5th Mar 2014 17:17
LONDON (Alliance News) - UK stocks slid a little lower Wednesday, while the pound gained against the dollar amid a round of weaker-than-expected US economic data.
The FTSE 100 has closed down 0.7% at 6,775.42, while the FTSE 250 has closed down 0.5% at 16,614.35. The AIM All-Share has outperformed the main market, closing up 0.5% at 892.76.
Major European markets also closed lower, with the French CAC 40 closing down 0.1% and the DAX 30 closing down 0.5%.
After the close of European markets, US stocks are mixed with the DJIA and the S&P 500 marginally lower but the Nazdaq Composite marginally higher.
"Profit taking looks to be the main reason for the slightly negative session as investors look to cash in their earnings whilst they can, despite the geopolitical situation in Ukraine easing slightly over the past 24 hours," said Spreadex financial sales trader Sam Fox.
UK and European macro data has broadly outshone numbers from the US Thursday, leading some analysts to suggest that economists may be lowering their forecasts for Friday's US non-farm payroll report.
Less people gained employment in the US than expected in February, with the latest ADP employment change showing a rise of 139,000, missing economists expectations of 160,000. There was also a large downward revision January's report, to 127,000 from 175,000.
"In context of these figures, we expect that the February NFP report is likely to disappoint. A negative print seems far-fetched given the ADP figure but a reading below the current consensus of 150,000 seems likely," said DailyFX currency analyst Christopher Vecchio.
Neither the Markit services PMI or the ISM non-manufacturing PMI provided any positivity, both recording a fall in US economic activity in February, with the ISM number falling much further than expected, to it's lowest level for four-years. The number came in at 51.6 in February, down from 54.0 in January, missing economists expectations of 53.5.
It's the first time the US number has fallen below the composite eurozone PMI since May 2011. The Eurozone composite PMI was revised up to its highest level since mid-2011, recording 53.3 in February, up from the flash estimate of 52.7.
Each European country's individual Markit services PMI was fairly positive Wednesday, with the readings from German, France and Italy all exceeding expectations. Spain's number came in at 53.7, down from 54.9, and missing expectations of 55.0. While France exceeded expectations, it continues to be the only major European economy with a service sector stuck in contraction, with a reading of 47.2, beating estimates of 46.9.
Despite the broadly stronger-than-expected European data, the euro remained fairly muted against the dollar. Ahead of the European Central Bank meeting rate setting meeting on Thursday, the euro is currently stable against the dollar at USD1.3735.
"Despite the more positive trends in Euro area growth, with the weakness of inflation an increasing concern, we think the ECB could try and strengthen their forward guidance somewhat at their meeting tomorrow," said Bank of America Merrill Lynch economist Laurence Boone. While BAML does not expect a rate cut, Boone argues that the ECB should pursue another form of policy easing, such as extending the fixed rate full allotment Main Refinancing Option until 2016, to provide more liquidity.
UK data Wednesday showed that growth in the UK services sector eased slightly in February, although by less than expected, remaining remarkably robust given the impact on many businesses of the recent flooding and poor weather in the UK. The Markit services PMI slipped to 58.2 in February, down from 58.2 in January, exceeding economists expectations of a fall to 58.0.
The weaker US data combined with continued strong UK data has allowed the pound to make gains against the dollar. Sterling is almost 0.5 cents higher Wednesday, currently trading at USD1.6730.
The Bank of England meets Thursday, marking exactly five years since the UK central bank lowered interest rates their historic low of 0.5%. Heading in to the meeting the pound is at the upper end of its range over that five years, with many analysts predicting the UK won't reach six years before rates go up.
Within the FTSE 100, BHP Billiton, Rio Tinto, and Shire were amongst the big names going ex-dividend Thursday. The three companies comprise almost 6% of the market cap of the FTSE 100 and closed down 1.9%, 3.0% and 1.7% respectively, providing a drag on the index.
Non-life insurance was the best performing sector, led higher by Admiral which closed up more than 8% after reporting a 7% rise in annual pretax profits, beating consensus expectations. The results seemed to provide a boost to others in the sector, with Esure gaining 3.0% and Direct line gaining 0.6%. RSA Insurance group also gained 2.1% after receiving an upgrade to Neutral from Underweight from HSBC.
Melrose Industries was the heaviest blue chip faller, closing down 8.4%. Despite announcing an increase in profits, the engineering investment group received a downgrade from both Numis and Investec. Looking ahead, the company has warned of continued benign end markets and currency headwinds, said Numis analyst David Larkam.
Looking to Thursday, Aggreko, Aviva PLC, and Balfour Beatty are due to report preliminary full-year results, along with Schroders, Inmarsat PLC, and Cobham. Easyjet is also due to publish its latest passenger traffic statistics.
No change is expected from either the BoE or the ECB at their rate setting meetings Thursday, although all eyes will be on ECB resident Mario Draghi as he delivers his usual post-meeting press conference at 1330 GMT.
After the latest eurozone PPI data this week showed factory gate prices falling at 1.4% annually, investors will want to hear from Draghi about how he intends to combat the deflationary pressure. The ECB will also be offering CPI inflation forecasts up to 2016 for the first time at Thursday's meeting.
From the US Thursday, initial jobless claims and factory orders data will be released.
By Jon Darby; [email protected]; @jondarby100
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