LONDON (Alliance News) - London shares were mixed Thursday midday, while Wall Street was called for a weak open, with investors cautious as they await the US Federal Reserve's interest rate decision after the London market close.
"Positive moves yesterday have been tempered by traditional hold-off-and-see stance by market participants ahead of a Fed announcement," said Michael van Dulken, Head of Research at Accendo Markets.
The FTSE 100 opened higher Thursday but turned lower shortly thereafter, trading at midday down 0.2% at 6,218.57. The FTSE 250 was flat at 17,069.60, while the AIM All-Share index was in the green, up 0.1% at 739.16.
It was only a slightly better picture for Europe's main indices, with the CAC 40 index in Paris up 0.1% and the DAX 30 in Frankfurt up 0.3%.
Asian stocks ended mixed Thursday. The Nikkei 225 index in Tokyo closed up 1.4%, while Chinese major indices gave back earlier gains near the session end, with the Hang Seng in Hong Kong ending down 0.5% and the Shanghai Composite down 2.1%.
Meanwhile, US futures pointed to a slightly lower open, with the Dow 30 and the S&P 500 seen down 0.2% and the Nasdaq 100 pointed down 0.1%.
Wall Street closed higher Wednesday after soft inflation data supported the view that the US Federal Reserve will hold fire this month and leave an interest rates hike for later in the year. The Dow rose 0.8%, the S&P 500 0.9% and the Nasdaq Composite 0.6%.
The focus Thursday is very much in the Fed's monetary policy decision, which will be announced at 1900 BST and will be followed by a press conference at 1930 BST.
Analysts have been split ahead of the decision, with some pointing to the strength of the US labour market as a reason to raise rates, while others note sluggish inflation and the poor health of the global economy as reasons why the Federal Reserve should delay.
"Our US economics team does not expect the Federal Open Market Committee to raise rates at this meeting, as we think uncertainty about the outlook for inflation remains material, while the sell off in global financial markets over the last six weeks has increased downside risks," said analysts at Nomura.
UBS analysts said that its US economics team expects, with a 60% probability, that the Fed will raise rates by 25 basis points. However, the bank said that "market pricing implies that the Fed stays on hold" in September, but analyst opinion is more split.
"Consensus expectations are leaning towards a September hike (looking at Bloomberg consensus data), but the dispersion of opinions is large," said UBS.
In the US economic calendar before the Fed monetary policy decision, there are initial and continuing jobless claims due at 1330 BST, while the Philadelphia Fed Manufacturing survey is due at 1500 BST.
Meanwhile, UK retail sales grew for the first time in three months in August, the Office for National Statistics showed Thursday.
Retail sales including automotive fuel advanced 0.2% month-on-month in August, in line with economists expectations, after staying flat a month ago. This was the first increase in three months.
Excluding auto fuel, growth in retail sales volume eased to 0.1% month-on-month, as expected, from 0.3% in July. Food store sales fell 0.9% month-on-month, while non-food store advanced 1.2% and automotive fuel sales climbed 1.3% in August.
On a yearly basis, retail sales including fuel climbed 3.7% in August after rising 4.1% in July. Economists had forecast 3.8% increase for August. Likewise, sales excluding auto fuel rose at a slower pace of 3.5% year-on-year, following July's 4.1% increase. It was also slower than a 3.8% rise forecast by economists.
The pound experienced some sharp gyrations after the data to stand at USD1.5507, having traded at 1.5519 prior.
On the London Stock Exchange, SABMiller, up 0.9% at 3,644 pence, was still attracting opportunistic investors after it confirmed Wednesday that it has been approached by rival Anheuser-Busch InBev about a possible takeover, a mega deal that would create by far the world's largest brewer.
The brewer was also benefiting from an upgrade to Hold from Reduce by Kepler Cheuvreux, and an increase to its price target by Goldman Sachs, which raised the target to 3,980p from 3,750p, keeping a Buy recommendation on the stock.
Babcock International Group and Intertek Group, both down 1.9%, were amongst the worst blue-chip performers after receiving downgrades by Exane BNP Paribas. Exane downgraded Babcock to Underperform from Neutral, while Intertek was downgraded to Neutral from Outperform.
Among risers in the FTSE 250, Ocado Group shares were up 10% after Deutsche Bank upgraded it to Hold from Sell. Meanwhile, Serco Group shares were lifted 3.8% after Berenberg upgraded it to Hold from Sell.
Among mid-cap stocks in the red, Premier Farnell was down 14% after it slashed its interim dividend by 41%, as it reported a fall in pretax profit for its first half, and said it will sell its Akron Brass business in the US as part of an ongoing operational review.
The company, which will be relegated from the FTSE 250 next week, began an operational review in July after it issued a profit warning, and as part of this review said Thursday it will sell Akron Brass and cease direct operations in Brazil due to sub-optimal returns and high costs of operations.
Rotork shares were off 13% after it issued a profit warning. The actuator and flow control products manufacturer said project delays and cancellations are set to push its revenue lower for the full year 2015 and will leave its adjusted operating profit falling short of its 2014 numbers.
The company, which has been hit hard in recent months due to its exposure to the struggling oil and gas industry, said that while it has seen an encouraging amount of quote activity and though it has a strong pipeline in place, the timing of orders and product deliveries remains tough to forecast.
Rotork now expects its revenue for 2015 to be between GBP530.0 million and GBP555.0 million, down from GBP594.7 million in 2014, while its adjusted operating profit will be GBP120.0 million to GBP130.0 million, down from GBP157.2 million.
On AIM, Independent Resources was up 22%. The oil and gas company said it has identified two new substantial potential leads at the Acacus play in the Ksar Hadada prospect in Tunisia. The company said the new leads have a recoverable estimated resource of 49 million and 13 million barrels of oil equivalent, respectively.
Motive Television was down 33% at 0.0123p. The television software company on Wednesday raised GBP350,000 through the placing of 280 million shares at a price of 0.125p each. The company said it will use the funds to develop and market its products.
By Daniel Ruiz; danielruiz@alliancenews.com
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30 Sep 2014 12:35
