13th Aug 2014 09:22
LONDON (Alliance News) - UK stocks are trading mixed Wednesday, with sentiment held back by some disappointing economic data from around the world, while the pound has given up recent gains against other major currencies following the release of data that showed the first drop in UK average earnings in more than five years.
By mid-morning Wednesday, the FTSE 100 is fractionally higher at 6,632.62, the FTSE 250 is down 0.3% at 15,412.92, and the AIM All-Share is down 0.1% at 755.31.
Major European markets are preforming better, rebounding from a much worse performance on Tuesday. The French CAC 40 is up 0.7%, and the German DAX is up 0.9%.
The headline rate of UK unemployment fell to 6.4% in the three months to June, down from 6.5% the month before. Six months ago that would have been taken as very positive news and provided a boost to the pound, but sterling fell to a session low against other currencies as data released at the same time showed further disappointing growth in average UK wages, a key measure now being looked at by the Bank of England before it will raise interest rates.
Average earnings excluding bonuses grew by just 0.6% year-on-year in the three-months to June, slipping from 0.7% growth previously and disappointing economists that were expecting growth to remain stable. Including bonuses, meanwhile, average earnings fell by 0.2%, reversing some of the 0.4% growth recorded last month.
While real wages have been getting continually squeezed for a long time, as inflation has exceeded wage growth, these latest numbers represent the first actual fall in wages since March 2009. The data may lift a little pressure from the Bank of England to raise interest rates, but investors will want to hear how the central plans to handle the issue of falling wages when Bovernor Mark Carney delivers the Quarterly Inflation Report starting at 1030 BST.
"A clear pattern is emerging here with the continued widespread creation of jobs offset by depressingly sluggish wage growth. The economic recovery is filtering down to more people across the country, although many are still feeling the pinch with the cost of living going up far quicker than their pay packets," said UFX Managing Director Dennis de Jong.
Ahead of Carney's appearance, the pound has slipped from early highs to trade broadly flat on the day at USD1.6808 and EUR1.2584.
The mining stocks are holding the London market back from further gains Wednesday, following the Chinese data released overnight that showed a dip in industrial production, retail sales, urban investment, and the money slightly in the world's second largest economy.
The FTSE 350 Mining sector is down 1.4%. Glencore is down 2.1% alone, after it provided a mixed production update. The metals giant reported higher copper, ferrochrome and oil production in the first half of the year as it ramped up output at some mines and oil facilities, although zinc and nickel production was down on the year as other mines depleted reserves or were placed on care and maintenance.
The non-life insurance stocks are being led lower by Admiral Group, which warned of pressure on its earnings from many sources as it released its 2014 interim results. The group's revenue decreased by 5% to GBP1.04 billion, mainly due to a 9% reduction in premium rates in the UK car insurance business during 2013. Although UK motor are no longer falling, there is yet to be evidence of an upturn, and the group also saw an 8% fall in its ancillary income, from sources such as breakdown cover referral.
Admiral is down 2.6%, while fellow motor insurer Direct Line is down 5.2%, and esure is down 1.0%. Shore Capital notes that regulatory clouds still surround the industry and that UK households are being provided no respite from an income squeeze, as evidenced by the most recent wage data.
Elsewhere in the insurance sector, Brit is one of the biggest gainers in the FTSE 250, up 2.4% despite reporting a fall in pretax profit in the first half to GBP61.5 million, compared to GBP75.4 million in the previous year. The results are Brit's first since its April flotation, and the company said they were hurt by the cost of the IPO as well as the ongoing strength of the pound.
Michael Page also warned about the strength of the pound, with the recruiter saying its revenue growth was just 1.8%, compared to 8.3% at a constant currency rate, while its operating profit grew 11%, compared with 21.4% at constant currencies. The stock is down 3.7%.
G4S shares are up 1.4% after the security company said it swung back to a profit in the first half of the year as revenue rose and it didn't repeat the write offs and impairments that weighed on last year's results. ChiefEexecutive Ashley Almanza said the company's turnaround remains a work in progress. The group pretax profit rose to GBP185 million from GBP175 million, as revenue rose to GBP3.37 billion from GBP3.25 billion.
Eurozone industrial production data just released has added to the list of recent disappointing reading in Europe. Production was flat year-on-year in June, down from 0.5% growth in May and missing expectations for 0.1% growth.
Later in the session, US retail sales data are due at 1330 BST, followed by a speech from Federal Reserve member William Dudley at 1405 BST and fellow member Eric Rosengren at 1420 BST.
Currently, futures trading indicates that Wall Street will open higher, with the DJIA pointing up 0.3% and the S&P 500 pointing up 0.4%.
By Jon Darby; [email protected]; @jondarby100
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
AdmiralDirect LineEsure GroupGlencore