2nd Oct 2014 09:25
LONDON (Alliance News) - Stock markets are lower across the UK and Europe Thursday, following heavy losses suffered in both the US and Asian markets, as investors await the latest policy decision of the European Central Bank later in the session.
Markets also remain apprehensive of the ongoing protests in Hong Kong, where pro-democracy activists have demanded that Chief Executive Leung Chung-ying resign by the end of the day or they will begin to occupy important government buildings. Chinese officials have warned of "unimaginable consequences" if the protests continue.
So although China's National Day fireworks were cancelled on Wednesday because of the protests, investors are worried that sparks of a different kind will start to fly on Thursday and Friday.
By mid-morning Thursday, the FTSE 100 is down 0.5% at 6,526.67, the FTSE 250 is down 0.5% at 15,142.64, and the AIM All-Share is down 0.6% at 739.75.
In Europe, the French CAC 40 is down 0.6%, and the German DAX 30 is down 0.6%.
Within UK equity movers, TUI Travel shares are bucking the general market trend, up 0.6% after it said in a pre-close update that it has been trading in line with expectations. The big story for TUI remains its proposed merger with parent TUI AG. Analysts expect the deal to lead to big shareholder returns as the combined group could dispose of non-core assets.
Hargreaves Lansdown shares are off earlier highs but continuing to hold gains against a falling market after receiving an upgrade to Buy from Numis Securities. Some analysts have become wary of Hargreaves Lansdown's future growth potential given a number of new competitors entering the do-it-yourself investment market. However, Numis says that the underlying growth profile of the business remains strong, with the industry expected to grow by 150%, while new freedoms in the UK pension market also may give it a boost.
In a very rare sight of late, Morrisons sits near the top of the FTSE 100 gainers table, with Tesco not far behind, up 0.8% and 0.2%, respectively. The supermarkets are experiencing a little bargain hunt buying given the particularly heavy falls suffered in recent days. Tesco shares are still more than 20% cheaper to buy than they were two weeks ago.
In the FTSE 250, Domino's Pizza is up 1.7% after announcing impressive like-for-like UK sales growth of 13% in the 13 weeks to September 18, although the was partially offset by weakness in its German business, where sales were down 9.9%.
Ted Baker shares are up 0.7% after the clothing designer increased its interim dividend by 19% on the back of a 34% rise in first half pretax profit.
The Financial Policy Committee of the Bank of England has requested more powers from the Treasury to control the UK housing market, which it has long said poses the biggest risk to the UK economic recovery. The FPC wants more powers to control the loan-to-value ratio of new mortgages, but said that the Help to Buy scheme does not pose a stability risk and the price cap of the scheme is appropriate.
UK construction activity continued to expand strongly in September, according to the latest PMI, which rose to 64.2 in September from 64.0 in August, beating expectations for a slight fall to 63.5. The data follows a more disappointing drop in the manufacturing reading on Wednesday.
"The UK?s lopsided recovery seems to have continued into September with the manufacturing PMI dragged down by weak growth overseas while the domestic oriented construction sector powers ahead, driven by low interest rates and rising confidence," said Rob Wood, chief UK economist at Beremberg.
The pound is slightly lower on the day, however, with major currency pairs fairly subdued in general ahead of the ECB decision to come. The pound trades at USD1.6183, while the euro trades at USD1.2646.
At 1245 BST, the ECB will publish any changes to its interest rates. Currently the deposit rate stands at minus 0.2%, the refinancing rate at 0.05%, and the marginal lending rate at 0.3%. The broad market expectation is for these rates to be left unchanged, which would put all the focus on President Mario Draghi's press conference that follows at 1330 BST.
While most commentators agree that the possibility of full quantitative easing by the ECB remains a way off, if even possible at all, the market is expecting the full details of the asset backed security programme announced at last month's meeting to be revealed, leaving markets in a state of nervousness that the measures may not be enough.
"The danger of today's ECB Council meeting is that there is nothing new for Mr Draghi to put on the table and little scope to ease given the concerns about the feasibility of plans to grow the balance sheet," says Societe Generale strategist Kit Jukes.
SocGen's economists expect combined asset backed security and covered bond purchases of under GBP150 billion, which "won't set the market alight", says Juckes.
Draghi is also widely expected to highlight, once again, his frustration at the eurozone nations that have so far made little in the way of structural reforms to their economies, something that the central bank chief sees as crucial to the success of his innovative easing measures such as the TLTRO's and the new ABS purchases.
There's also some US data to come after the ECB meeting has finished, with weekly initial and continued jobless claims data at 1330 BST, followed by US factory orders data for August at 1500 BST. Thursday's data will be seen as something of a warm up ahead of Friday's US non-farm payroll print.
Ahead of the Wall Street open, US futures are pointing a little lower, with the DJIA, S&P 500, and the Nasdaq Composite all roughly 0.1% lower.
By Jon Darby; [email protected]; @jondarby100
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