FTSE 100 parks itself just above the 7,100 level, lifted by aerospace stocks
The agreed bid for Meggitt has prompted speculators to take a butcher’s at aerospace related stocks
- FTSE 100 rises 72 points
- UK PMI ebbs to 60.4 in July from 63.9 in June
- Unite Group higher after broker upgrade
Reacting to this morning’s UK PMI manufacturing data, Pantheon Macroeconomics said the manufacturing recovery had been temporarily slowed by rising COVID-19 cases.
“The sharp decline in the new orders index to 57.3 in July, from 64.2 in June, demonstrates that the slowdown primarily was demand-led, though production also remains constrained by supply issues. Even with the diminished rate of demand growth, suppliers’ delivery times continued to lengthen rapidly and work backlogs continued to accumulate, albeit both at slower rates than in the previous two months. In addition, producers remained successful in passing on higher input prices to customers; the output price index remained in July at a level consistent with a further rise in producer output price inflation to about 5.5% in the autumn, from 2.7% in June,” said Pantheon’s Samuel Tombs.
“Looking ahead, the adverse impact of Covid-19 on production lines should ease over the coming months, thanks to changes to self-isolation rules for doubly-vaccinated workers and an easing of social distancing rules. Expanding manufacturers also should be able to source new employees more easily after the furlough scheme has been wound down at the end of September. Nonetheless, demand likely is being supported at present by firms panic-buying goods in order to rebuild their inventories, as well as by high demand for consumer goods, because Covid-19 still is dissuading people from purchasing services. These temporary supports to demand probably will have faded by the end of this year, leaving both goods output and prices vulnerable to fall back in the winter,” Tombs added.
The FTSE 100 seems to have parked itself just above the 7,100 level now; it is up 72 points at 7,105.
() is failing to get with the programme, shedding 2.8% at 844.8p, giving back some of the gains made on Friday following its halfway decent half-year report.
Student accommodation operator () was 2.8% firmer at 1,189.5p after Barclays upgraded the stock to ‘overweight’ from ‘underweight’, although the price target remains unchanged at 1,250p.
The UK Manufacturing purchasing managers’ index (PMI) for July slipped to at 60.4 from 63.9 in June, IHS Markit/CIPS revealed.
A reading above 50 indicates an expansion in activity.
Although rates of expansion in output and new orders slowed, they remained among the best in the survey history amid robust sales to both domestic and export clients, IHS Markit reported.
Scarcities remained a prime concern, however, as stretched supply chains and staff shortages were constraints preventing faster growth of output and employment, it added.
“Although July saw UK manufacturers report a further month of solid growth, scarcities of inputs, transport and labour are stifling many businesses,” said Rob Dobson, IHS Markit director.
UK July Final Markit Manufacturing PMI Report – IHS Markithttps://t.co/vJcy8JLhsG pic.twitter.com/hrO7ye9pXA
— LiveSquawk (@LiveSquawk) August 2, 2021
“On one hand, manufacturers are benefiting from reopening economies. This is leading to solid inflows of new work from both domestic and overseas markets, including the US, the EU, China and the Middle East.
“On the other, the recent surge in global manufacturing growth has led to another month of near-record supply chain delays, exacerbated by factories and their customers building up safety stocks. Some firms also noted that post-Brexit issues were still a constraint on efforts to rebuild sales and manage supply and distribution channels to the EU,”2 he added.
Duncan Brock, the group director at the Chartered Institute of Procurement & Supply (CIPS), said UK manufacturing in July was one again unable to maintain the pace of output growth seen earlier in the year, such as in May, when the PMI hit a new high.
“A mismatch in global recovery rates following the pandemic meant some businesses abandoned their usual suppliers to seek new sources and avoid elevated lead times and the shortages gripping the sector. Disruption is a worldwide problem however, so there was likely to be limited success in re-modelling supply chains completely with the challenges too difficult to circumnavigate,” Brock said.
“As more and more supply chain managers chased fewer materials, three quarters of manufacturing companies paid higher prices as the weight of inflation bore down on an increasing number of input items. Firms were also in stronger pursuit of skilled labour as recruitment became more difficult with workers changing jobs, isolating or hesitating to return,” he added.
The FTSE 100 as up 62 points (0.9%) at 7,094.
8.40am: Meggitt soars as it agrees to takeover
The sun is shining outside and on traders’ screens as aerospace and retail-related stock lead the Footsie’s advance in London.
The FTSE 100 was up 70 points (1.0%) at 7,102, with (), owner of aerospace and automotive engineer (), on top of the tree with a 5.7% gain.
Also going well were British Airways owner International Consolidated Airlines SA, up 4.2%, and aeroplane engine maker (), up 4.1%.
It appears speculators are taking a punt on the sector after () soared 59% to 745.8p this morning on an agreed bid from () worth 800p in cash per share.
The terms value Meggitt at roughly £6.3bn.
() is leading the way in the retail sector, as it often does, with a 3.1% gain at 8,122p while (), up 2.6% at 920.2p, is in hot pursuit.
Banking giant HSBC Holdings PLC outperformed the market, rising 1.4% to 403.1p after its results announcement.
“The banking bounce back has continued with HSBC doubling first-half pre-tax profits as economies come out of their defensive hiding places, and the spectre of bad debt recedes,” said Susannah Streeter at Hargreaves Lansdown.
“The worst-case scenario of an increase in bad loans hasn’t materialised, so the bank has been confident enough to release over $700 million that had been set aside as a buffer. It is in stark contrast to a year ago when it clocked up US$6.9 billion in impairment charges.
“Given the frightening twists the global economy has had to deal with due to the emergence of new variants, the worry is that there could still be monsters lurking under the bed, so the bank is keen to stress it views the recovery as still in the early stages. If inflation lingers, central banks may be minded to push up rates more quickly but that still looks like it is quite far down the road,” she added.
(), in contention for the little-wanted accolade of London’s least sexy stock, was up 1.8% at 1,471p after it agreed to sell its one-third stake in gas distribution operator Scotia Networks for £1,225mln in cash.
6.45am: Risk-on back on
The FTSE 100 is expected to jump 37 points at the very start of the week as risk sentiment is rebounding after a sour end to last week, according to ().
“Last week Asia markets saw big declines due to a regulatory crackdown in China, with the Nikkei more or less trading near to its lows this year and the Hang Seng trading at a nine-month low. The extent of the falls appeared to prompt a partial backtrack, or softening of tone by the Chinese authorities prompting a little bit of a rebound which appears to have continued today in Asia,” said Michael Hewson at CMC Markets.
Monday will see the release of manufacturing PMIs for July across Europe, with the UK expected to see a slowdown to 60.4, from 63.9 due to disruptions caused by staff shortages, and interruptions to supply chains due to a rise in infections and workers self-isolating.
Input costs are also rising, raising some concern that price rises could become more persistent and act as a brake on consumer confidence.
6.50am: Early Markets – Asia / Australia
Stocks in the Asia-Pacific region were higher on Monday as U.S. fintech firm Square announced it has agreed to buy Australian buy now, pay later giant Afterpay.
The Shanghai Composite in China surged 1.40% and Hong Kong’s Hang Seng index lifted 1.04%
In Japan, the Nikkei 225 jumped 1.89% while South Korea’s Kospi gained 0.55%.
Shares in Australia surged, with the S&P/ASX 200 trading 1.41% higher.
FTSE 100 parks itself just above the 7,100 level, lifted by aerospace stocks
Tags: FTSE Stock Market
Latest News on C N N.