Weaker PMI Sees FTSE 100 Trump Trade & EM Woes

Monday, September 3: The FTSE 100 index commenced the week in the green lifted in the main by a slew of financial, mining, and packaging stocks(+0.97%). Weaker sterling shortly after the open induced investors to buy “overseas earners”, courtesy of a UK PMI read which undershot market expectations. The UK bucked the trend of wider equity markets thanks to the former, as overseas markets were generally consumed by worries relating to the escalation of trade disputes and the deepening sell-off across emerging market currencies.

The largest faller on the FTSE 250, Dechra Pharmaceuticals, slumped 13.61% after warning on challenges ahead despite reporting a rise in profit for financial year 2018. The veterinary products manufacturer noted revenue in the year to the end of June grew 13% to £407.1m from £359.3m reported from the same period a year earlier, nudging pretax profit higher to £28.9m from £28.6m. Dechra proposed a final dividend of 18.17p, up from 15.33p paid in the prior year. The full year payout came in at 25.5p per share, +19% year-on-year. Divisionally, European Pharmaceuticals revenue improved by 14% to £258.7m, while revenue in North American Pharmaceuticals segment grew by 12% to £148.4m.

UK Manufacturing PMI data came in somewhat short of a forecast 53.7 for August at 52.8 and the prior month’s print of 53.8, proving to be the weakest PMI data point for over two years as export orders exhibited a rare fall, a stagnation in Brexit negotiations and prospects of a world economic slowdown weighed on the expectations of UK manufacturers. Sterling gapped lower on the news, and looked set to close 0.28% & 0.32% lower versus the US dollar and the euro at $1.2885 and €1.1086 respectively.

News also hit the wires that the Treasury and Bank of England have entered discussions with respect to Mark Carney staying on beyond his initial departure date of June 2019. Officials are concerned that finding a new governor with quagmired Brexit talks will be difficult. It is rumoured that Mr Carney is open to staying on for as long as another 12 months until 2020, with the Treasury looking to lengthen the amount of time they have to appoint a successor.

At the close European equities were mixed, with the FTSE 100 +0.92%, the CAC 40 +0.13% and the DAX -0.14%.

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