4th Feb 2015 10:55
LONDON (Alliance News) - London stock indices trade lower Wednesday, as a downturn in the price of oil offset the positive effect from UK Markit Services Purchasing Managers' Index beating expectations. Stocks also got a small boost from China's central bank, which cut its banks' reserve ratio by 0.5 percentage point to 19.5%.
After a choppy start to trade, the FTSE 100 is down 0.6% at 6,828.53, the FTSE 250 trades down 0.3% at 16,514.68, while the AIM All-Share is down 0.1% at 692.44.
Oil prices have given back some of their earlier gains, dragging down oil-related stocks. Having hit an intraday high of USD57.24 a barrel, Brent currently trades at USD56.26 a barrel. West Texas Intermediate trades at USD51.11 a barrel, falling from a high of USD52.54 a barrel.
Tullow Oil, down 3.8%, and Royal Dutch Shell 'B', down 1.7%, are two of the biggest fallers in the FTSE 100. In the FTSE 250 Hunting, down 2.4%, and Premier Oil, down 2.4%, and John Wood Group, down 1.9%, were amongst the worst performers at mid morning.
The UK service sector began the year strongly, according to a report from Markit. The services PMI index for January came in at 57.2, ahead of the 56.3 which was predicted by economists and the 55.8 reading in December.
"The data will allay fears that the economy is slowing sharply, having merely seen growth cool during the winter to a more sustainable pace," says Chris Williamson, chief economist at Markit.
The pound rose following the PMI data and currently trades the dollar at USD1.5198.
The eurozone private sector expanded at the fastest pace since July last year as output expanded in Germany, Italy and Spain. But the downturn in the French economy extended into its ninth month. The final eurozone composite output index rose to 52.6 in January from 51.4 in December. It was also above the flash reading of 52.2.
The French private sector continued to contract in January. The final French composite PMI came in at 49.3, down from 49.7 in December and flash reading of 49.5. Likewise, the French services PMI fell to 49.4 from 50.6 in December. It stayed below the flash score of 49.5. The composite PMI in Germany rose to 53.5 from 52 a month ago. The flash score was 52.6. Similarly, the German services PMI climbed to 54 from 52.1 in December. The flash score was 52.7.
European stocks are lower, with the CAC 40 in Paris down 0.4%, and the DAX 30 in Frankfurt down 0.5%.
Focus remains on Greece's new finance minister Yanis Varoufakis' tour of Europe. Varoufakis is due to hold talks in Frankfurt with European Central Bank chief Mario Draghi before meeting Thursday with German Finance Minister Wolfgang Schaeuble.
"This roadshow has proven to be very successful to date, but tomorrow's expected meeting with German finance minister Wolfgang Schaeuble will ultimately define this exercise a success or failure," says Alastair McCaig, market analyst at IG.
Sky, up 1.2%, is one of the biggest blue-chip gainers. The broadcaster posted a big increase in pretax profit for the first half of its financial year, boosted by a rise in revenue and exceptional gains from the sale of its stakes in ITV and the National Geographic Channel.
In its first results incorporating its acquisitions of Sky Italia and a majority stake in Sky Deutschland, Sky posted a pretax profit of GBP1.21 billion for the half year to end-December, compared with GBP507 million a year before, as revenue rose to GBP4.30 billion from GBP3.67 billion.
Hargreaves Lansdown, down 5.4%, is the biggest faller in the FTSE 100. The investment management product provider reported a drop in first-half pretax profit despite a rise in assets under administration over the course of the six months, in what was described as a "muted" time for stocks and retail investors.
In a statement, the company said pretax profit declined to GBP101.9 million in the six months ended December 31 from GBP104.1 million in the corresponding period last year. Lower interest rates due to central bank policy and due to new rules meaning that client money cannot be placed on term deposit beyond 30 days, coupled with reduced revenue on funds, have meant that profit growth has lagged growth in assets under administration, it said.
ARM Holdings is one of the best blue-chip performers, up 1.3%. The chip designer announced Tuesday a new suite of intellectual properties that are expected to be launched on mobile devices in 2016, including its ARM Cortex-A72 processor.
In addition, Sony, one of ARM's main customers, on Wednesday said it expects significant growth in its third-quarter profit with higher sales, despite the estimated impact of the cyber attack in its Pictures business segment. Sony also lifted its forecast for the full year, now projecting a narrower net loss and higher sales than expected earlier.
Moneysupermarket.com is the worst FTSE 250 performer, down 4.4%. Numis downgraded the company to Sell from Reduce, saying it is overvalued based on numerous metrics.
Still to come, full-year results are due from pharmaceutical giant GlaxoSmithKline at 1200 GMT.
The rest of the the economic calendar is dominated by the US with MBA mortgage applications at 1200 GMT, US Markit services PMI at 1445 GMT, and ISM non-manufacturing PMI at 1500 GMT.
By Neil Thakrar; [email protected]; @NeilThakrar1
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