FTSE steady but manufacturing growth slows

The UK manufacturing sector continued to slow last month, with the weakest expansion for a year, data released this morning showed.

The Purchasing Managers Index will add to speculation that the Bank of England may start a new round of quantitative easing to boost the economy.

Rob Dobson, senior economist at Markit, said: 'September saw the weakest expansion of UK manufacturing for a year, but some reassurance can be gained from the fact that growth has merely slowed from an exceptionally strong rate in the first half of 2010.'

Despite serious sovereign debt concerns across Europe, September - usually a bad month for shares - bucked the trend in 2010 with an 8.5% gain. In the US the S&P 500 had its best September for 71 years.

But some commentators say the gains are not built on solid ground. David Buik of BGC Capital said: ‘The reasons for the FTSE’s strong performance are quite basic. Equities have decoupled from the vagaries of economic reality, despite many believing that the recovery train is gathering momentum.’

Shares in natural gas supplier BG Group were the biggest gainers on the FTSE 100, up nearly 5% at £11.71. Traders said that the jump was due to the news that Spanish Oil giant Repsol and China's Sinopec have agreed to form a $17.8 billion joint venture.

Silver Miner Fresnillo was up 2.25% at £12.70. It was the biggest gainer of the five miners in the FTSE’s top 10 biggest gainers this morning which also included Xstrata, Anglo American, Lonmin and African Barrick.  

HSBC, the largest company in the index, was up 1% at £6.51. The bank was added to Goldman Sachs ‘conviction buy’ list.

The biggest faller was drug company Shire, down 1.32% at £14.15, the worst hit in a sector-wide sell off of pharmaceutical companies.  

Gold was selling at $1,311 per ounce and the pound was worth $1.58 against the US dollar, up 0.55% and €1.15 against the euro, a gain of 0.16%.