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(Alliance News) - Stocks in London ended Thursday in the red with the European Central Bank unable to offset worrying Chinese retail sales and UK jobs data.
The FTSE 100 index closed down 41.96 points, or 0.7%, at 6,250.69. The mid-cap FTSE 250 index lost 99.26 points, or 0.6%, at 17,321.29. The AIM All-Share index, however, ended marginally higher at 875.40.
The Cboe UK 100 index finished down 0.7% at 623.50. The Cboe 250 closed 0.4% lower at 14,713.69, and the Cboe Small Companies index ended up 0.1% at 9,183.89.
In mainland Europe, the CAC 40 in Paris lost 0.5% while the DAX 30 in Frankfurt gave back 0.4%.
"Indices remain in the red this afternoon but have seen losses abate during the course of the session. After some mixed numbers from China, where rebounding GDP is no longer enough to provide a bullish catalyst, we were treated to some dire UK jobs data," IG Chief Market Analyst Chris Beauchamp said.
China saw forecast-beating economic growth in the second quarter after a record contraction in the previous three months, as businesses cautiously returned to normality after strict lockdowns across the country.
Gross domestic product expanded 3.2% in April to June, the National Bureau of Statistics said, smashing expectations and a massive improvement on the 6.8% contraction in the first quarter. The growth reading, while smashing the 1.3% growth tipped in an AFP poll of analysts, is still among the lowest rates on record on a quarterly basis.
However, while the reading was welcomed, analysts said investors had largely priced in a recovery and pointed to a worse-than-expected drop in retail sales in June - a small rise had been forecast - suggesting consumers are still reluctant to spend.
China retail sales in June fell 1.8% year-on-year, falling short of market expectations of a 0.3% increase. The retail sector has taken on an increasingly significant role in China's economy as leaders look for consumers, rather than trade and investment, to drive growth.
In the UK, the jobless rate remained unchanged in the three months to June from the previous 3.9% in May, according to the Office for National Statistics. However, the number of UK workers on company payrolls has fallen by 649,000 during lockdown as the coronavirus crisis claimed another 74,000 jobs last month.
The ONS said early estimates showed the number of paid employees fell by 1.9% year on year in June to 28.4 million, and by 0.3% compared with the previous month. It said the pace of job losses appeared to have slowed in June, with claims under Universal Credit by the unemployed and those on low incomes falling by 28,100 between May and June to 2.6 million. But the claimant count has more than doubled since March - soaring 112% or by 1.4 million - indicating the severity of the jobs crisis facing the UK.
Beauchamp commented: "However, even the loss of hundreds of thousands of jobs was not enough to put a dent in sterling, which continues to take advantage of the dollar weakness that has been such a feature of recent weeks. In part this desire to move away from the greenback is a wish to cut exposure to an economy that is still struggling with its Covid response, let alone the entirely different challenge of easing lockdown, but also the hope that more open economies in other parts of the world will see a rebound in growth in coming months, making them more attractive to capital flows."
The pound was quoted at USD1.2607 at the equities close on Thursday, broadly flat from USD1.2604 at the London equities close Wednesday.
The euro was changing hands at USD1.1429, firm from USD1.1419.
"No news was good news for ECB watchers, and with the balance of risks still to the downside Christine Lagarde was keen to stress the bank's willingness to do more as needed. Given that central bank liquidity has underpinned the bounce in risk assets since March, central banks need to keep reiterating this message whenever the opportunity presents itself. As the ongoing rally in eurozone assets shows, better an activist central bank than one that is asleep at the wheel," Beauchamp added.
European Central Bank President Christine Lagarde on Thursday called for a collective response to deal with the coronavirus crisis, ahead of a crunch EU budget meeting.
On Friday, leaders from 27 European Union nations will be meeting face-to-face for the first time since February to carve up a potential EUR750 billion rescue package among themselves, and more importantly, attempt to agree on who will pay in the most.
Denmark, Sweden, Austria and the Netherlands - also known as the 'Frugal Four' - signalled their opposition to what they deem to be an overly generous recovery fund, taking opposition to issuing debt to bail out hardest-hit nations.
In a press conference, Lagarde said that "an ambitious and co-ordinated" effort from governments "remains critical" on top of the monetary policies enacted by the central bank.
"President Lagarde [urged] EU leaders to finalise details of the EUR750 billion Recovery Fund at their meeting which begins tomorrow, though experience suggests that it will take longer to broker a compromise over the many issues under negotiation," said analysts at Capital Economics.
The European Central Bank earlier on Thursday kept its key interest rates unchanged as widely expected and reaffirmed its pandemic bond-buying size at EUR1.35 trillion until June 2021.
In London, SSE gained 2.4% after the power company committed to paying dividends to shareholders, as many other companies refrain from payouts due to the coronavirus crisis.
The Perth, Scotland-based electricity utility said its five-year dividend plan to financial 2023 remains unchanged, including a planned payout of 80 pence plus RPI for the current year, incorporating a 24.4p interim dividend to be declared in November.
BP added 1.3% after Jefferies raised the UK oil major to Buy from Hold.
Heading in the opposite direction, Segro lost 2.1% after Jefferies cut the warehouse property investor to Hold from Buy.
Luxury fashion retailer Burberry gave back another 2.1% after losing 5.6% on Wednesday. The fashion house, said Wednesday, sales in the first quarter took a severe hit, as demand for luxury goods was dealt a blow due to the coronavirus pandemic.
The luxury retailer expects the second quarter to end of September to continue to suffer from the pandemic. In retail, it said, tourist flows are likely to remain negligible, and store operations are continuing to face significant pressures, with some remaining closed and operating with reduced trading hours.
Burberry expects retail sales performance to decline by 15% to 20% in the second quarter. In wholesale, it is collaborating with partners to protect the brand and as a result, anticipates first-half sales to fall around 40% to 50%.
Peer Compagnie Financiere Richemont said Thursday its total sales in the three months to June 30 slumped 47% year-on-year to EUR1.99 billion from EUR3.74 billion, due to a double digit decline across all regions.
In the midcaps, cruise operator Carnival lost 2.5% after it agreed to sell four ships in its Holland America Fleet.
Amsterdam, Maasdam, Rotterdam and Veendam will leave the fleet, Carnival said.
The names of the buyers and the sale prices were not disclosed.
Biffa added 5.2%. The waste disposal company said trading in the first quarter of the year to March 2021 has been "slightly" ahead of forecasts and the company is seeing a steady recovery in demand following easing of government lockdown measures.
Group revenue, which in April were 70% of pre-Covid-19 run rates, recovered in June to 83% of pre-Covid-19 levels, the waste management company explained.
Wall Street was in the red at the London equities close. The DJIA was down 0.3%, the S&P 500 index 0.6%, and the Nasdaq Composite was 1.5% lower.
US weekly jobless claims were flat this week but came in above market consensus, data from the Department of Labor showed on Thursday.
For the week to July 11, seasonally-adjusted initial claims were 1.30 million, down slightly from a revised 1.31 million the week before. Market consensus, according to FXStreet, had pencilled in 1.25 million claims for the week to July 11.
Analysts for Pantheon Macro commented: "The trend in initial jobless claims has now just about stopped falling; next week could easily see an increase, for the first time since March, in the wake of the continued gradual re-imposition of restrictions across the South and parts of the West.
"We see some hopeful signs in the latest Covid data for Arizona, California and perhaps even Florida and Texas, at the margin, but the scarring experience of the botched reopening in May and June means that it will be some time before the numbers even in these states are good enough to allow a renewed easing of restrictions. And in a host of other states, new daily cases continue to rise. As a result, a flat trend in initial claims - which will in due course stop the downward trend in continuing claims - probably is about the best we can hope for."
Against the yen, the dollar was trading at JPY107.11, firm from JPY106.88, in London.
Brent oil was trading at USD43.72 Thursday evening, up from USD43.42 a barrel late Wednesday. Gold was quoted at USD1,805.00 an ounce, down from USD1,809.00 an ounce.
In the UK corporate calendar on Friday, investment service Walker Crips and investment trust Artemis Alpha will issue full year results. Currency manager Record will issue its first quarter results and assets manager Ninety One will update investors on its assets under management.
In the economic calendar, all eyes will be on the crunch EU summit in Brussels on Friday and Saturday, at which leaders will wrangle over a proposed EUR750 billion recovery fund to kickstart the bloc's battered economy.
Elsewhere, there is a eurozone consumer price index and construction output prints at 1000 BST. In the US, there is a Michigan consumer sentiment index reading at 1500 BST.
By Paul McGowan; paulmcgowan@alliancenews.com
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