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LONDON (Alliance News) - UK stocks closed mixed again Thursday after trading in a relatively tight range, as investors continued to await clear signals of when the world's central banks might start tightening monetary policy.
The Federal Reserve's policy meeting minutes late Wednesday showed that the rate-setting members still "generally expected" to begin to taper the US central bank's asset purchase program in "coming months", if the labour market continues to improve in line with projections.
"Many members" of the Federal Open Market Committee "stressed the data-dependent nature of the current asset purchase program, and some pointed out that, if economic conditions warranted, the committee could decide to slow the pace of purchases at one of its next few meetings," the minutes read.
However, "the eagerly awaited Fed minutes have, on balance, still not really given us any clarity on the tapering timeline," Toby Morris, senior sales trader at CMC Markets, said.
In Japan, The central bank decided to keep its massive stimulus program unchanged while also retaining its outlook for a moderate economic recovery. At the end of a two-day meeting of the nine-member Policy Board, led by Governor Haruhiko Kuroda, the Bank of Japan said it will keep the target for the monetary base expansion at an annual pace of JPY60-70 trillion. In April, Kuroda announced the bank's plan to double the monetary base in two years with an aim to reverse 15 years of deflation in the country. Indicators released thus far have suggested that his efforts are gradually taking effect.
The FTSE 100 closed fractionally higher at 6,681.33, the FTSE 250 closed down 0.2% at 15,148.5, and the AIM All-Share closed up 0.2% at 812.84.
Sentiment was not helped by the continued divergence between the French and German economies.
Manufacturing PMI in France fell to 47.8 in November, from 49.1 in October, while the service PMI fell to 48.8 from 50.9. In Germany, however, manufacturing PMI rose to 52.5 in November, from 51.7 in October, beating economists expectations of 52.0. The German services PMI also improved to 54.5, from 52.9, and beat the expectation for a reading of 53.0.
"The worry for me with respect to these PMI?s is they show the economies of the two main pillars of Europe going in completely opposite directions," said Michael Hewson, chief market analyst at CMC Markets added.
The euro was hit hard by the disappointing PMI data Thursday morning, dropping to a low for the day of USD1.3397 in immediate aftermath of the poor French reading.
"While both the German PMI manufacturing and services figures were better than expected, steep declines in both French indices weighed the regional gauge lower," said Christopher Vecchio, currency analyst at DailyFX.
However, comments made by European Central Bank President Mario Draghi saw the currency rebound. Draghi rejected media reports that the central bank may be planning to take the deposit rate - the rate the ECB charges banks to park money at the central bank - to negative territory. At the close of the UK equity market, the euro was trading at USD1.3470.
Economic data from the UK continued to show a divergence with the euro zone. The Confederation of British Industry said growth in British manufacturing orders and production over the last three months has reached its strongest level for 18 years. In the latest show of strength from the UK economy, 36% of firms reported that total order books were above normal in November and 25% said they were below, giving a positive balance of 11%, the highest since March 1995. The reading is a significant improvement from the minus 4% seen in October.
?This new evidence shows encouraging signs of a broadening and deepening recovery in the manufacturing sector," Stephen Gifford, CBI Director of Economics, said. "Manufacturers finally seem to be feeling the benefit of growing confidence and spending within the UK and globally."
Data released from the US was largely mixed.
First-time claims for US unemployment benefits fell by more than expected in the week ended November 16. A report released by the Labor Department said initial jobless claims dropped to 323,000, a decrease of 21,000 from the previous week's revised figure of 344,000.
At the same time, producer prices in the US saw a modest decrease in the month of October. The Labor Department said its producer price index dipped by 0.2% in October after edging down by 0.1% in September. The drop by the index matched economist estimates.
However, growth in Philadelphia-area manufacturing activity has slowed by much more than anticipated in the month of November. The Philadelphia Fed said its diffusion index of current activity tumbled to 6.5 in November from 19.8 in October. Economists had expected a much more modest decrease to a reading of 15.5.
US President Barack Obama's pick to lead the Federal Reserve cleared a key hurdle Thursday, gaining approval from a key Senate committee. Janet Yellen, who currently serves as vice chairman of the central bank, was approved 14-8 by the Senate Banking Committee. Her nomination must now be approved by the full Senate.
At a confirmation hearing last week, Yellen defended the Federal Reserve's existing policies, including record-low interest rates that have been in place for years and the large-scale purchase of government bonds to stimulate the economy, but stopped short of saying how long the policies would continue.
At the close of the UK equity markets, the DJIA is up 0.6%, the S&P is up 0.7%, and the Nasdaq is up 0.9%.
At the individual UK equity level, Johnson Matthey, closing up 3.5% at 3,200.60 pence, was the biggest riser on the FTSE 100. The company said pretax profit jumped 12% to GBP202.1 million for the six months ended September 30 from GBP180.1 million the previous year, as sales rose 31% to GBP6.41 billion from GBP4.89 billion. It's being buoyed by strong demand for catalytic convertors ahead of tighter EU emissions rules that come into effect next year.
At the other end of the spectrum, Imperial Tobacco Group, closing down 1.5% at 2,394.0209p, and British American Tobacco, closing down 1.7% at 3,302.1886p, were amongst the biggest fallers. The companies were hit after rival Philip Morris warned that international cigarette industry volume in 2014 could decline by 2% to 3% overall, by 7% to 8% in the EU, and by 9% to 11% in Russia.
QinetiQ Group, closing up 7.6% at 211.5493p, was the leading riser in the FTSE 250. The company reported lower profits and revenues for the first half of its current financial year, hit by the slowdown in US defence spending, but it raised its dividend, saying the US services market is stabilising and it's seen an encouraging pickup in services orders in Europe, Middle East and Africa.
FTSE 250-listed Serco Group, closing up 2.2% at 439.99p, also made the headlines. Serco's Chief Executive Officer for the UK and Europe, Jeremy Stafford, became the latest casualty in its management team, stepping down as the firm works to win back trust from the the UK government after being put under investigation over allegations of fraudulent charging on two contracts.
In a much lighter data calendar Friday, German GDP numbers are released at 0700 GMT, ahead of German IFO figures at 0900 GMT. In the US, the Kansas Federal Reserve will release the results of its manufacturing survey for November.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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