19th Jul 2016 11:09
LONDON (Alliance News) - Stock prices in London were mixed Tuesday midday, with investors concerned by the situation in Turkey, while higher-than-expected UK inflation figures failed to lift the depressed pound for long.
The FTSE 100 was down 0.4%, or 28.26 points, at 6,667.16, while the FTSE 250 was off 0.3% at 16,825.00. The AIM All-Share was outperforming the two larger-cap indices, up 0.5% at 730.18 points.
IG analyst Chris Beauchamp said the aftermath of Friday's failed coup in Turkey is limiting further risk appetite among investors following the post-Brexit rally.
"The 'wall of worry' appears to be getting bigger, with investors trimming some positions after a good run that has seen some markets hit new all-time highs," noted Beauchamp. "The situation in Turkey continues to provide cause for concern, as it becomes more and more apparent that President [Recep Tayyip] Erdogan is taking this opportunity to tighten his grip on the country in a way that will concern both the EU and NATO."
After the attempted coup was defeated, Erdogan said on Monday he and legislators will discuss reviving the death penalty, which has not been used in Turkey since 1984 and was abolished in 2004.
"It will take a parliamentary decision for that to take action in the form of a constitutional measure. So the leaders will have to come together, discuss it. If they accept to discuss it then as the president I will approve any decision to come out of the parliament," Erdogan told CNN from Istanbul.
However, reinstituting capital punishment would be diplomatically troubling to many of Turkey's Western allies. The European Union, which Turkey has sought to join since 1999, has no member that allows the death penalty. Germany said that restoring the death penalty would lead to a suspension of EU membership talks.
UK inflation accelerated by more than expected in June, figures from the Office for National Statistics showed. Consumer prices climbed 0.5% year-on-year in June, faster than the 0.3% rise seen in May. Inflation was expected to edge up to 0.4%. On a monthly basis, consumer prices gained 0.2% in June as seen in May and in line with expectations. Core inflation that excludes energy, food, alcoholic beverages and tobacco, rose to 1.4% year-on-year, versus 1.2% in May.
Ben Brettell, senior economist at Hargreaves Lansdown, noted that the data was gathered by the ONS prior to the EU referendum, so doesn't include the effect of the pound's dramatic fall since the vote.
"Sterling's weakness means higher import prices, and this is expected to feed through to significantly higher inflation figures in the coming months. Forecasts suggest it could reach 3% to 4%," said Brettell. "However, this will be a temporary factor. Assuming sterling remains weak, the effect will fall out of the year-on-year calculation in the second half of next year."
The pound rose slightly to a high of USD1.3220 immediately after the inflation data, but it gave back those gains shortly thereafter, standing at USD1.3174 at midday Tuesday. The currency had been quoted at USD1.3304 at the London equities close Monday.
In Europe, the CAC 40 index in Paris was down 1.2% and the DAX 30 in Frankfurt was down 1.3%. German economic sentiment plunged in July to its lowest level in more than three years, hurt by the Brexit vote and the consequent uncertainty for the economy, results of a survey by the ZEW showed.
The ZEW indicator of economic sentiment for Germany plummeted to minus 6.8 from positive 19.2 in June. It was the lowest since November 2012, well below its long-term average of 24.3 points. Economists had forecast a score of positive 9.
In Asia, the Nikkei 225 index in Tokyo closed up 1.4% and the Shanghai Composite ended down 0.2%. The Hang Seng in Hong Kong fell 0.6%.
Stocks in New York were called for a lower open, with the Dow 30 index pointed down 0.2%, while the S&P 500 and the Nasdaq 100 were both seen down 0.3%. US housing starts and building permits are due for release at 1330 BST, before the Redbook index on US retail sales at 1355 BST. Philip Morris has reported second-quarter results prior to the US open, while Microsoft reports earnings after the close.
Elsewhere in the economic calendar, at 1505 BST, Ben Broadbent will be the latest member of the Bank of England's monetary policy committee to make a speech after the UK central bank's surprise decision to keep its interest rate unchanged last week.
On the London Stock Exchange, IG's Chris Beauchamp said it was "not surprising to see miners take a hit" amid lack of investor confidence. Glencore was down 4.0%, Rio Tinto down 3.7% and Anglo American down 3.3%.
Rio Tinto, the world's second-largest iron-ore producer, said its Pilbara iron ore production for the second quarter increased 8% to 80.9 million tons. The miner said Pilbara iron ore shipments rose 6% to 82.2 million tonnes.
Despite chief executive Jean-Sebastien Jacques saying the miner delivered "another robust quarter of operational performance", Accendo Markets analyst Mike van Dulken said Rio's production report delivered iron-ore shipments below analyst expectations, with management's "pledges of compelling and consistent returns falling on deaf ears".
Sky was up 1.8 after RBC Capital upgraded the pay-television stock to Outperform from Underperform.
Shares in postal service and logistics operator Royal Mail were up 0.7%, after the company said trading in the first quarter of its financial year was in line with its expectations. In the three months to June 26, Royal Mail group revenue grew 1.0% year-on-year. Revenue in its UK parcels and letters business declined 1.0%, with parcel revenue rising 2.0% but letter revenue down 3.0%.
In the FTSE 250, Evraz was the biggest decliner, down 5.5%. The miner said all of its units reported a drop in production during the first half of 2016 as the Russian company produced less steel, steel products and coking coal concentrate. Crude steel production in the first half of this year was down 7.6% to 6.7 million tonnes from 7.3 million a year earlier, whilst production of steel products, net of re-rolled volumes, fell 8.0% to 6.2 million tonnes from 6.7 million
By Daniel Ruiz; [email protected]
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