Leading shares began the month and the quarter on a bright note, as investors accentuated the positive from a mixed bag of global manufacturing surveys.
In particular the latest data from China suggested continuing strong demand from the country, a key consumer of commodities. So copper hit a near four month high, prompting a rise in mining shares. Anglo American added 57p to £14.87, Rio Tinto rose 94p to 3202.5p, BHP Billiton was 55p better at 1944.5p and Fresnillo was up 26.5p at 898.5p. African Barrick Gold was the biggest mid-cap riser, up 14.9p at 220.6p. Michael Hewson, chief market analyst at CMC Markets UK, said:
Europe's markets have got the third quarter of 2014 off to a solid start despite some fairly mixed manufacturing PMI data. The FTSE 100 has been more of a leader than a laggard for a change, helped by an improvement in both the Chinese manufacturing PMI data sets for June.
France continues to lag behind the rest of Europe in terms of economic growth while Spain posted its best manufacturing number for seven years at 54.6. The wider EU measure though came in at a seven month low reinforcing the patchy nature of the recovery in the euro area.
Supermarkets were under pressure as discount rivals continued to gain ground on the major players. Morrisons fell 3.2p to 180.2p and J Sainsbury slipped 1.4p to 314.1p. Tesco dipped 0.05p to 284.15p.
Morrisons partner Ocado slumped 16.3p to 355p on concerns it cannot keep up the growth rate, despite the online retailer making a half year profit of £7.5m before one off items, compared to a £1m loss this time last year.
But touted takeover targetDiageo continued to be in demand, up 36.5p at 1902.5p
Among the mid-caps, property group St Modwen Properties climbed 12.5p to 371.1p after a 32% rise in half year profits.
Serco was 1.8p lower at 363.7p as analysts at Barclays cut their target price on the outsourcing group from 435p to 355p, with the bank suggesting its dividend should be cut. It said:
[Serco's] margin upside is significant but might be eroded by downward pressure on revenue growth especially for next year. From a balance sheet perspective Serco's headroom is limited: it may be able to avoid another equity issue, but the dividend looks vulnerable and should be cut, in our view.
Our forecasts now reflect recent profit warnings and the equity issue – we forecast earnings per share of 18.5p this year, rising to 20.2p in 2015 and 24.4p in 2016. The latter compares to the 22p-26p earnings per share thresholds laid out in Serco's recently rebased Performance Share Plan (which rises to 30p-35p by 2018). On this basis Serco trades on 18 times 2015 PE, falling to 15 times 2016 PE, the latter in-line with its average over the last 5 years. This balances margin recovery potential versus revenue and execution risk in our view.
Lower down the market, Cyan Holdings closed 25% higher at 0.37p after a consortium including the utility meter and lighting control group won a contract from Tata Power in India for 5,000 smart meters.
But mobile commerce group MoPowered slumped 51% to 29.75p after it said contract delays would hit its revenues.
Litebulb, the brand development group, added 14% to 0.93p after revealing £1m worth of orders from a number of major retailers. Recent acquisition Go Entertainment will develop a new range of products including books, DVDs and magazines for what is described as "a major UK retailer." The brands involved include the History Channel, Discovery and the Imperial War Museum. Meanwhile Litebulb's Bluw subsidiary has received an order from Debenhams to supply items for its Christmas gift range, and from German retailer Tchibo for Star Wars and Scootrix merchandise.
Finally Ilika added 7.5p to 70p as it announced it had increased the energy capacity of its solid state batteries by more than 25 times since January.
It is clear that the market opportunity for Ilika's battery technology is very large and the development progress is clearly positive.
Consumer interest in "internet-of-things" devices like "wearables" is building as a way of getting further utility out of smartphones/tablets. A key constraint to producing compelling devices however is their need to be highly mobile and thus battery powered. We estimate the wearables/IoT segment represents a $6bn longer term market opportunity, which based on a 30% share and a 2% royalty rate could produce peak annual royalty income of $36m for Ilika from its solid state battery.