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London midday: Stocks maintain gains after UK services data

(Sharecast News) - London stocks were still in the black by midday on Monday after better-than-expected UK services data, as investors mulled the latest comments from Federal Reserve chairman Jerome Powell. The FTSE 100 was up 0.4% at 7,646.54.

Russ Mould, investment director at AJ Bell, said: "The markets continue to forge ahead despite a blowout jobs report from the US last Friday which seems to have finally put the nail in the coffin of the idea rates will be cut next month.

"The FTSE 100 clawed its way to its best levels in nearly a month with fairly broad-based strength throughout the index. There are just the first signs that we are inching away from a looking glass world where bad news is good news because of the implications for monetary policy to good news being good news once again."

Investors were digesting comments from Powell. In an interview with US TV show '60 Minutes', he reiterated comments from the press conference last Wednesday, that the FOMC would most likely not begin cutting rates in March.

Danske Bank said: "He also backed the dot plot released at the December meeting indicating FOMC members expect three rate cuts this year. This compares to markets currently pricing in five cuts for 2024.

"Powell emphasised the strength of the economy, underlining a strong jobs market, and saying how the economic pain he forewarned in Jackson Hole in August 2022 may come with the following rate hikes in large parts have not materialised."

Danske noted that the interview was filmed on Thursday, a day before the release of the surprisingly strong non-farm payrolls data.

On the macro front, a survey out earlier showed the UK services sector grew in January at its fastest pace in eight months.

The S&P Global services purchasing managers' index ticked up to 54.3 from 53.4 in December, coming in above the 50 mark that separates contraction from expansion for the third month in a row. It was also above the first estimate and consensus expectations of 53.8.

The composite PMI- which measures activity in the services and manufacturing sectors - rose to 52.9 in January from 52.1. This was above the first estimate and consensus of 52.5 and marked the highest reading since May 2023.

Tim Moore, economics director at S&P Global, said: "The revival in UK service sector performance gained momentum at the start of 2024, with output growth accelerating to its fastest for eight months amid stronger business and consumer spending. New orders have also rebounded this winter as receding recession risks and looser financial conditions led to greater willingness-to-spend among clients.

"Inflationary pressures subsided during January, despite stronger demand conditions. Latest data indicated that total input costs increased at one of the slowest rates seen in the past three years. Softer cost inflation reflected lower energy and fuel costs, alongside falling raw material prices."

Moore said a combination of falling inflation and improving order books provided a strong boost to business activity expectations across the service economy.

"The degree of optimism regarding year ahead growth prospects was the highest since April 2023. Another uplift in business confidence in January provides a signal that elevated levels of geopolitical uncertainty have yet to exert much of a constraint on service sector growth projections for 2024," he said.

In equity markets, spreadbetting and CFD trading group CMC Markets surged as it announced plans to axe 200 jobs following a cost-cutting programme expected to save £21m.

Telecoms giant Vodafone edged lower after it held full-year guidance as it reported a fall in third-quarter service revenues. The company said service revenues fell 1.4% to €9.3bn on a reported basis. Vodafone still expects adjusted core earnings of around €13.3bn and adjusted free cash flow of €3.3bn.

JD Sports was under the cosh after Sky News reported that Liverpool-based Applied Nutrition, which is part-owned by JD, is kicking off preparations for £1bn London flotation.

B&Q and Castorama owner Kingfisher lost ground as JPMorgan Cazenove cut its price target on the shares to 180p from 190p and placed them on 'negative catalyst watch' ahead of full-year results on 25 March.

Land Securities boosted by an upgrade to 'overweight' from 'equalweight' at Morgan Stanley, while British Land ticked up as the bank reiterated its 'overweight' rating.

"The last 10 years were a lost decade for shareholder returns given headwinds in retail (and recently office), Brexit-related uncertainty and Covid offset tailwinds from low rates," the bank said. "However, stabilising property yields with solid total NAV-based returns could drive a further meaningful re-rating."

Market Movers

FTSE 100 (UKX) 7,646.54 0.41% FTSE 250 (MCX) 19,232.49 0.31% techMARK (TASX) 4,394.81 0.66%

FTSE 100 - Risers

Ocado Group (OCDO) 527.60p 4.48% GSK (GSK) 1,645.60p 2.14% Land Securities Group (LAND) 664.40p 2.06% National Grid (NG.) 1,061.50p 2.02% Smith & Nephew (SN.) 1,119.00p 2.01% Scottish Mortgage Inv Trust (SMT) 778.40p 1.83% Burberry Group (BRBY) 1,305.50p 1.79% Fresnillo (FRES) 513.80p 1.62% SSE (SSE) 1,695.50p 1.62% Admiral Group (ADM) 2,514.00p 1.62%

FTSE 100 - Fallers

JD Sports Fashion (JD.) 110.15p -2.52% Spirax-Sarco Engineering (SPX) 9,816.00p -1.35% Airtel Africa (AAF) 109.90p -1.35% Weir Group (WEIR) 1,789.50p -1.27% BP (BP.) 453.30p -1.18% Glencore (GLEN) 413.25p -1.04% Lloyds Banking Group (LLOY) 41.89p -1.00% Barclays (BARC) 149.22p -1.00% Kingfisher (KGF) 212.60p -0.93% IMI (IMI) 1,704.00p -0.76%

FTSE 250 - Risers

W.A.G Payment Solutions (WPS) 89.40p 5.18% Helios Towers (HTWS) 76.05p 3.19% Watches of Switzerland Group (WOSG) 370.80p 3.11% Trustpilot Group (TRST) 181.50p 2.95% Close Brothers Group (CBG) 515.00p 2.79% Wizz Air Holdings (WIZZ) 2,245.00p 2.61% TUI AG Reg Shs (DI) (TUI) 538.00p 2.57% Pets at Home Group (PETS) 276.00p 2.45% Polar Capital Technology Trust (PCT) 2,800.00p 2.38% Auction Technology Group (ATG) 531.00p 1.92%

FTSE 250 - Fallers

PZ Cussons (PZC) 124.60p -3.56% Bakkavor Group (BAKK) 91.20p -3.39% Howden Joinery Group (HWDN) 783.00p -2.49% North Atlantic Smaller Companies Inv Trust (NAS) 3,660.00p -2.40% BBGI Global Infrastructure S.A. NPV (DI) (BBGI) 124.00p -1.90% Abrdn Private Equity Opportunities Trust (APEO) 502.00p -1.76% PPHE Hotel Group Ltd (PPH) 1,185.00p -1.66% Volution Group (FAN) 421.40p -1.59% BlackRock World Mining Trust (BRWM) 528.00p -1.49% FDM Group (Holdings) (FDM) 440.00p -1.46%

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Important information: This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Past performance is not a reliable indicator of future returns.

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