2nd Jul 2014 16:17
LONDON (Alliance News) - The FTSE 100 closed modestly higher Wednesday, following a firmly higher close on Tuesday, as UK data continues to impress.
Meanwhile, it was a volatile session for the pound, as the currency moved sharply higher against its major rivals in the wake of a better-than-expected reading of UK construction PMI, but then fell in the immediate aftermath of an upbeat US ADP employment change report.
"Risk appetite has rebounded in the last few sessions, with economic data coming in above expectations," said Brenda Kelly, chief market strategist at IG.
In data released ahead of the UK market open Wednesday, the Nationwide house price index rose by 11.8% year-on-year in June, up from 11.1% in May and exceeding the expectation for a rise of 11.2%. On a monthly basis prices rose by 1.0%, up from 0.7% in the previous month and exceeding the expected 0.6% rise.
Shortly after the open, the latest reading of UK construction PMI came in at 62.6 in June, up from 60.0 in May, reversing the last few months of declining growth to reach the highest level since February. The jump in the reading also came as a surprise to economists, who had been expecting a decline to 59.5.
"This is the second PMI report this week that has pointed to a continuation of the strong recovery that is already being seen in the UK, with the manufacturing PMI yesterday rising to the highest level since November despite expectations here also being for a small decline," said Craig Erlam, a market analyst at Alpari. "This bodes well ahead of the services PMI report tomorrow and many will now be expecting a hatrick of PMI beats," he said.
The FTSE 100 closed up 0.2% at 6,816.37 Wednesday, the FTSE 250 closed up 0.4% at 15,897.11, while the AIM All-Share index closed down 0.4% at 784.54.
"Crucially, US data has turned around, and while better, is not so good as to raise fears about faster tapering," said IG's Kelly. "Yet another ‘Goldilocks moment’ has arrived," she added.
In US data Wednesday, a report released by payroll processor ADP revealed that the US private sector employment added 281,000 jobs in June following an increase of 179,000 jobs in May. Economists had been expecting employment to climb by about 200,000 jobs. Meanwhile, the Institute for Supply Management's New York current business conditions index rose to 60.5 in June, up from 55.3 in May.
It was not all good news, however, with new orders for US manufactured goods falling by more than expected in the month of May. A report released by the US Commerce Department revealed that factory orders in the world's largest economy fell by 0.5% in May, following an upwardly revised increase of 0.8% in April. Economists had expected orders to dip by about 0.3% compared to the 0.7% increase that had been reported for the previous month.
Still, at the UK equity market close, US stocks are fractionally higher. The DJIA, S&P 500, and NASDAQ Composite are all up 0.1%.
At the individual UK equity level, BHP Billiton ended the day among the leading risers in London's FTSE 100, closing up 0.8%. The mining company's shares rose sharply in the wake of press reports that it is considering further job cuts to its iron ore operations in Australia. The miner's iron ore unit president said on an Australian business news website that his aspiration is to at least hold headcount, or reduce it, while increasing volumes.
International Consolidated Airlines closed down 0.1%. The airline company said it had agreed a new multi-year distribution agreement with travel and tourism technology provider Sabre Corporation.
Under the deal, IAG, the parent of British Airways and Spanish airlines Iberia and Vueling, will market and sell airfares and ancillary services such as bags and seats, for British Airways, Iberia, Iberia Express through Sabre's global travel marketplace.
Royal Mail, closing down 2.5%, Burberry Group, closing down 1.3%, and Babcock International Group, closing down 0.3%, were also big fallers in the index after going ex-dividend Wednesday, meaning new buyers no longer qualify for the latest dividend payout.
In the FTSE 250, De La Rue closed down 3.5%, Cranswick closed down 2.9%, Dairy Crest Group closed down 2.7%, TalkTalk Telecom Group closed down 2.5%, ITE Group closed down 2.1%, Homeserve closed down 1.9%, and Halfords Group closed down 1.7% after going ex-dividend.
Carillion, closing up 3.1%, was of of the mid-cap index's biggest risers. Shares in the construction company rose after it said that its performance in the first-half was in line with expectations, and that it remains on track to resume revenue growth in the full-year, despite an expected dip in first-half revenue due to the rescaling of its UK construction activities. It also said that operating margins are expected to increase in the first-half as it continues to be selective regarding the contracts it bids for.
Investec Securities upgraded the company to Buy from Hold in the wake of the release, increasing its price target to 380 pence from 360p. Investec has been neutral on the company for some time, with concerns over cash and Middle East margins "at the fore," said Andrew Gibb, an analyst at the asset managers. However, the company has had a positive start to the year in terms of new contract wins, and its net debt position is now likely to be better-than-expected, Gibb said.
Kier Group was another big riser in the FTSE 250, closing up 3.8%. The construction and support services company's shares jumped after it said its underlying trading performance for the full-year remains on track for expectations with good visibility of earnings in 2015.
The company said its construction division experienced a good second-half with an encouraging level of opportunities. Operating margins remain stable at around 2% and the order book of secured or probable work stood at GBP2.6 billion, which represents around 90% of anticipated revenue for the year to June 2015. It said its services division also performed well, with its order book stable at GBP3.6 billion, while the property divisions also benefited from an increase in investor appetite.
Blinkx was the main reason for the underperformance of the AIM All-Share index Wednesday. The online advertising company closed down 45% after it said its earnings before interest, tax, depreciation and amortisation will be around USD5 million below management expectations.
It said that, as a result of this lower demand in its Desktop division over the last three months, it has seen a shortfall in revenues and EBITDA. The firm attributed this to "industry-wide issues of efficiency and effectiveness," which it said had been compounded by the lingering effects of a disparaging blog about its business in January.
In the data calendar Thursday, the latest release of the official Chinese non-manufacturing purchasing managers' index is released at 0200 BST, ahead of Markit Economics' HSBC China services PMI reading at 0245 BST. The latest reading of the Italian Markit services PMI is scheduled at 0845 BST, with the French equivalent at 0850 BST, the German reading at 0855 BST, and the figure for the wider eurozone area at 0900 BST. The UK Markit services PMI reading is due at 0930 BST.
Eurozone retail sales data are released at 1000 BST, ahead of the European Central Bank's interest rate decision at 1245 BST and the accompanying monetary policy statement and press conference at 1330 BST.
In the US, the Bureau of Labor Statistics releases its participation rate reading at 1300 BST, with US jobless data and the much anticipated non farm payrolls release scheduled for 1330 BST. June's reading of Markit services PMI from the world's largest economy is scheduled for 1445 BST, ahead of the latest reading of ISM non-manufacturing PMI at 1500 BST.
In the corporate calendar, FTSE 250-constituents Poundland Group and Greene King release full-year results Thursday.
By James Kemp; [email protected]; @jamespkemp
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