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LONDON (Alliance News) - London stock indices trade lower mid-morning Thursday as investors await developments from the latest Eurogroup meeting on Greece and continue to digest the details from the US Federal Reserve's policy announcement on Wednesday evening.
The FTSE 100 trades down 0.7% at 6,633.00, the FTSE 250 is down 0.9% at 17,552.41, and the AIM All-Share index is down 0.6% at 761.56.
European stocks are performing even worse, with the CAC 40 in Paris down 1.1% and the DAX 30 in Frankfurt down 1.2%.
Investors attention will be drawn to the meeting of eurozone finance ministers to discuss Greece's debt crisis, but many analysts are largely of the view that the meeting will provide no decisive outcome in Greece's struggle to unlock EUR7.2 billion in funds.
"Not to put too fine a point on it, but if a deal arises out of the testy and tired collection of Eurogroup finance ministers meeting later today it will be somewhat of a miracle," says Connor Campbell, financial analyst at Spreadex.
"The aggressive rhetoric of the past few weeks has left no uncertainty about the state of relations between the two sides of the Greek divide, and there have been precious few signs of progress towards a solution in the last couple of days," Campbell adds.
Eurogroup chief Jeroen Dijsselbloem stressed that his fellow finance ministers would not be prepared to make much in the way of concessions: "If we conclude a deal that undermines the credibility of the eurozone, then that will explode in front of our eyes."
The Fed late Wednesday offered no explicit guidance indicating that it will soon raise US interest rates from zero, despite a modest improvement in the US economic outlook. Many economists thought the Fed would lay further groundwork for a rate hike as soon as September but policy makers remained reluctant to tip their hand, even though US economic activity seems to be picking up after a second consecutive rough winter.
The Fed also cut its forecast for GDP this year to 1.8% to 2%, down from 2.3% to 2.7%, reflecting the brutal winter weather. The economy has "expanded moderately" since the winter contraction, but analysts say the Fed is keeping a close eye on developments in Europe, where a Greek default could de-stabilize the euro area.
The dollar weakened immediately after the Fed decision and continues to trade lower against other major currencies through the European session. The pound currently trades the dollar at USD1.5894, having touched its highest level against the greenback since mid November. The euro trades the dollar at USD1.1384.
Commodity prices were boosted by the dollar's weakness, with gold rising to a high of USD1,197.94 an ounce. Gold miners Fresnillo, up 3.0%, and Randgold Resources, up 2.5%, are the two best performers in the FTSE 100, followed by a host of other miners.
The pound was also lifted a touch higher after UK retail sales unexpectedly rose in May. Retail sales including auto fuel rose 0.2% in May from April, when it climbed 0.9%. Nonetheless, this was the second consecutive rise in sales and was in contrast to a 0.1% fall forecast by economists. Sales excluding auto fuel also grew by 0.2% in May, following a 0.8% rise in April. Sales were up for the fourth straight month. Economists had forecast a 0.2% drop.
On a yearly basis, overall retail sales volume advanced 4.6% in May, the same rate as seen in April and in line with expectations. This was the 26th consecutive annual growth and the longest period of sustained growth since May 2008.
3i Group, down 3.8%, and Severn Trent, down 3.5% are the two worst performers in the FTSE 100 after going ex-dividend, meaning new buyers no longer qualify for the latest dividend payout.
Premier Farnell, down 4.9% leads FTSE 250 fallers after it reported growth in sales but warned it is continuing to battle adverse exchange rate movements, particularly the weakness of the euro.
The electronics distributor said sales per day rose 5.9% in Europe, 2.2% in the Americas, and 16.2% in Asia Pacific between February 2 and May 3, with most of the growth driven by further strong demand for the Raspberry Pi single board computers.
Despite the higher sales volumes, gross profit at constant currency was 2% down on the year, the company said gross margin declined sequentially 1.2 percentage points from the fourth quarter of its last financial year, mainly due to the impact of the higher-than-expected Raspberry Pi sales and adverse foreign exchange movements, particularly of the euro.
Poundland Group shares trade down 3.5% as the discount retailer's profit slightly missed analyst expectations, it revealed slower growth in the first quarter of its current financial year compared with the prior year, and it said consensus figures for full-year profit will be lowered.
Poundland reported a pretax profit in the year to March 29 of GBP36.2 million, a rise of more than half the GBP21.5 million made the year before. However, the underlying pretax profit of GBP43.7 million was lower than the analyst forecast of GBP44.0 million.
European electrical goods retailer Darty trades up 2.3% after it reported a drop in profit in its recently-ended financial year as it booked property and reorganisation charges and it continued with its strategic 'Nouvelle Confiance' plan to eliminate losses in non-core markets and focus on growth opportunities.
Darty said it is continuing with its 'Nouvelle Confiance' strategic plan, launched in 2012, to eliminate losses at non-core markets and refocus on core markets, create value from market leadership and efficiency savings, and identify further growth opportunities.
Still ahead in the economic calendar is US inflation data for May at 1330 BST. Economists are expecting consumer price to edge up 0.2% year-on-year following a 0.2% decline in April. US initial and continuing jobless figures are also at 1330 BST and Philadelphia Fed manufacturing survey is at 1500 BST.
US futures indicate Wall Street for a lower open, with the DJIA, S&P 500 and Nasdaq 100 all expected to open down 0.1%.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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