FTSE CLOSE: Market rebounds on U.S. manufacturing growth; UK and China expand too but eurozone falters

FTSE CLOSE: Market rebounds on U.S. manufacturing growth; UK and China expand too but eurozone falters

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Updated: 17:32 BST, 2 April 2012

17.25 (close): The London market erupted into life with gains of nearly 2 per cent today after better-than-expected US manufacturing data revived hopes for the world’s biggest economy.

The FTSE 100 Index closed 106.4 points higher at 5874.9 after an unpredictable session, which saw the market hit negative territory earlier in the day.

The Institute for Supply Management, a trade group of purchasing managers, said its index of manufacturing activity rose to 53.4 in March, from 52.4 the previous month.Economists were expecting the index to rise to 53.0.

The positive reading, the latest in a series of sound economic data from the US, added to optimism in the UK, where a purchasing managers survey showed the manufacturing sector grew in March, lifting hopes that the wider economy may have returned to growth.

Troubling data on the eurozone’s manufacturing sector, which showed its eighth consecutive monthly decline, had weighed on the market earlier in the session but this was overshadowed by the strong US result.

The pound was boosted by the UK manufacturing survey, rising to 1.60 against the US dollar and 1.20 against the euro.

The mining sector received the biggest boost credit score overnight from the improved sentiment around the manufacturing industry in US, as well as China, which also recorded a positive PMI survey for March overnight.

Fresnillo set the pace with a rise of 66p to 1664p, while Rio Tinto was 110p higher at 3556p and Vedanta Resources lifted 32p to 1260p.

Randgold Resources reversed earlier losses, caused by Nomura’s decision to downgrade the stock amid the threat of potential sanctions on Mali, where it has significant operations, and closed 50p ahead at 5420p.

The banking sector also fought back from losses earlier in the session after reports that some of Europe’s major banks will look to repay the cheap three-year funding from the European Central Bank as early as later this year.

Lloyds Banking Group remained unchanged at 33.6p, while Barclays recovered to stand 1.2p higher at 236.5p and HSBC added 3.9p at 558.7p.

In the FTSE 250 Index, industrial conglomerate Cookson rose 6% amid reports it has appointed investment bank Rothschild to work on a plan that would see the electronics division, which makes parts for gadgets including Apple’s iPad, floated on the stock exchange as a stand-alone company.Shares were 41.5p higher at 732.5p.

However, transport firm FirstGroup was on the wrong track, with its shares down 12.7p to 225p, after Deutsche Bank removed its buy rating on the stock due to concerns about the performance of the company’s bus division.

And banking software firm Misys retreated 3 per cent, down 9p to 349p, after CVC Capital Partners and ValueAct – the company’s biggest shareholder – said they were no longer mulling a joint bid for the business.

The decision clears the path for a £1.3billion takeover by US firm Vista Equity Partners, which last month secured the backing of the Misys board.

The biggest Footsie risers were Pearson up 56p at 1221p, Fresnillo ahead 66p at 1664p, Rolls-Royce up 30.5p at 842.5p, SAB Miller ahead 93p at 2602.5p.

The biggest Footsie fallers were Schroders down 15p at 1225p and Man Group off 1.5p at 133.3p.

16.10: London stocks put on a late-session spurt after ISM manufacturing data from the U.S.showed its recovery was still holding up.

The FTSE 100 is 42.7 points higher at 5,811.1 as today’s trading draws to a close. The Dow Jones is flat, down 1.8 points at 13,210.3.

‘It’s been a lacklustre start to the new quarter as markets crossed between positive and negative territory during the morning session in the absence of anything new to drive sentiment,’ said Michael Hewson of CMC Markets.

‘It was the U.S.ISM that provided a positive catalyst in the afternoon session sending stocks higher after a morning of indecision.’

‘Chinese manufacturing PMI data for March gave mixed signals while European economic data proved to be every bit as disappointing as markets expected it to be.’

The eurozone agreed to raise its financial firewall at the end of the last week, but City commentators remain concerned about future shocks in the troubled single currency bloc.

Suki Mann, head of credit strategy at Societe Generale, said: ‘Spain needs some heavy lifting because after all the brouhaha surrounding Greece, the eurozone’s politicians need to get a grip of the issues Spain faces before they spiral totally out of control.

‘The budget last week was tough – some think not tough enough, and we wait to see the domestic and market reaction to it. If the “authorities” don’t get a grip, Greece’s woes will pale into insignificance by comparison (firewall or no firewall).’

15.35:

The U.S.manufacturing sector expanded in March although performance just missed economists’ expectations.

The monthly ISM survey showed a reading of 53.4 – up from 52.4 in February but lagging forecasts of a rise to 53.5. Any figure above 50 denotes growth.

Christopher Low, economist at FTN Financial, told Reuters the figure was about as expected.

‘It’s been in the low 50s since last August.It’s still right in the middle of that range, suggesting that manufacturing is still chugging along here in the U.S. even though manufacturing is in a recession in Europe and just barely growing in China.’   

Construction spending in the U.S.slid 1.1 per cent in February, versus a predicted 0.7 per cent gain.

The Dow Jones has crept into the black to trade 3 points higher at 13,215.

The FTSE 100 has bounced 43.4 points higher to 5,811.8.

14.40:

The Dow Jones has slid ahead of March manufacturing and February construction data due out later.

The U.S.index is down 26.2 points at 13,185.7 on the open. The FTSE 100 is still trading flat, up 6.3 points at 5,774.7.

‘The overriding fear remains that we see a repeat of a year ago where expectations were for the economic recovery to grab a stronghold and continue well into this year only for the European sovereign debt crisis to blow up in investors’ faces,’ said Simon Denham of Capital Spreads.

‘So far 2012 has started in a similar fashion as businesses are becoming slightly more optimistic about the future and they are starting to recruit a few more people in expectation of improving growth, but they are holding back from really ramping up investment as they don’t want to have their fingers burnt again like they were this time last year. 

‘There’s a high probability that the next European nation might become embroiled in the crisis with either Portugal needing another bailout or Spain and Italy, far bigger economies than those bailed out so far, suddenly falling off their tightrope.’

13.15:

Weakness in banking stocks is holding back the wider market today – the FTSE 100 is just 1.6 points lower at 5,766.9 at lunchtime.

Barclays was 4.7p lower at 230.6p, HSBC dipped 10.3p to 544.5p and Lloyds Banking Group retreated 0.8p to 32.8p.

Their disappointing performance offset gains for the mining sector after China’s manufacturing sector gained ground – helping to dispel fears about a hard landing for the world’s second-largest economy.

Fresnillo set the pace with a rise of 42.5p to 1640.5p, while Rio Tinto was 46.75p higher at 3492.5p and Vedanta Resources lifted 13p to 1241p.

The exception proved to be Randgold Resources, which declined 117.5p to 5252.5p, after Nomura downgraded the stock amid the threat of potential sanctions on Mali, where it has significant operations.

And banking software firm Misys retreated 3 per cent, down 9.75p to 348.25p, after CVC Capital Partners and ValueAct – the company’s biggest shareholder – said they were no longer mulling a joint bid for the business.

The decision clears the path for a £1.3billion takeover by US firm Vista Equity Partners, which last month secured the backing of the Misys board.

11.10:

UK manufacturing expanded by more than expected in March, the latest Markit/CIPS survey revealed.

It hit a 10-month high of 52.1, which was higher than February’s score and exceeded City expectations of 50.8, although the growth was partly driven by companies building up levels of inventories at record rates.

A reading above 50 represents growth and one below contraction.

Similar eurozone data proved dismal, with the major economies seeing a contraction in manufacturing last month, while a separate unemployment report from the euro bloc showed a sharp rise in the number of people out of work in February.

‘Not a good day for the eurozone economy with news of another sharp overall rise in the number of jobless in February following on from the purchasing managers confirming that manufacturing activity contracted at an increased rate in March,’ said economist Howard Archer of IHS Global Insight.

‘It looks odds-on that eurozone GDP contracted again in the first quarter of 2012 after a drop of 0.3 per cent quarter-on-quarter in the fourth quarter of 2011, thereby moving into recession. And the prospects for the second quarter of 2012 currently hardly look rosy!’

An early rally on the FTSE 100, fuelled by better than expected Chinese factory activity, has ran out of steam and it was down 3.2 points at 5,765.3 in late-morning trading.

In the FTSE 250, industrial conglomerate Cookson rose nearly 5 per cent amid reports it has appointed investment bank Rothschild to work on a plan that would see the electronics division, which makes parts for gadgets including Apple’s iPad, floated on the stock exchange as a stand-alone company.Shares were 34p higher at 725p.

However, transport firm FirstGroup was on the wrong track, with its shares down 9.85p to 227.85p, after Deutsche Bank removed its buy rating on the stock due to concerns about the performance of the company’s bus division.

Five-a-side pitch operator Goals Soccer Centres leapt 18 per cent or 19p to 126.5p after it emerged it was the subject of takeover interest from Ontario Teachers’ Pension Plan.

8.40:

The FTSE 100 is 26.1 points higher at 5,794.6 as investors welcome upbeat news from China’s factory sector which suggests that recent fears of a sharp slowdown may have been overdone.

On the continent, Germany’s DAX is up 61.7 points at 7,008.5 and France’s CAC 40 is ahead 13 points at 3,436.8.

‘The Chinese PMI data over the weekend was a case of something for everyone,’ said Gary Jenkins of Swordfish Research.

‘The official number of 53.1 beat expectations and was indicative of growth, but would suggest less of a need for immediate monetary stimulus, whereas the HSBC equivalent came in at a disappointing 48.3, which would suggest a need for further easing.

‘Today we have ISM manufacturing from the U.S., PMI manufacturing from the UK and Europe, with unemployment data from the latter too.’

Preview: The FTSE 100 is forecast to open up 10-15 points as surprisingly strong Chinese manufacturing data eased recent worries about global economic prospects.

China’s big factories were surprisingly busy in March – the country’s official measure of manufacturing activity jumped to 53.1 in March, up from February’s 51 and comfortably beating forecasts of 50.5.A figure above 50 indicates growth and below a contraction.

‘The figure was in stark contrast to the unofficial HSBC Chinese PMI print of 48.1 just over a week ago and may somewhat ease some market concerns about the extent of China’s slowing economy,’ said IG Markets analyst Cameron Peacock.   

The blue-chip Footsie index closed up 26.24 points at 5,768.45 on Friday, supported by strength in mining stocks on the final session of the first quarter.

The index snapped a three-month winning streak to close down 1.8 per cent in March, but recorded a quarterly gain of 3.5 per cent.       

London copper futures rose overnight as the upbeat Chinese manufacturing data helped calm fears about a sharp slowdown in the world’s top consumer of the metal.

Brent crude also rose above $123 following the news from China, and as continuing tension in the Middle East threatened crude supplies.

Financial firms in Britain, including banks hit in 2011 by the eurozone debt crisis, have started taking on new staff again, confounding forecasts for more lay-offs, according to a survey by the Confederation of British Industry and accounting and consultancy firm PricewaterhouseCoopers.

On the economic data front, the March Markit/CIPS manufacturing purchasing managers’ index will be released later with a reading of 50.7 forecast, down from 51.2 in the previous month.

Stocks to watch include:

Royal Bank of Scotland: Sovereign wealth funds Qatar Investment Authority, Singapore’s Temasek Holdings and the Government Pension Fund of Norway are understood to be weighing up whether to bid for part of the UK government’s 82 per cent stake in RBS, the Sunday Express said.

Also, RBS Chief Executive Stephen Hester has held meetings with fund managers about making a major investment in the bank priced at as low as 32 pence a share, the Sunday Telegraph said.  

The state-owned lender is expected to reinstate dividends on its preference shares in May, which could lead to a £400million capital raising, the Daily Telegraph said on Monday.    

Lloyds Banking Group: Former Northern Rock chief executive Gary Hoffman’s buyout vehicle NBNK Investment is planning to restart its campaign to buy more than 600 branches from Lloyds this week, according to industry sources, the Sunday Times said.    

BSkyB: Two key independent directors at BSkyB are set to leave as the pay-TV company embarks on an overhaul of its board that could weaken its unanimous backing of James Murdoch as chairman, the Financial Times said.        

Vodafone: The mobile phones operator is ready to take the Indian government to the United Nations over its demands for the telecoms company to hand over more than $2billion in back-dated tax, the Independent on Sunday said.    

Diageo: The drinks group has instructed Goldman Sachs to finalise its talks on taking a stake in Jose Cuervo, valuing the Mexican tequila brand in the region of $3billion, the Sunday Telegraph said.   

GlaxoSmithKline: A new once-daily AIDS drug from Glaxo and its partner Shionogi proved as effective as Merck & Co’s twice-daily rival product Isentress in a late-stage clinical trial. 

London Stock Exchange: The bourses operator closed in on completing its takeover of European clearing house LCH.Clearnet, saying the $1billion deal had won the approval of the majority of shareholders and was expected to conclude in the fourth quarter.

Cookson: The British firm is working on a plan to spin off its electronics business, which accounts for about a third of its annual sales, and list it as a standalone company. It has appointed Rothschild to work on the proposal, the Sunday Times said. 

3i Group: Top shareholders want a radical new strategy at the quoted private equity firm after the departure of chief executive Michael Queen last week.They are calling for rapid sell-offs and savage cost cuts, and have even suggested the firm considers selling all of its assets and closing down, the Sunday Times said.  

Balfour Beatty: The contractor is looking to sell its one-third stake in London’s University College Hospital, which it hopes will fetch £60million to £80million , the Independent on Sunday said. 

United Business Media: Helen Alexander, a former CBI president and chairman of privately owned publisher Incisive Media, is understood to have been lined up to chair the publishing and events business, the Independent on Sunday said.       

Hikma Pharmaceuticals: The drugs group plans to spend nearly $300million on acquisitions and expansion initiatives in 2012 amid strong growth prospects in the Middle East and North Africa, its chief financial officer Khalid Nabilsi told Reuters.       

Goals Soccer Centres: The British five-a-side soccer operator, responding to weekend press speculation, confirmed that it has received a bid approach from the private equity arm of Canada’s Ontario Teachers’ Pension plan. 

Falklands oil explorers: A group of British and American banks have been threatened with legal action by the Argentine government for advising companies involved in the Falkland Islands’ £1.6billion oil industry, the Sunday Telegraph said.