16th May 2014 09:46
LONDON (Alliance News) - UK stocks trade lower Friday, with a notable divergence continuing between the UK's leading index, the FTSE 100, and its mid-cap peer, the FTSE 250.
A lack of new top-tier economic data and a quieter corporate calendar Friday leaves little to shift the sentiment from Thursday, which saw investors adopt a risk-off approach, ditching equities in favour of the relative safety of government bonds, in light of some less-than-impressive European economic data.
By mid-morning Friday, the FTSE 100 is down 0.1% at 6,835.35, while the FTSE 250 is heavily underperforming, down 1.8% at 15,334.40, and the AIM All-Share is down 0.4% at 798.21.
"Since October 2011, the FTSE 250 is up 75%, contrasting with a FTSE 100 performance of 35% which suggests that FTSE 250 valuations may be broadly stretched even allowing for a recovery in the UK economy," says CMC Markets market analyst Michael Hewson. "This sort of out-performance is likely to invite greater scrutiny on valuations as the economy continues to recover."
Investor concern over the equal merger between Carphone Warehouse and Dixons Retail also continues to weigh on the mid-cap index. After both suffering heavy falls on Thursday when the merger was confirmed, Carphone is down another 3.3% Friday, while Dixons is down 3.0%.
Inchcape is also lower within the FTSE 250, down 3.7% despite reporting that its revenue increased to GBP2.21 billion in the four months to April 30, up 2.5% at actual exchange rates, and up 11% on a constant currency basis. The motor retailer is "a well run business with good long-term growth potential," says Liberum Capital, but a lack of earnings upgrade momentum is likely to hold back the shares, the brokerage says.
Within the FTSE 100, Intertek Group leads the fallers, down 5.7% after the firm said variable market conditions, weaker-than-expected activity in its energy infrastructure market, and the appreciation of sterling hit its first quarter revenues.
The supermarkets are performing well for the second day on the back of the unexpectedly positive update from Asda Thursday, released along with the results of its parent company, Wal-Mart. Asda reported slim like-for-like sales growth of 0.1%.
"Ordinarily 0.1% growth would not be much to be writing home about. However, within the context of a British food retailing segment, where superstores are being eschewed by a significant number of customers in favour or small stores, discount outlets and online, such a performance actually merits a degree of credit to our minds," said Shore Capital analyst Clive Black.
The read across sees Morrison's lead the FTSE 100 gainers Friday, up 3.9%, while Sainsbury's is up 2.7%, and Tesco up 1.3%.
From a market-wide perspective it's certainly an unusual sight to see the supermarkets as the best performers. "When the supermarket sector is leading the market there is clearly something amiss, and when Morrison?s is the biggest gainer in the index, investors should have cause for concern," said IG market analyst Alastair McCaig.
Eurozone trade balance numbers have shown the surplus grew to EUR17.1 billion in March, up from EUR13.6 billion in February and exceeding expectations of a rise to EUR15.5 billion.
There's been little impact from this or anything else on the major currency pairs, with forex trading remaining subdued across the session. Against the dollar, the pound currently trades at USD1.6807, while the euro trades at USD1.3718.
Major European equity markets are similarity quiet, with both the German DAX 30 and the French CAC 40 trading broadly flat.
US futures trading currently indicates that Wall Street will open broadly flat Friday ahead of the few data drivers to come.
The Reuters/Michigan consumer sentiment index for May will provide the main focus of the US session, with analysts expecting a small rise in the index to 84.5, from 84.1 in April, which would be the strongest outcome in ten months, says DailyFX currency strategist Ilya Spivak.
By Jon Darby; [email protected]; @jondarby100
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
TescoInchcapeMRW.LSainsbury'sDXNS.LCPW.L