26th Feb 2014 17:21
LONDON (Alliance News) - UK stock indices opened lower Wednesday and never recovered. While a busy day of corporate news provided some stand-out movers, a number of stocks going ex-dividend provided a drag, while a small downgrade to the UK's 2013 GDP numbers appeared to keep overall sentiment negative ahead of some major events economic events Thursday.
After rallying about 3% last week and closing at a 14-yeah high on Monday, the FTSE 100 has done very little over the last couple of sessions, and closed down 0.5% Wednesday at 6,799.15. The FTSE 250 closed down 0.3% at 16,471.66, and the AIM All-Share closed down 0.3% at 887.18.
In Europe, the CAC 40 and the DAX 30 both closed down 0.4%.
"There appears to be an awful lot of indecision amongst investors as to what the next move will be, despite the making of new highs on US and UK markets this week, with the result that there has been little conviction either way in the last couple of days," said CMC Markets chief market analyst Michael Hewson.
The UK economy grew at a slightly slower rate over the whole of 2013 than previously thought, according to the second of three readings, from the Office for National Statistics Wednesday. UK GDP came in at 2.7% year-on-year in the fourth quarter, revised down from the first preliminary reading of 2.8%. In the fourth-quarter alone, GDP was unrevised at 0.7%.
Total business investment in the UK increased by 2.4% in the fourth quarter, up from the 2.0% growth recorded in the third-quarter, according to data released at the same time by the ONS. Economists had been expecting a bigger rise, to 2.6%.
The pound had a very muted reaction to the UK data, with currency traders appearing to prefer to wait for the US data out later in the day to take their direction.
Following a run of disappointing US data that has been largely discounted by the market as weather effected, new home sales in the US increased by more than expected. Sales grew by 9.6% in January, with 468,000 new home sold, more than the 400,000 expected by economists.
"We finally had some good news from the world?s largest economy as sales of new homes in the US surged 9.6% in January to a 5 and a half year high. This saw the dollar stage a relief rally," said Forex.com analyst Fawad Razaqzada.
The dollar regained a little strength against other currency majors after the data and as US equity markets opened. At the close of European equity markets the pound and the euro are both trading at intra day lows against the greenback, currently USD1.6630 and USD1.3660 respectively.
US stocks markets opened in a more positive mood and the DJIA and S&P500 both continue to trade up about 0.4%, while the Nasdaq Composite is up about 0.6%.
Within UK equities, the food and drug retailers lead the fallers as the UK supermarkets appear to get stuck into a new price war. At an event on Tuesday Tesco updated investors and analysts on its long-term strategy. The headline announcement was that Tesco will cut its annual group capital expenditure to GBP2.5 billion for at least three years. Tesco is also planning to focus on lower regular pricing rather than sporadic offers. Asda immediately replied, saying it too will increase its focus on price cutting. Tesco was one of the biggest blue-chip fallers Wednesday, closing down 2.7%. Sainsbury's also lost 1.3% and Morrison dropped 1.9%.
ITV was a big faller Wednesday, closing down 2.2%. Although the group announced impressive full-year results, investors have been disappointed that higher cash payouts have not been made after the special dividend was kept at the same level at 2012. ITV is said to be looking to charge pay-tv platforms for ITV1. Liberum Capital estimates this could add 15% on top of 2014 consensus estimates and say the company is its top media sector pick.
On the way up Wednesday, Weir Group almost single-handedly made Industrial Engineering the top gaining sector. Weir was the top FTSE 100 gainer, closing up 7.1% after keeping investors happy by raiding its dividend by 11%.
Easyjet was the heaviest blue chip faller, down 5.1%, as one of a number of names going ex-dividend Wednesday. Beazley led the declines in the FTSE 250 to close down 7.0% after also going ex-dividend. Diageo and Playtech also went ex-dividend Wednesday.
The UK earnings season reaches its peak on Thursday. Financials groups RBS, RSA Insurance and Man Group all release full-year results. Other big names releasing full-year results include British American Tobacco, Reed Elsevier, Premier Oil and Kazakhmys, while house builders Redrow and Barratt Developments are due to release interims.
In the macro calendar, the European economy will be the morning focus, with German unemployment numbers due at 0855 GMT. Economists are expecting a reduction of 10,000 in February, slowing the improvement from the 28,000 drop seen in January. The headline rate is expected to remain stable for the third consecutive month February, at 6.8%.
Later in the day we will get the latest update on price pressures in Europe's largest economy, with the release of preliminary German CPI data. Consumer prices in February are expected to have risen by 0.6% month-on-month, after having fallen by 0.6% in January.
The harmonised index, or HCPI, which is most closely watched by the European Central Bank for policy decision making is expected to record 1.1% growth year-on-year in February, slipping from 1.2% in January. Such a reading would be likely to re-ignite the debate over whether further monetary easing is needed in the Eurozone.
From the US, monthly durable goods orders are due at 1330 GMT, followed by initial jobless claims at 1330 GMT. Janet Yellen will also be sitting to deliver the second part of her address to Congress, which was postponed on February 13 due to heavy snow in New York.
"Generally, the second part of the testimony brings very little new information relative to the first section. However, given the time lapse this year, more attention than usual will likely be paid to Yellen?s Senate testimony this time around," says Rabobank senior strategist Jane Foley.
By Jon Darby; [email protected]; @jondarby100
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