31st Mar 2014 09:51
LONDON (Alliance News) - The UK's main stock indices are higher Monday, despite some disappointing UK mortgage approvals and lending data, while eurozone inflation data has increased the volatility of the euro, as commentators indicate an increased likelihood of action by the European Central Bank later this week.
By mid-morning Monday the FTSE 100 is up 0.2% at 6,628.64, the FTSE 250 is up 0.3% at 16,230.63, and the AIM All-Share is up 0.1% at 851.42.
In Europe, the CAC 40 is up 0.1%, and the DAX 30 up 0.2%.
Consumer price inflation in the eurozone fell by faster than expected in March, to 0.5% year-on-year from 0.7% in February. Inflation in the region is now at the lowest level since October 2009, which puts pressure on ECB President Mario Draghi to take some form of easing action at this week's policy meeting on Thursday. Economists had expected CPI to fall to 0.6%.
Core inflation also fell to 0.8% from the 1.0% recorded in February. The data follows weak CPI readings from both Germany and Spain last week.
"Faced with soft CPI releases, it is difficult for the market to dismiss the deflationary risk," said Rabobank senior currency strategist Jane Foley. "Consequently, despite Draghi?s more upbeat message in March, there is speculation that the ECB this week may want to make clear to the market that it does have the tools to ease policy again if and when it deems it necessary," said Foley.
The euro fell to a session low against the dollar of USD1.3721 immediately after the data print, but, despite an increasing number of commentators pointing to further monetary easing by the ECB, has actually rallied back to a session high of USD1.3780.
The move follows the release of stronger-than-expected German retail sales data earlier in the morning. Sales in Europe's largest economy expanded by 2.0% year-on-year in February, accelerating from 0.9% growth recorded in January, and exceeding economists expectations of 0.8% expansion. On a monthly basis, retail sales grew by 1.3% in February.
In the UK, the expansion of both consumer credit and mortgage approvals in the UK slowed in February, according to the latest data from the Bank of England. Following three months of expansion, the number of UK mortgages approved last month fell to 70,309 from 76,753 in January. Economists had expected approvals to only marginally slow to 75,250.
The amount of money borrowed by individuals in the UK also slowed in February, to GBP0.552 billion from GBP0.624 billion in January. Economists has expected an expansion in lending to GBP0.7 billion.
"Rain stopped play in the housing market during February," said Berenberg chief UK economist Rob Wood. However, with interest rates very low, consumer confidence rising sharply and most housing indicators still rising high, it is "unlikely to herald the start of a prolonged slowdown", the economists says.
The pound has softened slightly against the dollar, currently trading at USD1.6635.
Within UK equities, the Life Insurance sector is rebounding from the heavy selling seen on Friday on the back of the news that the FCA is about to launch an inquiry into the sector. Aviva is up 2.0%, Phoenix Group is up 3.3%, Resolution Limited is up 2.6%, and Partnership Assurance is up 2.8%.
Babcock shares have jumped 3.8% to lead the FTSE 100 higher on the announcement that its partner Cavendish Fluor Partnership has been selected as the preferred bidder for the site licence of 12 UK nuclear sites.
Still to come Monday, the US Chicago PMI at 1345 GMT, and the Dallas Fed manufacturing business index at 1430 GMT.
Investors are also awaiting a speech from Fed Chair Janet Yellen Monday afternoon, at 1355 GMT.
By Jon Darby; [email protected]; @jondarby100
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