Interserve Share News (IRV)

LONDON (Alliance News) - UK stock indices were lower Friday midday, extending Thursday losses, as investors digested some worse-than-expected gross domestic product readings from Europe and await some US macroeconomic data as well.

US stock futures were pointing to a flat to slightly lower open. Earlier Friday, Asian stocks closed lower, with Japanese and Chinese indices shedding between 0.5% and 2.2%.

The FTSE 100 index was down 1.1% at 6,110.66 points, having closed down 1.9% on Thursday, while the FTSE 250 was down 0.6% at 16,769.88 and the AIM All-Share index was down 0.4% at 734.32.

In Europe, the CAC 40 in Paris was down 1.1%, while the DAX 30 in Frankfurt was down 1.0%.

"GDP data from the eurozone has done nothing to lift sentiment in Europe having confirmed that sluggish growth continued in the third quarter," said Craig Erlam, senior market analyst at OANDA.

Statistical office INSEE said that the French economy expanded as expected in the third quarter to the end of September. The preliminary reading of French GDP came in at 0.3% quarter-on-quarter, having remained flat at 0.0% in the previous quarter, coming in in-line with economists' expectations, according to FXStreet.com.

Preliminary data from Germany showed that economic growth slowed in the third quarter, with GDP expanding 0.3%, having grown 0.4% in the previous quarter. According to FXStreet.com, this was in line with economists' forecasts. In Italy, meanwhile, the flash reading of GDP climbed 0.2% sequentially in the third quarter, slightly slower than the 0.3% expansion seen a quarter ago and below economists' expectations of 0.3%.

For the eurozone as a whole, preliminary data from Eurostat showed that GDP grew 0.3% in the third quarter. Economists had forecast growth to remain unchanged at 0.4%.

"The slowdown in emerging markets is clearly hurting the euro area, given that it is responsible for around a quarter of all its exports, and the weak euro isn’t doing enough to drive higher demand," OANDA's Erlam said. "Under the circumstances, there is clearly a need for further monetary easing from the [European Central Bank] and based on recent comments from Mario Draghi, that is still likely to come in December," he added.

In the forex market, following the European data, the euro traded at USD1.0804, while the pound was at USD1.5223. On Thursday, at the UK equity market close, the euro stood at USD1.0759 with sterling at USD1.5206.

US stock futures pointed to a narrowly lower open, with the NASDAQ Composite seen down 0.1% and the DJIA and S&P 500 both expected to open flat to slightly lower. On Thursday, the three indices all closed down by between 1.2% and 1.4%.

At the individual UK equity level, "one of the few bright spots in the early trading session has been the bounce in the mining sector as the recent sell-off looks to have run out of impetus," said Alastair McCaig, market analyst at IG.

By midday, BHP Billiton and Anglo American were the biggest of just a handful of risers in the FTSE 100, up 1.1% and 0.7%, respectively. On Thursday, the two companies fell by 5.0% and 8.7%.

The FTSE 350 mining sector index was close to flat, having fallen 4.6% on Thursday.

BHP Billiton provided an update on the tailings dam breach at its Samarco Mineração joint venture with Brazilian miner Vale, saying nine fatalities have been confirmed so far and the operating licence for the site has been suspended.

Operations at the Samarco site will remain suspended as authorities open investigations into the incident and rectification plans are developed. BHP said Samarco is continuing to monitor the tailings facilities impacted by the dam breach at the project and is working up plans to reinforce the dam structures and stabilise the local area.

Outsourcer G4S was the biggest loser in the FTSE 100, down 4.9%, after RBC Capital Markets cut its price target to 210 pence from 230p, retaining its Underperform recommendation. "Organic growth has slowed of late, while we continue to have concerns that consensus margin expansion may be too aggressive and is primarily buoyed by business shrinkage," said David Greenall and Andrew Brooke, analysts at RBC.

In the FTSE 250, Auto Trader Group was one of the biggest risers, up 3.1%. The digital automotive marketplace operator proposed its first dividend since listing and reiterated confidence in meeting its expectations for its full financial year, as it reported a sharp jump in pretax profit in the first half due to a significant reduction in finance costs.

The company proposed a maiden interim dividend of 0.5 pence following its initial public offering in March.

For the half year to end-September, Auto Trader reported a pretax profit of GBP74.7 million, multiplying from GBP13.1 million a year before, as revenue rose to GBP138.2 million from GBP127.5 million. The leap in profit was primarily the result of a GBP46.2 million reduction in finance costs as Auto Trader benefited from a lower level of debt than under its previous private ownership, and with that debt less expensive.

Interserve, up 2.3%, was another big mid-cap riser. The support services and construction company said trading had been mixed in its key markets in the second half, but it remains on track to meet its expectations for the full year as it appointed a chairman-designate.

Interserve said its outlook for 2015 remains unchanged despite mixed trading conditions in its markets in the second half of the year so far.

The company also said Glyn Barker is to join the company's board on January 1, 2016 and will become chairman on March 1. Barker is taking over from Norman Blackwell, who announced his plan to retire from the role in February. Barker is a non-executive director at insurer Aviva and housebuilder Berkeley Group Holdings . He is also the chairman of Transocean Partners, the oil rig company, and is deputy chairman of the English National Opera.

IMI was one of the heaviest fallers in the FTSE 250, down 3.9%, following a number of negative broker ratings changes. JP Morgan downgraded the engineer to Neutral from Overweight, cutting its price target to 930 pence from 1,100p, while Societe Generale lowered its recommendation on IMI to Hold from Buy, slashing its price target to 975 pence from 1,350p. Deutsche Bank retained its Hold recommendation but cut its price target to 1,170p from 1,250p.

Japan Residential Investment Co, up 32% at 72.00 pence, was the biggest riser in the AIM All-Share index. The Japanese residential real estate investor said it has reached an agreement to be acquired by a unit of real estate and private equity investor Blackstone for GBP152.6 million.

Blackstone, which will acquire the Japanese-focused residential property investor through Nikko II, a newly-incorporated bidding vehicle, will pay 72.00p per share for the company. Japan Residential also said it has received another approach valuing the company at the same amount which may or may not lead to an offer. Discussions with this potential rival suitors are at an early stage and the possible bidder is carrying out due diligence.

DX Group, down 60%, was the index's biggest loser after it said that it now expects its profits for its current year to end-June 2016 will be "significantly below market forecasts."

The parcels, mail and logistics operator had previously reported that trading conditions in its current year remain challenging, with pricing pressure remaining a significant factor. However, it said Friday that trading patterns in its first half to date have deteriorated.

Still ahead in data calendar Friday, US producer price index and retail sales data for October are scheduled to be published at 1330 GMT. The preliminary reading of the Reuters/University of Michigan consumer sentiment index for November is due at 1500 GMT, at the same time as US business inventories information for September.

"With expectations of the Federal Reserve’s 'lift-off' continuing to harden, US retail sales data for October will provide a timely cross-check on household consumption trends at the beginning of Q4 [the fourth quarter]," said Michael Sawicki, senior economist at Lloyds Bank, referring to a US interest rate hike. "Data for August and September proved disappointing, but a return to moderate growth is expected," he added.

According to FXStreet.com, economists' expectations are for an increase of 0.3% month-on-month in October, having come in at 0.1% in September.

"Even another disappointing outturn, however, would seem unlikely to derail expectations of a December lift-off unless mirrored in a weaker November employment report," Sawicki noted.

By James Kemp; jameskemp@alliancenews.com; @jamespkemp

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