2nd Oct 2013 16:20
LONDON (Alliance News) - London's major equity indices all closed down Wednesday as investors reacted to a series of political headlines and US data releases.
On the second day of the US government's partial shut-down, traders continue to exercise caution. UK stock indices all opened firmly lower. With Democrats and Republicans refusing to compromise, a resolution seems to be some distance away. Subsequently, fears are building that the shut-down could last longer than the markets had initially anticipated.
Alongside this, we are another day closer to the October 17 deadline for the US government to raise its debt ceiling. If it fails to widen this limit, the world's number one economy will default on some of its debts, and so runs the risk of being downgraded. Even if the limit is boosted, there is still the risk of a credit rating downgrade. The last time Standard & Poor's downgraded the country, Congress managed to increase the ceiling at the eleventh hour.
Stocks staged a mini recovery early afternoon as former Italian premier, Silvio Berlusconi, revoked his threat to pull out of the ruling coalition. Instead, Berlusconi announced that he will back Prime Minister Enrico Letta. Letta secured 235 votes in Italy's Senate, a long way ahead of the 161 majority required.
Any signs of a resurgence was swiftly allayed on the back of disappointing US data releases. The latest US ADP jobs data fell short of consensus expectation. The addition of 166,000 jobs in September was behind the forecast 180,000, according to FXstreet.com. Although data from the private sector is usually viewed as less important than official government figures, with markets wary that the official data will not be produced during the shut-down, the data has been afforded increased significance.
Combined with this, the ISM New York business conditions index also saw disappointing figures released Wednesday. The index fell to 53.6 for September, from 60.5 in August.
The FTSE 100 closed down 0.4%, at 6,437.5, the FTSE 250 closed down 0.5%, at 14,891.26, and the AIM All-Share index closed down 0.7% at 782.
The French CAC index closed the day down 0.9%, at 4,158.16, and the German DAX closed down 0.7%, at 8,629.42.
Similar sentiment was shared on Wall Street. At the close of the UK equity indices, the Nasdaq is down 0.4%, at 3,803.39, the S&P is down 0.5%, at 1,686.53, and the DJIA is down 0.7% at 15,093.87.
At the individual stock level, UK food retailers were amongst the biggest fallers on the blue-chip index as both Sainsbury and Tesco made announcements. Tesco closed down 2%, at 351.7775 pence, after the company announced that pretax profit for the first-half of the year declined 23.5% to GBP1.39 billion. It said its net profit for the first-half was down 34% to GBP820 million, compared with GBP1.2 billion a year earlier.
J Sainsbury closed down 1.3%, at 385.1375p, despite outperforming its market rival, Tesco. Whilst Shore Capital was impressed by the grocers like-for-like growth, excluding petrol, rising 2.0%, ahead of management's full year guidance of 1.5% and at the upper end of Shore's expectations of 1.75% - 2.0%. It did not alter its forecasts or upgrade its rating due to the fact that Sainsbury's like-for-like and total sales were broadly in line with expectations.
Despite not releasing any specific news of its own, WM Morrison was hit by Sainsbury's and Tesco's reports. The food retailer closed down 1.8% at 274.8p.
On the FTSE 250, Domino's Pizza Group, 3.9% up at 611.8377p, closed as the biggest gainer after it delivered strong results. The company announced that sales rose in the third quarter. The pizza delivery company reported a 10.4% increase in system sales to GBP140.9 million for the 13 weeks to September 29, with like-for-like sales up 4% compared with 3.7% a year earlier, but online sales outperformed with a 19.8% increase to GBP72.3 million while mobile sales more than doubled and now account for 29% of its online business. The company said it opened eight new UK stores in the quarter and has opened 23 so far this year.
Conversely, Hochschild Mining, closing down 7.6% at 161.16, was the biggest faller. Investors reacted badly to the news that the mining company has proposed a USD280 million deal to acquire the remaining 40% stake in the Pallancata mine and Inmaculada project in Peru, from International Mineral Corporation. The acquisition should reduce the average unit costs of the company, says Kate Craig, analyst at Liberum Capital. Liberum retains a Hold rating on the stock pending further analysis.
Thursday's data calendar sees Chinese non-manufacturing PMI figures released at 0200 BST.
There is a raft of Markit services PMI data. Italian figures are scheduled for 0843 BST, with French data at 0848. The German equivalent is at 0853 BST, before the EU release at 0858 BST, and the UK's at 0928 BST.
US data has the potential to be affected by the on-going partial government shut-down. With 800,000 "non-essential" workers staying at home, the certainty of US data releases has been somewhat jeopardised.
US initial and continuing jobless claims are expected at 1330 BST, before US ISM non-manufacturing PMI is set to be released at 1500 BST.
By James Kemp; [email protected]
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