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London open: Stocks gain as China service activity improves in October
UK stocks gained on Wednesday after a report showed a pick-up in service sector growth in China.
Caixin’s purchasing managers’ index on China services rose to 52 in October from 50.2 in September, above the 50 level that signals an expansion.
“With China’s Caixin services PMI coming in higher than expected, and lifting the Shanghai Composite over 4% higher in the process, there was enough good cheer in the air for the FTSE to start the day with a bang instead of its recently regular whimper,” said Connor Campbell, financial analyst at Spreadex.
“That positive figure from China appears to have inspired a bit more of an appetite in the commodity sector, with the oil and mining stocks looking fairly strong.”
Markit releases its PMI on UK services activity at 0930 GMT with analysts predicting an increase to 54.5 in October from 53.3 the previous month. It will also publish its final estimate of US services PMI at 1445 GMT, while ISM will reveal its non-manufacturing composite at October.
Also in focus in the US, ADP releases its employment report. Analysts expect the US added 180,000 jobs in October. While the private payrolls report is not seen as important as the government’s monthly non-farm payrolls figures, it may provide some clues to the latter ahead of its Friday release.
The Federal Reserve will be scrutinising the data as it determines the best timing for an interest rate hike.
Fed speakers, including chief Janet Yellen and officials Lael Brainard and William Dudley, may offer hints on rates later on Wednesday.
“While Ms Yellen’s thoughts will be of particular interest markets will also be focussing on the view of Ms Brainard given how dovish she was in her previously reported comments, and whether she still believes that economic risks are ’tilted to the downside’,” said Michael Hewson, chief market analyst at CMC Markets.
In company news, Marks & Spencer gained after reporting an increase in first half profit as strong food counterbalanced weak clothing sales.
Legal & General rallied as it posted a 14% rise in net cash generation for the first nine months of the year as it said it is ahead of its target to deliver £80m of operating cost savings this year.
Glencore surged after reporting “significant progress” on plans to cut net debt to the low $20bns by the end of 2016 and increased output from its mines generally in line with estimates.
SABMiller climbed on news it has secured another deadline extension from the Takeover Panel for Anheuser-Busch InBev to make a formal offer to the company, as the two look to iron out the details and get shareholder backing for the £68bn deal.
Old Mutual jumped as it reported a 31% gain in third quarter sales.
Wizz Air Holdings declined despite posting an increase in interim profit, driven higher by a rise in the number of passengers it carried in the period.
Countrywide slumped after saying it slow pace of recovery in housing sales transactions will most likely result in volumes for year being at least 5% below 2014 at 950,000 in total. “We anticipate our EBITDA for full year will be less than £121.1 million achieved in 2014.”
