15th Oct 2015 15:53
LONDON (Alliance News) - Stocks in the UK held onto their early gains Thursday spurred by a strong session in Asia, while the dollar appreciated against other major currencies after US inflation came in a touch ahead of consensus.
The US Labor Department said its consumer price index was unchanged year-on-year in September, slipping from a 0.2% rise in August but coming ahead of expectations of a 0.1% decline. On a monthly basis CPI slipped by 0.2% in September, coming in-line with forecasts after edging down by 0.1% in August.
The decrease by the headline index was partly due to another steep drop in energy prices, which plunged by 4.7% in September after tumbling by 2.0% in August. All of the major components of the energy index decreased, with gasoline prices showing a particularly steep 9.0% drop.
However, excluding food and energy prices, the core consumer price index rose by 1.9% annually in September following a 1.8% uptick in the previous month. Core prices had been expected to inch up by another 1.8%.
Steve Murphy, US Economist at Capital Economics, said, "Overall, there is nothing in this report that would persuade Fed officials to hike interest rates before the end of this year."
"But it will be much harder to leave rates at near-zero next year when possibly both headline and core CPI inflation will be above 2%," he added.
Nevertheless, investors saw the better than expected inflation performance as a reason to push the dollar higher. By the London close, the pound traded the dollar at USD1.5468, while the euro traded the greenback at USD1.14022.
The price of gold rose sharply in the run-up to the data, but following the beat was brought back to earth. At the London close it was quoted at USD1,185.00 an ounce. Oil prices were also hit by the data because of the rise in the dollar and Brent oil was quoted at USD48.81 a barrel at the close.
The FTSE 100 closed up 1.1% at 6,338.67 points, ending a run of three consecutive sessions in the red. The FTSE 250 ended up 0.8% at 16,949.50 and the AIM All-Share ended up 0.6% at 736.45.
In Europe, the French CAC 40 ended up 1.4% and the German DAX 30 closed up 1.5%.
European stocks rose at the open following a strong performance in Asia. The Nikkei 225 index in Tokyo closed up 1.2%, the Hang Seng in Hong Kong up 2.0% and the Shanghai Composite index up 2.3%
On Wall Street at the London close, the Dow Jones Industrial Average was up 0.5%, the S&P 500 was up 0.6% and the Nasdaq Composite was up 0.8%.
Goldman Sachs Group shares recovered after a weak start following disappointing earnings, reporting a fall in third quarter profit. The bank said third quarter net revenue, including net interest income, for the quarter declined to USD6.86 billion from USD8.39 billion in the prior year quarter. Wall Street expected revenues of USD7.12 billion for the quarter.
Meanwhile, Citigroup reported a 51% surge in profit for the third quarter from last year as lower expenses more than offset a decline in revenues. Citigroup's third-quarter net income surged to USD4.29 billion or USD1.35 per share from USD2.84 billion or USD0.88 per share reported last year.
Staying in the US, first-time claims for US unemployment benefits unexpectedly decreased in the week ended October 10, according to a report released by the Labor Department. The report said initial jobless claims fell to 255,000, a decrease of 7,000 from the previous week's level of 262,000, which had been revised from 263,000. The drop surprised economists, who had expected jobless claims to climb to 270,000.
On the London Stock Exchange, Burberry Group spent the day as the worst performer, down 8.2%, with shares reaching their lowest level since the end of 2012. Exposure to the slowing Chinese economy continued to take a toll on the luxury fashion retailer in the first half of its financial year, prompting the luxury goods retailer to take further cost-cutting measure.
The company said its sales in Asia-Pacific fell by a mid-single-digit percentage in the first half to the end of September, with the main culprit of the declines its high-margin Hong Kong business. Like-for-like sales in mainland China were slightly lower in the half, due to weakening consumer sentiment in the second quarter, though excluding Hong Kong and Macau, like-for-like sales were broadly flat.
Burberry generates about 10% of its sales from the Hong Kong market, and 14% from the rest of China, meaning the slowdown for the world's second largest economy affects almost a quarter of its revenue. Conversely, Burberry derives only 2.0% of its global retail and wholesale revenue from the stronger Japanese market, to which many Chinese shoppers have been travelling instead of their traditional destination of Hong Kong.
Unilever closed up 4.3% after it reported a rise in sales in the third quarter of 2015 and said it expects underlying sales to grow at the upper end of its guided range for the full year.
The consumer goods giant said revenue in the third quarter of the year grew 9.4% to EUR13.4 billion, while rising 11% to EUR40.4 billion in the first nine months of the year. Growth was helped by soft comparatives in China, strong ice cream sales, and price increases in Latin America. The company added however, that consumer demand remained fragile, while volume growth was "barely positive" in the markets in which it operates.
Hedge fund manager Man Group was the best performer in the FTSE 250, up 5.2%, after it said it had USD1.4 billion of net inflows in the third quarter, driven by flows into its quantitative investment strategies business, although overall funds under management fell due to negative investment movements of USD2.7 billion and a USD600,000 hit from the strength of the US dollar.
The quarter coincided with tough conditions towards the end of August, with market volatility up due to fears about China's economy and concerns about a looming US interest rate rise and its likely effect on emerging markets.
"Despite the extreme market movements in late August impacting absolute performance across our long-only strategies, we have seen good relative performance across the majority of our strategies for the year to date," Chief Executive Manny Roman said.
In the economic calendar on Friday, eurozone inflation and trade balances data are at 1000 BST, US industrial production and capacity utilisation are both at 1315 BST, a preliminary reading of the Reuters/Michigan Consumer Sentiment Index is at 1500 BST and JOLTS Job Openings is at 1600 BST.
In the UK corporate calendar, steel-maker Evraz issues third quarter results, while ventilation products supplier Volution Group issues full-year results. Consumer credit lender Provident Financial issues an interim management statement while semiconductor and imaging technology company e2v Technologies and currency manager Record both release trading statements. Rio Tinto will release its third quarter operations review at 2230 BST.
By Neil Thakrar; [email protected]; @NeilThakrar1
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