London close: Shares little changed despite upbeat services data
London stocks were mired in the red on Wednesday as the pound ticked higher on the back of better-than-expected services data and with global trade concerns still weighing on investor sentiment.
The FTSE 100 was down 0.27% or 20.20 points to 7,573.09, with volumes lighter than usual as US markets remained shut for the Independence Day holiday.
Sterling was up 0.22% versus the dollar at 1.3222 and 0.34% firmer against the euro at 1.1356 after data revealed that activity in the UK dominant services industry improved much more than expected last month, suggesting the British economy grew 0.4% in the second quarter of the year, in turn raising the chances that the Bank of England will hike interest rates in August.
The UK services purchasing managers' index from IHS Markit/CIPS increased to 55.1 in June, the most positive growth sentiment since October and up from 54.0 in May, the level at which economists had expected it to remain.
Recent PMIs pointed to quarterly growth in services output of around 0.5% over the three months to June, up from the first quarter's 0.3% rate. The survey's forward-looking balances also indicated that solid growth in the services sector should be sustained in the coming months.
Chris Williamson, chief business economist at IHS Markit, said: "The signs of the economy rebounding in the second quarter accompanied by rising price pressures will add to expectations that the Bank of England will hike interest rates at its August meeting. Yet the details of the survey hint at the need for caution.
"Of greatest concern, companies' views on expected future growth remained worryingly downbeat. The survey responses indicate that political uncertainty, and Brexit in particular, continues to stoke nervousness about the outlook.
"Headline service rebounded in June, and now indicates a full retracement of the weather-related weakness in Q1 and offsets the lacklustre sentiment in manufacturing. The Composite PMI reading above 55 is consistent with a rebound in hard data and, potentially, provides support for the more hawkish members of the BoE ahead of the August meeting," said Fabrice Montagne at Barclays Research.
"Next week's activity data and new monthly GDP release will be key to watch for evidence of the Q2 rebound."
More broadly, trade worries persisted ahead of a 6 July deadline for Washington to levy tariffs on $34bn-worth of Chinese made goods.
On a more positive note, the Financial Times reported that EU officials were considering talks on a tariff-cutting deal between the world's big car exporters to prevent an all-out trade war with the US.
In the companies space, BP slipped as it entered into agreements with ConocoPhillips that will significantly increase its holding in the Clair field, a core asset of BP's North Sea business in the UK, while also selling its non-operating interest in the Kuparuk and satellite oilfields in Alaska.
Building products supplier SIG recovered from early weakness after it reported a slight improvement in UK sales in the second quarter but a slowing of growth in Europe.
Compass Group slid after announcing that Johnny Thomson will step down from his role as finance director and leave the company by the end of December.
On the upside, Anglo American advanced following a report that Anil Agarwal, who owns 19.35% of the company, is preparing a plan to merge Vedanta Resources and Anglo American's South African business via a share swap.
Sainsbury's also gained despite saying that revenue growth slowed in the first quarter as the supermarket chain cut prices to sell more items to customers.
FTSE 250 bus and rail operator National Express rose after saying that its Spanish and Moroccan division, ALSA, has been awarded a "major" bus contract worth €1bn that will see it become the largest transport operator in Morocco.
TalkTalk was a high riser as it emerged that Toscafund Asset Management lifted its stake in the company to 16.2% from 15.1%.
In broker note action, Petra Diamonds got a boost from an upgrade to 'outperform' at RBC Capital Markets, but Vesuvius was hit by a double downgrade to 'underperform' from Bank of America-Merrill Lynch.
Market Movers
FTSE 100 (UKX) 7,573.09 -0.27%
FTSE 250 (MCX) 20,652.51 -0.06%
techMARK (TASX) 3,511.85 -0.02%
FTSE 100 - Risers
Sainsbury (J) (SBRY) 328.00p 2.95%
BT Group (BT.A) 229.00p 2.69%
Anglo American (AAL) 1,674.40p 2.11%
Marks & Spencer Group (MKS) 306.10p 1.87%
Micro Focus International (MCRO) 1,258.00p 1.82%
ITV (ITV) 173.20p 1.35%
WPP (WPP) 1,173.50p 1.25%
Hargreaves Lansdown (HL.) 1,987.00p 1.12%
St James's Place (STJ) 1,163.50p 1.09%
Vodafone Group (VOD) 187.80p 0.97%
FTSE 100 - Fallers
Antofagasta (ANTO) 944.00p -2.68%
Evraz (EVR) 490.20p -2.54%
BHP Billiton (BLT) 1,630.80p -2.35%
Rio Tinto (RIO) 3,966.00p -2.28%
Intertek Group (ITRK) 5,546.00p -1.84%
Burberry Group (BRBY) 2,054.00p -1.77%
Compass Group (CPG) 1,594.00p -1.73%
Melrose Industries (MRO) 205.10p -1.72%
Johnson Matthey (JMAT) 3,500.00p -1.60%
Mondi (MNDI) 2,005.00p -1.57%
FTSE 250 - Risers
Contour Global (GLO) 250.00p 8.70%
TalkTalk Telecom Group (TALK) 110.00p 5.06%
Stagecoach Group (SGC) 157.80p 5.06%
IntegraFin Holding (IHP) 384.00p 4.92%
Euromoney Institutional Investor (ERM) 1,434.00p 3.17%
Rank Group (RNK) 191.60p 3.08%
Syncona Limited NPV (SYNC) 261.99p 2.93%
CLS Holdings (CLI) 232.00p 2.65%
Investec (INVP) 552.80p 2.45%
Inmarsat (ISAT) 523.60p 2.39%
FTSE 250 - Fallers
Ferrexpo (FXPO) 173.55p -4.17%
Ibstock (IBST) 284.40p -3.98%
888 Holdings (888) 263.40p -3.37%
Capita (CPI) 156.90p -3.15%
Vesuvius (VSVS) 570.50p -3.14%
Premier Oil (PMO) 118.40p -3.03%
Senior (SNR) 293.80p -2.91%
Playtech (PTEC) 540.20p -2.77%
Ascential (ASCL) 435.80p -2.68%
IMI (IMI) 1,078.00p -2.53%