3rd Jun 2015 09:45
LONDON (Alliance News) - London shares are flat to higher Wednesday mid-morning, as the pound takes a hit from disappointing UK services sector data, while investor focus turns to the European Central Bank latest monetary policy decision, due at 1245 BST.
The FTSE 100 is flat at 6,926.70, while the FTSE 250 is up 0.4% at 18,288.17. The AIM All-Share is up 0.2% at 776.90.
The pound sharply declined as the key British services sector expanded at the weakest pace in five months in May, survey results from Markit revealed Wednesday. The Markit UK Services PMI for the services sector, fell to 56.5 in May from 59.5 in April, with economists expecting a reading of 59.2. It was the steepest decline since August 2011. However, any reading above 50 still indicates expansion in the sector.
New orders received by the the UK service sector increased for the twenty-ninth successive month in May, but the rate of growth marked the slowest since last December. Service providers raised their payroll numbers further in May, despite a slight easing in the rate of job creation to a five-month low.
?Recent weakness in manufacturing and construction has spread to services. Overall growth in May across all three sectors was the lowest since December and the second-weakest for two years," says Chris Williamson, chief economist at Markit.
The pound currently trades at USD1.5261.
European major indices are slightly higher following eurozone manufacturing PMI readings from Markit. Eurozone private sector growth slowed less than estimated in May, as the final composite output index from Markit fell to 53.6 in May from 53.9 in April. However, it was above the flash score of 53.4, and above expectations for a reading of 53.3.
In Paris, the CAC 40 is up 0.1%. France's Markit PMI Composite index came in at 52.0, higher than estimates for 51.6, and the previous reading of 51.0. Meanwhile, in Frankfurt, the DAX 40 is up 0.3%, as Germany's Services PMI index reading also came in a touch better than expected to 53.0, with economists expecting it to be 52.9.
Wednesday's ECB decision comes amid the Greece debt negotiations and after eurozone inflation figures released on Tuesday.
"Eurozone bond yields rose yesterday after inflation data showed prices rising faster than expected at 0.3% in May, while the core reading was 0.9%," says Oanda analyst Craig Erlam. "While this is unlikely to even prompt a discussion among the ECB about tapering its QE program earlier than September next year, it will invite many questions and could be the cause of significant volatility today, particularly in bond markets."
Investors will see if ECB President Mario Draghi gives further details of the compromise deal between Athens and its international creditors that eurozone officials say is taking shape as part of negotiations to head off the threat of Greece running out of money.
Greek Prime Minister Alexis Tsipras is due to meet European Commission President Jean-Claude Juncker in Brussels later Wednesday, the Greek government announced Tuesday, amid intense media speculation in Athens that a breakthrough is imminent in the country's bailout saga.
The euro is giving back some of its earlier gains ahead of the ECB decision and trades at USD1.1115.
On the London Stock Exchange, TUI Group joint Chief Executive Peter Long is set to become chairman of the travel and cruise operator and the chairman of Royal Mail after the postal operator said he will succeed Donald Brydon as its chair on September 1. Royal Mail said Long will join its board as a non-executive director and chairman designate on June 18, and will stand for election at its annual general meeting on July 23. He will then succeed current chairman Brydon at the start of September. TUI Group shares are up 0.4%, while Royal Mail is up 0.9%.
Dixons Carphone shares are down 0.8% even though it reported growth in like-for-like sales in both the fourth quarter of its financial year and in its full year, and said it expects pro-forma headline pretax profit for the year to exceed the top end of its guidance. The FTSE 100 electricals and telecoms retailer said that like-for-like revenue in the 17 weeks to May 2 was up 9% and up 6% for the full year to the same date.
Mining stocks are taking a hit after Tuesday's gains, with Anglo American down 1.6%, BHP Billiton down 1.6%, Fresnillo down 1.6% and Rio Tinto down 0.8%.
In the FTSE 250, WH Smith is amongst the best performers, up 4.0%, after it reported a rise in total sales in the 13 weeks to May 30, although it said that like-for-like revenue was flat, as its Travel business outperformed the High Street business. The books and stationery retailer said that total group sales in the 13 weeks were up 1% compared to the same period the year before, but like-for-like revenue remained flat year-on-year.
Morgan Advanced Materials and Spectris are the worst mid-cap performers, down 2.6% and 2.5%, respectively, after UBS downgraded both of the stocks to Sell from Neutral. Meanwhile, Melrose Industries is up 2.6% after being upgraded by UBS to Buy from Neutral.
The FTSE Committee will announce Wednesday its index review decision based on Tuesday's closing prices. Aerospace and defence company Meggitt is likely to drop out of the FTSE 100 after a volatile March and a weak share performance in April and May, while satellite communications service provider Inmarsat is set to return to the blue-chip index following a strong run in its shares since the previous index review.
Often, the likely moves become apparent in the days ahead of the index review. However, this time the changes to the FTSE 100, outside of Inmarsat and Meggitt, are too close to call. Wm Morrison Supermarkets, Sports Direct International and Aggreko are amongst the other potential candidates for demotion from the FTSE 100.
Wm Morrison Supermarkets shares are up 2.4%, Sports Direct International is up 0.8%, and Aggreko is up 0.7%.
Still in the economic calendar, in the US, the Markit Services and Composite PMI is at 1445 BST, while EIA crude oil stocks are due at 1530 BST.
By Daniel Ruiz; [email protected]
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