FTSE trades flat despite surprisingly stronger manufacturing data

The FTSE 100 traded between small losses and flat territory on Monday as financials weighed on the UK Index despite mining stocks receiving a boost by positive data out of China and UK manufacturing data surprisingly rose last month.

It’s the financial sector, such as banks and insurers, that are weighing on the FTSE 100 in Monday trade. The FTSE 350 banking sector has lost as much as 2% in early trading, with 0.8% losses also seen in the insurance sector, and this is from where much of the drag on the FTSE 100 has originated. Were it not for poor performance in financials this morning, positive demand for mining stocks would have seen the FTSE 100 trade well in positive territory.

Barclays, Lloyds Banking Group and HSBC were amongst the top three fallers on the FTSE 100, with all three respective share prices losing around 2% as a result.

Aside from financials, there have however been areas of positivity in the morning session, with large cap miners seeing higher demand thanks to a stronger than expected rise in new orders in China, seeing the PMI measure rising to an 11-month high of 53.1, which roundly beat expectations of a small fall from 51 to 50.5.

Whilst underlying concerns remain about a slowdown in the Chinese economy, this reading could have been much worse and investors have clung on to the fact that we have not seen Chinese data disappoint further, despite expectations now that the Chinese economy could see its worst quarterly performance for three years.

Mining stocks rallied on the back of the Chinese data, with stocks such as Fresnillo and Rio Tinto both gaining over 1% as a result. The FTSE 350 mining sector remains some 15% off its early February highs, but has seen a bounce back of 3% since last Thursday as bargain hunters attempted to pick up stocks from their lows.

Randgold Resources shares see more weakness on Mali events
Shares in Randgold Resources saw more weakness on Monday as its shares price lost another 2% to trade back towards the 5200p level after a deadline for soldiers to start returning to their barracks passed, threatening possible sanctions which could disrupt production at the miners operations within the country, a concern echoed by Nomura, who downgraded their view on the stock last Friday.

UK manufacturing surprises with growth last month
Data showed that UK manufacturing activity expanded to 52.1 in March from an upwardly revised reading of 51.5 and beating expectations of a fall to 50.7, its fastest rate of expansion for 10 months. New orders increased to 52.7 from an upwardly revised 50.5 in February, also boosting expectations that the UK should avoid a technical recession, with expectations of a growth rate of 0.2% to 0.3% in the first quarter of this year.

Inflationary pressures however does pose a threat to the potential for more asset purchases from the Bank of England and it is this element that is being closely watched by investors, particularly with the BoE decision due out on Thursday before the long bank holiday weekend.