LONDON (Alliance News) - UK equities traded slightly lower midday Tuesday, with concerns about China creeping up once again after another sell-off in Chinese stocks and as investors continued to prepare for the upcoming US Federal Reserve interest rate decision.
The FTSE 100 index was down 0.1% at 6,078.04, the FTSE 250 down 0.2% at 16,887.02 and the AIM All-Share up 0.2% at 733.53.
In Europe, the French CAC 40 index was up 0.7%, and the German DAX 30 was up 0.4%.
US futures were pointing to a flat open on Wall Street, with the Dow 30, S&P 500 and Nasdaq 100 all indicated flat.
Chinese stocks succumbed to selling pressure once again Tuesday as investors grew apprehensive about Beijing's ability to shore up short-term growth and fend off growing deflationary pressures. The benchmark Shanghai Composite index closed down 3.5%, while the Hang Seng in Hong Kong fell 0.5%, but the Japanese Nikkei closed up 0.3%.
Japanese shares pared some of their earlier gains as the Bank of Japan refrained from boosting stimulus, disappointing some who had expected the central bank to unveil further easing measures. The central bank pledged to continue buying bonds and other assets at an annual rate of JPY80 trillion, but warned that the country's exports and output were feeling the pinch from slowing demand in emerging markets.
London investors also continued to look ahead to the crucial interest rate decision by the Fed on Thursday, after the close of the London stock market. Market participants remain split in their predictions of whether the US central bank will finally raise interest rates for the first time since 2006.
Salman Ahmed, chief strategist, Lombard Odier Investment Managers said the case for the Fed tightening policy in September has diminished and now expects a December rate hike.
"Both market pricing and survey data show a clear-cut shift away from September's lift-off date in recent weeks, on the back of the very sharp China-induced hit to global confidence in mid-August," Ahmed said. The analyst said survey-based expectations and market pricing put the chances of a September hike well below 50%, compared to around 80% and 60%, respectively, in July.
Craig Erlam, senior market analyst at Oanda, said that investors remain nervous ahead of the Fed decision Thursday, and the economic data from the US later on Tuesday could provide some clarity.
"Stanley Fischer, Fed vice chair, recently claimed that the economic data in the lead up to the September meeting could still influence the outcome, which suggested a number of policy makers remain on the fence. With that in mind, today’s releases may well matter when it comes to the all-important decision on Thursday," Erlam said.
US retail sales data are expected at 1330 BST, while the NY Empire State manufacturing index also is due at 1330 BST. US industrial production is due at 1415 BST, and US business inventories are expected at 1500 BST.
On the UK domestic front, data from the Office for National Statistics showed that UK inflation was zero in August on an annual basis, following a 0.1% rise in July, as expected, on slower growth in clothing prices. On a monthly basis, consumer prices advanced 0.2% as expected by economists, offsetting a 0.2% fall in July.
UK house price inflation slowed sharply in July to its weakest level in nearly two years, figures from the ONS showed. The house price index rose 5.2% year-on-year after a 5.7% increase in June. In April and May, house price inflation was 5.6%. The latest figure was the lowest since September 2013, when house prices rose 3.8%.
On the London Stock Exchange, miner Glencore was the worst performer in the FTSE 100, down 4.5% and touching yet another record low, as London's mining sector underperformed.
Kingfisher was down 2.5% after the DIY retailer reported lower profit in the first half of its financial year, which it said was hit by movements in currency exchange rates, but said that the business is on track in its turnaround programme.
Kingfisher reported a 1.8% drop in pretax profit in the 26 weeks ended August 1 to GBP386 million from GBP393 million in the same period the year before, as sales fell 4.8% to GBP5.49 billion from GBP5.77 billion. It said that sales and profit were hit by adverse foreign exchange movements on the translation of non-sterling profits, but that it is progressing with its plan to turn the business around.
ARM Holdings was the best blue-chip performer, up 2.4%. The chipmaker said its current trading and operating costs in the third quarter are broadly in line with the guidance it gave in its second quarter results in July.
ARM said its capital markets day on Tuesday will focus on its plans to invest in technologies for smart mobile devices, networking infrastructure and in complementary technologies for the Internet of Things, all of which it expects to increase its revenue and operating costs but which will become earnings accretive only in 2017.
Meanwhile on Monday, major ARM customer Apple said initial sales of its newly introduced iPhone 6s are likely to beat a record set just last year. Worldwide pre-orders for the new smartphone were "very strong" and "on pace to beat last year's 10 million unit first weekend record" set by the then-new iPhone 6, Apple said in a statement. Apple said the online demand exceeded its own forecasts.
In the AIM All-Share index, Mosman Oil & Gas was up 26%. The oil and gas company said it has agreed to sell a royalty to part-fund its proposed acquisition of the South Taranaki energy project in New Zealand. Mosman signed a conditional sale and purchase agreement with Origin Energy to acquire a stake in the project and on Tuesday, the company agreed to sell a 2.0% royalty from the project to Canadian-based Ridge Royalty Corp for NZD4.0 million, which will part fund the acquisition.
Teathers Financial was up 22% after the investing company said its Teathers Financial Software subsidiary has signed its first broker licence deal with Shard Capital Partners. The agreement covers the launch of the first crowd equity app powered by the Teathers unit's technology platform and is the first commercial deal for the technology. No financial details on the deal were disclosed.
On the other side of the index, Hydrogen Group traded down 21%. The recruitment company posted a wider pretax loss for the first half as it felt the effect of the downturn in the oil and gas industry on its net fee income, prompting it to scrap its dividend.
Hydrogen said its net fee income for the six months to the end of June fell 31% to GBP10.1 million, almost entirely driven by a 62% fall in oil and gas net fee income to GBP1.7 million and by a 22% decline in net fee income from its largest customer.
Its pretax loss in the half widened to GBP1.9 million from GBP1.1 million, as total revenue fell to GBP65.9 million from GBP87.3 million. Hydrogen expects cost savings to flow through in the second half.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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14 May 2015 15:04
