1st Oct 2014 09:48
LONDON (Alliance News) - The FTSE 100 has recovered some of its opening losses by mid-morning Wednesday, after another fall in European purchasing managers indices added pressure on the European Central Bank to provide further stimulus of the eurozone economy at its monthly meeting on Thursday.
But a poor performance by UK supermarket stocks, following a weak trading update from Sainsbury's, continues to drag on the blue-chip index.
The FTSE 100 is trading down 0.3% at 6,602.87, having sunk below the 6,600 mark for the first time since August 11. The FTSE 250 is down 0.1% at 15,368.93, and the AIM All-Share index is 0.5% lower at 746.49.
European stock markets are trading mixed, with the CAC 40 down 0.2% and the DAX up 0.1%.
Eurozone manufacturing moved closer to stagnation in September as the German factory sector contracted for the first time in 15 months, final data from Markit Economics showed. The manufacturing PMI for the European economic engine room fell to 49.9 from 51.4 in August and below the flash estimate of 50.3. A reading below 50 indicates contraction, while a reading above 50 represents expansion.
The manufacturing PMI for the whole of the eurozone fell more than initially estimated, to a 14-month low of 50.3 from August's reading 50.7. The reading was below the earlier flash estimate of 50.5.
The UK manufacturing sector growth also eased unexpectedly to its slowest pace in seventeen months. The seasonally adjusted Markit/CIPS manufacturing PMI fell to 51.6 in September from 52.2 in August. Economists had expected the index to rise to 52.7.
Wednesday?s UK manufacturing PMI figures "will have little impact on the Bank of England. They had anyway expected growth to slow a little in the near-term and manufacturing is just 10% of the economy. Friday?s PMI for the dominant service sector will be much more important. We expect that to fall back but still signal strong growth," says Berenberg's chief UK economist Rob Wood. "
On the London Stock Exchange, a trading update from Sainsbury has sent UK grocer shares tumbling. The company said it has cut its like-for-like sales forecast for the second half of the year, after it said sales in the second quarter slumped, a move that had been expected by analysts after the whole sector continued to be hit by competition from discounters and premium grocers.
Sainsbury revealed that sales momentum weakened further in the 16 weeks to September 27, reporting a decline in like-for-like sales in the second quarter of 2.8% year-on-year excluding fuel, and down 4.1% including fuel, its third consecutive quarterly decline. Prior to these declines, Sainsbury had been enjoying 36 quarters of growth on a like-for-like basis, meaning nine years of unbroken sales growth.
The company's shares have declined 4.5%, while William Morrison Supermarkets' share are trading down 4.4% and Tesco is down 2.8%. Tesco also confirmed it is being investigated by the UK Financial Conduct Authority over its recent profit revision.
Oil companies are down after the price of Brent oil fell to a fresh two-year low overnight, reaching USD94.240. Tullow Oil, down 1.7%, and Royal Dutch Shell 'A', down 1%, are both amongst the biggest fallers in the FTSE 100 index.
Still ahead on Wednesday is data from the US. MBA mortgage applications for the week ending September 26 will be released at 1200 BST, while ISM manufacturing PMI will be released at 1500 BST.
Futures indicate Wall Street for a broadly lower opening with the DJIA expected to open flat, while the S&P 500 and Nasdaq Composite is shown to open 0.1% lower.
By Neil Thakrar; [email protected]
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Tullow OilTescoMRW.LSainsbury's