4th Feb 2014 17:39
LONDON (Alliance News) - The FTSE 100 closed lower for a fifth consecutive day Tuesday, even though the index was higher at one point, as concerns about the impact of the Federal Reserve's tapering of its economic stimulus programme continued to weigh on stock markets across the world.
Tuesday's declines weren't as severe as those seen in recent sessions, but market analysts are worried that the sell-off could accelerate again later in the week if US economic data points to a slowdown.
UK stocks opened in the red Monday, taking a lead from heavy falls suffered in the US and Asian markets overnight as the global equity sell-off continued. The Japanese Nikkei in particular lost 4.2% on Tuesday, meaning the index has now shed more than 13% since the start of the year.
Spreadex estimates that USD2.9 trillion has been wiped off the value of global equity markets so far in 2014.
"With the Federal Reserve trimming their bond purchases, investors are now questioning if the US economy is strong enough to support itself without Fed assistance," said Spreadex Sales Trader Lee Mumford.
The FTSE 100 recovered the early losses to trade briefly higher mid-afternoon, but still closed down 0.2% at 6,449.27. The FTSE 250 closed down 0.1% at 15,540.28, while the AIM All-Share outperformed and closed up 0.1% at 857.47.
"It may well be the calm before the storm, with lots of data expected in the latter parts of the week, culminating in the release of the January (US) non-farm payrolls report", said Forex.com technical analyst Fawad Razaqzada.
In Europe, the CAC 40 in Paris ended up 0.2%, while in Frankfurt the DAX closed down 0.6%.
However, Wall Street was faring better when Europe closed, with the DJIA up 0.4%, the S&P500 up 0.6% and the Nasdaq Composite up 0.8%.
There was plenty of news from individual stocks in London, with oil majors BP and BG Group both reporting a deterioration in the fourth quarter, with BG swinging to a loss. However, BG still ended the day as the third-biggest riser on the FTSE 100, up 2.6%, because it has already warned that it would disappoint. BP closed down 1.3%.
BP reported a 58% decline in its fourth-quarter pretax profit as it was hit by the latest asset sales, weaker refining margins, and higher depreciation and exploration write-offs as the group brought new projects online and increased its investment in exploration.
Within the UK equity sector indices, Technology and Telecommunications was among the worst performers, led by chip design developer ARM Holdings.
ARM ended down 7.4%, the biggest decline on the FTSE 100, after it reported slowing growth in its royalty revenues, which missed expectations after sales of chips for high-end smartphones such as the Apple iPhone slowed in the second half of the year. Royalties per unit delivered declined sharply to 4.5 US cents in the fourth quarter as a result.
FTSE 250 listed Imagination Technologies, which also makes processors for smart phones, closed down 3.2% as a result of the ARM warning.
Randgold resources and Fresnillo also closed amongst the biggest fallers, down 3.1% and 1.2% as the gold price fell. The yellow metal was trading at USD1,251.42 per ounce when the London equity markets closed.
Financial stocks had a stronger day. Aberdeen Asset Management and Prudential, which have both fallen sharply in recent sessions due to their emerging market exposure, closed as top blue chip gainers, up 4.9% and 1.0% respectively. Hargreaves Lansdown gained 3.3% ahead of its interim results Wednesday.
The pound rose against the euro and dollar in morning trade after some UK economic data came in stronger than expected, but slipped back to be relatively flat on the day in later trade. It is trading at USD1.6300, while the euro was worth GBP1.2065
The UK construction PMI for January came in at 64.6, up from 62.1 in December and much better than the slowdown to 61.5 that economists had expected. The figure had been expected to be hit by the poor January weather, but instead the Chartered Institute of Purchasing & Supply said that business conditions were the best since August 2007.
Wednesday morning brings another round of European Purchasing Managers Index data from Markit, this time for the services sector in January. The readings are expected to largely mirror the manufacturing sector prints released on Monday in showing slow improvement across the region, led by strong growth in German. The German number is out at 0853 GMT, with the eurozone following at 0858 GMT. Eurozone retail sales are due at 1000 GMT and are expected to show a slight slowdown in growth to 1.5% year-on-year in December, from 1.6% in November.
The UK Markit Services PMI for January is out at 0928 GMT and is expected to be stronger than the eurozone's figure, at 59.0, up from 58.8 in December. The British Retail Consortium shop price index will also be released overnight.
In the UK corporate calendar Wednesday, GlaxoSmithKline will release its fourth quarter results at noon. AIM listed GW Pharmaceuticals will earlier release its first quarter results. Brokerage Hargreaves Lansdown is due to release interim results, while ICAP will release an interim statement.
Some of London's market participants will be struggling to their desks Wednesday morning as unions begin a 48 hour stoppage on the London Underground. There will be a limited service that will start later and finish earlier. Many stations will stay closed altogether.
By Jon Darby; [email protected]; @jondarby100
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