LONDON (Alliance News) - UK and European equities were posting modest gains midday Wednesday, but the pound and the euro took hits after disappointing construction data in the UK and a weaker-than-expected preliminary inflation reading from the eurozone.
The FTSE 100 index traded up 0.5% at 6,428.94 points, the FTSE 250 was up 0.2% at 17,542.68 and the AIM All-Share was up 0.4% at 741.50. In Europe, the French CAC 40 index was up 0.3% and the German DAX 30 was up 0.1%.
The euro erased its early gains against the other major currencies after data showed that eurozone consumer prices grew by less than forecast in November.
Flash data from Eurostat showed inflation rose 0.1% year-on-year, the same rate as seen in October, marking the second consecutive rise in prices after the 0.1% fall in September. However, economists had forecast inflation to rise by 0.2%. Headline inflation also remains well below the European Central Bank's target of 'below, but close to 2%'.
Analysts believe the weak inflation reading helped pave the way for ECB President Mario Draghi to announce further stimulus measures in the central bank's policy announcement on Thursday.
"Coming in at 0.1% against the expected 0.2%, the Eurozone's inert inflation appears to give Mario Draghi the green light to increase his quantitative easing scheme tomorrow," said Connor Campbell, financial analyst at Spreadex.
Jasper Lawler, market analyst at CMC Markets commented: "The inflation miss adds to the case for stronger action from the ECB tomorrow. The data could be the difference-maker for the ECB choosing to increase the size of monthly asset purchases over just extending the end-date of the QE program."
The ECB currently runs a EUR1.1 trillion quantitative easing programme, which it indicated would run to at least September 2016.
The euro fell sharply after the data and at midday traded the dollar at USD1.0594 and the Swiss franc at CHF1.0875.
The pound declined against other major currencies after data from Markit and the Chartered Institute of Procurement & Supply showed UK construction activity expanded at the slowest pace in seven months in November.
The Markit/CIPS purchasing managers' index for construction fell to 55.3 in November from 58.8 in October coming in much lower than the 58.6 consensus estimate. The reading signalled the slowest growth in business activity for seven months. Aside from the pre-election slowdown seen in April, overall output growth was the weakest since mid-2013.
Tim Moore, senior economist at Markit said: "Overall the latest results suggest that construction companies have become a little more cautious towards year-end, especially in terms of job hiring. However, a healthy flow of new tenders from public and private sector clients is expected to provide a tailwind to growth heading into 2016."
Moore added construction firms were overwhelmingly positive about the outlook for their business activity.
The pound, however, fell against the dollar, trading at USD1.5034 at midday.
US futures pointed to a modestly higher open Wednesday ahead of a number of US data releases. The DJIA and S&P 500 are both pointed up 0.1% and the Nasdaq 100 is indicated up 0.2%.
The focus in the US will be on ADP employment at 1315 GMT, nonfarm productivity and unit labour costs at 1330 GMT, and Energy Information Administration crude oil stocks at 1530 GMT.
Investors will also be keen to hear speeches from Federal Reserve Chair Janet Yellen at 1330 GMT and 1725 GMT, and from Atlanta Fed President Dennis Lockhart at 1310 GMT.
In London, Sage Group shares recovered from earlier heavy losses but still traded down 2.5%, making it the worst performer in the FTSE 100. The enterprise software provider said its pretax profit edged lower in its recently-ended financial year due to restructuring costs, but its organic growth hit its target and the group remains confident on its outlook.
Sage said its pretax profit for the year to the end of September was GBP275.8 million, slightly down from the GBP278.7 million it made a year earlier, due to higher one-off selling and administrative costs related to restructuring activity to save costs.
Stripping out those one-offs, pretax profit rose to GBP358.5 million from GBP340.9 million. Sage will pay a total dividend for the year of 13.10 pence per share, up from 12.12p.
Greene King was the best performer in the FTSE 250 index, up 9.3%. The pub company said its pretax profit and revenue rose in the first half thanks to the integration of the Spirit Pub business, though like-for-like sales growth also was solid, and the group hiked its interim dividend.
The company said its pretax profit for the 24 weeks to October 18 was GBP84.9 million, up from GBP72.0 million, as revenue surged up to GBP917.7 million from GBP614.9 million. Greene King will pay an interim dividend of 8.45 pence, up from 7.95p.
Pace shares were up 7.6% after US broadband network equipment maker Arris Group said the US Department of Justice has closed its investigation into its proposed acquisition of set-top box maker Pace. Having agreed a GBP1.4 billion deal to acquire Pace in April, Arris has already secured clearance in Colombia, Germany, Portugal and South Africa and is now awaiting regulatory approval in Brazil.
Price comparison site Moneysupermarket.com was the worst performer in the midcap index, down 7.1% to 304.90p after founder Simon Nixon sold a 5.8% stake in the company through a share placing, almost half of his holding, and the company said he will step down from the board at the end of the year.
Nixon placed 32.0 million shares at 305.00 pence per share, raising gross proceeds of GBP98.0 million for Nixon. Shares in Moneysupermarket closed at 328.30p on Tuesday. Following completion of the placing, Nixon will be subject to a lock-up on its remaining shareholding in the company until the announcement of its 2015 results, due in March 2016. His remaining stake in Moneysupermarket.com is around 6.9%.
Saga shares also were suffering from a large sale, down 5.2% to 201.10p. Acromas sold a 13% stake in the over-50s products and services provider to institutional investors, more than had initially been planned and raising GBP290.0 million for the seller.
Acromas sold 145.0 million Saga shares at 200.00 pence per share compared to Saga's closing price of 212.2p on Tuesday. The deal was announced late on Tuesday, but Acromas had initially only intended to sell around 110.0 million shares, or a 10% stake in Saga. Acromas now will hold 32% of Saga following the sale.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
Copyright 2015 Alliance News Limited. All Rights Reserved.
26 Jan 2016 10:25
