8th Apr 2014 10:02
LONDON (Alliance News) - UK stock indices have continued to slide Tuesday following the technology stock-led sell-off in global equities on Monday, and as tensions once again escalate between Russia and Ukraine.
The pound meanwhile has jumped to a near four-week high as UK manufacturing activity grows at the fastest rate in more than three years.
UK manufacturing production expanded by 0.9% month-on-month in February, faster than the 0.3% growth recorded in January and exceeding economists expectations of steady growth. On a yearly basis manufacturing production grew by 3.8%, up from 3.2% in January and at the fastest rate since February 2011.
Similarly, UK industrial production grew by 0.9% month-on-month in February and by 2.7% on a yearly basis, exceeding expectations of 0.3% and 2.2% growth.
The data comes after the Quarterly Economic Survey from the British Chambers of Commerce showed that the UK service sector exports rose to an all-time high in the first quarter.
"The UK rebound has much more momentum than consensus or the official forecasters seem to believe. Monetary policy is increasingly gaining traction, and the recovery is snowballing into rising capital spending, real wages and more optimism," said Berenberg chief UK economist Rob Wood.
The strong UK data has boosted the pound by more than a cent against the dollar to a near four-week high of USD1.6716.
Equity sentiment remains broadly negative, however, with investors cautious on stock valuations ahead of first quarter earnings reports in the US while keeping an eye on the developing situation in Ukraine.
By mid-morning Tuesday the FTSE 100 is down 0.6% at 6,584.38, the FTSE 250 is down 1.2% at 16,072.87, and the AIM All-share is off 1.1% at 840.30.
Within major European markets the French CAC 40 and the German DAX 30 are both down about 0.2% Tuesday.
The latest developments in Ukraine have seen Ukrainian forces raid a government building in the eastern city of Kharkiv and arrest some 70 pro-Russian activists that had been occupying the building. No shots were fired in the arrests, but Russia has reportedly warned Kiev that if any force is used against pro-Kremlin activists, it could tip Ukraine into civil war.
Technology stocks led the falls on Monday, with investors expressing concern over the high multiples on which the sector trades. "Investors finally start to focus on valuations ahead of the beginning of the US first quarter earnings season which starts today," said CMC Markets chief market analyst Michael Hewson.
Rabobank analyst Michael Every notes that Amazon trades at a 562.4x price-to-earnings ratio, with LinkedIn trading at 694.1x, which look huge compared to an average of more like 15x for your average UK stock.
In any case, after the falls suffered on Monday by the technology stocks, it is the FTSE 350 Technology sector that is gaining the most in the UK Tuesday, up 0.5%. The sector is buoyed by ARM Holdings, up 1.3% and leading the FTSE 100 gainers after receiving an upgrade to Market-Perform by Bernstein Research.
A similar picture to Monday sees the traditional defensive sectors of Tobacco and Beverages making small gains Tuesday. The mining sector is also providing a little support, FTSE 350 sector up 0.1%, buoyed in part by a rise in precious metal prices.
Gold is up about 1.0% at USD1,313.32 per ounce, while silver is also up about 1.0% at USD20.159 per ounce.
Sports Direct is the heaviest faller Tuesday, down 6.7% on the news that Mike Ashley has sold a 4.0% stake in the company. The move by the company co-founder follows the withdrawal last week of a proposal to pay Ashley a share bonus payment worth GBP75.5 million, due to a lack of support by shareholders. The irony is that Tuesday's share price fall in reaction to Ashley's sale has wiped more than that, some GBP150 million, off the company's market capitalisation.
There is little left in the data calendar Tuesday, but investors will be watching the direction of US markets on the open, with quarterly earnings due from aluminium producer Alcoa. Currently the futures markets indicate a marginally higher open on Wall Street.
By Jon Darby; [email protected]; @jondarby100
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