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FTSE 100 consolidates gains after manufacturing PMI

  • FTSE 100 index jumps 60 points
  • The UK manufacturing PMI reading was revised to 40.7 from the flash estimate of 40.6
  • Output in May fell at its fourth-fastest rate in the near 30-year survey history.

10.35am: UK manufacturing industry still in bad shape

Continued supply chain disruptions resulted in another strong contraction in the manufacturing sector, according to the Chartered Institute of Procurement & Supply (CIPS).

Duncan Brock, the group director of CIPS, said output in May fell at its fourth-fastest rate in the near 30-year survey history.

The May revision to the UK manafacturing purchasing managers index was little different to the flash estimate – moving to 40.7 from 40.6.

???????? UK Manufacturing #PMI rises to 40.7 in May (April: 32.6) to signal a further sharp downturn, but the pace of contraction eases from April's record. Output, new orders and employment all fell sharply again amid #COVID-19 restrictions. Read more: https://t.co/ety9bOTOmZ pic.twitter.com/dcI0JrUAXM

— IHS Markit PMI™ (@IHSMarkitPMI) June 1, 2020

“With new orders from home and abroad drying up for the third month in a row, company owners watched helplessly as the result of factory shutdowns, raw material shortages and furloughed staff continued to eat away at their operations. With no new pipeline of work to fulfil, purchasing dropped at one of the fastest rates for three decades as companies focussed their attention on completing any work in hand with current stocks of materials and with what little capacity remained in factories,” Brock said.

“Worries over safety for returning staff and repairs to broken supply chains will be uppermost in business minds, and are obstacles to be overcome before real recovery can begin. Uncertainty remains the watchword for the months ahead,” he added.

The FTSE 100 was up 60 points (1.0%) at 6,137.

10.00am: Minor revision to May manufacturing PMI

The IHS Markit/CIPS UK manufacturing purchasing managers index (PMI) for May was revised marginally upwards from the flash estimate.

The PMI reading was revised to 40.7 from the flash estimate of 40.6, and was up from 32.6 in April. A level below 50 indicates a contraction in activity.

“Those who typically see the glass half empty will note that the UK manufacturing sector remained mired in its deepest downturn in recent memory. Output, new orders and employment fell sharply again in May as restrictions to combat the spread of COVID-19 caused further widespread disruptions to economic activity, demand and global supply chains,” said IHS Markits Rob Dobson.

“However, the glass-half-full perspective is one where the rate of contraction has eased considerably since April, meaning – absent a resurgence of infections – the worst of the production downturn may be behind us. Pressure on manufacturers should ease further as lockdown restrictions are loosened, customers return to work and global activity restarts,” Dobson said, adding that the UK seems “set for a drawn-out economic recovery”.

The FTSE 100 was up 59 points (1.0%) at 6,135.

9.30am: Mounting trade tensions take the gloss off the Footsie's flying start

Blue-chips in London have come off the top on reports that China is to stop importing some US soya beans.

The FTSE 100, which flew out of the traps to hit 6,177 early doors, was up 55 points (0.9%) at 6,131.

Reports That China Is Said To Stop Importing Some US Soybeans As US-China Tensions Increase $ZS_F $ES_F $USDCNH $USDCNY

— LiveSquawk (@LiveSquawk) June 1, 2020

The Footsies advance was spearheaded by Associated British Foods PLC (LON:ABF), which was up 6.4% at 1,937.5p after it said early trading indicators from the recently re-opened Primark stores have been both “reassuring and encouraging”.

8.30am: Positive start to the week

The FTSE 100 was in bounce-back territory in early trade on Monday after Fridays triple-digit losses, buoyed by a positive start to the trading week in Asia.

The index of UK blue-chips opened 81 points to the good at 6,157.43.

The positivity was provided by President Trump, who opted for a restrained and considered response to Beijings clampdown on Hong Kong.

The Hang Seng provided the pull for the rest of the world with index staging a relief rally that bumped it up 3%.

Closer to home, British Airways owner IAG (LON:IAG) flew to the top of the UK blue-chip index with a 5.6% gain after the Lufthansa board accepted amendments to its proposed bail-out, paving the way for industry-wide state aid.

easyJet (LON:EZJ), up 4.4%, followed in IAGs vapour trails.

After several days of heavy selling activity after the downgrade of its bonds to junk status, Rolls Royce (LON:RR.) received a little love with its shares nudging 3.8% higher.

The miners, led by Anglo American (LON:AAL), were in demand early on as the latest batch of data from China pointed to a poor but not disastrous economic performance in May for the worlds second-largest economy.

Remember, the fortunes of the natural resources firms are closely allied to the state of the Chinese construction sector.

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