14th Nov 2013 10:59
LONDON (Alliance News) - UK stocks are firmly higher Thursday, in a busy day of corporate earnings. Equities are rebounding from heavy selling Wednesday, lifted by dovish comments from President Obama's nominee to head the US Federal Reserve, while the pound has slipped after the release of disappointing UK retail sales data.
By mid-morning Thursday, the FTSE 100 is up 0.9% at 6,686.85, the FTSE 250 is up 1.0% at 15,335.30, and the AIM All-Share is up 0.6% at 807.58.
Hawkish comments from members of the US FOMC, along with disappointment over the lack of concrete reforms announced in China, had led stocks significantly lower across the globe Wednesday. However, more dovish prepared remarks by Janet Yellen, released ahead of her confirmation hearing later Thursday, have reversed sentiment.
While gains in manufacturing and housing have helped drive modest economic growth this year, Yellen warned that unemployment remains too high for the Fed to consider significantly scaling back its USD85 billion-a-month in asset purchases.
"The market love affair with Fed stimulus continued today as European markets shrugged off this weeks? growing pessimism to post gains, as incoming Chair Janet Yellen gave her strongest indication yet that an accommodative stance will be held into 2014", comments CMC Senior trader Toby Morris.
Asian markets have closed significantly higher, the Nikkei up 2.1% and the Hang Seng up 0.8%, reversing some of Wednesdays heavy losses. Asian stocks took a lift both from the Fed taper debate and Japanese GDP figures that showed 0.5% growth in the third-quarter, beating economists forecasts of 0.4%, although down from the second quarters gain of 0.9%.
Major European markets also have been buoyed by the prospect of further quantitative easing in the US. The CAC40 is up 1% and the DAX is up 0.9%.
The French market is managing to hold onto gains despite the country's GDP slipping into negative territory in the third-quarter. The GDP for the eurozone's second-biggest economy shrank 0.1%, following growth in the second quarter of 0.5%.
The German economic growth came in line with expectations, at 0.3% quarter-on-quarter, but down from 0.7% in the second quarter. Italian GDP declined for the ninth straight quarter. Growth was down 0.1% in the third-quarter, although a slower decline than the 0.3% fall seen in the second-quarter.
Growth across the whole eurozone came in at 0.1% for the third quarter, slightly slower than the 0.2% expected. Similarly, yearly GDP shrank by 0.4%, slightly more than the 0.3% contraction expected.
The euro has moved slightly lower following the GDP numbers, currently down on the day against the dollar at USD1.3440. Against the pound the euro is relatively unchanged as the pound has also fallen against the dollar, currently holding just above USD1.60, following disappointing UK retail sales numbers.
UK retail sales declined 0.7% month-on-month in October, worse than the unchanged reading expected by economists and down from the 0.6% rise seen in September. On a yearly basis, sales were up 1.8%, again worse than the 3.1% expected and down from the 2.2% rise seen last month.
Although the pound reacted negatively to the retail sales data, the reaction has been relatively muted in the wake of Wednesday's economic growth upgrades and inflation forecasts from the Bank of England. As Societe Generale Currency Strategist Kit Jukes puts it, retail sales "are a weather-affected lottery".
Within UK equity sectors, despite the reported slowdown in UK retail sales, Personal Goods are outperforming, the sector up more than 3%, lifted by strong interim results from Burberry and a positive management statement from Ted Baker. The Industrial Transportation sector performs the worst, down 2.1%, weighed down by BBA Aviation.
Having fallen sharply last month on the announcement that Chief Creative Officer Christopher Bailey will take over from current Chief Executive Officer Angela Ahrendts, Burberry shares are up 3.1% Thursday. The company reported its pretax profit increased to GBP159 million, compared with GBP112 million a year earlier and also increased its dividend by 10%.
Ted Baker shares are up 4.6% after the group said its revenues rose significantly in the third quarter, driven by new space and a strong performance across the business. Ted Baker reported group revenues of GBP77.1 million in the third quarter ended November 9, a 24% increase on the GBP62.0 million a year earlier.
On a day when very few FTSE 100 stocks are falling, Centrica is the stand out blue-chip laggard. The Utilities giant is down 3.8% after the company released interim results showing flat profits and a downgrade to full-year guidance. While the themes of Centrica's management statement should be well known to the market, "the extent of it may be a surprise", says Liberum Capital analyst Peter Atherton.
After a couple of days with the UK firmly in focus, attention will switch back to the US later, with US initial jobless claims out at 1330 GMT, as well as trade balance data. At 1500 GMT incoming Fed chair Janet Yellen will deliver the speech whose written remarks have already moved markets, at the Senate Banking Committee confirmation hearing.
By Jon Darby; [email protected]; @jondarby100
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