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LONDON (Alliance News) - UK stocks indices, along with major European markets, have slowly lost ground over the morning as disappointing PMI data from both China and across the eurozone have put an end to the rally sparked late last week when the Bank of Japan unexpectedly announced extra monetary stimulus.
The FTSE 100 is outperforming its European counterparts, however, on the back of a more healthy UK manufacturing sector.
By mid-morning Monday, the FTSE 100 is down 0.1% at 6,539.78, the FTSE 250 also is down 0.1% at 15,488.94, and the AIM All-Share is down 0.3% at 718.08.
Major European markets are lower, with the French CAC 40 and the German DAX 30 both off 0.4%.
Stocks across Europe got off to a fractionally lower start as investors weighed the benefit of the extra monetary stimulus announced by the Bank of Japan late last week against slowing growth in China. Official non-manufacturing PMI, released at the weekend, decreased to 53.8 in October from 54 in September, indicating the slowest rate of growth since January. The HSBC manufacturing PMI, released at the same time, recorded a fractional improvement to 50.4 in October from 50.2 in September, although that is only marginally in expansion territory.
Stocks have been weighed upon further Monday by disappointing October manufacturing PMI data from across Europe, which has generally been revised lower from the flash estimates a week-or-so ago.
The eurozone number come in at 50.6, up from 50.3 in September, but lower than the previous flash estimate of 50.7. Germany's manufacturing sector was confirmed to have returned to expansion in October, after briefly flirting with contraction in September, with a reading of 51.4, up from 49.9, although that was also lower than the flash estimate of 51.8. Italy slipped back into contraction with a reading of 49.0, while France actually improved to 48.5 from the flash reading of 47.3, although that leaves it still firmly in contraction.
"The performance of eurozone manufacturing remained broadly flat at the start of the final quarter, as the sector struggles to recover the traction lost following its mid-year slowdown," said the senior economist at Markit, Rob Dobson. "Manufacturing is therefore unlikely to provide any meaningful boost to the currency union?s anaemic GDP growth. Perhaps most worrying is the trend in new orders, a key bellwether of future output growth, which declined for the second month running," the economist said.
The UK manufacturing sector appears to be in far better shape, with the Market PMI rising strongly to 53.2 in October from 51.6 in September, marking a three-month high and beating expectations for a print of 51.2.
The stronger-than-expected UK data will be a boost for UK Prime Minister David Cameron Monday as rhetoric heats up with German Chancellor Angela Merkel over immigration issues in the region. Merkel has reportedly said Cameron's pledge to curb the number of migrants entering Britain from the EU could lead her to drop efforts to keep Britain in the bloc.
The pound is the better performing of the two currencies Monday, having risen against the euro to GBP1.2818. Against the dollar the pound is also a little higher, currently quoted at USD1.6005.
The airlines are amongst the most positive UK stock movers Monday after Ireland's low-cost carrier Ryanair significantly raised its full-year guidance. Ryanair said it now expects profit for the full year to be between EUR750 million to EUR770 million, up some 17% from its previous guidance of EUR650 million, although it cautioned that this will depend on booking strength in the third and fourth quarters, for which it currently has little visibility.
The guidance hike comes after a period that has seen the airline overhaul its website, improve its route network and generally aim to be a little nicer to its customers. Cantor Fitzgerald says that Ryanair's recent strategy shift of lifting customer service quality is "paying-off handsomely".
Dublin and London-listed Ryanair is up almost 10%. The read-across sees easyJet as one of the best FTSE 100 performers, up 2.6%, and British Airways parent company International Consolidated Airlines up 1.3%.
HSBC has joined the other big banks by reporting a rise in pretax profit in the third quarter, but also large provisions for matters including UK customer redress and regulatory investigations into alleged manipulation of the foreign exchange market. HSBC shares fell heavily on the mid-morning release of the statement, but have since recovered to trade close to flat on the day.
The largest London-listed bank said it made a USD4.61 billion pretax profit in the third quarter, compared with USD4.53 billion last year. However, operating expenses increased to USD11.09 billion from, USD9.58 billion, as it set aside USD701 million in provisions for UK customer redress, including a further USD589 million for possible mis-selling in previous years of payment protection insurance policies. The bank also took a charge of USD378 million relating to the "estimated liability" in connection with the ongoing foreign exchange investigation by the UK Financial Conduct Authority, following similar moves by US and UK peers.
Royal Bank of Scotland is performing worse, down 1.6% after suffering a downgrade to Sell from Hold by Investec Securities. The asset manager says that RBS's impairment charges, conduct costs, and restructuring spend, are all higher than the other UK domestic banks.
FTSE 250-listed gaming group Betfair Group is up 3.1% after saying its revenue in the three months to October 31 rose 22% to GBP119 million, boosted by an increase in customer numbers after a strong World Cup.
Still to come Monday, the US Markit manufacturing PMI and the ISM Manufacturing PMI for October will be released at 1445 GMT and 1500 GMT respectively, while construction spending data for September is also due at 1500 GMT.
Ahead of the data, and following the record highs recorded on Friday, futures indicate that Wall Street will open a little lower Monday, with the DJIA, S&P 500, and Nasdaq Composite all pointing down 0.1%.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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