20th Jan 2015 10:47
LONDON (Alliance News) - London markets are broadly higher Tuesday, lifted by better-than-expected economic growth in China and positive consumer sentiment in Germany and shrugging off cuts to global growth forecasts by the International Monetary Fund.
The FTSE 100 is 0.4% higher at 6,609.54, the FTSE 250 is up 0.3% at 16,114.7 and the AIM All-Share index is 0.2% higher at 698.87.
The International Monetary Fund downgraded its global growth outlook for 2015 as positive effects of lower oil prices and the depreciation of the euro and yen are being more than offset by persistent negative forces. The reduced forecast by the IMF follows a similar move by the World Bank last week.
In its World Economic Outlook Update released Tuesday, the Washington-based lender said the global economy is set to grow 3.5% this year, down from the prior forecast of 3.8%. For 2016, growth is projected to be at 3.7% instead of 4%. US economic growth was revised up to 3.6% but the euro area was revised down to 1.2% despite the support from lower oil prices and the prospect of further monetary policy easing.
The 2015 growth forecast for China, where the IMF said investment growth has slowed and is expected to moderate further, was lowered to below 7%. The country's economy grew at the weakest pace since early 2009 in the fourth quarter, though the growth was more than the consensus estimate, data from the National Bureau of Statistics reported Tuesday.
Gross domestic product grew 7.3% in the fourth quarter of 2014 from a year ago, the same rate as in the third quarter, marking the weakest growth since the first quarter of 2009. However, the growth was stronger than the 7.2% rise forecast by economists.
"Today's data suggest that although slowing investment has continued to put downward pressure on growth, this has been offset by a pick-up in consumption and service sector activity," Julian Evans-Pritchard, China economist at Capital Economics, says.
The better-than-expected GDP figure lifted Asian markets, and the Shanghai Composite ended 1.8% higher at 3,173.052. Japan's Nikkei closed up 2.1% at 17,366.3 and the Hang Seng in Hong Kong finished up 0.9% at 23,951.16.
German producer prices fell by more than expected in December, dropping 0.7% on the month and 1.7% on the year, adding weight to the expectation that the European Central Bank will broaden its economic stimulus measures when its governors meet on Thursday for the first policy meeting of the new year.
However, the country's ZEW sentiment survey for January showed consumers were more optimistic about the economy, with the index rising for a third consecutive month to 48.4 from 34.9 in December to the reach the highest level since February 2014.
Germany's DAX is up 0.3% and the CAC-40 in Paris is 0.8% higher.
Futures are pointing to a higher open on Wall Street, as US investors return from a long weekend. Markets were closed Monday for Martin Luther King Jr Day. The DJIA is called to open up 0.4%, the S&P 500 up 0.5%, and the Nasdaq 100 up 0.6%.
Brent crude is quoted at around USD48.50 a barrel Tuesday, down slightly on the day and edging closer to last week's six-year low of USD45.16. US benchmark West Texas Intermediate is quoted at USD47.60 a barrel.
"Oil seems to be settling into a decline once more, as Brent crude edges closer to USD48 per barrel," says Connor Campbell at Spreadex. "After being the focus of global interest for so long, the commodity has been overshadowed recently by news arising from the Eurozone; yet this hasn?t stopped the black stuff from floundering, and it still threatens to sink back to the lows seen last week."
Gold, meanwhile, is ticking higher at USD1,292 an ounce as investors seek safer investments amid persistent uncertainty.
"Momentum is strong and the USD1,300 psychological (level) no longer seems too far away," says UBS in a note. "The SNB's surprise announcement last week helped gold extend the uptrend, as the uncertainty further enhanced gold's safe haven appeal."
In UK corporate news, Unilever shares are down 1.8%, the third worst performer in the FTSE 100. The consumer goods giant reported a 2.7% drop in sales in 2014 to GBP48.44 billion and said it doesn't expect tough market conditions to improve in 2015.
Online trader IG Group said net trading revenue rose 8% to GBP197.4 million in the six months to November 30. It reiterated that full-year profit will be hit by as much as GBP30 million after the Swiss National Bank dropped its exchange rate peg last week, causing extreme market volatility. Of that, GBP12 million is IG's own market exposure, the rest that of its clients, which it may or may not be able to collect. Its shares are up 2.4%.
William Hill is the worst performing stock in the FTSE 250, down 4%. The bookmaker said revenue and adjusted operating profit fell in the fourth quarter of 2014 as football results went against it over the Christmas holidays. It suffered a similar fate in the third week of 2015. Full-year 2014 revenue rose 8% despite a 2% drop in the final quarter of the year.
3i Infrastructure is up 4.6% after announcing a deal to sell its entire stake in UK train leasing company Eversholt Rail Group to Hong Kong-based CK Investments SARL, a company jointly owned by Hong Kong-based Cheung Kong Infrastructure Holdings Ltd and Cheung Kong (Holdings) Ltd, generating estimated proceeds of about GBP358 million.
Admiral shares are down 2.1% after a report from the AA said UK car insurance premiums rose at a slower rate over the final three months of last year. The AA British Insurance Premium Index's average 'shoparound' quote for an annual comprehensive car insurance policy increased by 0.2% from the third quarter, compared with a quarter-on quarter rise of 1.2% in the three months to end-September.
By Ian Edmondson; [email protected]
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