23rd Oct 2014 09:31
LONDON (Alliance News) - UK stock indices Thursday have been lifted from early lows, along with indices across Europe, by some better than expected eurozone economic data, which showed the German manufacturing industry expanding again after briefly slipping into contraction last month.
UK indices are underperforming their European counterparts, however, with a number of corporate updates weighing on the London market. Troubled supermarket Tesco is grabbing headlines after confirming recent accounting errors, while estate agent Foxtons has seen its shares plummet after warning about a slowdown in the London property market.
By mid-morning Thursday the FTSE 100 is down 0.5% at 6,367.40, the FTSE 250 is down 0.6% at 15,076.77, and the AIM All-share is off 0.1% at 708.40.
Major European markets are firmly positive, with the French CAC 40 up 0.2% and the German DAX 30 up 0.4%.
The FTSE 100 and other major stock indices across Europe had been more than 1.0% lower in early trade after the French manufacturing and service sector October PMI readings both disappointed, coming in at 47.3 and 48.1, respectively, down from September and missing expectations for prints of 48.5 and 48.2.
The eurozone flash PMI readings were always likely to be the major market driver Thursday given the recent focus on a worrying economic slowdown in the region, and subsequent numbers from Germany have been enough to immediately reverse the negative from France.
The German manufacturing PMI rose to 51.8 in October, signalling a return to growth after slipping into contraction in September with a reading of 49.9. The print came as a surprise relief given that it had been expected to fall further to 49.5. The German service sector was a little weaker than expected but remains firmly in expansion territory with a print of 54.8 in October.
The strength of the German numbers was enough to lift the eurozone composite PMI to 52.2 in October, up from 52.0 in September and beating expectations for a fall to 51.7.
UK retail sales data have disappointed, showing a 0.3% drop month-on-month in September, reversing most of the 0.4% growth recorded in August and missing expectations for a smaller fall of just 0.1%.
The weak UK data has sent the pound tumbling back below USD1.60 for the first time in a week, and to a low against the euro of EUR1.2631.
Tesco sits firmly at the bottom of the FTSE 100 movers table, down 5.2%, after revealing the results of an investigation into its first half accounts. The supermarket said that it overstated its first half profit expectations by GBP263 million, more than the GBP250 million it originally calculated. Chairman Richard Broadbent has announced that he will step down once the business is "back on track".
Moreover, accountants Deloitte said the questionable accounting measures that led to the error in Tesco's books also were applied over previous periods, leading to concern from analysts about yet more negative press headlines that could accompany deeper historic delving. Ultimately, Tesco reported first half trading profit of just GBP937 million, down 41% on the year before, and said that it couldn't provide a forecast for the full year.
The other UK supermarkets also are feeling the pressure Thursday, with Morrisons and Sainsbury's both amongst the worst performers, down 3.1% and 2.7%, respectively.
Tullow Oil is a heavy blue chip faller, down 4.7%, after saying that one of its exploration wells in Kenya, Kudos-1, will be plugged and abandoned.
Unilever is more than 2.0% lower after saying revenue declined 2.0% to EUR12.2 billion in the three months to end-September, with currency movements taking 2.6% off the figure. The Anglo-Dutch consumer goods giant said that underlying sales growth was 2.1%, compared with 3.2% growth for the whole nine months, while volume growth in the quarter was just 0.3%, compared with growth of 1.4% in the first nine months of the year.
Foxtons is heavily lower, down 14%, after downgrading its full-year expectations. The FTSE 250 estate agent said its third quarter performance suffered from a sharp slowdown in London property sales in the period.
Some traders have seen the fall in Foxtons shares as a buying opportunity given that the slowdown is only sharp relative the strongest period of growth in the London market for many years. "Rates remaining low for an extended period of time is nailed on, and London's property market is bulletproof - look to take advantage of the over-reaction," says Accendo Markets trader Aymen Azizi.
Inchcape is the best FTSE 250 performer, up 3.3%, after saying its third-quarter revenue was GBP1.7 billion, up 10.6% on a constant currency basis, although only up 4.4% at actual currency rates.
Debenhams is a strong gainer, up 2.6%, despite reporting lower pretax profit for its last financial year. It said its turnaround plan for the business is working, as operating profit rose in the second half.
Still to come Thursday, the eurozone consumer confidence survey results at 1500 BST are expected to make gloomy reading, with a further deterioration to negative 12.0 in October expected, from negative 11.4 in September.
From the US Thursday, initial jobless claims data are due at 1330 BST, followed by a house price index at 1400 BST and the Markit manufacturing PMI at 1445 BST.
It's also a busy day in the US earnings calendar, with quarterly numbers due from Amazon.com Inc, Microsoft Corp, and General Motors amongst others.
Futures markets currently point to a higher open on Wall Street, with the DJIA, the S&P 500, and the Nasdaq Composite all pointing up 0.7%.
By Jon Darby; [email protected]; @jondarby100
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