4th Nov 2013 10:57
LONDON (Alliance News) - UK shares are pushing higher Monday, boosted by strong Chinese and domestic data, the expectation of looser monetary policy from the ECB later in the week, and strong results from HSBC, the last of the UK banks to report interims.
Bu mid-morning Monday the FTSE 100 is up 0.4% at 6,762.25, the FTSE 250 is up 0.4% at 15,510.17, and the AMI All-Share is up 0.2% at 812.44.
Chinese service sector growth hit a 14-month high in October, with the official PMI rising to 56.3, up from 55.4 in September.
European Markit manufacturing PMI data this morning has been less impressive. Both French and Italian numbers have come in below economists forecasts, with France actually recording a decline in manufacturing, showing with a PMI reading below 50.0, at 49.1.
In an indication of how much remains Germany is the engine room of Europe, German manufacturing PMI came in at 51.7 for October, up from 51.5 in September, which pulled up the number for the whole eurozone to 51.3, from 51.1, and in line with economist expectations.
In the UK, construction output grew at the steepest pace since September 2007, survey results from Markit Economics and the Chartered Institute of Purchasing & Supply have shown. Construction PMI came in at 59.4 in October, up from 58.9 in September and above the 58.8 reading expected by economists. "The future is looking bright for the UK construction industry as it soars into the final quarter with its strongest performance in over six years, boosted by a strengthening surge in activity broadening out across all sectors," CIPS Chief Executive Officer David Noble said.
The latest economic forecast from the Confederation of British Industry showed that the economy would expand 1.4% this year, faster than 1.2% the business lobby had predicted in August. The upward revision mainly reflects the third quarter's better-than expected GDP growth and improving sentiment across the major business sectors.
However the CBI also expressed concern over the UK's dwindling influence over EU rulings.
"We are better off in a reformed EU than outside with no influence. Each year, membership is worth GBP3,000 to every household in this country", said CBI Director General John Gridland.
The positive economic sentiment from the UK has allowed the pound to push slightly higher against the dollar, regaining some ground from falls seen towards the end of last week. The pound is up about 50 points, to USD1.5950 from lows on Friday near USD1.5900.
The euro remains under pressure compared to other major currencies as traders continue to speculate of on possible base-rate cut at the upcoming ECB meeting on Thursday following a round of disappointing inflation and unemployment numbers. "The ECB meeting on Thursday is one of the most interesting we have had in a while, with banks now roughly split about expecting a rate cut at this meeting", says Forex.com research director Kathleen Brooks.
Speculation over the timing of fiscal tightening in the US also continues to drive markets following the more-hawkish-than-expected tone from the Fed last week, with the October non-farm payroll number the hotly anticipated indicator, due out on Friday. Market consensus is currently split over whether a small taper of quantitative easing will begin in December or not until the new year, with any positive economic readings bringing expectations forward and vice versa.
"While the October Labour report is keenly awaited, it is likely that the integrity of this report will be impacted by the shutdown. The same goes for other October releases. Indeed, it could be a couple of months before a realistic assessment of the government shutdown on economic growth can be ascertained", says Rabobank Senior Strategist Jane Foley, who continues to expect the first taper to be pushed back into the new year.
Within UK equities, Industrial Metals are the biggest gainers, the FTSE 350 sector up 3.3%, buoyed by the strong PMI reading from China. Industrial Engineering is the fastest falling sector, weighed down by Weir Group, which trades down 7.5%, leading the blue chip fallers after cutting its full year guidance by 6%, prompted by lower-than-expected revenues and profits, as well as currency headwinds.
Airline stocks are experiencing some turbulence, with easyJet down 4% and International Consolidated Airlines down 1.6% after Ryanair released its second profit warning in as many months. Ryanair shares are down 12% after on the back of the low-cost Irish carrier revising down its full year earnings forecasts, citing pressure on fares. Although reading across to the whole sector, Ryanair may be experiencing more issues than easyJet due to currency conversion, as it makes at least 40% of its revenue in pounds that need to be converted back to euros, says airline analyst Wyn Ellis.
HSBC shares are up 1.9% after the bank reported a rise in third quarter profits. HSBC added a further USD147 million to its payment-protection insurance provisions, taking the bank's total provision to approximately USD3.0 billion. The bank also confirmed it has joined the list of firms being investigated by the UK Financial Conduct Authority and agencies in several other countries regarding trading on the foreign exchange market.
Still to come Monday, US ISM New York index at 1445 GMT and US factory orders at 1500 GMT.
By Jon Darby; [email protected]; @jondarby100
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