1st Aug 2014 09:52
LONDON (Alliance News) - UK stocks are sharply lower Friday, following heavy falls in both the US and Asian markets, as investors react to a numbers of events that increase the global risk environment and prepare for a US non-farm payroll report later in the session that could encourage the Federal Reserve to look at raising interest rates sooner than previously thought.
By mid-morning Friday, the FTSE 100 is down 1.3% at 6,641.89, the FTSE 250 is down 1.3% at 15,293.67, and the AIM All-Share is down 0.8% at 762.35.
Continued concern over the economic impact in Europe of increased sanctions against Russia continues to weigh heavily on sentiment, highlighted on Thursday by the sharp fall in the shares of sports retail giant Adidas after it warned over the problems of doing business in Russia in the current environment.
Major European markets are also sharply lower Friday, with the French CAC 40 down 1.3%, and the German DAX 30 down almost 2.0%.
Smith & Nephew is the best performer in the FTSE 100, up 1.6%, after announcing interim results slightly ahead of expectations. The company posted a pretax profit of USD128 million in the quarter, down from USD188 million a year earlier, on revenue of USD1.15 billion, up from USD1.07 billion. The group also proposed an interim dividend of 11.0 cents, up from 10.4 cents in the previous year.
Berneberg says that the surgical device business showed some encouraging trends. "Overall, we think this was a reasonable performance from Smith & Nephew," said analyst Tom Jones.
International Consolidated Airlines, parent of British Airways is up 0.6% after reporting a big rise in operating profit in the second quarter and saying it expects a big jump in profit for the full year. The group posted an operating profit, excluding exceptional items, of EUR380 million in the three months to June 30, up from EUR245 million a year earlier, as revenue rose 6.7% to EUR5.09 billion.
The non-life insurance stocks are well supported after Direct Line announced interim results slightly ahead of the consensus expectation and surprised investors with a 10 pence special dividend. The UK insurance industry in continuing to come under the regulatory spotlight, but Direct Line's results have been well received, boosting the stock 2.9% to the top of the FTSE 250 early Friday. Fellow insurer Admiral is one of the few other FTSE stocks holding on to gains, up just 0.2%.
UK manufacturing activity fell to its lowest level for a year in July, with analysts pointing to the tension between the west and Russia as a reason for the unexpectedly sharp slowdown. The Markit manufacturing PMI fell to 55.4 in July, from 57.5 in June, missing expectations for just a small moderation to 57.2 and recording the slowest level of growth since July last year.
"Today's fall was most likely driven by slower world growth in recent months and the escalation of troubles in Ukraine," said Berenberg chief UK economist Rob Wood. "The English Channel is not wide enough to insulate British manufacturers from some wobbles in their main trading partner."
The pound reached a seven-week low against the dollar early Friday in response to the disappointing domestic data. Against the euro, the pound reached a neat three-week low of EUR1.2564.
The market focus Friday is firmly on the afternoon monthly US jobs report at 1330 BST, and what it might mean for the timing of the first US interest rate rise in the wake of the surprisingly strong US second-quarter GDP figure earlier in the week. With the US economy looking increasingly ready for a rate rise, the dollar has been strengthening across the board in recent sessions.
The consensus expectation is for the US economy to have added 233,000 jobs in July, which would be the fifth consecutive month of jobs growth above 200,000, and would likely lead to increased concern that strong economic data might lead the Federal Reserve to shorten the length of time between finishing its asset purchase programme and the first interest rate rise.
By Jon Darby; [email protected]; @jondarby100
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
AdmiralInternational AirlinesSmith & NephewDirect Line