16th Oct 2014 09:55
LONDON (Alliance News) - UK stock indices have fallen back into the red Wednesday, giving up all of their earlier gains and more by mid-morning, as eurozone consumer price data show a continued economic slump in the region. Shire leads the UK's leading index lower for the second consecutive day after AbbVie drove another nail into the coffin of their previously agreed takeover deal.
The FTSE 100 opened sharply higher as investors looked pick up bargains from Wednesday's extreme sell-off. However, by mid-morning the move looks like a classic "dead cat bounce" as the leading index has given up all of the early gains and trades heavily lower again, down 2.1% at 6,085.96. The FTSE 250 is down 1.5% at 14,220.39, while the AIM ALL-Share is down 0.8% at 675.65.
European majors are also lower again, with the French CAC 40 down 1.9%, and the German DAX 30 down 1.0%.
"So far we see no buying opportunity but instead a long overdue regime shift to a more volatile market environment," said Edison investment strategist Alastair George.
Markets have become increasingly volatile in recent sessions, amid concern over sluggish growth in the eurozone, as well as a dip in US economic activity, coming at a time when the US is ending its massive quantitative easing programme. Eurozone data Thursday has been little more supportive, showing consumer prices rose by 0.3% year-on-year in September, in line with expectations. Core prices rose by 0.8%, slightly better than the 0.7% that had been expected, but less than the 0.9% growth the month before.
The price of oil also is giving investors cause for concern, continuing to trade near its recent low of just above USD83 per barrel of Brent. Furthermore, the spread of Ebola is not far from investors minds, with France confirming late Wednesday that it will start to screen for the virus at Charles de Gaulle airport in Paris.
With the stock market having given up on its early positivity, the sector movements are looking decidedly "risk-off", with the utility majors and tobacco stocks providing some downside support, while the oil stocks continue to come under pressure given the low price of the commodity, and the pharmaceutical stocks get led lower by Shire once again.
Shire is the most volatile stock in the FTSE 100 for the second consecutive day Thursday, following the news late Wednesday night that AbbVie has recommended its shareholders vote against the previously agreed takeover of the Irish drug maker. The market appears to have taken the move as the final nail in the coffin for the previously agreed takeover deal, and Shire trades down about 7.8% at 3,700 pence.
Analysts have said Shire shares may start to find support from here, as Shire's fair value as a stand-alone company is estimated variously to be between the current price and 4,000p per share.
Man Group is is the best performing stock in the FTSE 250, up 7.7% after saying its funds under management grew by a quarter during the third quarter, as its acquisition of Numeric and Pine Grove, and USD1.3 billion of net inflows and performance, offset a USD2.9 billion hit from the rise in the US dollar.
WH Smith is up 3.5% after reporting a rise in its pretax profit in its last financial year, despite another fall in revenue, as the company continued to cut costs and it increased trading profits in both its businesses. Analysts have been impressed by WH Smith's travel business, which returned to like-for-like quarterly growth for the first time since the global financial crisis. Investec says the stock is increasingly becoming a play on International travel.
There are a raft of appearances from US Federal Reserve officials still to come Thursday, including Atlanta President Dennis Lockhart at 1400 BST, followed by Minneapolis President Narayana Kocherlakota at 1500 BST, and St. Louis President James Bullard at 1800 BST.
The release Wednesday night of the Fed's Beige Book showed a modest expansion in economic activity across most regions, but investors will be keen to hear the updated thought of the monetary policy makers given the recent sharp increase in market volatility.
US industrial production data for September also will be closely watched at 1415 BST. The expectation is for a 0.4% rise in production, following a 0.1% fall in August.
After the Dow Jones recorded its biggest one-day fall of the year on Wednesday, futures indicate that Wall Street is set for another heavily lower open, with the DJIA pointing down 1.2%, the S&P 500 down 1.7%, and the Nasdaq Composite down 1.7%.
By Jon Darby; [email protected]; @jondarby100
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Wh SmithManShire