18th May 2016 11:09
LONDON (Alliance News) - London share prices were lower Wednesday midday, with miners dragging the leading index on China worries and after a rise in the dollar hit commodities prices.
The minutes of the latest US Federal Reserve meeting are set to be released after the London market close.
The FTSE 100 index was down 0.5%, or 29.42 points, at 6,138.35. The FTSE 250 was down 0.6% at 16,751.49 and the AIM All-Share was down 0.2% at 724.49.
Miners were the main drag of the blue-chip index, with the FTSE 350 Mining sector index down 3.5%, the worst performing sector index, following a shift in sentiment towards miners, according to Liberum.
"In the past three days China has released strong monthly property and floor space data, but the mining sector has reacted largely indifferently. There is clearly a shift in market sentiment underway, a result of continued hawkish commentary from the Chinese government," said Liberum analyst Richard Knights.
The analyst recalled that on Monday the South China Morning Post reported Chinese President Xi saying that the economy may have cyclical and aggregate demand problems, "but the main problems are structural ones, and the key issue still lies on the supply side. As a result, the country's economic policy priorities should be to cut production capacity and inventory."
In Asia on Wednesday, the Japanese Nikkei 225 index fell 0.1%. In China, the Shanghai Composite dropped 1.3%, while the Hang Seng index in Hong Kong ended down 1.5%.
London-listed blue-chips Anglo American, down 5.7%, Glencore, down 4.7%, and Rio Tinto, down 3.1%, were the most affected miners Wednesday midday. A rise in the dollar ahead of the release of the Fed minutes from its April 27 monetary policy meeting also weighed on mining stocks, as the strength of the greenback hit commodities prices.
"Growing expectations of a Fed move in June, which come admittedly off a very low base, have kept markets on the back foot this morning," said IG Group analyst Chris Beauchamp. "The chances of a move at the next meeting now stand at a heady 12%, having been just 4% on Monday, but while on an absolute basis this might not be much, in financial markets it's all relative."
Gold was quoted at USD1,271.86 an ounce at midday, lower than 1,280.36 at the London equities close on Tuesday. Meanwhile, Brent oil was at USD49.29 a barrel at midday, flat against its level of USD49.30 on Tuesday.
The release of the Fed minutes is scheduled for 1900 BST. The Federal Open Market Committee left its benchmark US interest rate unchanged in a range of 0.25% to 0.50% in April. Low inflation and a rough patch for the US economy have kept the Fed from raising interest rates since December, when rates were hiked for the first time in a decade.
Stocks in New York are expected to open lower Wednesday, with the Dow 30, the S&P 500 and the Nasdaq 100 all pointed down 0.1%.
Still in the economic calendar Wednesday, the UK Conference Board leading economic index is at 1330 BST. In the US, the EIA crude oil stocks are due at 1530 BST
Already out Wednesday were UK jobs figures. The unemployment rate held steady, as expected, at 5.1% in the three months to April, the Office for National Statistics showed. Average earnings for employees increased by 2.0% including bonuses and by 2.1% excluding bonuses compared with a year earlier.
Spreadex analyst Connor Campbell said the data could show, on the surface, a "fairly stable" picture, but the analyst said questions remain over the quality of the jobs being created.
"When adjusted for inflation, wage growth is still under its pre-crisis levels, and although this April saw a reduction in those claiming unemployment benefits for March, the figure was revised up to the biggest monthly rise in over four and a half years," Campbell said.
"In other words, there are still more than a few reasons to be concerned about the UK economy, a sentiment that fed into the FTSE and prevented it doing much of anything as the morning continued," Campbell noted.
The pound declined following the employment data to a low of USD1.4401, having stood at USD1.4429 previously. Sterling was quoted at USD1.4417 at midday.
In Europe, the CAC 40 in Paris was down 0.3%, as well was the DAX 30 in Frankfurt.
Elsewhere on the London Stock Exchange, Burberry Group was down 5.5%. The luxury good retailer announced a three-year investment and cost-saving strategy, after profit fell in its recently ended financial year and it warned of ongoing challenges in its high-margin Chinese business.
Burberry said it will invest about GBP10 million in financial 2017 and then a further GBP20 million to GBP25 million per year over the following two years in order to improve the business and ultimately boost revenue. It also intends to deliver at least GBP100 million of annualised cost savings by financial 2019.
Burberry had warned throughout the course of the year that unfavourable foreign exchange rates and a challenging economic environment for its high-margin Chinese business were harming its results.
Meanwhile, ARM Holdings was among the best performers, up 1.3%, following the acquisition of UK imaging technology products company Apical for USD350.0 million in cash.
Though saying Apical is fast growing business and has the same model as ARM, analysts at Liberum weren't convinced by the purchase, as they believe the FTSE 100-listed computer chip maker has paid a "very high price".
"Computer vision is a very hot space at present, and ARM appears to have paid a high price to get into the market," Liberum said.
London Stock Exchange Group was up 0.5%, after the stock market operator confirmed the timetable for its agreed merger with Deutsche Boerse. LSE said shareholder documents on the merger will be published in June, and LSE shareholder meetings in connection with the merger will take place in July.
That will mean LSE shareholders will vote on the deal after the outcome of the UK's referendum on its place in the European Union, set for June 23, is known.
In the FTSE 250, Booker Group was the best mid-cap performer, up 6.2%, after Goldman Sachs upgraded the food wholesaler to Buy from Neutral.
At the other end of the index, Marshalls was down 9.0%. The concrete paving manufacturer said revenue in the first four months of 2016 edged up against tough comparatives and a softening commercial market. Marshalls said revenue for the four months to the end of April was GBP120.0 million, up slightly from GBP119.0 million a year earlier.
By Daniel Ruiz; [email protected]
Copyright 2016 Alliance News Limited. All Rights Reserved.
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