9th Nov 2015 17:07
LONDON (Alliance News) - UK stock indices fluctuated between gains and losses for much of Monday, but ended very much in the red, with investors reinstating their expectations of a US interest rate hike before the year's out by the Federal Reserve after a strong jobs report last Friday.
The FTSE 100 closed down 0.9% at 6,295.16 marking its third consecutive session of losses. The FTSE 250 closed down 0.3% at 17,112.65, and the AIM All-Share closed down 0.3% at 744.12.
The CAC 40 in France closed down 1.5%, and the DAX 30 in Germany ended down 1.6%.
Stocks on Wall Street at London close were trading much lower as investors ramped up their expectations for a December US rate hike. The Dow Jones Industrial Average was down 1.2%, the S&P 500 index was down 1.3%, while the Nasdaq Composite was down 1.4%.
In foreign exchange, though, the dollar was slightly weaker. The pound traded the dollar at USD1.5121 at the London close, up from USD1.5070 at the same point on Friday, while the euro was quoted at USD1.0770, up from USD1.0746 on Friday.
The report on Friday from the US Labor Department said non-farm payroll employment jumped by 271,000 jobs in October following a downwardly revised increase of 137,000 jobs in September. Economists had expected an increase of about 185,000 jobs compared to the addition of 142,000 jobs originally reported for the previous month.
After the data, Nomura economists said that the relatively low bar set for a lift off by the Federal Open Market Committee and the strong data on the US labour market makes a December lift-off "highly likely", as the Japanese bank brought its forecast forward from its previous expectation of a March rate hike.
"In our judgement, the positive turn in the economic data [last] week and [Fed Chair Janet] Yellen's comments significantly increase the probability that the FOMC will raise rates for the first time at its meeting in December. We now think that the probability of lift-off in December is 75%," Nomura said.
The Fed is scheduled to announce its next monetary policy decision following a two-day meeting concluding on December 16. No meeting will be held this month.
Meanwhile, another key central bank which is expected to take action in December was in focus as well on Monday. Reuters reported that the European Central Bank 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%.
Two policymakers said the bank should go for a bolder move, in line with its recent tradition of delivering policy moves in excess of expectations.
"There is no bottom to the deposit rate in the near term, it could be lowered quite sharply still," one policymaker said, according to Reuters. "There must be a bottom but it's further out."
The ECB will announce its monetary policy decision on December 3.
The Organisation for Economic Cooperation and Development lowered its forecast for global economic growth after a downward turn in important emerging economies. The OECD said it now expects the global economy to grow by 2.9% this year, well below the long-run average and down from its previous estimate for 3.0% growth. The OECD slashed the growth outlook for next year to 3.3% from 3.6%. The group projected global growth at 3.6% in 2017.
The group attributed the lower growth forecast to a further sharp downturn in emerging market economies and a drop in world trade.
The recent economic lull in China is a main concern for global traders, while recessions in Russia and Brazil has also contributed to "a source of uncertainty for near-term prospects report," according to the OECD report.
China was in focus ahead of the open Monday, after data published by the General Administration of Customs on Sunday showed China's exports fell for the fourth straight month in October, while imports plunged on weak domestic demand.
However, a number of press reports stated that China's securities regulator said on Friday it will allow the resumption of initial public offerings of shares in China, lifting a suspension put into effect in July as authorities desperately tried to slow falling stock prices.
The China Securities Regulatory Commission said that 28 companies which had seen their already-approved listings halted by the freeze would be the first out of the gate, adding they have two weeks to prepare for the resumption, with the first batch of 10 companies launching after November 20.
This saw Asia-focused bank Standard Chartered and fund manager Aberdeen Asset Management close as the best performers in the FTSE 100, up 2.3% and 1.9%, respectively.
Elsewhere on the London Stock Exchange, a commodity sector rally lost steam, with miners and oil-related companies giving up by the close the majority of the gains they had made earlier in the day. Tullow Oil and Premier Oil still ended amongst the best FTSE 250 performers up 11% and 3.7% respectively but were both up by more than 15% earlier in the session.
The price of Brent oil also gave up gains throughout the day and at the London equities close was quoted at USD47.09 a barrel. The gold price was little changed from Friday and was at USD1,090.01 an ounce.
Intercontinental Hotels Group ended down 3.7%, after the hotel operator said that it was not considering a potential sale or merger of the company, following recent market speculation.
On Friday, Bloomberg reported that IHG was exploring strategic options including a potential sale or merger after attracting interest amid a boom in hotel sector deals. IHG previously had been linked to the US's Starwood Hotels & Resorts Worldwide.
In the FTSE 250, Serco Group said it reached a deal with the Australian government to amend the terms of its existing contract providing in-service support for Armidale Class Patrol Boats, which will result in the group booking significantly smaller provisions against losses from the contract in the future.
The outsourcer said the amendments made to the contract mean the deal will now end in 2017 rather than in 2022. Serco will provide maintenance and remediation work on an agreed cost recovery basis, which will be subject to strict cost caps and audit processes, it said.
Serco ended with a 6.1% gain on the day.
Aggreko closed up 3.5% after the temporary power provider maintained its pretax profit guidance for the year despite the tough conditions which have hit the company in 2015 continuing in the third quarter.
The company said it continues to expect its pretax profit for the full year to be GBP250.0 million to GBP270.0 million, down from GBP289.0 million in 2014. The group said its revenue for the third quarter to the end of September was down 6.0% on a year before and was down 7.0% on an underlying basis.
In the economic calendar Tuesday, Chinese inflation data are at 0130 GMT, the UK inflation report hearing at the House of Commons is at 0900 GMT, before the NFIB Research Foundation's US business optimism index at 1100 GMT. US import and export price indices are at 1330 GMT and the Redbook index is at 1355 GMT.
On a busy day in the UK corporate calendar, there are interim results from mobile telecommunications provider Vodafone Group, information services company Experian, property developer Land Securities, engineering software company Aveva, food producer Premier Foods, and speciality pharmaceuticals company BTG amongst others.
UK power grid operator National Grid reports full-year results, while building materials company Wolseley and life insurer Prudential release third quarter interim management statements. Broadcaster ITV, media and events company UBM, property developer Capital & Counties Properties, and power plant operator Drax Group also release trading statements.
By Neil Thakrar; [email protected]; @NeilThakrar1
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