14th Oct 2014 09:58
LONDON (Alliance News) - Stocks indices are trading lower in the UK and across Europe Tuesday, while the pound also has fallen, amid a drop in UK inflation to five-year low and yet more worrisome data from the eurozone economy.
By mid-morning Tuesday, the FTSE 100 is down 0.9% at 6,311.73, the FTSE 250 is down 0.6% at 14,450.83, and the AIM All-Share is fractionally lower at 697.03.
Movements by major European indices are similarly small but negative, with the French CAC 40 down 1.0%, and the German DAX down 0.7%.
UK consumer price inflation fell to 1.2% year-on-year in September from 1.5% in August. The drop was driven by falling food and energy prices and exceeded analyst expectations for a fall to 1.4%.
The news is good for the UK consumer, with the Office for National statistics highlighting a 6% fall in the price of motor fuel. Petrol prices have been falling along with the price of oil as Saudi Arabia continues to maintain its rate of production despite global oversupply for fear of losing market share to smaller producers. The price of Brent crude oil has been on a relentless slide for weeks and reached a near four-year low Monday of USD87.90 per barrel.
Both Italian and French consumer prices fell by 0.4% in September from August, according to data released Tuesday, and given the UK's close ties to Europe, Bank of England Governor Mark Carney acknowledged Monday that the slowdown in Europe will be taken into account when considering UK monetary policy.
The slip away from the BoE's 2.0% inflation target has sent the pound lower as investors push back their interest-rate rise expectations. The pound slipped below the USD1.60 level to a weekly low of USD1.5948. Sterling also hit a near-one month against the euro of EUR1.2564.
"Weak inflation as well as the stalling eurozone economy could stay the BoE?s hand," says Rob Wood, chief UK economist for Berenberg Bank.
On top of the weak Italian and French inflation numbers, there has been further bad news from Europe Tuesday, with the German ZEW survey of economic sentiment slipping into negative territory for the first time since November 2012. The closely watched sentiment reading fell to negative 3.6 in October from positive 6.9 in September, missing expectations for sentiment to remain just about positive.
"Today?s poor Economic Sentiment figures represent the global view that Germany?s economy is in freefall and could kill off a European-wide recovery," says UFX.com Managing Director Dennis de Jong.
Furthermore, eurozoone industrial production fell faster than expected in August, dropping 1.9% year-on-year, reversing the 1.6% growth recorded in August and exceeding the forecasts for a 0.9% drop.
Miners are once again providing the main support to London's equity market, with the FTSE 350 equity sector index up 0.9% as natural resource stocks continue to recover from recent lows following Monday's strong Chinese trade data. Rio Tinto is the best FTSE 100 performer, up 1.8%, with Anglo American close behind, up 1.6%.
Luxury UK clothing brands Burberry and Mulberry are both heavily lower Tuesday. Burberry is down 4.3% and leading the FTSE 100 fallers, while Mulberry has plunged almost 20%, making it one of the worst performers on AIM. Burberry is seen as something of a bellwether for the Chinese consumer, so the market has reacted negatively to the company highlighting a slowing in growth from some if its key markets, including China. Burberry also warned that weak consumer confidence in Europe and slower Asian growth would weigh on its second half.
Hargreaves Lansdown shares are down 2.8% after saying growth of new business slowed during its first quarter due to uncertainty over the Scottish referendum vote. In a statement, Hargreaves Lansdown reported GBP970.0 million of net new business inflows in the quarter ended September 30, compared with GBP1.26 billion in the corresponding quarter last year.
Afren is the best performing FTSE 250-listed stock, up 3.0% after announcing it has fired Chief Executive Osman Shahenshah and Chief Operating Officer Shahid Ullah with immediate effect, citing gross misconduct based on evidence found by a review that unearthed irregular payments and starting legal proceedings to recover money from them.
Bellway shares are up 2.9% after the housebuilder reported a jump in full-year profit as higher sales volumes at higher average prices lifted revenue by a third, and the company predicted further volume growth in the current year, albeit at a slower rate. The company reported a pretax profit of GBP245.9 million for the year to end-July, up from GBP140.9 million a year earlier, as revenue rose to GBP1.49 billion, from GBP1.11 billion.
Michael Page has plummeted 10% after saying that its profits will take a significant hit from the strength of the pound. The FTSE 250 recruitment company said its gross profit grew 11.6% on a constant currency basis in the quarter to September 30, with positive results coming from all four of its operating regions. On an actual currency basis, however, gross profit for the group increased only 4.7% as it was hit by the strength of sterling.
After a busy morning in Europe, the focus will shortly switch to the US, where the third-quarter earnings season is under-way. JPMorgan has released its numbers earlier than expected and posted earnings of USD1.36 per share, compared to a loss of USD0.17 per share last year. Analysts had predicted earnings of USD1.38 per share.
Ahead of the US opening bell, futures are pointing to a lower open on Wall Street, with the DJIA down 0.1%, the S&P 500 down 0.2%, and the Nasdaq Composite down 0.1%.
By Jon Darby; [email protected]; @jondarby100
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