16th Sep 2014 09:54
LONDON (Alliance News) - UK stocks are lower across the board Tuesday morning, despite the latest UK inflation data giving confidence that interest rates are staying low for now, as nervousness continues to grip markets in the run up to Thursday's independence referendum in Scotland and as the US Federal Reserve begins its two-day policy meeting.
By mid-morning Tuesday the FTSE 100 is down 0.5% at 6,773.11, the FTSE 250 down 0.7% at 15,538.14, and the AIM All-share down 0.8% at 766.20.
Major European markets also are lower, with the French CAC 40 down 0.6%, and the German DAX 30 down 0.5%.
UK consumer price inflation eased to 1.5% in August from 1.6% in July, in line with economists expectations. The Office for National Statistics said falls in the prices of motor fuels and in food and non-alcoholic drinks provided the largest downward contributions to the change in the rate, partially offset by upward effects from clothing, transport services and alcohol.
Core consumer prices, exuding the most volatile items such as food and energy, rose by faster than expected in August, as a rate of 1.9%, up from 1.8% in July. Economists had expected core CPI to remain stable.
"With UK inflation falling to 1.5% and continuing sluggish wage growth, homeowners with mortgages can sleep easily for the moment with an interest rate hike now extremely unlikely this year," says UFX managing director Dennis de Jong.
The pound had a very muted response to the latest inflation data, barely moving against the dollar at the time of the print. Sterling continues to drift a little lower, while the dollar strengthens, ahead of Wednesday's Federal Open Market Committee meeting, at which some analysts expect to see a hawkish shift in tone from the Fed. The currency pair currently trades at USD1.6170.
The euro also remains little changed against the dollar, despite the German ZEW survey showing that confidence in Europe's largest economy remains a little higher than expected. The economic sentiment survey fell to 6.9 in September, down from 8.6 in August and marking the ninth consecutive month of falling sentiment, although the reading was a little better than the 4.8 that had been expected by economists.
Sentiment in the eurozone as a whole fell to its lowest level since 2012, with a ZEW reading of 14.2, down from 23.7 and mising expectations for a print of 21.3.
With both the Fed meeting and the Alibaba IPO looming, high-multiple technology stocks weighed on Wall Street on Monday, and that trend has followed through to London on Tuesday, with Technology Hardware & Equipment the worst performing FTSE 350 equity sector, down 2.0%.
"A good proportion of the capital being invested into the Alibaba IPO will be at the expense of other stocks in the market, so ahead of the Fed, whose chair in the past has warned against stretched valuations in the tech and social media stocks, it made sense for investors to choose these names especially to make way for their allocation of shares in Alibaba," says Jasper Lawler, a market analyst as CMC Markets.
The Scotland exposed stocks remain under pressure ahead of Thursday's vote, with Babcock International down 2.0%, Standard Life down 1.8%, and SSE down 0.8%.
AIM-listed online retail darling ASOS saw its shares tumble as much as 14% in early trade after it said its profit in the new financial year just started will be broadly flat, due to an increase in investment spending. The fashion retailer quantified the recent fire at its main warehouse in Barnsley. While the stock was insured, ASOS said the incident cost it between GBP25 million and GBP30 million in sales. Analysts have been rushing to downgrade earnings forecasts in light of the update and the stock continues to trade down 10%, providing a drag on the junior market.
St James's Place is amongst the worst FTSE 100 performer, trading down 2.7% following the news that a former senior partner at the wealth manager, Peter Carron, has been fined GBP300,000 by the Financial Conduct Authority after finding that he misled clients about the likely performance of investments.
Thomas Cook Group leads the FTSE 250 lower, down 5.3% after warning over weakness in demand at its German business, as it said that it expects to report earnings in line with expectations for the full year.
Crest Nicholson leads the housebuilder sector lower, down 3.8%. The smallest volume housebuilder by unit reported a moderation of sales rates in the past few months, although sales still remain significantly above historic norms.
"As with the rest of the sector Crest Nicholson reports a ?return to normal? in the trading environment after the demand surge caused by help-to-buy a year ago," says Shore Capital analyst Robin Hardy.
The London property market has been said to be cooling recently, but the latest data from the ONS, released along with the inflation numbers, showed house prices grew 11.7% year-on-year in July, accelerating again from the 10.2% rise in June. This was driven by the 19.1% increase in house prices in London.
Ahead of the US market open, futures trading indicates that Wall Street will open lower Tuesday, with the DJIA pointing down 0.2%, and the S&P 500 pointing down 0.1%.
By Jon Darby; [email protected]; @jondarby100
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