LONDON MARKETS: FTSE 100 Advances As BP Rises, Manufacturing Activity Hits 3-year High

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Ocado, M&S to start talking about tie-up: report

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U.K. stocks marched higher Tuesday, with trading in May kicking off with BP PLC gaining following the oil heavyweight's earnings report, and with a report showing British manufacturing activity hit a three-year high.

The FTSE 100 rose 0.5% to 7,240.31, with all but the basic materials sector moving higher. The benchmark last week logged a gain of 1.3% (http://www.marketwatch.com/story/ftse-100-falls-as-barclays-drops-pound-rises-ahead-of-gdp-data-2017-04-28). But for April, the London benchmark lost 1.6%, in part because the pound surged more than 3% against the dollar over the month.

Sterling on Tuesday briefly rose above $1.29 after Markit/CIPS said the U.K. manufacturing sector grew at the start of the second quarter. But the pound returned back to pre-data levels, to the relief of exporters listed on the FTSE 100.

Data: The manufacturing sector PMI rose to 57.3 in April, the highest reading in three years, outstripping a 54.1 estimate from FactSet, said Markit/CIPS. New orders and employment grew, and new export business was aided by the pound's decline.

The "April bounce-back in the manufacturing PMI effectively ends the recent underperformance of U.K. manufacturing vis-à-vis its eurozone equivalent," said Citi analysts in a research note.

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The sector's "apparent April bounce provides the first evidence that the 1Q growth weakness may just have been a blip, reassuring hawks at the Bank of England about rate hikes and the U.K.'s Brexit negotiation team about a tough negotiation position," said Citi.

The British economy grew 0.3% in the first quarter (http://www.marketwatch.com/story/uk-economy-slows-sharply-ahead-of-election-2017-04-28), based on a preliminary reading, missing a 0.4% forecast.

The pound hit an intraday high of $1.2913 after the manufacturing report before drifting back to $1.2888, where it was before the data were released and not far from the $1.2885 it bought late Monday in New York. Shares of multinational companies listed on the FTSE 100 tend to fall when the pound rises, as it raises the prospect that earnings and revenue made overseas by multinationals will be dented.

Stock movers: BP PLC shares (BP.LN) (BP.LN) climbed 1.4% after the oil producer swung to a first-quarter profit of $1.4 billion. (http://www.marketwatch.com/story/bp-swings-to-profit-2017-05-02)

Shares of Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) were higher after BP's report, but pared its gain to 0.4%. Shell will release its first-quarter report on Thursday. The oil and gas sector contributes a 14% weighting on the FTSE 100, according to FactSet data.

But mining shares swung lower after a private gauge of China's factory activity slowed to a seven-month low in April (http://www.marketwatch.com/story/chinas-factory-output-slows-to-7-month-low-2017-05-01). China is a major buyer of industrial and precious metals.

In the mining sector, Anglo American PLC (AAL.LN) flipped down 1.7%, Rio Tinto PLC (RIO) (RIO) (RIO) lost 1.1% and BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) gave up 1.2%.

Fresnillo PLC (FRES.LN) and Randgold Resources Ltd. (RRS.LN) (RRS.LN) remained lower, by 2.1% each.

Ocado Group PLC (OCDO.LN) shares surged 7.1% on the mid-cap FTSE 250 . The Telegraph newspaper reported Saturday that the online grocery delivery company and Marks & Spencer Group PLC (MKS.LN) (MKS.LN) will start discussing a possible tie-up (http://www.telegraph.co.uk/business/2017/04/29/ms-ocado-plot-food-delivery-shake-up/) that could see M&S begin food-delivery service.

Aberdeen Asset Management PLC (ADN.LN) shares moved up 3.6% after the asset manager said it has completed plans to deliver 70 million pounds ($90.28 million) of annualized cost savings (http://www.marketwatch.com/story/aberdeen-asset-to-log-70-mln-in-cost-savings-2017-05-02). Aberdeen also said business outflows in the second quarter narrowed from the year-earlier period.

U.K. equity trading was closed Monday for a Bank Holiday. This week will be a busy one for investors as they will receive earnings reports, U.K. services-sector data, growth figures from the eurozone and the U.S. jobs report. The Federal Reserve's two-day meeting begins later Tuesday, with its interest rate decision due Wednesday. On Sunday, France will hold its presidential election.

(END) Dow Jones Newswires

May 02, 2017 06:27 ET (10:27 GMT)