2nd Sep 2014 16:52
LONDON (Alliance News) - UK stocks ended the day marginally higher Tuesday, with investors cautious ahead of the European Central Bank monetary policy meeting on Thursday.
The UK markets started strongly on hopes the ECB will take new stimulus action at its meeting, but gave up some of the gains as the day wore on as investors became reluctant to over-acquire after positive economic data from the US and UK.
Sentiment wasn't helped by Wall Street, where US stocks opened higher after Monday's Labor Day holiday, but then quickly dropped.
The FTSE 100, FTSE 250 and the AIM All-Share all ended the day 0.1% higher, at 6,829.17, 15,965.43 and 779.77 respectively.
In Europe, the CAC 40 ended flat after a strong start, while the DAX managed to hold on to 0.3% gains.
At the close of the European markets, the DJIA and the S&P 500 were trading down 0.2% while the NASDAQ Composite was up 0.1%.
"Today’s [Tuesday's] positive US data has pulled Europe’s markets off their intraday lows, investors remain reluctant to load up too aggressively ahead of this week’s ECB rate meeting and this appears to be limiting the upside potential, as investors weigh up the likelihood of further action at Thursday’s meeting," sais Michael Hewson, chief market analyst at CMC Markets.
The US ISM manufacturing purchasing managers' index for August came in at 59, ahead of the consensus of 56.8 and July's figure of 57.1. The results is the highest since April 2011 and caused the FTSE 100 to rise, but not enough to bring it back to the highs of the morning.
Housebuilder Redrow was the latest housebuilder to say the UK housing market is reverting to more normal levels of transactions, as it reported an increase in profit and revenue for its recent full year, although it also warned of rising costs due to dwindling numbers of skilled workers to hire.
The company, which said pretax profit almost doubled in the full-year, said market conditions have returned to a more seasonal pattern of activity, meaning fewer people buying in the summer and more in the spring and autumn. This comes after Berkeley Group Holdings on Monday said the UK housing market has reverted to normal transaction levels from the high point witnessed in 2013.
The comments suggest that the Bank of England's efforts to cool the surging market earlier in the year by further toughening mortgage lending criteria is working.
The strength of the housing market was reflected in economic data, which showed UK construction activity grew at a faster pace in August, defying expectations of a slow down, results of a survey by Markit Economics and the Chartered Institute of Purchasing & Supply showed. The Markit/CIPS construction PMI rose to 64 in August, from 62.4 in July, well above the 61.5 expected by economists. This marked the fastest rate of increase since January and the second-strongest rate of expansion since the pre-recession peak of August 2007.
The improvement was led by housebuilding again, although the rate of expansion in the residential construction sector moderated somewhat to a three-month low, reflecting the comments by housebuilders of a return to a more "normal" market. Civil engineering activity rose at the fastest pace since March and commercial construction activity continued to increase at a rate that was close to its fastest pace since the summer of 2007.
The FTSE 350 mining sector index was up 1% after the controversial mining profits tax in Australia was repealed after the government struck a deal with business tycoon Clive Palmer.
The 30% tax on mining profits on coal and iron ore was first introduced by the former Labor government in 2012. The country's Senate voted to remove the mining tax, and the bill is now heading to the House of Representatives where it is expected to pass as well, the BBC said, adding that Palmer's party had agreed to the move in return for concessions including freezing the government's contributions to state pensions and keeping a bonus programme for school children.
Miners such as Anglo American, up 2.5%, Glencore, up 1.8%, Antofagasta, up 1.4% and BHP Billiton, up 0.8% were amongst the top gainers in the FTSE 100 in reaction to the news.
In the economic calendar on Wednesday, a host of Markit services PMI data will be released for European countries and the UK. In the US, the Beige Book report on the current US economic situation will be released at 1900 BST.
In the corporate calendar, the quarterly FTSE index review results will be announced after the close of trade on Wednesday. The review will be based on closing prices on Tuesday and will be implemented on September 22.
Finally, FTSE 100-listed Hargreaves Lansdown and FTSE 250-listed Genus will report full year results, while Ashtead Group will release first quarter results.
By Neil Thakrar; [email protected]
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