7th Aug 2014 10:07
LONDON (Alliance News) - UK stocks are trading a little lower Thursday morning, with company updates driving the main stock movers as investors await the announcements by the UK and European central banks still to come.
With little in the morning economic calendar, investor sentiment has been held back a little by the ongoing war of sanctions between the Russian and western economies, with Russia most recently imposing a "full embargo" on food imports from any country involved in the sanctions.
The FTSE 100 is down 0.2% at 6,620.43, the FTSE 250 is down 0.2% at 15,237.41, and the AIM All-Share is down 0.2% at 749.67.
"The escalation of sanctions, coupled with looming interest rate decisions, has seen a shaky start to the FTSE 100 as traders prepare themselves for a day of disappointment," said IG market analyst Alistair McCaig
Major European markets also are a little lower, with the French CAC 40 down 0.4%, and the German DAX 30 down 0.1%.
Coca-Cola HBC leads the FTSE 100 lower, down 3.1% despite reporting a rise in first half profit to EUR178.7 million in the second quarter, up from EUR120.0 million in the previous year. The world's second largest bottler of Coca-Cola products warned that difficult economic and trading conditions, and a sudden deterioration of trading in Russia, means it now expects the volume decline trend seen in the first half to persist in the remainder of the year.
Last week, German sports wear giant Adidas caused a big market upset by saying that it will be vastly scaling back its Russia operation in light of recent developments, sending its share price, the German DAX, and European equity markets in general, much lower.
Recent disappointing European economic data, as well as a growing number of companies starting to warn over the impact that deteriorating relations with Russia will have on their business, has left Thursday's focus squarely on ECB President Mario Draghi's press conference at 1330 BST.
There's been mixed reactions to the London-listed insurers that have reported Thursday. Aviva is the best performer, leading the FTSE 100 gainers, up 2.6%, after reporting a rise in pretax profit to GBP1.05 billion in the first half from GBP1.01 billion the year before. The group said that increases in its life business and from fund management more than offset a drop in general insurance and health.
RSA Insurance said the strength of the pound during the first half drove reported premiums down 16%. Stephen Hester's group also said it was hit by a one-off loss of GBP30 million due to the fire at the Glasgow School of Art in May. Overall, the group reported a GBP45.0 million pretax profit in the six months ended June 30, a big fall from the GBP240.0 million reported in the previous year. After opening lower, the shares have recovered to trade higher, up about 0.5%.
Shore Capital said that after stripping back the write-offs and one-offs, the underlying performance "isn't too bad".
Old Mutual is down 2.6% after reporting a drop in pretax profit to GBP564.0 million in the first half from GBP805.0 million a year earlier. Old Mutual operates across a number of countries and joined the growing list of international companies that have blamed the recent strength of the pound for eating away overseas profits when translated into sterling.
With the Bank of England currently sitting to discuss interest rates, Old Mutual CEO Julian Roberts argued in an interview earlier Thursday that if there's not more upward pressure on wages in the UK then, there is no need to put up interest rates, which would only strengthen the pound further and therefore further impact profit from international business.
The Bank of England has already made clear that it agrees with that reasoning, and given that real wages are still falling in the UK, it remains highly unlikely that the BoE will announce any change in policy at midday Thursday. In fact, given that there will be no statement released, the BoE announcement is likely to be a complete non-event, although all eyes will be on the release of the meeting minutes a couple of weeks later to see who voted which way.
Drax Group has fallen almost 10% to the bottom of the FTSE 250 after announcing that the Court of Appeal has sided with the UK government, which appealed a decision by the High Court to award a subsidy to the power station owner to help to it convert coal-fired generating units to biomass. The stock has been up and down like a yo-yo in recent weeks as the decision has been referred from one court to another.
The ECB press conference is now the major focus, after which there is some US initial jobless claims data at 1330 BST.
US futures markets currently indicate that a fractionally higher open can be expected on Wall Street, with both the DJIA and the S&P 500 pointing 0.2% higher.
By Jon Darby; [email protected]; @jondarby100
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Related Shares:
Old Mutual PLCAvivaRSA.LCoca-Cola HBCDrax