HSBC Holdings Share News (HSBA)

LONDON (Alliance News) - London shares were lower Thursday midday, with the Bank of England's minutes and interest rate decision in focus, while US stocks were called higher following Wednesday's sudden retreat after a jobs report lent support to a September rate hike by the US Federal Reserve.

The UK central bank's Monetary Policy Committee voted 8-1 to keep UK interest rates on hold at 0.5%, as expected.

Ahead of the Bank of England rate decision, the pound was higher against the dollar at USD1.5392. It was quoted at USD1.5422 just afterwards.

The FTSE 100 was down 0.7% at 6,184.79, the FTSE 250 down 0.5% at 17,072.41 and the AIM All-Share down 0.3% at 734.18. In Europe, the CAC 40 in Paris was down 0.4% and the DAX 30 in Frankfurt was off 0.3%.

Wall Street was called for a positive open, with the DJIA, the S&P 500 and the Nasdaq 100, all seen up 0.4%.

On Wednesday, US equities surged at the open but ended the session in the red after a strong JOLTS job openings report saw increased speculation in favour of a September rate hike by the Fed. The Dow closed down 1.5%, the S&P 500 ended down 1.4% and the Nasdaq Composite closed down 1.2%.

The US Bureau of Labor Statistics reported Wednesday that job openings in July rose to 5.8 million from the 5.3 million seen in June and surpassing expectations of a 5.3 million increase. The Bureau said this was the highest since the series began in December 2000, beating the prior high of 5.4 million in May.

Market participants will look again Thursday to job reports coming from the US, as weekly initial and continuing jobless claims are due at 1330 BST, alongside import and export price indices. Meanwhile, US Energy Information Administration crude oil stocks are due at 1600 BST.

According to FXStreet.com, economists expect initial jobless claims to rise by 275,000, after increasing by 282,000 a week earlier. Continuing jobless claims are expected to drop by 7,000 from a week ago.

"The bulls lost control yesterday afternoon and a deterioration in market sentiment has ensued as the market volatility continues. Bond markets were a big driver of this as yields on US Treasuries fell away, with equities also closing sharply weaker in the US," said Hantec Markets analyst Richard Perry. "Furthermore, the oil price is increasingly under pressure once more, still seemingly acting as a barometer for market sentiment."

Brent oil price has retreated to USD48.10 a barrel from a peak reached Wednesday of USD50.00. Similarly, the West Texas Intermediate oil price was at USD44.83 a barrel, having reached a USD46.29 peak on Wednesday.

Risk appetite in Europe was hit by a negative close in Asian stocks Wednesday. The Japanese Nikkei 225 index closed down 2.5%, while in China, Hong Kong's Hang Seng finished down 2.6%, and the Shanghai Composite ended down 1.4%.

China's inflation accelerated in August on soaring food prices, while producer prices fell at the fastest pace since late 2009 largely due to easing commodity prices. The divergence complicates matters for China's wavering economy, experts said.

The consumer price index was up 2% year-on-year in August, while the producer price index was down 5.9%, the biggest drop in more than five years, the National Bureau of Statistics said. Both shifts were greater than predicted. Analysts had forecast a 1.8% rise in consumer prices, up from a year-on-year inflation of 1.6% in July, and a 5.5% drop in producer prices, compared with 5.4% year-on-year the previous month.

Meanwhile, at the World Economic Forum's event in Dalian, known as the Summer Davos, Chinese Premier Li Keqiang promised to relax restrictions on foreign capital in financial markets and said the country would meet its economic targets.

"We are speeding up structural reform," Li said. China faces a "painful and treacherous" transition from over reliance on manufacturing toward a "growth model driven by consumption and investment".

"It's true that the economy has come under downward pressure...but the Chinese economy will not have a hard landing," he said in a speech on policy direction. "Despite some moderation in speed, growth is stable."

On the London Stock Exchange, BHP Billiton was down 5.3%, while Glencore was off 3.6%. Miners were trading lower on following the weak producer price inflation data from China.

Banking stocks Standard Chartered, down 2.6%, and HSBC Holdings, down 2.0%, also were suffering from their heavy exposure to Asian markets. Also Thursday, HSBC shares were raised to Neutral from Underperform by Merrill Lynch, according to traders, while Exane BNP remained Neutral on the stock while cutting its price target.

Wm Morrison Supermarkets also was one of the biggest fallers in the FTSE 100 after another poor set of results.

The grocer reported a sharp drop in profit in the first half of its financial year, as its revenue and like-for-like sales continued to decline in a deflationary UK food market and as it competes on price with other supermarkets in the face of discounters Aldi and Lidl.

Morrisons posted a drop in pretax profit in the half year ended August 2 to GBP126 million from GBP239 million in the first half of the prior year, as total revenue fell 5.1% to GBP8.1 billion from GBP8.5 billion, and like-for-like sales excluding fuel declined 2.7%. It said that its like-for-like sales continue to be hit by deflation as it continues to lower prices.

Morrisons traded down 3.9%, while fellow blue-chip grocers Tesco and J Sainsbury were down 2.1% and 1.7%, respectively.

In the green were housebuilders. Barratt Developments was up 2.8%, Taylor Wimpey, up 1.0% and Persimmon, up 0.8%.

The stock were in favour after UK house prices logged their biggest monthly increase in 15 months, according to data from Lloyds Banking Group's Halifax division. House prices advanced 2.7% in August from July, which was the fastest monthly increase since May 2014. Economists had forecast prices to climb 0.5% after falling 0.4% in July.

Dixons Carphone was up 1.8%. The electricals retailer said its like-for-like sales grew in the first quarter, driven by a strong performance in the UK and Ireland which offset mixed conditions in Southern Europe.

The company said its group like-for-like revenue growth in the 13 weeks to August 1 was 8%, driven by 10% growth in the UK and Ireland. Like-for-like revenue from its Nordics operations was up by 4% in the quarter, but Southern Europe revenue was flat, as an improvement in Spain and growth in Greece was offset by challenging markets elsewhere.

Meanwhile, shares in Next were up 0.8%. The fashion retailer traded up 2.4% after it said its pretax profit and revenue both rose in the first half of its financial year, driven by higher-than-expected full-price brand sales growth and a robust performance in its directory business, while retail sales rose only marginally.

The company said its pretax profit for the 26 weeks to July 25 was GBP347.1 million, up from GBP324.2 million, as its total sales revenue for the period rose to GBP1.89 billion from GBP1.85 billion a year earlier.

In the FTSE 250, Tullow Oil was down 6.1% to 195.10 pence. The oil and gas stock was hit by HSBC cutting its target price to 310p from 514p, though it kept a Buy rating on the shares. It was the second price target downgrade for Tullow this week, after UBS cut its target to 195 pence from 270 pence on Tuesday.

On AIM, Amphion Innovations was up 10%. The investor its subsidiary DataTern received a favourable ruling from the US District Court in Massachusetts over a patent dispute. The ruling denied two motions for summary judgement filed by MicroStrategy, which sought the dismissal of DataTern's claims on the grounds of validity and infringement. The two motions argued that DataTern's '502 patent is invalid, and that MicroStrategy did not infringe on the '502 patent.

By Daniel Ruiz; danielruiz@alliancenews.com

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