5th Feb 2014 17:10
LONDON (Alliance News) - Mixed data in Europe and the US Wednesday has kept equity markets subdued ahead of the major US jobs report and central bank meetings still to come this week. Meanwhile the pound has underperformed other major currencies after an unexpected drop in UK service sector activity.
The FTSE 100 has closed up 0.1% at 6,457.89, the FTSE 250 has closed up 0.1% at 15,561.38, while the FTSE All-Share has closed down 0.6% at 852.58.
In Europe, the CAC40 has closed flat at 4,117.79 and the DAX has closed down 0.1% at 9,116.32.
A round of European service sector PMI readings from Markit for January largely showed slight improvements from December but were slightly behind expectations. The eurozone composite reading came in at 52.9, up from 52.1 but missing the forecast of 53.2.
The main exception to that rule was the UK, where the Markit PMI slipped to 58.3 in January, from 58.8 in December. Economists had been expecting a rise to 59.0.
That data miss sent the pound a little lower, recording a low Wednesday of USD1.6248 and EUR1.1997.
In the US, 175,000 more people were employed in the private sector in January, according to the ADP report released Wednesday. That's a slowdown from the 238,000 added in December, and slightly less than the 180,000 that had been expected by economists.
The ADP report is seen as something of a warm up to the Non-Farm payroll jobs report on Friday. With a reading more-or-less in line with expectations, "this would suggest that while there was some slowdown in hiring in January any effect the weather may have had appears to have been fairly muted", said CMC Markets Chief Market Analyst Michael Hewson.
The US services sector is expanding slightly faster than expected, again suggesting the weather effect has been minimal, with the Markit services PMI rising to 54.0 in January, from 53.0 in December. Economists had expected a reading of 53.7.
After the close of European equity markets, US stocks are lower. The DJIA is down 0.1%, the S&P 500 is down 0.4% and the Nasdaq Composite is down 0.7%.
US investors will have their eyes on Twitter later Wednesday, with the company due to release its fourth-quarter results after the US market close.
In UK equity sectors, Pharmaceuticals performed well, boosted by GlaxoSmithKline reporting mixed results. Although reporting numbers not far from analyst expectations, strong hopes for a number or new products saw the stock close up 1.5%.
RSA Insurance was another big FTSE 100 gainer, closing up 4.1%. The troubled insurer said late Tuesday that it had appointed former Royal Bank of Scotland PLC boss Stephen Hester as its new Chief Executive. Following the new appointment, Barclays upgraded RSA to Equalweight from Underweight, saying that with Hester on board the risk/reward ratio has improved.
In UK equity movers, Hargreaves Lansdown was the stand out casualty Wednesday, closing down 11% despite reporting a rise in first-half profits. The stockbroker said it made a GBP104.1 million pretax profit for the six months ended December 31 2013, compared with GBP93.7 million for the corresponding period last year, as revenue rose by GBP18.1 million to GBP158.4 million. Those results fell about 4% short of expectations however, with the company also saying it was making less and less on its excess funds in the continued low interest rate environment in the UK.
That low interest rate will be in focus again on Thursday, with the Bank of England making its latest policy decision at midday. Commentators widely expect no change and for Governor Mark Carney to maintain a dovish tone in any statement, preferring to wait for the publication of the quarterly inflation report on February 12 to provide further clarity on the bank's forward guidance.
The European Central Bank decision is shortly after at 1245 GMT, with President Mario Draghi's usual press conference to follow at 1330 GMT. This will be the main focus in Europe, with analysts currently split on whether the ECB will make a policy change. Wednesday's generally improving European services PMI's added to the broad evidence of better growth signals in the region overall recently. However "the softness of inflation may be more of a discussion point for the ECB," said Bank of America Merrill Lynch European Economist Laurence Boone. "Overall, we expect the ECB to look through the latest inflation numbers and leave monetary policy unchanged. But the weakness of inflation has nevertheless raised the risk of action," the economist said.
In the afternoon, US initial jobless claims at 1330 GMT will provide the focus, as the precursor to the major economic print of the week - US Non-Farm Payrolls on Friday.
By Jon Darby; [email protected]; @jondarby100
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