4th Aug 2014 09:58
LONDON (Alliance News) - UK stocks are mixed Monday, with indices trading in fairly tight ranges, as the state bailout of Portugal's troubled Espirito Santo Bank appears to have returned calm to the market following last week's sell-off, while the mid-morning release of results from HSBC has provided a boost for the FTSE 100.
By mid-morning Monday, the FTSE 100 is up 0.3% at 6,701.69, the FTSE 250 is down 0.4% at 15,338.37, and the AIM All-Share is down 0.7% at 757.43.
Major European markets also are mixed, with the French CAC 40 up 0.5%, and the German DAX down 0.2%.
Along with concerns over the situations in Ukraine and Gaza weighing on market sentiment in recent sessions, investors have been keeping a wary eye on headlines coming out of Portugal about debt problems at one of its biggest banks, Espirito Santo.
Since the start of the banking crisis in 2008, concerns over the debt levels of a particular bank or sovereign have tended to spread quickly around the eurozone from one heavily indebted institution to another. However, for the moment, the weekend decision by the EU to approve a EUR4.9 billion bail-out plan of Espirito Santo appears to have had the the desired effect of cutting off any contagion fears.
"Investor nerves have been settled after the weekend announcement," said Hantec Markets market analyst Richard Perry.
However, bailout doesn't bode well for the upcoming results of the European Central Bank's stress testing later this year, and Thursday's ECB meeting will be closely watched for comments about the situation.
"It does raise the question of what other banks will require funding, either pre-emptively or on a forced basis," said IG analyst Alastair McCaig.
The fact that the German DAX is continuing to underperform, however, indicates that the concern over the knock-on effect of increased sanctions against Russia is continuing to weigh, analyst say. The DAX fell particularly heavily last week, led lower by sportswear giant Adidas, which said it will be reining in its Russian operations as a result of the current tensions.
HSBC's interim results have kept the banking sector in focus Monday. The UK bank reported a decrease in first half profit that was a little worse than analysts had expected. HSBC said it made a USD12.34 billion pretax profit in the first half, compared with GBP14.07 billion in the previous year, and coming in a little light of the USD12.46 billion consensus analyst estimate.
HSBC shares have been jumping around since the 0915 BST release, and are now leading the FTSE 100, up 2.1%.
No update from the UK banks is complete without an update on how much has been set aside for redress past issues such as compensating customers that were miss-sold payment protection insurance, and for HSBC in the first half of the year that number was USD234 million, a significant reduction from the USD412 million it set aside the year before.
The UK Construction PMI from Markit has shown a slightly moderation in overall activity in July, with a print of 62.4, down from 62.6 in June, but ahead of the expected reading of 62.0, and remaining very strong considering that a reading above 50.0 indicates expansion.
Residential housebuilding in the UK is seeing a particular boom, with the report noting the steepest rise in residential building activity in more than a decade, attributed to favourable funding conditions and strong demand for new housing starts.
"The index signals extremely strong construction growth, particularly in housebuilding which apparently just saw its fastest expansion since November 2003," said Berenberg chief UK economist Rob Wood.
Investor confidence in the eurozone, meanwhile, has fallen to its lowest level in a year, according to the monthly Sentex survey which came in at 2.7 in August, falling from 10.1 in July and missing expectations for just a small fall to 9.0.
The currency market has remained relatively stable amid the mixed data readings, with the pound trading at USD1.6828, and the euro trading at USD1.3426.
Intertek Group is the stand-out FTSE 100 gainer, up 2.2% despite reporting a drop in pretax profit for the first half of the year to GBP119.8 million from GBP127.9 million a year earlier. The quality testing company said it was seeing good growth in consumer goods and its commercial and electrical business, offset by weakness in its commodities and industry & insurance divisions. Shore Capital said the results were a a little below its forecasts, but likely within the range of the wider analyst community.
Keller Group leads the FTSE 250 gainers, up 4.0% after reporting a 21% rise in pretax profit to GBP32.5 million in the first half from GBP26.8 million in the previous year. The engineering company said all four of its divisions achieved strong revenue growth compared with the same period a year ago, despite an adverse currency translation impact.
Telecity leads the FTSE 250 fallers, down 5.1% despite reporting an 11% rise in pretax profit and a 9.3% rise in revenue in the first half of the year. The group said that customer churn levels were elevated in the first half, which analysts say may lead to a drop in profits in the second half.
There's very little left in the data calendar Monday, with just the US ISM New York index being of interest at 1445 BST.
Futures currently indicate that US markets will open a little higher, with the DJIA and the S&P 500 both up about 0.2%.
By Jon Darby; [email protected]; @jondarby100
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