25th Sep 2014 16:04
LONDON (Alliance News) - UK indices ended Thursday lower as investors become increasingly weary of a potential US Federal Reserve rate hike amid solid economic data from the country.
The FTSE 100 closed the day down 1% at 6,639.71, the FTSE 250 closed 0.7% lower at 15,425.91, while the AIM All-Share recorded a 0.3% loss to close at 751.3.
European equity markets traded lower as well with the French CAC 40 closing down 1.5% and the German DAX down 1.7%.
US indices are trading lower at the London close, with the DJIA down 1.2%, the S&P 500 down 1.3% and the Nasdaq Composite down 1.7%. Early trade in the US sees all three indices hand back all of the gains made Wednesday.
UK shares suffered this afternoon when data from the US came in ahead of expectations, raising concerns that the Fed could increase interest rates. US initial jobless claims for the week ending September 19 came in at 293,000; below the expectation of 300,000 but above 281,000 the previous week.
The continuing jobless claims for the week ending September 12 also beat expectations, coming in at 2.439 million, below the forecast of 2.45 million but above 2.432 million the week before.
US durable goods orders for August did come in a little short of economist forecasts, showing a fall of 18.2%, below the expected fall of 18%. The figure for July showed an increase of 22.5%. Excluding orders for transportation equipment, durable goods orders actually rose by 0.7% in August compared to a 0.5% drop in July. The rebound matched economist estimates.
The pound, meanwhile, jumped in value against the dollar amid comments made by Bank of England Governor Mark Carney saying that the central bank is closer to raising interest rates, as the economy has largely normalised. "With many of the conditions for the economy to normalize now met, the point at which interest rates also begin to normalise is getting closer," Carney said in a speech at the Institute and Faculty of Actuaries General Insurance Conference, Wales. "In recent months the judgement about precisely when to raise Bank Rate has become more balanced," he said.
The pound recovered to USD1.6342 against the greenback, from early 1-week low of USD1.6275. At the close of European trade, sterling was trading the dollar at USD1.6302.
In individual stock news, easyJet put in a strong performance, with its shares boosted by a positive update from sector peer Ryanair that came on the back easyJet's investor day and ahead of its own trading statement due next week.
Ryanair raised its profit guidance for the current year Thursday, saying that the recent launch of new higher-end services and revamped website is paying off. The low-cost Irish carrier said it now expects to fly 87 million customers in the year to March 31, 2015, up from its previous forecast of 86 million, which will take profits to the upper-end of previous guidance. EasyJet shares ended the day atop the FTSE 100, gaining 2.7%.
Miners also weighed UK indices with the FTSE 350 mining sector index falling 2.6%. This comes on the back of more falls in prices in commodities, with gold hitting its lowest price since early January Thursday, before recovering later in the day. Brent Oil hit its lowest price since 2012 on Wednesday.
Companies such as Fresnillo, down 3.6%, and BHP Billiton, down 2.9% were amongst the biggest fallers in the FTSE 100, while Polymetal International, down 4.4% was a notable faller in the FTSE 250.
"The sector has taken the brunt of the selling as raw materials' prices dive once again, and spells out a very bleak outlook for the FTSE 100 versus other indices given its heavy mining contingent," said IG market analyst Chris Beauchamp.
In the FTSE 250, CSR topped the index after it said the Takeover Panel has granted an extension to the deadline for Microchip Technology Inc to make a bid for the company. CSR said the deadline for the US semiconductor maker to make a bid has been extended to October 15 in order to allow the two companies more time to conclude their discussions. The company's shares gained 5%.
Meanwhile, Mitchells & Butlers shares fell 7.9%, making it the worst performing stock of the mid-cap index. The UK pubs and restaurant operator said total sales in the 51 weeks of its financial year grew by 3.8%, helped by better food and drink sales, but said that after strong demand in July following the World Cup, trading conditions in August slumped. In a pre-close trading update, the company said like-for-like sales in the 51 weeks to September 20 were up 0.6%, however it said growth in the nine weeks to September 20 was minimal, up just 0.1% as food sales grew by 0.1% and drink sales declined by 0.2%.
With no domestic economic releases Friday, the focus will be on Germany in the morning with the Gfk consumer confidence survey for October, released at 0700 BST, before turning to US for annualised gross domestic product for the second quarter and personal consumption expenditure prices for the same period, both at 1330 BST.
The corporate calendar is even quieter, with the only release coming from AIM-listed Digital Globe Services which will report its full-year results.
By Neil Thakrar; [email protected]
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