3rd Mar 2014 11:02
LONDON (Alliance News) - Stock indices across the UK and Europe are heavily down Monday as global investor confidence has been undermined by the unfolding developments in the Ukraine.
Despite broadly positive European PMI data, morning trading has been dominated by safe-haven flows, sending equities lower, and gold up to more than a four-month high. Domestically, some positive UK data is keeping the pound well supported.
By mid-morning Monday, the FTSE 100 is down 1.4% at 6,713.65, the FTSE 250 is down 2.0% at 16,395.35, and the AIM All-Share is down 1.0% at 884.26.
The German DAX is the worst performing major European index, down 2.3%, while the French CAC 40 is down 1.8%.
At the epicentre of Monday's investor concern, the Russian stock market opened almost 10% lower, and the Russian rouble reached its lowest ever level against the US dollar, despite the Russian central bank trying to support the currency by raising interest rates to 7% from 5.5% overnight.
The second reading of European manufacturing PMI's for February have been broadly positive, with all the major European countries, bar Italy, exceeding economist expectations. Germany recorded 54.8 in February, up from 56.5 in January and exceeding expectations of 54.7. Italy's growth slipped slightly to 52.3, down from 53.1 in January and missing expectations of 52.8, although still recording expansion. Coming in under 50.0, at 49.7, France's manufacturing sector is still in contraction, although the reading is slightly improved from the 49.3 recorded in January.
The Eurozone composite PMI was revised up to 53.2 in February, from the preliminary reading of 53.0, although confirming a slowdown from 54.0 in January.
In the UK, the Markit manufacturing PMI expanded unexpectedly to 56.9 in February, from 56.7 in January. Economists had expected a slight slowdown to 56.5.
Further UK data releases have been mixed Monday, with mortgage approvals reaching the highest level since 2007, but consumer credit and lending to individuals lower than expected.
British lenders approved 76,947 mortgages in January, up from 72,798 in December, exceeding analyst expectations of 73,500.
Meanwhile, net lending to individuals fell to GBP2.1 billion in January, from GBP2.3 billion in December, missing economist expectations of an expansion in lending to GBP2.5 billion. Consumer credit expanded to GBP0.66 billion in January, from 0.58 billion in December, although economists had expected a further expansion to GBP0.7 billion.
The pound and the euro remain relatively well supported after the broadly positive data, on a day that otherwise sees the dollar higher across the board amid safe-haven flows. The pound remains about flat against the greenback, currently at USD1.6730. The euro is also close to flat over the morning session, currently at USD1.3780.
Both oil and gold prices have jumped significantly higher in response to the situation in Ukraine. Russia is the world's largest oil producer, according to International Energy Agency, exporting over 5 million barrels per day to Europe alone. "It is hardly surprising that Brent has risen in response to the conflict, even though the risk of actual delivery outages is small," Commerzbank says in a morning note to clients.
Brent Oil has jumped more than two dollars to a new 2014 high Monday of USD111.38 per barrel and continues to trade close to that level. Gold trades at its highest level in since late October 2013, peaking at USD1,350.01 per ounce.
The rising commodity prices are evidenced in the moving stocks Monday, with the gold miners and oil producers leading the short list of gainers. Randgold Resources, Fresnillo and BG Group are three of the eight gaining FTSE 100 stocks, up 4.5%, 1.9% and 0.6%, respectively. In the FTSE 250, African Barrick Gold leads the gainers, up 5.8%.
The Industrial Metals sector is the worst performing Monday, on risk aversion and confirmation overnight that the Chinese manufacturing sector contracted in February, according to the HSBC PMI, which came in at 48.5. Evraz and Ferrexpo are both down more than 10%.
Financial groups with any emerging market exposure are also underperforming, with Aberdeen Asset Management down 3.1%, Jupiter Fund Management down 3.7% and Schroders down 3.0%.
HellermanTyton Group is one stock performing well, independent of the wider market sentiment. The producer of cable products is up 5.0% after announced full-year results that beat expectations. Analysts are forecasting sales to continue to grow as the global demand for data, and therefore cabling, increases.
Any developments in Ukraine will, of course, be in focus throughout the day. In the data calendar, US personal income and consumption numbers are still to come at 1330 GMT.
By Jon Darby; [email protected]; @jondarby100
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