7th Apr 2014 16:19
LONDON (Alliance News) - London's major stock indices closed firmly in the red Monday, led lower by technology stocks, following on from an equity sell-off on Wall Street on Friday.
Meanwhile, concerns over a possible further encroachment into Ukraine by Russia also weighed heavily upon investor sentiment.
UK stocks fell sharply in early trading Monday, tracking the losses posted by their US counterparts late on Friday, as investors continued to digest the raft of US jobs data released on Friday.
The monthly non-farm payroll report showed that the US economy added 192,000 jobs in March, slightly below the 200,000 average prediction, while the January and February numbers were revised higher to 144,000 and 197,000 respectively, in a net upward revision of 37,000 jobs. The headline rate of unemployment held steady in Friday's report at 6.7% in March, missing economists' estimates of a slight dip to 6.6%.
After initially pushing US stocks higher, Wall Street closed the day in negative territory. However, analysts noted that there was not a huge outflow from equities as an asset class, but rather a shift between so called "momentum stocks" to the more defensive stocks.
Momentum stocks, such technology stocks that have been attracting investment because of their rapid price rises, led the falls in the US on Friday, with Facebook losing 4.6% and the technology-heavy NASDAQ Composite closing down 2.6%.
This was transferred into the UK session on Monday, where the FTSE 350 technology hardware and equipment sector index closed down 2.2%. FTSE 100-listed ARM Holdings closed down 2.4%, while FTSE 250-listed Imagination Technologies Group and Pace closed down 5.6% and 1.2%, respectively, meaning they ended the day amongst the leading fallers in their respective index's.
"The market is sensitive to tech stocks because they tend to be high-beta, high risk stocks, which can act as a leading indicator for for the broader market," said Kathleen Brooks, research director at Forex.com. "Thus, as tech stocks sell off, some market participants are wondering if this could lead to a broader decline in risky assets."
Eventually, the FTSE 100 closed down 1.1% at 6,622.84, the FTSE 250 closed down 1% at 16,262.84, and the AIM All-Share index closed down 0.4% at 849.69.
It was a similar story in Europe where the DAX 30 in Frankfurt closed down 1.9% and the CAC 40 in Paris closed down 1.1%.
Adding to the negative sentiment, the crisis in Ukraine deepened Monday. Pro-Russian protesters have declared a "People's Republic in the eastern industrial centre of Donetsk amid waves of protests in the eastern cities of Kharkiv, Luhansk and Donetsk.
Acting Ukrainian President Oleksandr Turchynov has described the protests as a Russian "special operation" aimed at tearing Ukraine apart. "The enemies of Ukraine are playing the Crimean scenario, but we won't let this happen," he said.
At the UK equity level, and away from technology stocks, GlaxoSmithKline ended the day down 1.5%. The pharmaceuticals giant's shares fell heavily after the Wall Street Journal's reports that Glaxo was investigating allegations of improper conduct in its Iraq business were confirmed by the company.
"We have zero tolerance for unethical or illegal behaviour," a spokesperson said in a statement, noting that the company employs less than 60 people in its Iraq pharmaceuticals operation, and the allegations related to a small number of individuals in the country. The investigations are ongoing.
CRH was one of just nine gainers in the FTSE 100, closing up 0.4%. The building materials group was boosted by some merger and acquisition news in the sector.
Switzerland-based Holcim and Lafarge of France have agreed a merger to become the world's biggest cement maker.
The deal is likely to come under heavy scrutiny from competition regulators, and the two companies are said to be looking to sell businesses worth 10%-15% of pretax earnings to satisfy regulator concerns. The rise in CRH shares Monday reflects the opportunity for the company to pick up some of this business, say analysts.
In the FTSE 250, Kentz Corporation was a big winner, closing up 1.1%. The major oil and gas engineering company has been awarded a USD570 million services contract for the Ichthys Project Onshore LNG Facilities in Darwin, Australia.
It said its Australian subsidiary for the electrical and instrumentation construction packages at the Darwin site was awarded the contract by JKC Australia LNG Pty Ltd, a joint venture between JGC Corp, KBR and Chiyoda Corp.
In the forex market, the euro edged higher against most of its major rivals Monday. The single currency rose after European Central Bank board member Yves Mersch said that quantitative easing remains a "theoretical" concept at the moment and that there remains a long way for its practice in terms of execution.
Mersch said that Eurozone is not under imminent risk of deflation as yet, but added that the ECB is prepared to act if it is deemed necessary.
At the close of the UK equity market, the euro trades at USD1.3745 and JPY141.600, while the pound trades at EUR1.2085.
In the data calendar Tuesday, the Bank of Japan releases its interest rate decision at 0300 GMT, with a press conference by BoJ governor Haruhiko Kuroda scheduled for 0630 GMT. French trade data is published at 0645 GMT, ahead of UK industrial and manufacturing production numbers at 0830 GMT.
The US NFIB business optimism index is scheduled for 1130 GMT, before the US Redbook index at 1255 GMT. Later in the day, the National Institute of Economic and Social Research releases UK gross domestic product data at 1400 GMT.
In the corporate calendar, FTSE 250-listed Victrex releases a trading statement, while Ferrexpo releases first quarter results.
By James Kemp; [email protected]; @jamespkemp
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