5th Jun 2014 09:50
LONDON (Alliance News) - The UK's leading share indices are trading slightly lower Thursday, while major European indices, along with the euro, are barely moved ahead of the all-important policy announcement from the European Central Bank at 1245 BST.
By mid-morning Thursday the FTSE 100 is down 0.2% at 6,803.13, and the FTSE 250 is down 0.3% at 15,943.26. In France, the CAC 40 is fractionally higher, and in Germany the DAX 30 is fractionally lower.
The currency market also is quiet, ahead of the almost certain volatility to come. Against the dollar, the euro remains tethered at just above USD1.36, while the pound is a little higher at USD1.6760.
Meanwhile, London's junior market, AIM, is being dragged significantly lower by a profit warning from its largest constituent - ASOS. The AIM All-Share is down 1.8% at 797.73.
ASOS shares opened as much as 44% lower Thursday after guiding that its full-year pretax profit will be far worse than previously expected, due to the continued strength of the pound and increased levels of promotional activity. Liberum Capital estimates that the new guidance translates to full-year pretax profit being 30% lower than previously expected.
The strength of the pound has been a concern noted by UK companies operating internationally across all-sectors in recent months, but, added to an increasingly competitive online-retail sector, the impact appears to be particularly severe for ASOS. The stock continues to lead the AIM-All-Share losers, down more than 30% at 3,108 pence.
Smith & Nephew sits at the top of the FTSE 100 for the fifth time out of the last eight trading session, as market speculation continues over potential suitors for a takeover. Following a press report last week that US company Stryker was preparing an offer, Bloomberg has reported Thursday that fellow US medical device maker Medtronic Inc is considering a takeover bid. The news has sent Smith & Nephew shares up 4.7%. The value of the company has now risen by almost 17% since the takeover rumour mill started spinning last Wednesday.
Most of the housebuilders are performing well Thursday following the latest bumper reading of UK house price inflation, but Persimmon leads the FTSE 100 fallers after going ex a 70p dividend. Bellway is up 1.8% after receiving an upgrade to Buy from Numis Securities. Bellway said Thursday morning that its reservations rate is up 11% on the year before. Following along, Berkeley Group is up 1.1%.
Halifax said the price of the average UK house rose by 3.9% month-on-month in April, after having fallen by 0.3% in March, exceeding economists expectations for a ride of 0.7%. It represents the biggest one-month gain since October 2002, while on an annual basis Halifax said prices rose by 8.7% in April.
Data from the eurozone has been better than expected so far Thursday, with German factory orders rising by 3.1% month-on-month in April, reversing a 2.8% decline in March, and recording the best growth of the year so far.
Similarly, eurozone retail sales rose at the fastest pace for three months in April, recording a 0.4% month-on-month rise, up from just 0.1% in March. On an annual basis, retail sales were up 2.4% in April, beating economists expectations for a 1.3% rise.
The better-than-expected data has done next to nothing to the market, however, as its focus is squarely on the upcoming ECB announcement. The consensus at this stage is for a rate cut to be announced, but with a huge amount of speculation over whether that will involve the introduction of negative deposit rates or other liquidity-boosting measures.
"Rate cuts are fully priced in, but there is no widespread agreement about liquidity measures," said Societe Generale currency strategist Kit Jukes in a morning note to clients. "Markets are however, pricing in the possibility that the ECB president delivers a risk-friendly message successfully."
Indeed the 1330 BST press conference that follows the announcement will be just as important as the announcement itself, as investors will be looking for clues for what to begin pricing in at the next meeting.
With such focus on the ECB Thursday it would be easy to forget that the Bank of England also announces the results of its monthly policy deliberations at midday. It would be a huge surprise to see any change from the BoE, but the release of the minutes of Thursday's meeting on June 18 will be of interest as investors begin to expect a more hawkish tone from some of the nine monetary policy committee members.
US initial jobless claims at 1330 BST is the main economic data release Thursday afternoon. Following the disappointing ADP report on Wednesday, and ahead of the non-farm payrolls on Friday, economists expect an 10,000 increase in claims to 310,000 for the week ended May 30 from 300,000 in the previous week.
Ahead of the central banks and the Wall Street opening bell, futures trading indicates that US stocks will also make a cautious start, with the DJIA and the S&P 500 expected to open just fractionally lower.
By Jon Darby; [email protected]; @jondarby100
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Related Shares:
Smith & NephewBerkeley GroupBellwayPersimmonASOS