15th Apr 2014 09:57
LONDON (Alliance News) - The UK's main stocks indices have slipped into the red Tuesday, reversing the positivity that came from Monday's better-than-expected US banking sector earnings, while a raft of data from the Office for National Statistics has confirmed UK inflation at its lowest level since October 2009, while house prices made record gains.
By mid-morning Tuesday the FTSE 100 is down 0.3% at 6,567.83, the FTSE 250 is down 0.2% at 15,669.96, and the AIM All-Share is down 0.4% at 821.26.
Major European stock markets are also lower, with the French CAC 40 down 0.5%, and the German DAX down 1.0%.
Consumer price inflation in the UK slipped to 1.6% year-on-year in March, down from 1.7% in February. That was in line with economist expectations, and is the lowest level of CPI growth since October 2009. In the month of February alone, consumer prices rose at 0.2%, down from 0.5% in February and also in line with economists forecasts.
Analysts attribute the falling inflation to high-street discounting, stable commodity prices, as well as the late timing of Easter, which provides an spending boost to the economy.
"Although some of today?s inflation decline will be reversed next month the Easter distortion drops out, that cannot disguise the trend. Inflation is under-control and the downward pressure on wages is easing," said Berenberg chief UK economist Rob Wood.
There is very little easing the pressure on those trying to buy a house however, with data also released from the ONS Tuesday showing that house prices nationwide rose by 9.1% annually in February, up from 6.8% in the year to January 2014.
The rise was again driven by London, where house prices rose by a huge 17.7% in the year to February. While much has been made of the effect of foreign cash buyers on the London market, analysts point out that the ONS data is calculated using mortgage financed transactions, and is therefore less distorted by cash buyers.
The pound initially dipped to a five day low of USD1.6656 on the low inflation numbers but has quickly recovered and now trades broadly flat on the day at USD1.6720.
The euro has continued to soften a little against the dollar, reaching a four day low of USD1.3788 Monday, although now back to the USD1.38 level after the release of the German and eurozone ZEW surveys.
The German ZEW survey of current investor sentiment came in strong at 59.5 for April, up from 51.3 in March, and beating economist expectations for a print of 51.8. However, the German economic sentiment outlook fell to 43.2 in April, from 46.6 in March, missing economists expectations of 45.0.
The eurozone ZEW economic sentiment survey slipped slightly to 61.2 in April, down from 61.5 in March, although better than the fall to 60.7 that has been expected.
The eurozone trade surplus grew to EUR13.6 billion in February, up from a small surplus of EUR0.8 billion in January. The growing trade surplus in the region is "one of the key supports behind euro's strength," says Rabobank analyst Michael Every.
The British Retail Consortium sales monitor released much earlier showed that total sales fell by 0.3% in March, with Jefferies analyst James Grizinic calculating that the late timing of Easter likely depressed the reading by at least 250 basis points.
While food sales continued to lead the overall fall, non-food sales performed at a much more robust rate, "continuing an ongoing trend evident in the UK for some time," said Shore Capital analyst Darren Shirley. Like-for-like non-food sales were up 1.4%, slower than the 3.9% seen in the previous three periods, but likely consistent with the overall picture when adjusted for Easter, analysts suggest.
Within UK equities, Debenhams continues to be one of the biggest gainers, up 3.7%, after reporting a rise in revenues for the first-half of the year - although the retailer noted the negative impact of heavy discounting that has been cited by analysts as contributing to the UK's low inflation.
Aggreko is the top FTSE 100 gainer, up 1.9%, after the temporary power supplier said its underlying revenues grew by 5% in the three months to March 31 - although its reported revenues fell 4% as a result of exchange rate movements.
G4S leads the blue chip fallers, down 4.0% after being cut to Sell from Hold by Deutsche Bank, with analyst saying they see little room for cost cutting at the outsourcing firm.
SABMiller also suffered a rating cut, to Hold from Buy by Investec. The asset manager now sees the brewers rating as full after it's outperformed the FTSE 100 by 15% since the start of February as emerging market growth concerns have faded.
Still to come Tuesday, US CPI data and the NY Empire State manufacturing index at 1230 GMT, as well as a speech from Federal Reserve Chair Janet Yellen at 1245 GMT.
By Jon Darby; [email protected]; @jondarby100
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