14th Feb 2014 10:54
LONDON (Alliance News) - The pound is trading close to a three-year high against the dollar Friday, while the main UK stock indices are just marginally higher. In a quieter day for corporate earnings, the main market focus of the morning has been European fourth-quarter GDP data, which has been slightly better than expected.
By mid-morning Friday the FTSE 100 is up 0.1% at 6,667.45, the FTSE 250 is up 0.3% at 16,084.22, and the AIM All-Share is up 0.1% at 873.94.
Major European markets also are higher, with the CAC 40 up 0.4% and the DAX up 0.5%.
The UK construction sector grew by 0.2% in the fourth-quarter of 2013, according to official data from the Office for National Statistics Friday. The reading was better than the 0.3% fall that had been expected by economists, but analysts suggest it was not strong enough to lead to a major revision of UK GDP data.
The only UK numbers of the day had little effect on the pound, which was already testing three-year highs Friday. Against the dollar, the pound has peaked at USD1.6717, close to the highs made in early 2011. If the pound pushes just 30 points, or 0.3 cent, higher from there it will record its highest level for more than 4-years.
The Eurozone economy grew faster than expected in the fourth-quarter of 2013, with GDP growing by 0.5% year-on-year, compared to the 0.4% that had been expected. On a quarter-on-quarer basis, GDP growth in the region was 0.3%, faster than the 0.2% expected.
The market had already been led to expect a strong reading given that key individual countries in Europe already surprised to the upside with their GDP data. Germany recorded quarterly growth of 0.4%, higher than the 0.3% expected. France recorded 0.3%, higher than the 0.2% expected.
Even the troubled Italian economy recorded quarterly growth in line with expectations, of 0.1%. The focus in Italy may well be on politics, however, with Prime Minister Letter looking set to step down Friday afternoon.
The euro has been making modest gains throughout the morning on the back of the strong GDP data and as the dollar remains suppressed across the board following the weak US retail sales and higher-than-expected jobless claims data on Thursday. Currently the euro trades at USD1.3690.
The strong GDP data comes after downward revisions Thursday by the European Central Bank of its inflation expectations. With the ECB reportedly considering further easing in its monetary policy, the markets will now be looking to how ECB President Mario Draghi will try to deal with very modest economic growth but continuing downward pressure on prices in the eurozone.
The weak dollar has allowed the gold to make further gains. The precious metal continues to make new three-month highs, having broken above USD1,300 to make a high of USD1,310.31 per ounce.
"The big story in the market right now is gold. The yellow metal closed out last year with one of its worst performances to date, being hit by bearish calls from banks and huge withdrawals. This year, however, is looking to be different. And the fact that gold has rallied more than USD100 from those lows is a positive sign, drawing in more capital from other asset classes," said Spreadex trader David White.
Within UK equities, the metal and mining stocks are outperforming on the back of the firmer precious metal pricing. Fresnillo leads the gains in the FTSE 100, up 4.7%. In the FTSE 250, African Barrick Gold is a big gainer, up 5.5%.
Petrofac is also a top blue chip gainer Friday. The oil equipment and services group has been upgraded by analysts at Berenberg to Buy. The bank says Petrofac is set to get a boost from new contracts in Turkmenistan, Kasakhstan, and Algeria this year.
Still to come Friday, US industrial production numbers at 1415 GMT, followed by the Michigan consumer sentiment survey at 1455 GMT.
By Jon Darby; [email protected]; @jondarby100
Copyright © 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
PetrofacFresnillo