London open: Stocks sink after Chinese manufacturing figures

3rd Jun 2013 08:27

A disappointing reading of Chinese manufacturing activity combined with the realisation that US stimulus may soon be trimmed weighed heavily on market sentiment on Monday morning.The FTSE 100 sunk by nearly one per cent early on, falling to levels not seen since the start of May, following sharp falls on Friday and another session of heavy losses in Asia overnight.Better-than-expected economic data from the States failed to give markets a boost last week as the improved outlook increased speculation that the Federal Reserve will soon begin to scale back its stimulus measures."Market valuations are now being adjusted in anticipation of the US Fed winding down its asset purchase programme," said analysts at CMC Markets this morning.  "Markets are forward looking. While it may yet be some time before the Fed starts to taper the programme, and even longer before it actually begins to withdraw stimulus, investors seem to have decided that the time has come to take action to protect profits."Chinese manufacturing revised lowerThe final reading of the Chinese manufacturing purchasing managers' index (PMI) was revised lower to 49.2, worse than the initial 49.6 estimate. With any figure below 50 representing contraction, this now stands at its worst level in eight months. April's reading was 50.4.HSBC's Chief Economic for China, Qu Hongbin, said that the final PMI "suggests a marginal weakening of manufacturing activities towards the end of May, thanks to deteriorating domestic demand conditions".Nevertheless, the government's official figures released this weekend showed the PMI rising from 50.6 to 50.8 in May. However, the government data is usually better than the HSBC report primarily because it focuses on large, state-owned firms while the private survey targets smaller, private companies in the sector.Elsewhere, Australian manufacturing activity contracted for a 23rd consecutive month in May. Meanwhile, manufacturing PMI figures are also due out in the Eurozone, UK and US later on today.Polymetal gains after upgradeGold miner Polymetal International rose strongly this morning after JPMorgan Cazenove upgraded its rating for the stock from 'neutral' to 'overweight', citing an EPS inflection point next year following the sharp falls in the gold price earlier this year.Sector peers ENRC, EVRAZ, Rio Tinto and Antogasta were also in demand, shrugging off the weak Chinese economic data early on.Electricity provider Centrica was a heavy faller after Berenberg cut its rating to 'hold'.Manufacturing investment firm Melrose was in the red after confirming that it is eyeing a potential disposal of its lifting equipment divisions, Crosby and Acco, confirming media speculation over the weekend.UK engineering and construction firm Costain gained after being awarded one of four places on Transport for London's framework for Early Contractor Involvement and Construction, initially worth £200m overall.FTSE 100 - RisersPolymetal International (POLY) 708.00p +2.53%Eurasian Natural Resources Corp. (ENRC) 242.80p +1.21%Tullow Oil (TLW) 1,052.00p +0.67%Kingfisher (KGF) 347.80p +0.64%Capita (CPI) 967.50p +0.57%Antofagasta (ANTO) 947.50p +0.21%Evraz (EVR) 135.50p +0.15%Rio Tinto (RIO) 2,860.00p +0.10%Lloyds Banking Group (LLOY) 62.16p +0.08%Royal Bank of Scotland Group (RBS) 336.70p +0.03%FTSE 100 - FallersAberdeen Asset Management (ADN) 452.00p -3.00%BT Group (BT.A) 295.10p -2.32%SABMiller (SAB) 3,259.00p -2.13%ARM Holdings (ARM) 967.00p -2.13%Schroders (SDR) 2,319.00p -2.07%William Hill (WMH) 434.10p -1.94%Centrica (CNA) 373.00p -1.84%Carnival (CCL) 2,207.00p -1.69%Hammerson (HMSO) 505.00p -1.56%Tesco (TSCO) 359.85p -1.53%FTSE 250 - RisersRPS Group (RPS) 214.30p +2.05%Thomas Cook Group (TCG) 145.70p +2.03%Rank Group (RNK) 151.70p +1.95%Centamin (DI) (CEY) 38.99p +1.43%African Barrick Gold (ABG) 139.20p +1.38%Kenmare Resources (KMR) 31.09p +1.34%RPC Group (RPC) 406.40p +1.27%Diploma (DPLM) 537.50p +1.03%Atkins (WS) (ATK) 889.00p +0.97%Alent (ALNT) 374.00p +0.92%FTSE 250 - FallersSalamander Energy (SMDR) 167.80p -3.56%Galliford Try (GFRD) 925.00p -3.24%Halfords Group (HFD) 318.50p -3.19%Oxford Instruments (OXIG) 1,630.00p -3.15%Taylor Wimpey (TW.) 96.90p -2.27%Brewin Dolphin Holdings (BRW) 239.20p -2.25%International Personal Finance (IPF) 508.00p -2.21%Travis Perkins (TPK) 1,577.00p -2.11%Persimmon (PSN) 1,195.00p -2.05%Templeton Emerging Markets Inv Trust (TEM) 599.00p -2.04%