14th Oct 2013 16:32
LONDON (Alliance News) - UK stocks closed marginally higher Monday as investors continue to wait with bated breath for developments in the US.
As the US government's self-imposed debt ceiling deadline of October 17 edges ever-closer, a quiet day of trading has seen London's main equity indices close slightly above their opening levels.
Despite both Republicans and Democrats suggesting that they earnestly wish to avert a debt default, no concrete agreement appears forthcoming, as they are still at loggerheads over a unanimous solution. While signs of progress toward an agreement helped to drive stocks higher at the end of last week, the talks appear to have reached a standstill even as the debt limit deadline looms. The threat of a US debt default is very much alive, comments Christopher Vecchio at DailyFX.
Alongside this, with the US celebrating Columbus Day, economic data releases were sparse Monday. As a result, investors were offered little guidance.
Michael Hewson, senior market analyst at CMC Markets, commented that, "European markets have struggled for direction today with the primary focus remaining firmly fixed on the goings on in the US, after the failure at the weekend for US politicians to build on market expectations of some kind of deal at the end of last week."
Alongside this, Hewson notes that oil prices have been put under pressure today on the back of a lack of agreement over the weekend. He also believes that concerns over global demand are, "weighing particularly on Brent prices after Chinese exports showed a surprise drop in their September numbers. The drag appears to have been as a result of a slowdown in emerging markets, not altogether surprising given the turmoil seen in recent months as Fed taper talk roiled investors."
Figures from the General Administration of Customs released over the weekend, revealed that China's exports declined unexpectedly in September. Shipments dropped 0.3% year-on-year in September compared with forecast for a 6.0% increase.
At the close of the UK equities market, Brent Oil is 0.5% lower at USD110.36 per barrel
The FTSE 100 closed up 0.3% at 6,507.65, the FTSE 250 closed up 0.6% at 15,057.43, and the AIM All-Share closed up 0.1% at 786.85.
US stocks opened lower after the failure to secure a deal to raise the debt ceiling over the weekend. In the absence of official economic data releases, the major indices continue to trade in a relatively narrow range at the close of the UK equities markets. The Nasdaq trades 0.1% lower at 3,786.73, the S&P is down 0.3% at 1,698.33, and the DJIA is down 0.3% at 15,197.87.
The US bond market was closed all day for the Columbus Day holiday.
At an individual UK stock level, Glencore Xstrata, closing the day down 1.5% at 330.7141 pence, was one of the biggest fallers on the blue-chip index. The company's share price suffered after Liberum Capital downgraded the group to Hold from Buy. The price gap between Glencore shares and the shares of peer BHP Billiton is unjustified, says Liberum analyst, Ben Davis. Glencore trades at a price to earnings ration of 19.6x, while BHP trades at 9.8x. For the two stocks to trade at similar multiples in 2014 there would have to be a 20% increase in the price of thermal coal and copper and a 20% decrease in the price of iron ore, explains Davis. While prices are forecast to move in those directions, a move of that magnitude for all three commodities is highly unlikely, says Liberum.
Michael Page International, closing down 5% at 470p, was the biggest faller on the FTSE 250. Despite posting a rise in gross profit in the third quarter, the recruitment company warned that the fourth quarter would be tough. "Although we have limited visibility, we expect the fourth quarter to be another challenging quarter, with difficult conditions likely to continue in some markets, but with gradual improvements in others," the company said. Separately, it said that Chief Financial Officer Andrew Bracey, had resigned on Friday and Finance Controller Kelvin Stagg, will step up to be acting CFO. Despite these mixed results and a falling share price, Numis remains encouraged by the company's outlook. Numis believes that the underlying trading trends are largely consistent with those seen at the company's peers, indicating improvements in candidate and customer confidence. Alongside this, the surprise departure of Bracey is positive, according to Numis. Steve Woolf, an analyst at Numis, comments, "while a modest earnings downgrade is likely to see profit taking, we would look to buy into weakness."
On the London Market, Royal Mail continues to perform well after Friday's debut. Having been priced at 330p by the government before Friday's market open, shares immediately climbed more than a third above that price on open. The group hit a high of 475.278 Monday. Unconditional trading, open to retail investors, begins Tuesday.
Tuesday's data calendar sees Chinese FDI released overnight. Japanese industrial production figures are set for release at 0530 BST.
In Europe, German import price information is scheduled for 0700 BST, before French CPI data at 0745. UK CPI, PPI, and RPI are released at 0930 BST. EU and German economic sentiment results are expected at 1000 BST.
In the US, New York Empire State manufacturing index is expected at 1330 BST, with Redbook index data at 1355 BST.
By James Kemp; [email protected]; @jamespkemp
Copyright 2013 Alliance News Limited. All Rights Reserved.
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