2nd Apr 2014 09:50
LONDON (Alliance News) - UK stock are holding onto small gains Wednesday, amid data that shows the UK construction industry continuing to boom, while in Europe there has been a further fall in producer prices ahead of the European Central Bank meeting Thursday.
By mid-morning Wednesday the FTSE 100 is up 0.1% at 6,661.23, the FTSE 250 is up 0.2% at 16,433.15, and the AIM All-Share is just fractionally higher at 849.17.
UK construction activity growth slowed very slightly in March, although confidence in the twelve-month outlook reached its highest level since January 2007, which analysts suggest is an important sign that the UK recovery is becoming more sustainable. The Markit construction PMI slipped to 62.5 in March from 62.6 in February, missing economists forecasts for faster expansion to 63.0.
The index has now registered above the 50.0 no-change value for eleven consecutive months. The booming UK housing market and the effect of Help to Buy was in evidence, with Markit saying housing activity regained its place as the best performing category of construction in March, driven by improving underlying demand.
While the headline data missed consensus forecasts, "at these sorts of levels it makes next to no difference," said Berenberg chief UK economist Rob Wood. "Construction is roaring ahead amid extremely supportive conditions for the sector. Housebuilding in particular is rising fast, driven by surging prices and government subsidies," the economist said.
Indeed the PMI data comes shortly after Nationwide said Wednesday that UK house prices increased at the fastest pace since May 2010 over the last month, recording a 9.5% year-on-year rise in March, up from 9.4% in February.
Most of the UK housebuilders are marginally higher over Wednesday's session so far, with Crest Nicholson up 1.0%, Bovis Homes up 0.8%, and Barratt Developments up 0.6%.
Real Estate Investment Trusts are also performing well, with British Land up 1.7%, and Hammerson up 1.7%.
In the eurozone there has been another worrying sign of deflation, with producer prices falling by 1.7% year-on-year in February. That's an acceleration in the PPI decline from 1.4% in January, faster than the 1.6% drop expected by economists, and the fastest fall since December 2009. On a monthly basis prices slipped by 0.2%, faster than the 0.1% expected fall.
Eurozone fourth quarter GDP has been confirmed at 0.5% year-on-year, with 0.2% growth confirmed in the fourth quarter alone. The third and final GDP readings were unchanged and in line with expectations.
The data comes ahead of the European Central Bank policy meeting on Thursday, with the falling prices putting more pressure on President Mario Draghi to take some form of monetary easing action.
Within major European equity markets, the CAC 40 is fractionally lower, while the DAX 30 is up 0.3%.
Oil prices have seen a big fall due to hopes of rising oil supply from Libya. Brent dropped more than USD2.5 per barrel to a five month low of USD105.09 per barrel in Tuesday evening trade. "The price slide was triggered by reports that rebels in Libya allegedly intend within days to open up oil terminals that have been occupied for months," said strategists at Commerzbank. The terminals in question reportedly have a daily export capacity of 600,000 barrels, which Commerzbank says would increase Libya's oil shipments by six-fold.
The UK listed Oil & Gas producers are consequently underperfoming Wednesday, with Royal Dutch Shell down 0.6%, and Premier Oil down 0.4%. While Royal Dutch Shell's movement doesn't look huge, Accendo Research estimates that its 8% index weighting is providing a 3.6 point drag on the FTSE 100.
Both the pound and the euro have remained relatively stable over the session so far, with pound trading at USD1.6643 and the euro trading at USD1.3792.
Still to come Wednesday, US MBA mortgage applications at 1100 GMT, followed by the US ADP employment change number at 1215 GMT. Analysts expect an improvement in the employment number to 195,000 in March from 139,000 in February. A high number will raise expectations of the all-important US non-farm payroll print on Friday.
Also still to come, the ISM New York index at 1345 GMT, and US factory orders at 1400 GMT.
By Jon Darby; [email protected]; @jondarby100
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Crest NicholsonBritish LandBovis HomesBarratt DevelopmentsHammersonPMO.L