4th Dec 2019 11:57
(Alliance News) - Market sentiment improved in Europe as Wednesday's session progressed, with equities managing to eke out some gains following a rocky start to the NATO summit on Tuesday.
However, London's main index was lagging behind counterparts in Europe as the pound surged to seven-month highs amid a better-than-expected services PMI reading and hopes of a Conservative party win in the UK general election next week.
The FTSE 100 index was up 17.46 points, or 0.2%, at 7,176.22. The FTSE 250 was up 76.05 points, or 0.4%, at 20,576.98, and the AIM All-Share was flat at 906.37.
The Cboe UK 100 was up 0.2% at 12,166.01, the Cboe UK 250 was up 0.4% at 18,499.16, and the Cboe Small Companies up 0.2% at 11,382.72.
In mainland Europe, the CAC 40 in Paris was up 1.3%, while the DAX 30 in Frankfurt was 1.0% higher in early afternoon trade.
Joshua Mahony, senior market analyst at IG, said sentiment is starting to "stabilise" following worrisome comments made on Tuesday by US President Donald Trump at the start of the NATO summit in Watford.
"With Trump warning that the US-China deal may not come until the end of 2020, hopes of an impending phase one deal took a sharp hit to the detriment of global indices. However, as ever these comments should be taken with a pinch of salt, as his comments are typically a negotiating tool to help push discussions in his favour," said Mahony.
In the US, it looks to be a brighter start for Wall Street on Wednesday with the Dow Jones Industrial Average called up 0.5%, the S&P 500 up 0.4% and the Nasdaq Composite 0.6% higher.
In focus in the US on Wednesday is an IHS Markit services PMI at 1445 GMT and an ISM non-manufacturing PMI at 1500 GMT.
Released in Europe earlier in the day, IHS Markit revealed the eurozone private sector was "stagnant" in November, remaining at the lowest levels for more than six years.
The final IHS Market eurozone purchasing managers' index composite output reading for November was 50.6, flat from October but exceeding the previous flash November PMI reading of 50.3. While exceeding the 50.0 neutral mark, this still put the index at "amongst the lowest levels in the past six-and-a-half years", IHS Markit said.
In the UK, meanwhile, the all-important services sector saw a renewed drop in business activity.
The business activity index slipped to 49.3 in November from 50.0 in October. Any reading below the neutral mark of 50 indicates shrinkage in a sector, while one above expansion.
This latest reading represented the steep decline in conditions since March, though it was ahead of market consensus, according to FXStreet, of 48.6.
The composite PMI for November - a weighted average of the services and manufacturing index readings - registered 49.3, down from a neutral reading of 50.0 in October.
"The softening in the all-sector PMI in November suggests that GDP growth has slowed sharply in Q4 from Q3's 0.3% quarter-on-quarter rise and has perhaps even turned negative. But we think that the PMIs are overstating the gloom," said Ruth Gregory at Capital Economics.
However, Capital Economics conceded "it is clear" that risks to its forecast of a 0.2% rise in GDP for the fourth quarter are tilted to the downside.
Sterling was quoted at USD1.3052 at midday following the PMI data, up from USD1.2999 at the London equities close on Tuesday.
The pound was trading around seven-month highs on Wednesday, buoyed by the latest services data and also by the expectation of a Conservative party win in the UK general election next week.
"While there is still another eight days to go, markets are becoming increasingly reassured that the prospect of a Labour government is slowly diminishing, and while nothing is absolutely certain, the number of sterling short positions is slowly getting squeezed," said Michael Hewson at CMC Markets.
In other currencies, the euro was quoted at USD1.1071 Wednesday midday, down from USD1.1089 late Tuesday. Against the yen, the dollar was quoted at JPY108.67, up from versus JPY108.50.
In commodities, Brent was trading at USD61.89 at midday, higher than USD60.96 at the London equities close on Tuesday.
"Oil prices are faring a little better today, lifted by the slightly improved sentiment in the markets. Tuesday's inventory number from API won't have done crude any harm either, with a 3.72 million barrel drawdown offsetting last week's similarly sized increase. Expectations for the EIA release today are for a smaller drawdown which could provide another boost for oil prices," commented Craig Erlam at Oanda.
Gold was quoted at USD1,476.20 Wednesday midday compared to USD1,480.64 at the London equities close on Tuesday. The safe haven asset loses its shine as risk appetite recovers.
This saw shares in Mexican gold miner Fresnillo trade 3.4% lower.
Elsewhere in the FTSE 100, SEGRO shares were down 1.0% after RBC cut the property investor to Underperform from Sector Perform.
Among UK mid-caps, Cineworld shares were up 6.8% after the stock closed down 3.9% on Tuesday on a warning that 2019 trading will be "slightly" below management expectations.
On AIM, M&C Saatchi shares collapsed 45% after the advertising firm issued a profit warning.
In addition, M&C Saatchi said it is to record a GBP11.6 million negative adjustment to 2019 results following an internal accounting review. Some GBP9.6 million relates to 2018's accounts, and the rest will fall in 2019.
Turning to the trading update, M&C Saatchi said that due to "weaker than expected trading", and higher central costs, underlying pretax profit is set to fall 22% to 27% from 2018's figure. The broad guidance range reflects the importance of December to trading.
This is the firm's second such warning in the quarter. In September, M&C Saatchi warned 2019 profit could be as much as 10% lower than expected.
"It may be a fabled name in UK advertising circles but M&C Saatchi would have a really tough time selling its own update this morning. A mess would be a polite description," commented Russ Mould at AJ Bell.
Stock Spirits was up 5.8% after the spirits and liqueurs producer said it delivered a year of good growth.
For the financial year ended September 30, revenue rose 9.2% to EUR312.4 million from EUR282.4 million a year ago. Pretax profit rose 24% to EUR38.2 million from EUR30.7 million.
By Lucy Heming; [email protected]
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