10th Nov 2015 17:01
LONDON (Alliance News) - London shares ended lower Tuesday, with Wall Street also weak, as concerns about a US interest rate hike hit investor confidence, while weak inflation data from China showed that the country's economy is far from improved.
The FTSE 100 index ended down 0.3% at 6,275.28 points, the FTSE 250 fell 0.4% at 17,039.82, and the AIM All-Share declined 0.1% at 743.70. In Europe, the French CAC 40 ended flat, while the German DAX 30 was up 0.1%.
In the US at the London close, the Dow 30 index and S&P 500 both were down 0.2% and the Nasdaq Composite down 0.6%. Also the London equities close, gold was quoted at USD1,092.35, while Brent oil was at USD47.44. The pound was at USD1.5110, while the euro was at USD1.0688.
"Evidently, traders are worried about the impact, in particular on emerging markets economies, of a potential US interest rate hike in December," said FOREX.com analyst Fawad Razaqzada.
The analyst said Friday's US "stellar" jobs report "dramatically" increased the possibility that the US Federal Reserve will raise interest rates at its next two-day monetary policy meeting ending on December 16. However, the analyst added that the weakness in economic data outside the US suggests the Fed "almost certainly" won't be starting an aggressive hiking cycle at any time soon.
"So interest rates will most likely remain low for some time yet, which should be positive for US stocks," Razaqzada said. "The Chinese central bank could further loosen its policy if the current trend of disappointingly weak economic numbers continues, while the [European Central Bank] has already paved the way for a potential expansion of its asset purchases programme in December."
Reuters reported on Monday that the ECB is set to take its deposit interest rate deeper into negative territory in December, citing four policymakers. Three of the ECB's policymakers said debate is now about the size of the rate cut with some arguing that a 10 basis point reduction, already priced in by markets, would have little impact. The ECB's deposit rate is currently -0.2%.
Meanwhile, expectations for more stimulus from the Chinese authorities also rose following another set of weak economic data from the Asian giant, while at the same time the Chinese painted a picture where in which any spark of recovery is hard to discern.
China's inflation slowed by more than expected in October largely reflecting a slowdown in food inflation, while producer prices continued their downward trend, giving room for the People's Bank of China to ease monetary policy further.
Consumer prices rose 1.3% year-on-year in October, slower than the 1.6% increase seen in September. Inflation was forecast to slow marginally to 1.5%. CPI slowed for a second month in a row and stayed well below the Chinese government's full-year target of around 3%.
Another report showed that producer prices in China fell 5.9% year-on-year in October, the same rate of decline as seen a month ago and in line with expectations.
In response, the Shanghai Composite ended down 0.2% Wednesday, while the Hang Seng index in Hong Kong finished down 1.4%. The Japanese Nikkei 225 index edged up 0.2%.
Spreadex analyst Connor Campbell said that rather than cheering any potential easing from China's central bank, investors concerns increased after a report from ratings agency Moody's that claimed "the main risks to the economic outlook are a bigger-than-expected global fallout from the Chinese slowdown".
Campbell added: "Not necessarily a surprising statement, but given the fact that they already had to endure China's crumbling inflation, investors were in no mood for another dour dollop of data reaffirming that the main market-bogeyman is just as terrifying as first thought."
China's retail sales and industrial production data are expected on Wednesday at 0530 GMT.
London-listed miners were sold following the Chinese data, with Anglo American ending down 4.9%, Glencore down 3.7%, Antofagasta down 1.3%, and mid-cap Acacia Mining down 2.6%.
Information services company Experian ended at the top of London's FTSE 100, up 7.2%, after it said that foreign exchange will continue to exert an unwelcome pressure on the business at the full year but that it expects to see organic revenue growth at constant currency.
Experian said that, as well as organic revenue growth in the mid-single digit range, it anticipates "stable" margins and further progress in its closely-watched benchmark earnings per share in its full 2016 financial year, all at constant currency.
Goldman Sachs said Experian's results highlighted the resilience in many business areas of the company and its geographies. The bank noted that Experian managed to improve organic revenue growth by 4% in the six months to September 30, compared to 3% in the first quarter, despite a weak macro environment in Latin America. Goldman Sachs acts as a broker to the company.
Vodafone Group ended up 3.0%. A strong underlying performance ahead of market expectations helped shares in telecommunications giant end among the best blue-chip performers, while prompting the group to edge up its guidance, despite its revenue and profit taking a hit from currency effects.
Vodafone said its pretax profit for the half to the end of September was GBP232.0 million, down from GBP406.0 million, thanks to slightly higher financing costs and lower investment income in the half. Earnings before interest, taxation, depreciation and amortisation fell to GBP5.79 billion, down 1.7% year-on-year, but rose 1.9% on an organic basis, which strips out currency effects and merger and acquisitions.
Thanks to the robust underlying performance, the group firmed up its guidance for the full year, raising the low-end of its Ebitda expectations to GBP11.7 billion from GBP11.5 billion, as the top end estimate of GBP12.0 billion remained in place.
National Grid also ended in the green, up 1.5%, after beating consensus earnings estimates by 14% in its half-year update, Jefferies said. The company also confirmed media speculation that it is looking to sell its UK gas distribution business in order to rebalance its portfolio.
"Effectively National Grid is monetising these assets. The sale of a majority stake in gas distribution assets will no doubt excite the market," said Jefferies. "We currently value the gas distribution business at GBP11.00 billion, representing a 28% premium to the regulated asset base of GBP8.5 billion."
National Grid said it will return "substantially all" of the net proceeds from the sale, which is expected to be finalised in 2017, to shareholders and also committed to maintaining its dividend policy and continuing with its investment programme. Importantly, National Grid looks set to retain some form of minority interest in the networks.
Meanwhile, broadcaster ITV ended up 1.5% after it said it expects to deliver strong double-digit profit growth for the full year and said its initial outlook for 2016 is encouraging, as it said revenue increased across the business in the first nine months of 2015.
At the other end, building materials company Wolseley declined 4.8%. Davy Research said the group's trading profit for the first quarter came in below the broker's expectations.
Wolseley reported revenue for the three months to the end of October rose to GBP3.56 billion, up from GBP3.38 billion a year earlier. However, Davy called these results "disappointing", as in the broker's view, this 5.3% year-on-year lift seems a "meaningful moderation" in the pace of like-for-like sales growth that "has been confirmed".
In the mid-cap index, distribution and logistics company DCC finished as the top gainer, up 8.2%. It said its revenue dipped in the first half but said pretax profit increased thanks to an improvement in its gross margin.
DCC said it expects its operating profit and earnings will be "very significantly" ahead year-on-year for the full year to the end of March 2016 and "modestly" ahead of market expectations assuming normal winter weather conditions prevail for the remainder of the financial year.
In the corporate calendar for Wednesday, J Sainsbury and SSE publish half-year results. Barratt Developments and Esure Group release trading statements. Fenner provides full-year results, while Workspace Group, ICAP, TalkTalk Telecom Group and Flybe Group issue half-year results. Centamin releases third-quarter results.
Elsewhere in the economic calendar, Germany's wholesale price index is due at 0700 GMT, while UK's ILO inemployment rate is expected at 0930 GMT.
Before that, at 0900 GMT, the Bank of England hosts the Open Forum 2015, looking at the future direction for financial regulation, with ECB President Mario Draghi expected to speak at 1315 GMT.
By Daniel Ruiz; [email protected]
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