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LONDON (Alliance News) - UK stocks are trading mixed Monday, with Lloyds Bank leading the FTSE 100 lower after announcing further provisions for compensation of past misdeeds.
Meanwhile a raft of European PMI data has been released, with the UK's missing forecasts, sending the pound lower.
By mid-morning Monday, the FTSE 100 is down 0.3% at 6,493.25, and the FTSE 250 is down 0.3% at 15,631.00, while the AIM All-Share is up 0.1% at 858.50.
With negative sentiment hanging over from January and the Chinese non-manufacturing PMI slipping in January, major European markets also are under pressure, with the German DAX down 0.4% and the French CAC down 0.3%.
China's official non-manufacturing PMI slipped to its lowest level since December 2008 in January, falling to 53.4 from 54.6 in December, according to data released overnight.
"Market bulls would have hoped that a new month might bring a change in sentiment, but the first trading day of February sees the market slide lower again," said CMC Markets senior sales trader Toby Morris.
The UK manufacturing sector expanded in January, but at a slower rate than had been expected, with the Markit Manufacturing PMI recording 56.7, down from 57.2 in December. Economists had expected a reading of 57.0.
With a PMI reading above 50.0 indicating growth, the UK manufacturing sector is still showing strong growth. The Markit survey also notes broad based growth in export orders, with manufacturers mentioning improved demand from North America, mainland Europe, Asia, Brazil, Scandinavia and the Middle-East. This is pushing new export orders to a three-year high.
In contrast to the UK, European Markit Manufacturing PMI's have largely exceeded expectations and continued the trend of strong German growth supporting weaker but improving numbers elsewhere in the eurozone.
Germany recorded 56.5 in January, up from 54.3 in December, and slightly ahead of the 56.3 that had been expected. France recorded 49.3 in January, reflecting continued contraction, although improving from 47.0 in December and better that the 48.8 that had been expected. Spain's PMI improved notably, to 52.2 in January from 50.8 in December.
Two notable and potentially concerning exceptions were Italy, where growth slowed to 53.1 in January from 53.3 in December, and the Netherlands, where growth slowed to 54.8 in January, from 57.0 in December.
The headline miss to forecasts in the UK reading saw the pound slip against the dollar to a low of USD1.6341, an 11-day low for the currency pair. The euro has gained slightly against the dollar so far Monday, reflecting the generally improving trend of PMI readings in the eurozone. Currently the euro buys USD1.3510. The combined effect has seen the pound lose almost a cent against the euro, the cross currently finding support at EUR1.2100.
Big risk events for the pound and the euro lay ahead later this week, with both the Bank of England and the European Central Bank meeting to talk interest rates on Thursday. Although Monday's PMI's slightly missed forecasts, the generally rapid improvement in the UK economy is leading some to forecast that the BoE will raise interest rates before the Federal Reserve. Meanwhile, last week's low eurozone inflation print of 0.7% has increased speculation of a further cut to rates by the ECB.
"Thursday?s ECB meeting will keep the Euro under some downward pressure in the first part of the week as talk of further action, perhaps involving the ECB buying bundles of loans, continues," said Societe Generale senior strategist Kit Jukes.
Within UK equities, the banks are amongst the biggest losers Monday after Lloyds announced it has further increased the amount set aside for the mis-selling of payment protection insurance and interest-rate hedging products. Adding another GBP1.9 billion, Lloyds total accruals for product mis-selling are running close to GBP10 billion - almost half of the amount set aside by UK banks in total - so far. Lloyds leads the FTSE 100 fallers, down 3.1%.
The banking sector is suffering in general, with Barclays down 1.6% and RBS down 0.9%. Standard Chartered is the only UK bank to have made gains so far, up 0.3%.
Randgold Resources is a leading FTSE 100 gainer, up 1.9% after reporting record production for 2013, although its fourth quarter profits fell alongside the price of gold.
Still to come Monday, the US Markit Manufacturing PMI is due at 1358 GMT, followed by the ISM Manufacturing PMI at 1500 GMT. US Construction Spending numbers are due at 1500 GMT.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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