15th Jan 2014 10:41
LONDON (Alliance News) - UK stocks are pushing higher Wednesday, led by the Personal Goods sector after Burberry released an impressive trading statement. Meanwhile the euro is taking a knock, as Germany's economy grows slower than expected.
By mid-morning the FTSE 100 is up 0.3% at 6,788.70, the FTSE 250 is up 0.1% at 16,251.30, and the AIM All-Share is up 0.2% at 882.45.
The first estimate of German 2013 GDP showed growth in Europe's biggest economy of 0.4%, a deceleration from the 0.7% growth in 2012 and slower than the 0.5% growth expected by economists.
In a morning relatively light on data releases, the disappointing German growth has seen the euro fall about 0.25% against other major currencies. Against the dollar, the euro currently trades at USD1.3610 and against the pound at GBP1.2045.
The German data comes after the World Bank raised its growth projections for the global economy earlier in the morning. In its Global Economic Projections report, the bank said it now expects the world economy to grow 3.2% this year, stronger than the 3% expansion forecast in its report last June.
The improved global outlook has provided a boost to equities Wednesday, with major European markets gaining along with the UK. Despite the weaker German GDP, the German DAX index has made a new record high this morning at 9,643.27. The DAX continues to trade up 0.8% while the French CAC40 is up 0.4%.
As European stocks gain, UK Chancellor George Osborne has warned that the European Union needs to "reform or decline". Speaking to Conservative Eurosceptics in Westminster, Osborne warned that London is in competition with places such as Hong Kong and Singapore as a financial centre and that Europe is falling behind India and China.
In the only UK data release of the day, the Conference Board's leading economic index increased 0.5% month-on-month to 108.3 in November, after rising 0.4% in October and 1.6% in September. The index has now recorded positive growth for the fifth consecutive month.
The result of the forward looking index suggests that the economy will continue expanding in the coming months. At the same time, the coincident economic index, which measures the current situation of the economy, moved up 0.2% sequentially to 105.7 in November. This followed a 0.1% rise in October and a 0.5% gain in September.
Within UK equities, the personal goods stocks lead the gains. The FTSE 350 sector is up 4.2%, led by Burberry, which leads the FTSE 100 gainers, up 5.6%. Burberry's outgoing CEO Angela Ahrendts looks to be going out with a bang, achieving a 14% rise in the group's revenues over the third quarter. The luxury fashion retailer's growth continues to be driven by Asia, though this is providing some foreign exchange headwind due to the recent strength in the pound.
"At current levels, exchange rates will be a significant headwind in the second half and beyond", Ahrendts said.
Also suffering from the strong pound, FTSE 250 listed industrial engineer Fenner leads the index fallers, down 5.3% after releasing an interim management statement that shows currency revaluation will make a 10% dent in full-year profits. The group makes 32% of its profit from the Asia Pacific/Australia region, and the pound has appreciated by 7.3% against the Australian dollar in the last two months.
Providing a boost at the other end of the FTSE 250, Bwin.party Digital Entertainment shares are one of the top gainers, up 3.8%. The gaming group has managed to grab 45% of the market share of the recently regulated online gambling market in New Jersey, according to figures released by the US state overnight. "This endorses the potential for bwin.party and 888 if other states do chose to regulate internet gambling", says Numis Securities analyst Ivor Jones.
Still to come Wednesday, US MBA mortgage applications data at midday, followed by the NY Empire State Manufacturing index and US PPI inflation data at 1330 GMT.
After the UK market close, the US Fed Beige Book of economic conditions will be released at 1900 GMT. Following last week's US jobs report, the Beige Book "will be dissected for any evidence of the so-called weather effect cited by some commentators for the disappointing December employment number," says CMC Markets chief analyst Michael Hewson.
By Jon Darby; [email protected]; @jondarby100
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