23rd Jan 2014 10:52
LONDON (Alliance News) - UK stock indices are lacking direction once again Thursday, continuing the stagnation that has afflicted equity markets this week, with the FTSE 100 currently trading just marginally lower than Monday's opening level. Meanwhile, a raft of generally strong European PMI's have provided a morning boost for the euro.
By mid-morning Thursday the FTSE 100 is flat at 6,826.55, and the FTSE 250 is flat at 16,151.92. The alternative market is underperforming, with the AIM All-Share down 0.5% at 877.77.
The eurozone Markit Composite PMI for January came in stronger than expected - recording 53.2, up from 52.1 in December and beating economist expectations of 52.4. Both the Manufacturing and the Services part of the reading beat expectations and showed strong growth in the industries.
The rate of growth acceleration across the eurozone was the fastest since June 2011, with growth picking up further in Germany and the rate of decline slowing in France.
With the French Manufaturing PMI at 48.8, and the Services PMI at 48.6, the private sector is still seen as shrinking in the troubled French economy. The decline has slowed from the readings of 47.0 and 47.8 respectively in December, however, and exceeded economist expectations of 47.5 and 48.1 respectively.
Germany's manufacturing industry continues to accelerate away from the rest of Europe, with the Markit Manufacturing PMI recording 56.3 in January, up from 54.3 in December, and beating expectations of 54.6. The German Service PMI recorded 53.6, slightly below the 54.0 expected but still indicating strong growth and a rise from 53.5 in December.
A PMI reading above 50.0 indicates growth.
The strong private sector growth readings have provided a boost for the euro, which is about a cent higher against the dollar, currently trading at USD1.3635. Against the pound, the euro has gained about 0.5 pence, the pair currently trading at GBP0.8215.
Although there have been no UK or US data releases yet Wednesday, the pound has continued to push slightly higher against the dollar, adding to Wednesday's gains that followed the sharp drop in UK unemployment to 7.1%. The pound is up a further 0.4 cents against the dollar, current trading at USD1.6600, having peaked so far at USD1.6616 - a high since August 2011.
European equity markets have fared little better than those in the UK despite the strong PMI's. The CAC40 is up 0.2%, while the DAX is down 0.1%.
Investors appear to be more concerned about the softer PMI data from China earlier in the morning. "For all the relative optimism coming out of the World Economic Forum in Davos, markets remain worried about the risk of a sharper slowdown in China," says Societe Generale strategist Kit Jukes.
Chinese Manufacturing PMI fell to a six-month low of 49.6, down from 50.5 in December, and well below expectations of a marginal rise to 50.6.
"Europe was led in lower this morning after a surprise contraction in Chinese manufacturing saw Asian stocks tumble. Since the open, data hasn?t been strong enough to spark any real bounce back so far," said CMC Markets Senior Trader Toby Morris.
Within individual UK equities, Pearson PLC is providing the main drag on the blue chips. The publisher is down 8.1% after saying it's "trading and financial performance has been weaker than expected, particularly in North America".
In the FTSE 250, Petra Diamonds leads the fallers, down 4.6%. Following Wednesday's excitement around Petra's discovery of 29.6 carat blue diamond, which saw the shares gain 8%, the stock is off about 4.5% Thursday after the company announced that sales were slightly lighter than expected in its first half.
On AIM, Verdes Management is part of the reason the market is underperforming, the restructuring specialist is down 18% after saying it has received a letter asking for the first GBP125,000 part of a recently received loan to be returned. The company has said it is urgently trying to clarify the situation.
Still to come Thursday, the Confederation of British Industry distributive trades survey for January. Due at 1100 GMT, economists expect the survey to record 25 in January, up from 34 in December.
Later in the afternoon, US initial jobless claims data is due at 1330 GMT, followed by US Manufacturing PMI at 1358 GMT.
By Jon Darby; [email protected]; @jondarby100
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