A rise in oil prices was supporting the FTSE 100 index at midday on Monday, but a survey showing the UK manufacturing sector continues to go in reverse was keeping the overall London market under a lid.
The FTSE 100 index was up 60.87 points, 0.8%, at 7,692.61. The FTSE 250 was down 7.46 points at 18,920.84. The AIM All-Share was up 5.66 points, 0.7%, at 814.93.
The Cboe UK 100 was up 0.7% at 769.17, the Cboe UK 250 was down 0.2% at 16,518.48, and the Cboe Small Companies was up 0.5% at 13,297.40.
The UK manufacturing sector fell further into contraction territory in March. The S&P Global/CIPS manufacturing purchasing managers’ index fell to 47.9 points in March from 49.3 the month before. February’s reading had been a seven-month high.
This marks the eighth consecutive month that the PMI reading for the UK factory sector has stayed below the neutral 50-point mark.
S&P explained that output was scaled back in response to subdued market demand, declining new export orders, and a preference among companies for reduced inventory holdings. It added that market conditions remained ‘tough’ in March.
However, business confidence strengthened to a 13-month high, with almost 60% of UK manufacturers forecasting output to rise over the coming year.
A similar story was seen in the eurozone, where the manufacturing sector remained in a state of contraction in March. The PMI fell to a four-month low of 47.3 points from February’s reading of 48.5.
‘Eurozone manufacturing remains in troubled waters, with factories reporting a fall in demand for goods for an eleventh straight month amid the surging cost of living, tighter monetary policy, a shift to inventory destocking and subdued customer confidence,’ said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Meanwhile, oil prices jumped after Saudi Arabia led a coordinated production cut by major oil powers on Sunday, despite US pressure to pump more crude, saying they were aiming at market stability.
Cuts by the Saudis, Iraq, UAE, Kuwait, Algeria and Oman from May to the end of the year will total more than one million barrels per day - the biggest reduction since the OPEC+ cartel slashed two million barrels per day in October. Russia, a member of OPEC+, said it also was extending its cuts of 500,000 barrels per day to the end of this year, calling it ‘a responsible and preventive action’.
A Saudi energy ministry official ‘emphasised that this is a precautionary measure aimed at supporting the stability of the oil market’, the official Saudi Press Agency said.
‘The decision by the oil producers’ cartel, unusually taken outside of any officially scheduled meeting, represents a flexing of its muscles and potentially a pre-emptive move as it anticipates a drop-off in crude demand relating to the collapse of [Silicon Valley Bank] and ensuing banking crisis,’ said Danni Hewson, head of financial analysis at AJ Bell.
On the back of the news, FTSE 100 oil company shares were in demand. BP rose by 4.3%, whilst Shell added 4.1%. In the FTSE 250, Harbour Energy was up 6.2% and Tullow Oil 4.0%.
Brent oil was quoted at $83.89 a barrel at midday in London on Monday, up from $79.14 late Friday.
Elsewhere in the FTSE 100, UK Government Investments said it has agreed to extend, for the second time, the sale of part of the Treasury’s shareholding in NatWest Group. NatWest was up 1.5%.
The sale is part of the trading plan that was announced in July 2021, and first extended in June last year, meaning that the plan will now end by August 2025, rather than August 11 this year.
The UK government currently holds a 41.5% stake in the lender, following a taxpayer bailout in 2008. Last month, the government reaffirmed its commitment of disposing of all of its stake in the bank by 2026.
Elsewhere, WANdisco said Co-founder & Chief Executive Officer David Richards and Chief Financial Officer Erik Miller have decided to step down, amid an investigation by FRP Advisory.
In March, WANdisco suspended trading in its shares after uncovering signs of possible ‘sophisticated’ fraudulent activity, just days after it announced it was exploring a potential US listing.
WANdisco on Monday noted that the board changes are not connected to the findings to date of the independent investigation, which is ‘progressing well’.
‘It is in the best interests of all stakeholders if [the objective of lifting the suspension of company shares] is pursued under new leadership,’ WANdisco said.
WANdisco said the investigation so far has confirmed that both the purchase orders giving rise to revenue of $14.9 million and sales bookings of $115.5 million recorded for 2022 are false.
Accordingly, it said 2022 revenue should have been $9.7 million and not $24 million as previously reported. Bookings should have been $11.4 million, instead of $127 million.
‘The results of the independent investigation to date continue to support the initial view that the irregularities are as a result of the actions of one senior sales employee,’ WANdisco said on Monday.
In European equities on Monday, the CAC 40 in Paris was up 0.5%, while the DAX 40 in Frankfurt was up 0.1%.
Commenting on the eurozone PMI results, Capital Economics said: ‘Surveys suggest that easing demand diminished the strain on supply chains, thus softening cost pressures - along with lower commodity prices - and making for a gradual decline in inflation. However, when the pile of backlogs is depleted and the restocking process is complete, support to industrial activity will falter.’
The dollar was mostly higher. The pound was quoted at $1.2358 at midday on Monday in London, lower compared to $1.2370 at the equities close on Tuesday. The euro stood at $1.0865, marginally higher against $1.0863. Against the yen, the dollar was trading at JP¥133.27, up compared to JP¥132.90.
Stocks in New York were called to open mixed on Monday. The Dow Jones Industrial Average was called up 0.4%, the S&P 500 index down 0.1%, and the Nasdaq Composite down 0.6%.
Gold was quoted at $1,969.99 an ounce against $1,979.05.
Still to come in Monday’s economic calendar is a US manufacturing PMI reading at 1445 BST.
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