28th Aug 2014 16:43
LONDON (Alliance News) - UK stocks on Thursday made losses as a combination of weak economic data from the eurozone and increased geopolitical tensions sapped bullish sentiment.
The FTSE 100 ended the day down 0.4% at 6,805.8 and the FTSE 250 down 0.7% at 15,910.86, while the AIM All-share finished flat at 778.97.
European indexes took an even bigger hit, the CAC 40 in Paris ending down 0.7% and the DAX in Frankfurt down 1.1%.
At the close of trade in Europe, New York also was trading lower, with the DJIA down 0.3%, the S&P 500 down 0.2% - slipping below the 2,000 mark - and the NASDAQ Composite down 0.2%.
Ukrainian President Petro Poroshenko accused Russia of a military invasion in the east and cancelled an official visit to Turkey, as the military said it had lost control of border cities in the south-east in what would be a "second front" in the conflict. Poroshenko has called an urgent meeting of the UN Security Council, saying: "The world must provide an assessment of the sharp aggravation of the situation in Ukraine."
The number of unemployed in Germany was worse than expected, increasing by 1,000 in August and missing economists' expectation of a 5,000 decrease. However, the German unemployment rate remained at 6.7%. German CPI met expectations with the year-on-year figure showing a growth of 0.6% in August, while the month-on-month figure came in flat. This news, accompanied by a report of reduced economic confidence in the eurozone, caused the DAX to fall particularly heavily.
Meanwhile, encouraging US GDP data showed a 4.2% rise in the second quarter, outstripping the consensus of 3.9% growth. The dollar jumped on the news as investors anticipate an earlier than expected rise in interest rates. At the UK close the pound was trading flat at USD1.6571 and the euro was down at USD1.3172.
“With unemployment falling, consumer confidence at its highest level since 2007 and now GDP hitting 4.2%, the skies above [Federal Reserve Chair] Janet Yellen’s head are getting brighter. An earlier-than-expected interest rates rise is surely now on the cards,” said Dennis de Jong, managing director at UFX.com.
On the London Stock Exchange, the FTSE 350 mining sector fell 2.7%, with Rio Tinto down 3.8%, Anglo American down 3.5%, Antofagasta down 2.2%, and BHP Billiton down 2.1%. They were among the leading the losers in the FTSE 100.
According to The Australian newspaper, iron ore prices have fallen to a five-year low at USD88.2 a tonne. The report said weak prices have been largely triggered by production expansions by major miners, including BHP Billiton and Rio Tinto, at a time when Chinese demand may be slackening.
In the FTSE 250, CSR shares rose 35% after the Financial Times reported the computer chip maker is exploring a possible sale, after receiving takeover offers from various rival semiconductor manufacturers. CSR has hired bankers to sound out offers and assess the merits of a sale, the newspaper said, quoting people familiar with the matter and saying the business could fetch as much as USD3 billion, a hefty premium to its current market cap of GBP1.2 billion, or about USD2.0 billion.
Following the FT report, CSR issued a statement saying it has rejected a takeover approach from US-based semiconductor manufacturer Microchip Technology Inc because the proposed price was too low, but said it is considering its options for the company.
Xaar lost almost a quarter of its value after it lowered its revenue expectations for the full year due to softening demand in the Chinese ceramic tile decoration market, and it posted a lower pretax profit for the first half of the year. Demand for ceramic tile decoration has weakened in the third quarter due to slowing construction activity in China, and the the company lowered its full-year revenue expectations to GBP115 million to GBP125 million, from a forecast of about GBP130 million it gave in July.
Still, it raised its interim dividend to 3.0 pence from 2.5 pence, and said it expects to pay a total dividend of 9 pence for 2014, which would be a 13% increase over 2013. Xaar posted a pretax profit of GBP15.3 million for the six months to June 30, down from GBP23.4 million a year earlier, as revenue declined to GBP60.4 million, from GBP70.2 million.
The economic calendar remains full with UK business investment figures coming in at 0930 BST. Inflation figures from the eurozone will be released at 1000 BST, together with EU unemployment. US personal income and consumption data at 1330 BST.
In the corporate calendar, interim results will be released from FTSE 250-listed Afren, Computacenter, Perform Group, Berendsen, Exova Group, Bwin.Party Digital Entertainment and Restaurant Group. Stobart Group is issuing a trading statement.
By Neil Thakrar; [email protected]
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