30th May 2014 15:55
LONDON (Alliance News) - UK stocks had a mixed session Friday, closing out the month with little clear direction as major stock markets around the world sit near to all-time highs, but struggle to push any further as investors remain reticent to add to positions ahead of a the key European Central Bank meeting next week.
Both volatility and trading volumes have collapsed this week as investors sit on their hands ahead of the most hotly anticipated central bank meeting of the year. Indeed, the FTSE 100 has just closed its lowest volume week and month of the year so far, with the trading range also the lowest seen since 2013.
"Investors have almost shut up shop in preparation for what could be an enormously volatile time, and if it is volatility you are after the meeting on June 6th is what you have been waiting for," said Alpari chief market analyst James Hughes.
Since ECB President Mario Draghi said that the ECB governing council was "comfortable with acting," at the June policy meeting, investors have increasingly been in wait and see mode, with equity indices pausing near all-time highs, waiting to find out how much extra stimulus is on the way, while the euro drifts lower, having its worst month of the year.
"Whether there is a change or not (by the ECB) the market?s will react, with either disappointment or with glee that the ECB members have finally realised the inflation pressures will not go away on their own," said Hughes.
On Friday alone, the FTSE 100 closed down 0.4% at 6,844.51, while the FTSE 250 closed up 0.4% at 16,010.25, and the AIM All-Share closed up 0.3% at 813.79.
Within major European markets, the French CAC 40 closed down 0.2%, and the German DAX closed just fractionally higher.
After the European close, US markets are also mixed, with the DJIA down 0.1%, the S&P 500 fractionally higher and the Nasdaq Composite fractionally lower.
Within UK stocks, the mining and metals sectors proved a drag on the FTSE 100 Friday, as concerns over a slowing Chinese economy spread, ahead of the Weekend release of the latest manufacturing PMI data from the Chinese government.
A falling gold price has also been unhelpful for the sector. The yellow metal dropped almost 1% on Friday alone and has shed almost USD50 over the week to currently trade at USD1,245.00 per ounce.
All of the top blue chip fallers Friday were miners. Anglo American ended as the biggest faller, down 5.6%, Rio Tinto lost 4.2%, BHP Billiton dropped 3.8%, and Fresnillo lost 3.4%.
Smith & Nephew was the best FTSE 100 performer for the third consecutive day, closing up more than 2% Friday amid continued speculation that the medical technology group has become the latest blue chip takeover target.
On Wednesday, the Financial Times published an article suggesting that Stryker, a US maker of hip implants and knee replacements, was about to make an unquantified takeover bid for the company. Stryker was quick to deny the rumours, but the possibility of interest from elsewhere keeps the stock well supported.
Whitbread gained 1.2% after Societe Generale upgraded the hotel, restaurant and coffee chain operator to Buy, from Sell, on Thursday, raising its price target to 4,800.00 pence from 2,900.00 pence, to take into account better economic conditions.
FTSE 250 listed Fenner was the stand out loser Friday. Shares in the polymer products maker plummeted more than 10% after it warned that its underlying pretax profit for the current financial year will come in 10% to 15% below the consensus estimate of GBP77.6 million. It warned that trading conditions in the US coal market have deteriorated and are showing no signs of imminent improvement.
Vedanta Resources also received some unwanted attention, closing down 2.3% following reports that hundreds of marchers protested outside its offices in Zambia after Chairman Anil Agarwal made comments online about how the company has made up to USD1 billion every year for nearly a decade from its Konkola Copper Mines subsidiary. The comments reignited a row about whether London miners are paying their fair share in tax.
The limited economic data that was released Friday was mixed, with US core personal consumption growth coming out in as expected at 0.2%, while US personal spending unexpectedly fell by 0.1% in April, compared to the expectation for a 0.2% rise.
While the markets appears to have shrugged of the disappointing first-quarter in the US, when the economy shrank by 1%, it may be more difficult to ignore disappointments in consumer spending data going forward, given the US economy's reliance on the consumer.
While it is a quiet start to next week in terms of corporate earnings, with just interim results from AIM listed RWS Holdings in the calendar for Monday, there is a lot more in the economic data calendar.
The Chinese manufacturing PMI for May will be released on Sunday, with any big disappointment potentially providing a catalyst for further weakness amongst the mining and metal stocks on Monday following the slump witnessed on Friday ahead of the numbers. China itself will be on holiday Monday, celebrating the annual Dragon Boat Festival.
The UK Hometrack house price survey is also released over the weekend, ahead of the latest UK mortgage approvals and consumer credit data due on Monday morning at 0930 BST.
The first trading day of the month brings the revised European Markit manufacturing PMI's for May. The initial readings showed that France slipped back into contraction over the month and investors will be watching to see if this is confirmed or revised higher at the 0850 BST print. The German print follows at 0855 BST, with the eurozone wide number at 0900 BST, and the UK number released along with the lending data at 0930 SBT.
German inflation data will be the key event to watch however. Due at 1300 BST, German CPI will be one of the last key pieces of data for the ECB to take into account ahead of Thursday's all-important policy meeting. Economists expect consumer prices to have risen by 0.2% in May, reversing the 0.2% drop recorded in April.
From the US Monday there's both the Markit and ISM PMI's and construction spending data.
By Jon Darby; [email protected]; @jondarby100
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