16th Sep 2014 16:17
LONDON (Alliance News) - UK stocks closed lower Tuesday as investors showed caution ahead of Wednesday's Federal Reserve interest rate decision and in the light of poor Chinese foreign direct investment figures.
The FTSE 100 closed the day down 0.2% at 6,792.24, with the FTSE 250 down 0.4% at 15,593.05 and the AIM All-Share index off 1% to 765.17.
European Stocks fared no better. The CAC 40 index in Paris closed 0.4% lower, and the DAX in Frankfurt ended 0.3% lower.
US indices were performing better at the close of European trade. The DJIA was up 0.2%, the S&P 500 up 0.3%, and the Nasdaq Composite up 0.1%.
FDI in China declined notably in August, figures from the Chinese Ministry of Commerce showed. During January to August, inbound investment slid 1.8% from last year to USD78.3 billion. Jasper Lawler, market analyst at CMC Markets, said this drop in FDI could indicate a "hard landing" for the world's second largest economy.
"China has so far met its 7.5% gross domestic product growth target this year, but recent economic indicators, including a drop in industrial production and retail sales, suggest that’s not so likely in the current quarter. One of the biggest risks to the global economy is that in a hard landing, China brings down the rest of the world with it," Lawler said.
UK consumer price inflation slowed to 1.5% in August from 1.6% in July, in line with economists' expectations. The Office for National Statistics said falls in the prices of motor fuels and in food and non-alcoholic drinks provided the largest downward contributions to the change in the rate, partially offset by upward effects from clothing, transport services and alcohol.
Core consumer prices, excluding the most volatile items such as food and energy, rose faster than expected in August, at a rate of 1.9%, accelerated from 1.8% in July. Economists had expected core CPI to remain stable.
"Inflation has now been below its 2% target for eight straight months, and with food and energy prices having remained soft at the wholesale level, we view inflation prospects to be benign for the next couple of years," said Investec analyst Philip Shaw.
German ZEW economic sentiment survey came in ahead of economists expectations but was not enough to boost European stock markets. The print for September was 6.9, ahead of the 4.8 consensus but showed a deterioration from August's result of 8.6, marking the ninth consecutive month of worsening sentiment.
Meanwhile, European ZEW economic sentiment for September slumped to its lowest level since 2012 at 14.2, from 23.7 in August and below economists' expectation of 21.3.
In individual UK stock news, St James's Place was amongst the biggest fallers in the FTSE 100 with its shares falling 2.4%. The Financial Conduct Authority said it has fined Peter Carron, a former senior partner at St James's Place Wealth Management, GBP300,000 after he was found to have advised clients to invest a total of GBP2.4 million in three companies in which he was a director without adequately disclosing his interests.
Between 2004 and 2010, Carron advised clients to invest GBP2.4 million in the three companies without disclosing his position on the board of the firms. These clients later lost approximately GBP2.2 million when the companies were placed into liquidation between May and August 2010. St James's Place subsequently paid GBP1.9 million in compensation to the 11 investors involved.
Meanwhile, Pearson has enjoyed a strong day of trading after Morgan Stanley raised the stock's rating to Overweight from Equal-Weight with a price target increase to 1,350 pence from 1,100p. The company ended the day atop the blue-chip index, with its shares up 1.8% at 1,227.2p.
In the FTSE 250, Thomas Cook was the biggest faller after it said, in a trading update, that Germany bookings have slowed, and its German business experienced weaker margins in the fourth quarter due to a combination of reduced demand and excess market capacity. Furthermore, the company's UK summer sales are flat from the previous year, with the group saying it has sold approximately 92% of its Summer 2014 programme but at average selling prices 4% lower year-on-year. The travel operator's shares closed the day down 6.2%.
Online fashion retailer ASOS, one of the biggest stocks on London's junior AIM market, took a tumble after management guided that profit in the new financial year just started is likely to be no better than the year just ended, as it looks to increase its investment spending on "zonal pricing" to make it more competitive in international markets.
ASOS also said that a the recent fire at its Barnsley warehouse cost it between GBP25 million and GBP30 million in sales over its fourth quarter. Analysts have rushed to slash forecasts on the stock following the update, with Numis Securities, for example, cutting its 2015 pretax profit estimate by 27%. The stock ended the day 8.9% lower.
Wednesday is a busy day in the economic calendar, beginning with the release of the Bank of England minutes from its latest interest rate meeting at 0930 BST. Last month's meeting showed a split decision on interest rates, the first time this has happened in over three years. Also at 0930 BST is the UK jobless rate for the three months up to July. The reading is expected to show a decrease in unemployment to 6.3% from 6.4% for the three months up to June.
At 1000 BST, Eurozone CPI figures will be released while US data dominates the afternoon. US CPI will be released at 1330 BST, ahead of the much-anticipated Federal Reserve interest rate decision after European markets close at 1900 BST.
In the corporate calendar, FTSE 100-listed Smiths Group will be reporting full-year results, while in the FTSE 250, JD Sports Fashion will report half-year results and Imagination Technologies Group will release an interim management statement.
By Neil Thakrar; [email protected]
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Imagination Technologies GroupPearsonThomas CookSmiths GroupSt James's PlaceASOSJD Sports