16th Oct 2014 16:14
LONDON (Alliance News) - UK stocks ended broadly lower Thursday, after failing to fulfil the early promise of a rally, while FTSE 100 drug maker Shire once again fell heavily.
Volatility continued, with the VIX index rising to its highest level since late 2011 in what was very much a roller-coaster day for European and US stock prices. Investors instead flocked to the most stable government bonds, causing their yields to fall further.
"European markets once again led the declines with southern European bourses once again getting pummelled, while Italian, Spanish and Greek bond yields blew higher again, as investor’s rotated capital out into US treasuries, UK gilts and German bunds," says Michael Hewson, chief market analyst at CMC Markets.
The FTSE 100 closed down 0.3% at 6,195.91, and the AIM All Share fell 0.7% to 676.29, having fallen to its lowest level in over two years at 669.37. The FTSE 250 outperformed, gaining 0.4% to 14,480.09.
European stock indices ended mixed, with the French CAC 40 down 0.3% and the German DAX up 0.4%.
US stocks were broadly higher at the London close. The DJIA and Nasdaq Composite traded flat, while the S&P 500 traded up 0.1%.
The second estimate for September of core consumer price inflation in the eurozone came in slightly higher than expected. The core figure showed a 0.8% rise on the previous year, revised up from a 0.7% rise. The eurozone economy, however, remains a concern for investors, many of whom have called for the European Central Bank to initiate full quantitative easing, but UBS economist Reinhard Cluse says the bank is unlikely to give in.
"Given the current weakness in economic and sentiment data, the calls for the ECB to trigger large-scale sovereign QE will remain loud, but we still don't think that the ECB will deliver – unless inflation fails to recover and Eurozone growth falters more disconcertingly, which is not our base case scenario," Cluse said.
Positive data from the US late in the day provided some relief for the London market. Initial claims for unemployment benefits unexpectedly decreased in the week ended October 11th, according to a report released by the US Labor Department, with initial jobless claims falling to their lowest level in over fourteen years.
The report said initial jobless claims fell to 264,000, a decrease of 23,000 from the previous week's unrevised level of 287,000. The decrease came as a surprise to economists, who had expected initial jobless claims to edge up to 290,000.
Furthermore, according to Bloomberg, US Federal Reserve Bank President James Bullard said the central bank should consider delaying the end of its bond-purchase programme to halt the decline in inflation expectations. The Fed's quantitative easing programme is set to end this month and the doveish comments made by Bullard provided some support to markets.
Shire was again the worst performer of the FTSE 100, closing down 12% Thursday, which added to its 22% loss on Wednesday. Chicago-based AbbVie Inc late Wednesday recommended that its shareholder vote against the takeover of Dublin-based Shire, a day after it said it was reconsidering the GBP32 billion recommended deal in the wake of the US Treasury's crackdown on so-called tax inversion deals. AbbVie confirmed it faces paying Shire a break fee of USD1.64 billion. Shire said it is "considering the current situation".
FTSE 100-listed distribution and outsourcing company Bunzl's shares rose 2.5%, making it one of the top gainers in the index. The company said overall trading has been in line with hopes since its results in August, with group revenue in the third quarter to September 30 up 6% year-on-year on a constant currency basis.
It said this was driven by underlying growth of around 3% on the back of positive contributions from acquisitions. In keeping with that comment, the group said it will acquire Netherlands-based De Ridder Groep BV, a specialist distribution business focusing on the prisons, police stations and detention centres segments, for an undisclosed amount.
Tesco shares took another hit, falling 1.7% after billionaire investor Warren Buffett sold more of his shares in the company, a regulatory filing showed, having earlier this month described his investment in the supermarket chain as a "huge mistake".
Berkshire Hathaway, the holding company controlled by Buffett, cut its stake in Tesco to less than 3% on Monday, the filing showed. It now holds 245 million shares in the company. Before the sale, it held a near 4% stake in the company, according to data from Hemscott.
The economic calendar is particularly quiet on Friday, with eurozone construction output for August at 1000 BST and US Reuters/Michigan consumer sentiment index for October, released at 1455 BST, being the main highlights.
Fed Chair Janet Yellen will be speaking at the Boston Economic Conference at 1330 BST as well.
In the corporate calendar, FTSE 100 building merchants Travis Perkins will release an interim management statement, as will FTSE 250 consumer lender Provident Financial.
By Neil Thakrar; [email protected]
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