26th May 2015 15:59
LONDON (Alliance News) - The FTSE 100 ended below the 7,000 mark Tuesday, as strong data from the US reignited investor concern about the potential for a US interest rate hike, sending the dollar higher against other major currencies.
The blue-chip index ended down 1.2% at 6,948.99 points, entirely wiping out the gains of last week, during in which the index rose on all five trading days. The FTSE 250 closed 0.5% lower at 18,098.81, and the AIM All-Share index slipped 0.2% at 764.86.
In mainland Europe, the French CAC 40 ended down 0.7%, while the German DAX 30 closed off 1.7%.
On Wall Street at the close of European equity trading, the DJIA was down 1.0%, the S&P 500 down 0.9%, and the Nasdaq Composite down 1.2%.
The US dollar extended its early rally against its major rivals as a decline in durable goods orders in April matched economists expectation, triggering speculation that the US Federal Reserve may not delay raising its interest rate.
The Commerce Department released a report showing that US durable goods orders dipped by 0.5% in April after surging up by a revised 5.1% in March. The drop in orders came in line with economist estimates, while the increase in the previous month was upwardly revised from the originally reported 4.0% jump. Excluding a decrease in orders for transportation equipment, durable goods orders rose by 0.5% in April compared to a revised 0.6% increase in March. Economists had expected orders to rise just 0.3%.
The Commerce Department also released separate reports showing an increase in new home sales and an improvement in a key reading on capital spending, while the Conference Board reported an unexpected uptick in US consumer confidence.
The data further supported investor concerns that an interest rate hike could still be on the table at the next Federal Reserve meeting in a few weeks time.
"This boost to the dollar was to the Dow's detriment, which fell to its lowest level in nearly two weeks on the usual fears of a rate hike. The US markets could suffer more losses when noted hawk Richard Fisher speaks this evening; despite stepping down from the central bank in March, the words of the head of the Dallas Federal Reserve should still hold some sway over the markets," said Connor Campbell, a financial analyst at Spreadex.
The pound fell to a low of USD1.5352 against the dollar, its lowest level in two and a half weeks. The euro fell to USD1.0871, its weakest in a month. The euro also was weighed upon by ongoing concerns about Greece's finances and heightened political uncertainty in Spain following municipal elections in which the governing People's Party suffered its worst result in 20 years.
The rise in the dollar weighed heavily on commodities prices, causing the London Stock Exchange's resources sector to fall. Miners Fresnillo and Randgold Resources, both down 3.5%, and Anglo American, down 2.5%, were amongst the leading decliners in the FTSE 100.
In the FTSE 250, Evraz and Tullow Oil, both down 4.5%, and Premier Oil, down 3.6%, were amongst the worst performers.
Royal Mail led the handful of FTSE 100 gainers, up 3.6%, after Cantor Fitzgerald upgraded it to Hold from Sell. The broker said the company is trading on a 30% price-earnings-ratio discount to the broad sector, but this looks justified at the moment given Cantor's forecast for low growth.
Travel stocks easyJet, up 1.6%, cruise ship operator Carnival, up 1.3%, and British Airways owner International Consolidated Airlines Group, up 0.8%, were boosted by the fall in oil prices. EasyJet's share price also was supported by strong results from peer Ryanair Holdings.
The Irish budget carrier ended up 5.1% after it said its net profit for the financial year to the end of March beat its upgraded guidance on the back of stronger revenue, higher customer numbers, and an improved load factor.
Ryanair said its profit after tax for the year to March 31 was EUR867 million, up 66% from the EUR523 million reported a year earlier and ahead of the upgraded guidance it issued in February for net profit of EUR840 million to EUR850 million. That guidance upgrade was the third the group had made since its half-year results were published in November, as it was boosted by falling fuel prices which resulted in its net margin improving to 15% from 10% a year earlier.
Meanwhile, the Financial Times reported that the Irish government may approve the EUR1.3 billion sale of Aer Lingus Group to IAG as early as Tuesday. Aer Lingus shares ended up 1.1%.
Cineworld Group closed up 0.6% after it reported a rise in revenue in the first 19 weeks of 2015 as sales grew in each of its divisions and it said it is confident it will meet market expectations for the full year. The cinema operator said total sales in the 19 weeks to May 14 grew 26.8% on the year before, with the box office growing 23.8%, retail rising 27.9%, and other income up 47.1%.
Inditherm was the best performer in the AIM All-Share index, up 71%. The heating products company proposed a reverse takeover of medical device distribution firm Inspiration Healthcare, a share consolidation, and a change in its name to Inspiration Healthcare Group.
The proposals include a share consolidation of every ten existing ordinary shares into one new share, following which the vendors of Inspiration Healthcare will receive 25.56 million new shares or 83.3% of the company's enlarged share capital as consideration for the reverse takeover, which values Inspiration at GBP7.2 million.
In a thin economic calendar Wednesday, there are German Gfk consumer confidence survey results at 0700 BST and French consumer confidence at 0745 BST. Later in the day, there is weekly US MBA mortgage applications at 1200 BST and the Redbook index at 1355 BST.
In the UK corporate calendar, there are full-year results from banknote printer De La Rue, self-managed investment trust Caledonia Investments, TR Property Investment Trust, Central and Eastern Europe-focused budget carrier Wizz Air, and real estate investment trust McKay Securities amongst others. Investment manager Brewin Dolphin and property company Urban&Civic both report half-year results, while HSS Hire Group issues a trading statement.
By Neil Thakrar; [email protected]; @NeilThakrar1
Copyright 2015 Alliance News Limited. All Rights Reserved.
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