15th May 2014 09:58
LONDON (Alliance News) - Stock indices across the UK and Europe are broadly softer Thursday amid a round of European economic data that has once again highlighted the problem of Eurozone constituent economies operating at different speeds, while average price growth across the region remains subdued.
By mid-morning Thursday the FTSE 100 is down 0.1% at 6,874.36, the FTSE 250 is down 0.4% at 15,906.76, while the AIM All-Share is fractionally higher at 808.60.
After UK unemployment numbers and the Bank of England economic forecasts provided the data focus on Wednesday, the Thursday morning session has been very much about the UK's biggest trading partner, the Eurozone. After ECB President Mario Draghi said last week that the ECB Governing Council was "comfortable with acting next time," but wanted to wait for the bank's updated economic projections first, the latest round of growth and inflation data has been in sharp focus, and the data has disappointed.
Major equity markets are performing slightly worse, with the German DAX 30 and the French CAC 40 both down about 0.3%.
Consumer prices in the Eurozone grew at 0.2% in the month of April, in line with expectations. On an annual basis prices increased by 0.7%, also in line with expectations, while on a core basis, they rose by 1.0% over the year, slightly more than the 0.7% expectation.
"Inflation remains well away from the European Central Bank's target of 2.0% and, with fears of Euro Zone deflation edging ever closer, its committee members will not allow it to deviate for much longer," said UFXMarkets managing director Dennis de Jong. "We fully expect the ECB to loosen monetary policy soon in order to stem the economic pressures that it just doesn?t seem able to shake off."
The latest GDP data has shown that the German economy grew by 0.8% over the first quarter, slightly faster than the 0.7% expected. Meanwhile, the French economy appears to have completely stalled, with a flat GDP reading, disappointing expectations of 0.2%.
Meanwhile, from the Eurozone periphery, Portuguese GDP turned negative, coming in at minus 0.7%, while Italy appears to be at risk of slipping back into recession after its preliminary reading recoding a second consecutive quarter of falling GDP, at minus 0.5%.
The overall effect was for a disappointing Eurozone GDP print of just 0.2% in the first quarter, half of the 0.4% that had been expected. On an annual basis, the euro-area economy grew at 0.9%, lower than the 1.1% that had been expected.
"It would be surprising if they (the ECB) didn?t ease next month given how poor these numbers are, but trying to get banks to lend when they are looking to boost their capital ahead of the ECB mandated stress tests is going to be a tough ask, if not impossible," said CMC Markets chief market analyst Michael Hewson.
While stocks remain subdued, the potential for the ECB to act next month is also weighing on the euro, which has lost ground against both the dollar and the pound so far Thursday, trading at USD1.3673 and GBP0.8160.
The pound has also continued to soften a little following the plunge it suffered on Wednesday after the Bank of England convinced markets that UK interest rates are staying down down for a while to come. Currently, the pound trades at USD1.6755.
Within UK equity movers, London Stock Exchange Group is performing well on the FTSE 100, up 2.5% after saying that it has identified some additional cost savings as part of integrating LCH.Clearnet. The stock exchange said that the synergies from the acquisition of LCH.Clearnet are likely to lead to cost savings of EUR60 million by the end of 2015, up from the previous estimate of EUR23 million, and moreover analysts believe this figure may grow further yet.
At the other end of the leading index, Tullow Oil is down 2.8% after proving the results of its latest oil finds. Volumes at it's Eknuyuk-1 well in Northern Kenya will be at the bottom end of pre-drill expectations, said Numis Securities.
In the FTSE 250, Kier Group shares are up 3.0% after it said its construction business was seeing more opportunities in the UK and overseas, its property unit had maintained its pipeline and won new contracts, and the business as a whole was "on course" in its current financial year. Numis upgraded the stock to Buy from Add on the back of the update.
Thomas Cook leads the fallers in the FTSE 250, down 6.0% as investors appear unconvinced about the holiday operator's latest update. Although it narrowed its pretax losses in the first-half of the year and increased its cost-cutting targets, Thomas Cook continues to see a negative impact on holiday bookings due to civil unrest in Egypt. Management said that a quarter of a million less people travelled to the previously popular destination over the period.
Still to come Thursday, a slew of US economic data at 1230 GMT, including the latest CPI numbers, initial jobless claims, and the NY Empire State manufacturing index. US CPI is expected to be slowly improving, with a monthly reading of 0.3% in April forecast, up from 0.2% in March.
Later in the session, monthly US industrial production numbers at 1315 GMT, followed by the Philadelphia Fed manufacturing survey at 1400 GMT, and a speech from Fed Chair Janet Yellen after the European close at 2300 GMT.
Ahead of all of that, the US futures currently indicate a slightly softer open for the DJIA and the S&P 500, while the Nasdaq Composite is expected to open slightly higher.
By Jon Darby; [email protected]; @jondarby100
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