75p 2.36% Airtel Africa (AAF) 97.00p 2.27% NATWEST GROUP (NWG) 244.50p 2.26% Anglo American (AAL) 1,736.40p 2.08% Reckitt Benckiser Group (RKT) 5,102.00p 2.08% Croda International (CRDA) 4,864.00p 2.06% BP (BP.) 469.65p 1.94%

FTSE 100 - Fallers

Ocado Group (OCDO) 493.80p -3.44% Rightmove (RMV) 553.80p -2.26% Hikma Pharmaceuticals (HIK) 1,932.50p -1.75% Melrose Industries (MRO) 625.00p -1.57% Relx plc (REL) 3,413.00p -1.39% St James's Place (STJ) 497.40p -1.11% Antofagasta (ANTO) 1,797.50p -1.10% IMI (IMI) 1,715.00p -1.04% Experian (EXPN) 3,354.00p -0.92% Bunzl (BNZL) 3,125.00p -0.89%

FTSE 250 - Risers

ITV (ITV) 64.48p 15.27% Close Brothers Group (CBG) 370.20p 6.75% TBC Bank Group (TBCG) 3,130.00p 5.74% Bank of Georgia Group (BGEO) 4,960.00p 5.31% North Atlantic Smaller Companies Inv Trust (NAS) 3,780.00p 4.71% OSB Group (OSB) 433.40p 4.18% Big Yellow Group (BYG) 1,038.00p 3.49% Shaftesbury Capital (SHC) 128.10p 3.39% Harbour Energy (HBR) 260.20p 3.09% Victrex plc (VCT) 1,266.00p 2.93%

FTSE 250 - Fallers

Vesuvius (VSVS) 468.00p -3.43% Spectris (SXS) 3,414.00p -2.60% Man Group (EMG) 238.60p -2.01% Mobico Group (MCG) 76.75p -1.60% Morgan Sindall Group (MGNS) 2,310.00p -1.49% Foresight Group Holdings Limited NPV (FSG) 424.00p -1.17% Genus (GNS) 1,772.00p -1.12% NCC Group (NCC) 125.00p -1.11% Quilter (QLT) 95.50p -0.98% Computacenter (CCC) 2,874.00p -0.96%