17th Sep 2015 16:06
LONDON (Alliance News) - UK stocks ended mixed Thursday, after a mixed set of US economic data provided no further clues as to whether the US Federal Reserve would announce an interest rate hike later in the day.
The FTSE 100 index ended down 0.7% at 6,186.99 points, and the FTSE 250 closed down 0.1% at 17,043.45, while the AIM All-Share finished up 0.4% at 740.73. In Europe, the CAC 40 index in Paris closed up 0.2% and the DAX 30 in Frankfurt ended flat.
Asian stocks ended mixed Thursday. The Nikkei 225 index in Tokyo added 1.4%, while Chinese major indices gave back earlier gains near the session end, with the Hang Seng index in Hong Kong ending down 0.5% and the Shanghai Composite down 2.1%.
Meanwhile, Wall Street was slightly higher at the London close. The Dow Jones Industrial Average and the S&P 500 both were up 0.1%, while the Nasdaq Composite was up 0.2%.
Trading remained subdued in the UK as the market awaited the US monetary policy decision, due at 1900 BST, to be followed by a press conference at 1930 BST.
Analysts were split ahead of the decision, with some pointing to the strength of the US labour market as a reason to raise rates, while others note a lack inflationary pressure and the poor health of the global economy as reasons why the Federal Reserve should delay.
A mixed set of US economic data released before the Fed's "data-dependent" decision added even more uncertainty to the outcome of the two-day policy-setting Federal Open Market Committee meeting.
If hawkish members of the FOMC were looking for more reasons for a rate hike, the latest initial and continuing jobless claims data supported their view.
First-time claims for US unemployment benefits unexpectedly decreased in the week ended September 12, according to a report released by the US Labor Department on Thursday, with jobless claims falling to a nearly two-month low. The report said initial jobless claims fell to 264,000, a decrease of 11,000 from the previous week's unrevised level of 275,000. Economists had expected initial jobless claims to come in unchanged.
Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, also dropped by 26,000 to 2.237 million in the week ended September 5. In the previous week, continuing claims came in at 2.260 million.
However, tempering the job report, the Philadelphia Fed Manufacturing survey came in much worse-than-expected in August, declining to a negative 6.0 from a previous positive reading of 8.3 in July. Economists had forecast a positive 6.0 reading.
Lloyds Bank senior economist Rhys Herbert said the bank believes the Fed will hike its base rate by 25 basis points to 0.5%, but noted that Fed Chair Janet Yellen's statement following the decision will be of great importance.
"Yellen will almost certainly use the press conference to reinforce the message that the Federal Open Market Committee expects to increase rates only gradually and that these will likely peak at a low level. The FOMC will also simultaneously publish the latest interest rate forecasts of participants and these may reinforce the gradualist message," Herbert said.
Meanwhile, UBS analysts also said that its US economics team expects, with a 60% probability, that the Fed will raise rates by 25 basis points. The bank said that "market pricing implies that the Fed stays on hold" in September, but analyst opinion is more split.
"Consensus expectations are leaning towards a September hike (looking at Bloomberg consensus data), but the dispersion of opinions is large," said UBS.
Analysts at Nomura said that its US economics team does not expect the Federal Open Market Committee to raise rates at this meeting. The broker said that uncertainty about the outlook for inflation remains material, while the sell-off in global financial markets over the past six weeks has increased downside risks.
In the UK, retail sales grew for the first time in three months in August, the Office for National Statistics reported Thursday.
Retail sales including automotive fuel advanced 0.2% month-on-month in August, in line with economists expectations, after staying flat a month ago. This was the first increase in three months.
Excluding auto fuel, growth in retail sales volume eased to 0.1% month-on-month, as expected, from 0.3% in July. Food store sales fell 0.9% month-on-month, while non-food store advanced 1.2% and automotive fuel sales climbed 1.3% in August.
On a yearly basis, retail sales including fuel climbed 3.7% in August after rising 4.1% in July. Economists had forecast 3.8% increase for August. Likewise, sales excluding auto fuel rose at a slower pace of 3.5% year-on-year, following July's 4.1% increase. It was also slower than a 3.8% rise forecast by economists.
The pound experienced some sharp gyrations after the data but stood at USD1.5503 at the London equities close, hardly changed from USD1.5519 just prior to the retail sales report.
On the London Stock Exchange, Antofagasta closed down 2.0%. The London-listed company and Chilean state-owned miner Codelco both have suspended operations at two major copper mines in Chile following the powerful earthquake which struck the country's coast on Wednesday, Reuters reported.
The closure of the two mines has put more than 600,000 tonnes of annual capacity at risk and has sent copper prices on the London Metal Exchange close to two-month highs. Antofagasta said it has temporarily closed the flagship Los Pelambres mine, which produced more than 400,000 tonnes of copper in 2014, and would wait to assess the damage before making a decision on reopening the mine.
Babcock International Group and Intertek Group, down 2.4% and 1.2%, respectively, ended amongst the worst blue-chip performers after receiving downgrades from Exane BNP Paribas. Exane downgraded Babcock to Underperform from Neutral, while Intertek was downgraded to Neutral from Outperform.
Among risers in the FTSE 250, Ocado Group shares finished up 8.4% after Deutsche Bank upgraded it to Hold from Sell. Meanwhile, Serco Group shares rose 4.4% after Berenberg upgraded it to Hold from Sell.
Among mid-cap stocks in the red, Premier Farnell ended down 16% after it slashed its interim dividend by 41%. The company makes electronic components and Rasberry Pi, a basic computer used in schools. It reported a fall in pretax profit for its first half and said it will sell its Akron Brass business in the US as part of an ongoing operational review.
Premier Farnell, which will be relegated from the FTSE 250 next week, began an operational review in July after it issued a profit warning, and as part of this review said Thursday it will sell Akron Brass and cease direct operations in Brazil due to sub-optimal returns and high costs of operations.
Rotork shares finished off 11% after it issued a profit warning. The actuator and flow control products manufacturer said project delays and cancellations are set to push its revenue lower for the full year 2015 and will leave its adjusted operating profit falling short of its 2014 numbers.
The company, which has been hit hard in recent months due to its exposure to the struggling oil and gas industry, said that while it has seen an encouraging amount of quote activity and though it has a strong pipeline in place, the timing of orders and product deliveries remains tough to forecast.
In a light UK corporate calendar Friday, Petra Diamonds releases full-year results.
In the economic calendar, China's house price index is due at 0230 BST, while eurozone current account is due at 0900 BST. In the US, Conference Board leading indicators are due at 1500 BST.
By Daniel Ruiz; [email protected]
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