20th Feb 2014 17:38
LONDON (Alliance News) - UK stocks extended their recent gains Thursday, reversing early losses during a day driven by economic data.
In the end, London's major indexes all ended slightly higher, but only after positive economic data from the US helped push up stocks on Wall Street and fueled a recovery in European markets.
The purchasing managers' index for the world's largest economy rose to 56.7 in February, up from 53.7 in January, and ahead of economists' expectations that it would drop to 53.0.
That came as the US Labor Department revealed that initial jobless claims fell 3,000 to 336,000 for the week ended February 15, from an unrevised reading of 339,000 in the previous week and only fractionally shy of the expected dip to 335,000.
The Labor Department also revealed that consumer prices advanced 0.1% in January, following an increase of 0.2% in the previous month, coming in line with economists expectations.
The only negative was a significant worsening in manufacturing conditions in the Philadelphia region in January, but that was due to brutal winter weather, according to the Philadelphia Federal Reserve's survey of business owners. The Philadelphia Fed's manufacturing index dropped sharply to a reading of minus 6.3 in February, from a 9.4 reading in January. Economists had been expecting a more modest slip to 8.
The FTSE 100 closed up 0.2% at 6,812.99, the FTSE 250 closed up 0.1% at 16,368.83, and the AIM All-Share closed up 0.1% at 882.9. As the London equity market closed, the DJIA and S&P 500 were both up 0.4%, with the NASDAQ Composite up 0.3%.
In Europe, the CAC 40 in Paris ended up 0.3%, while the DAX in Frankfurt closed down 41.20 points.
It was a strong turnaround from the early losses seen in Europe. The FTSE 100 had been down 1.0% at one point after investors reacted to disappointing Chinese manufacturing data and the minutes from the Federal Reserve's last policy meeting.
The Federal Open Market Committee's minutes indicated that the Fed will continue to gradually slow its asset purchase programme, and also suggested that there could be increased pressure for an earlier-than-expected interest rate hike.
The Chinese manufacturing sector, meanwhile, contracted for the second straight month in February, as a renewed fall in new orders dragged production lower, suggesting that the economic recovery is losing momentum. The seasonally adjusted Markit/HSBC purchasing managers' index dropped to 48.3 for this month, down from 49.5 in January. Economists had expected a much more modest decline to 49.4.
The data saw Asian equities close lower, with the Nikkei closing down 2.2%, the Hang Seng closing down 1.2%, and the Shanghai Composite closing down 0.2%.
The negative sentiment was added to by a raft of weaker-than-expected PMI readings from across Europe, with the Eurozone composite figure coming in at 52.7, down from 52.9 in January. Although it continues to signal growth, the two-month low of the index came as a disappointment as economists were expecting the index to expand further to 53.1.
In France, the Markit manufacturing number dropped to 48.5 in February, from 49.3 in January, missing expectations of an improvement to 49.6. The French service industry number was also lower than expected, recording 46.9 in February, from 48.9 in January, again missing expectations of an improvement to 49.4.
The only sector to beat expectations in Thursday's numbers was Germany's service sector, where the PMI expanded to 55.4 in February, from 53.1 in January, exceeding expectations of 53.4. Despite this, while the German manufacturing industry continues to expand, it is by less than expected, recording 54.7 in February, up from 54.3 in January. Economists has expected even stronger growth to 56.3.
Within the FTSE 350 sector indexes, aerospace and defence stocks more than reversed Wednesday's gains to close as the biggest losing sector, down 2.5%, pushed lower by BAE Systems.
The defence giant closed down 8.3% after it reported a sharp drop in profit in 2013 as sharply higher impairment charges more than offset higher revenues, and the company warned that cuts to defence spending in the UK and US would continue to weigh on its performance in 2014.
BAE Systems reported a net profit of GBP168 million for 2013, down from GBP948 million in 2012, with impairments rising to GBP887 million, up from GBP86 million, mainly due to the slowdown in US defence spending.
The sector had closed higher on Wednesday after BAE and Rolls Royce received a boost from the announcement that the governments of the UK and Saudi Arabia had reached a deal on the pricing on a BAE order of Typhoon jets.
At the other end of the spectrum, Petrofac ended the day as one of the leading risers in the FTSE 100, up 2.4%. The oil and gas engineering company's shares jumped after it revealed that it has been awarded a contract by BP, worth approximately USD1.2 billion, for work at the central processing facility for the Khazzan gas project in Oman.
Playtech, closing up 6.9%, was the stand-out gainer in the FTSE 250. The group posted a pretax profit of EUR491.3 million for 2013, up from EUR89.0 million in the previous year, as revenues rose to EUR367.2 million, from EUR317.5 million. The gaming and betting software company said it was confident going into 2014, and announced a special dividend of GBP100 million, in addition to maintaining its total dividend for the year at EUR23.2 euro cents per share.
In the data calendar Friday, Italian CPI inflation figures are released at 0900 GMT, ahead of UK retail sales and public sector borrowing dat at 0930 GMT. At 1000 GMT, the European Commission releases economic growth forecasts.
In the US, existing home sales numbers are published at 1500 GMT. The President of the Federal Reserve Bank of St. Louis James Bullard gives a speech at 1810 GMT.
In a much lighter corporate calendar, FTSE 250-constituents Informa and Millennium & Copthorne Hotels release full-year results.
By James Kemp; [email protected]; @jamespkemp
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