2nd Sep 2019 11:57
(Alliance News) - The FTSE 100 index surged on Monday as the pound tumbled toward USD1.20 on a looming battle in Parliament over Brexit and some weak UK manufacturing data, leaving European equity markets lagging behind.
The FTSE 100 was 105.23 points, or 1.5%, higher at 7,312.41 at midday. The FTSE 250 was 122.49 points higher, or 0.6%, at 19,516.12, while the AIM All-Share was up 0.2% at 872.93.
The Cboe UK 100 index was 1.7% higher at 12,400.26. The Cboe UK 250 was 0.8% higher, at 17,371.11, and the Cboe UK Small Companies was up 0.1% at 10,860.85.
In mainland Europe early Monday, the CAC 40 in Paris and the DAX 30 in Frankfurt were 0.6% and 0.8% higher, respectively.
In the US, markets are closed for the Labor Day holiday and will re-open on Tuesday.
"European markets are looking a little flat at the start of the week, with the FTSE 100 being the exception, up around 1%, as sterling suffers another Brexit blow," said Craig Erlam at Oanda.
The pound was quoted at USD1.2078 Monday midday, having traded above the USD2.11 mark earlier in the session, down from USD1.2178 late Friday.
Tory Brexit rebels have been put on notice that they face being barred from standing for the party if they vote against the government, ahead of a week which will be dominated by Commons clashes over UK Prime Minister Boris Johnson's EU withdrawal stance.
A senior source from the Tory whips office said: "The whips are telling Conservative MPs a very simple message – if they fail to vote with the government on Tuesday they will be destroying the government's negotiating position and handing control of Parliament to Jeremy Corbyn."
With a Tory-DUP Commons majority of just one, withdrawing the whip from rebel MPs would further weaken Johnson's grip on Parliament and make an early general election more likely.
Oanda's Erlam commented: "It's going to be a seriously eventful week in parliament, that's for sure, as MPs opposed to no-deal do everything in their power to stop it before they're gagged until the middle of October. I don't think sterling volatility is going anywhere soon."
Adding to the pound's Brexit woes at the start of the week, the latest manufacturing PMI reading signalled further trouble for the sector.
The IHS Markit/CIPS Purchasing Managers' Index slipped further into contraction territory in August with a reading of 47.4, down from 48.0 in July. Any reading below 50 indicates shrinkage in the sector, while one above signals expansion.
"Steep" reductions in new orders were registered across the consumer, intermediate and investment goods industries. Meanwhile, the level of new export business contracted at the fastest rate in over seven years.
IHS Markit noted that trade tensions, slower global growth and Brexit uncertainty all contributed to reduced overseas demand.
"We are expecting sterling to fall below USD1.20 by the end of this week, because there is no clarity whatsoever when it comes to Brexit. The drop in the UK's manufacturing sector was at the fastest pace since 2012 and this is going to only become worse if lawmakers don't get their act together," commented Naeem Aslam, chief market analyst at ThinkMarkets.
Focus now lies on the UK construction PMI due on Tuesday, and data from the all-important services sector - which is the majority contributor to UK GDP - on Wednesday.
The eurozone manufacturing sector fared little better, with the bloc's own PMI standing at 47.0 in August from 46.5 in July.
July's figure had been a six-and-a-half-year low, IHS Markit said, and August's reading is the second-worst since April 2013.
At 43.5, Germany's figure remained deep in contraction in August, and was not far off July's seven-year low of 43.2.
In London, AstraZeneca shares rose 3.1% after the drugmaker reported positive study results for two separate treatments for the prevention of cardiovascular events.
Astra said the phase III THEMIS trial showed Brilinta, or ticagrelor, plus aspirin reduced the relative risk of cardiovascular death, heart attacks, or strokes by 10% compared with aspirin alone in patients with coronary artery disease and type-2 diabetes.
Separately, the company detailed results from the phase III DAPA-HF trial showed Farxiga, or dapagliflozin, reduced both the incidence of cardiovascular death and the worsening of heart failure in patients with reduced ejection fraction, with and without Type-2 diabetes.
Deutsche Bank said the DAPA-HF results were "exceptionally impressive" and "likely mark a new standard-of-care for heart failure patients both with and without diabetes".
Shares in Ben & Jerry's ice cream owner Unilever were up 1.7% after Goldman Sachs raised the stock to Buy from Neutral.
Marks & Spencer shares declined 0.2% as Goldman Sachs resumed the high street stalwart with a Sell rating. In addition, the clothing, food and homewares retailer looks set for relegation from the FTSE 100 in this week's index review.
Marks & Spencer, which has fallen 19% since the start of this year, has a market capitalisation of just GBP3.74 billion, making it the smallest stock by market value in the FTSE 100.
Nine firms in the FTSE 250 are worth in excess of GBP3.80 billion, including drugmaker Hikma Pharmacuticals, low-cost airline easyJet, and home emergency repairs firm HomeServe.
The results of the latest index review will be announced after the market close on Wednesday.
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