26th Sep 2014 09:42
LONDON (Alliance News) - UK stock indices are lower Friday amid continued geopolitical fears, US rate rise concerns, and a dearth of fresh market data, and supermarkets are underperforming once again as J Sainsbury made the latest move in a deepening price war in the grocery sector.
Investors appear in no mood to add to equity positions ahead of the weekend, with the UK parliament about to sit for a debate over whether to re-join the war in Iraq, and reports emerging that Russia is considering retaliating against western sanctions by allowing the seizure of foreign owned property on its soil.
By mid-morning the FTSE 100 was fractionally lower at 6,638.62, the FTSE 250 was down 0.2% at 15,397.87, and the AIM All-Share was down 0.4% at 748.09.
Major European markets are mixed, with the French CAC 40 up just 0.1%, and the German DAX 30 down 0.1%.
The underperformance of the German market follows a fall in the German Gfk consumer confidence survey in October to 8.3, the lowest reading since February.
The gold price moved almost USD20 off its lows overnight as the geopolitical concerns led to increased demand for the safe-haven asset. By mid-morning the yellow metal trades at USD1,224.28 per ounce. Silver is also off its recent lows, at USD17.619 an ounce.
Following a sustained period of weakness, the bounce has provided a boost to the precious metal miners Friday, with Fresnillo one of the best performing FTSE 100 stocks, up 1.7%, and Randgold Resources up 1.5%.
The banks are also providing support to the London market, with the FTSE 350 sector index up 0.7%. Lloyds shares are up 0.9% after it said it raised GBP161 million by selling 57.5 million shares in TSB Banking Group, a sale that leaves it with about a 50% stake in the business it is spinning out. TBS shares are down 0.2%.
Lloyds only had a small window of opportunity in which to sell the latest tranche, following the expiry of the 90-day IPO lock-up earlier this week and ahead of the "connected party" restrictions in the lead up to TSB's third-quarter interim management statement on October 24, said Investec analyst Ian Gordon. Some analysts have expressed surprise that Lloyds didn't take the opportunity to offload more of the stock, given that the EU requires it to dispose of the remaining 50% by the end of next year.
FTSE 250-listed De La Rue has seen its shares plunge almost 30% after the company warned that its underlying operating and pretax profit for the current year will be GBP20 million lower than the previous year. The bank note printer received a boost earlier this month when the Bank of England announced it was the preferred bidder for the job of providing the UK with bank notes for the next ten years, a contract already held by the company. However, De La Rue said Friday that in light of a deteriorating trading environment it intends to reappraise its full year dividend and expects to cut it to 8.3 pence, from 14.1p the year before.
FTSE Small-Cap waste management company Shanks Group also issued a profit warning, saying it now expects to miss its own full year expectations by about 15%, after trading at its solid waste Benelux business deteriorated even further in the first half of its financial year in the face of stiff competition. The update has sent the stock down 15%.
The supermarkets are continuing to underperform, with J Sainsbury and Wm Morrison Supermarkets both amongst the worst FTSE 100 performers after Sainsbury's launched an advertising campaign pledging to match Asda's prices on branded products, even if they are on promotion at its rival. The grocer said it will be lowering base prices on thousands of lines within its food business starting on October 2. It said it will stop brand price matching with Tesco as well as Asda, focusing on Asda alone.
The decision has been seen as a fairly aggressive price cutting move given that Asda, owned by US retail giant Wal-Mart, has very deep pockets and is known to be the cheapest of the big four UK supermarkets. Sainsbury's is the decond-worst FTSE 100 performer, down 2.4%. Morrison is down 1.7%, and Tesco is down 0.6%.
Still to come Friday, the final reading of US second quarter GDP will be released at 1330 BST. Economists expect a final print of 4.6%, an upwards revision from the second estimate last month of 4.2%. The reading would confirm a strong bounce from the 2.1% drop in the first quarter.
The Reuters/Michigan consumer sentiment index for September follows at 1455 BST, with analysts looking for an improvement to 84.7 from 82.5 in the previous month.
Given that some reasonable US durable goods and jobless claims data dented equity values on Thursday as investors started to expect an interest rate rise sooner than previously thought, the final GDP reading will be closely watched.
Ahead of the data, futures show that US markets will see a bounce from Thursday's heavy sell-off at the open, with the DJIA pointed up 0.3%, the S&P 500 up 0.2%, and the Nasdaq Composite up 0.4%.
By Jon Darby; [email protected]; @jondarby100
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TescoLloydsDe La RueRandgold ResourcesMRW.LFresnilloSainsbury's