De La Rue Share News (DLAR)

LONDON (Alliance News) - UK stocks are trading mixed in low volumes Wednesday, with some disappointing eurozone data leading to investor caution ahead of the European Central Bank policy meeting next week.

By mid-morning Wednesday, the FTSE 100 is down 0.1% at 6,841.81, while the FTSE 250 is outperforming for the seventh consecutive session and trading up 0.2% at 15,872.48. The AIM All-Share is up 0.1% at 807.18.

In Europe, the French CAC 40 is down 0.1% and the German DAX is flat.

The stagnation of the leading indices comes after gains made so far this week had seen the German DAX and the US' S&P 500 reach fresh all-time highs, with the DAX nearing the psychological barrier of 10,000 points.

"The move has come on light volume, whilst US Treasury yields seemingly remain anchored. This would suggest an element of caution with regards to chasing these markets higher," said Hantec Markets market analyst Richard Perry.

German unemployment unexpectedly rose by 24,000 in May, when economists has been expecting the number to fall by 15,000, following the healthy 25,000 drop in the previous month. The headline rate of unemployment remained unchanged at 6.7%.

"German unemployment figures have cast a pall over markets, and a day devoid of further major macro has meant markets are struggling for direction," said IG chief market strategist Brenda Kelly.

Data from France earlier in the morning showed that consumer spending there declined by 0.3% month-on-month in April, missing economists' expectations for a rise of 0.3%, and reversing some of the 0.6% expansion recorded in March.

Adding to the disappointing European data, the eurozone M3 money supply, the broadest measure of money in an economy, grew at a slower rate than expected, rising at just 0.8% year-on-year in April, compared with the expectation of 1.1% growth.

An M3 reading below 1.0%, combined with disappointing growth in unemployment in Europe's largest economy, adds weight to the perception that the ECB will make policy change announcement at next week's meeting, analysts say.

"Some form of easing is already priced in, so today?s data will reinforce that perception," said CMC Markets chief market analyst Michael Hewson. "The only unknown remains as to what form it will take."

Forex traders have certainly been pricing in some action, as the euro is headed for its worst month of the year so far. The single currency has fallen about 2.5% against the dollar to its current level of USD1.3620, from almost USD1.40 before ECB President Mario Draghi said earlier this month that he was "comfortable with acting" at the next meeting. Against the pound, the euro has lost about 1.5% over the same period to currently trade at GBP0.8125.

GlaxoSmithKline is dragging on the FTSE 100, trading down 1.7% following the announcement that it is under investigation by the UK's Serious Fraud Office, the latest in a string of probes to be launched in various countries following initial allegations about the company's previous sales practices in China.

Weir Group is another FTSE 100 loser, down 1.9%, after saying it no longer intends to pursue a takeover of Metso Oyj after the Finnish company rejected an improved offer. Weir said it had made a new all-share offer under which Metso shareholders would have received 0.95 Weir share per Metso share, a 13% increase to the 0.84 exchange ratio that Weir Group initially proposed, but the proposal was rejected.

Marks & Spencer and Whitbread are down 0.7% and 0.3%, respectively, after going ex-dividend Wednesday.

London Stock Exchange Group is leading the FTSE 100 gainers, up 2.3%, after being added to a "focus list" by Credit Suisse. Analysts are reportedly encouraged by the possibility of the deal to acquire Russell Investments.

De La Rue leads the gainers in the FTSE 250. The bank note producer is up 4.5% after saying its restructuring programme is paying off as it reported a rise in pretax profit to GBP59.8 million in the year to March 29, up from GBP43.7 million a year earlier, as revenue rose to GBP513.3 million, from GBP483.7 million.

Aveva Group leads the FTSE 250 fallers, down 3.7%, after being downgraded to Sell, from Hold, by Liberum Capital. Analysts at the brokerage said that slowing oil & gas capital expenditure is not incorporated into the stock's steep valuation.

There's not much US economic data scheduled for Wednesday. US MBA mortgage applications are due at 1200 BST, followed by the redbook of retail sales at 1355 BST.

The UK's Confederation of British Industry distributive trades survey is released ahead of the US data at 1100 BST. Economists expect the reading to rise to 35 in May, from 30 in April.

Ahead of the relatively quiet afternoon, US futures markets are indicating a fractionally higher open on Wall Street.

By Jon Darby; jondarby@alliancenews.com; @jondarby100

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