30th Jan 2014 10:51
LONDON (Alliance News) - UK stocks are falling again Thursday. After a modestly positive open, shares quickly reversed. Poor regional results from Diageo have reignited emerging market growth concerns, and the global drinks maker is dragging the FTSE 100 lower.
By mid-morning Thursday the FTSE 100 is down 0.3% at 6,526.00, the FTSE 250 is down 0.2% at 15,663.11, and the AIM All-Share is down 0.5% at 853.99.
Beverages lead the FTSE 350 sector declines, down 4.6% after the world's largest producer of spirits said that its business in emerging markets has slowed. Diageo PLC reported lower like-for-like first half sales of GBP8.01 billion compared to GBP8.13 billion. Diageo's shares have seen heavy selling, currently trading 6.1% lower.
Diageo said that hoped-for improvements in emerging markets during the period were not met, and weakness will continue for the remainder of the year. The read across to others in the sector with emerging market exposure sees SABMiller down 2.6% and Coca-Cola HBC down 1.9%.
The emerging market negativity comes after data from China overnight confirmed that the world's second largest economy is indeed slowing, with the China HSBC PMI revised down to 49.5 in January, from last week's preliminary reading of 49.6. A PMI below 50.0 indicated contraction.
Diageo's announcement comes the day after the US Federal Reserve made a further cut to its quantitative easing program, which had been seen as key to supporting global stock prices generally and emerging market economies in particular. The Fed cut its monthly asset purchases by USD10 billion to USD65 billion.
"I think any company that has exposure to emerging markets is going to feel the pinch in the coming months. It?s just unfortunate that (Diageo) are announcing at around the time the markets focus is on emerging markets," said CMC Markets chief market analyst Michael Hewson.
At the other end of the FTSE 100, BSkyB is up 4.3% after releasing strong half-year results and raising its dividend by 9.1% to 12.0 pence. Royal Dutch Shell also are a big blue-chip gainer, with shares up 2.8% after announcing results in line with its recent profit warning and saying a 4% increase to the dividend is expected.
In a busy day of economic news, net lending to UK individuals rose to GBP2.3 billion in December, from GBP1.9 billion in November, according to statistics from the Bank of England released Thursday. It's the highest level for consumer lending since January 2009, and although it suggests the economy is growing, it may raise concerns over the sustainability of a debt-driven recovery.
Some 28,000 fewer Germans were unemployed in January than December, according to the latest data Wednesday. That beat economist expectations of a 5,000 improvement. The headline rate of unemployment ticked down to 6.8%, from 6.9%.
Economic sentiment in the eurozone is also improving, although by slightly less than expected, with the indicator from the European Commission recording 100.9 in January, up from 100.4 in December. Economists had expected a reading of 101.0.
The pound has had a negative reaction to the day's events so far, losing almost a cent against the dollar since the equity markets opened to trade currently at USD1.6450.
The euro is performing marginally better against the greenback, supported by improving German unemployment and Eurozone economic sentiment, but is still off about half a cent at USD1.3590.
The main economic focus Wednesday is still to come, with the initial reading of US fourth-quarter GDP released at 1330 GMT. Following the Fed's decision to push ahead with tapering last night, and it's commentary that further cuts will be data dependent, all eyes will be on the key release. The expectation is for an annualised reading of 3.2%, down from 4.1% in the third-quarter.
US initial jobless claims, consumption spending and home sales data are also all released at 1330 GMT.
By Jon Darby; [email protected]; @jondarby100
Copyright © 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
DiageoCoca-Cola HBCSAB.L