LONDON (Alliance News) - After a nervy open, UK stocks slipped deeper into losses midday Wednesday, following a poor Asian trading session, while the pound moved to its highest price against the dollar in three weeks, helped by better-than-expected UK service sector data.
Survey figures from Markit Economics showed that the Chartered Institute of Procurement & Supply/Markit services Purchasing Managers' Index rose marginally to 55.6 in January from 55.5 in December against the consensus forecast to fall to 55.4. Any reading above 50 indicates expansion in the sector.
Markit said the UK's dominant service sector output has now been in expansion for over three years in January, with this year's figure slightly stronger than the long-run average but weaker than the growth seen in 2013, 2014 and 2015.
"Given the ongoing anxieties about global growth which may have underpinned the somewhat soft tone to its manufacturing and construction counterparts which were released on Monday and Tuesday respectively, this headline print provides some reassurance that overall UK economic activity has started Q1 on a reasonably firm footing," said Jonathan Thomas, senior economist at Lloyds Bank.
The pound was supported by the services PMI and traded the dollar at USD1.4497, its highest level since January 12.
The FTSE 100, however, remained down 0.6% at 5,885.59 points. The FTSE 250 was down 0.7% at 16,180.18, and the AIM All-Share traded flat at 693.65. European stocks also were down, with the CAC 40 in Paris down 0.1% and the DAX 30 in Frankfurt down 1.0%.
This came after a downbeat Asian session, in which the Nikkei 225 index in Tokyo shed 3.2%, the Hang Seng in Hong Kong lost 2.3% and the Shanghai Composite 0.4%.
Futures indicated a higher start to trading on Wall Street. The Dow 30 index was up 0.2%, the S&P 500 up 0.3%, and the Nasdaq 100 up 0.1%.
Fund supermarket Hargreaves Lansdown was one of the worst performers in the FTSE 100, down 4.0% after it missed analyst expectations, as its first-half pretax profit increase was held back by a lower margin on net revenue and by spending on staff and new business ventures.
The group, which enables retail investors to invest in stocks and other financial assets through its execution-only platform, cautioned that its earnings are directly correlated with the value of the investments under its administration, meaning the tumult seen in global equities in the opening weeks of 2016 will not be helpful for its second half.
That said, Hargreaves Lansdown's second half coincides with the end of the UK tax year in April, and this typically encourages activity among its clients.
Pretax profit for the six months ended December 31 rose by 6.0% to GBP108.1 million year on year, missing analyst expectations of 110.9 million, while an increase in the company's interim dividend to 7.80 pence from 7.30p missed analyst forecasts of an 8.1p payment.
Prudential was the best blue-chip performer, up 4.6%, bouncing back from losses it made on Tuesday as it hit a two-year low. The life insurer's shares were hit by a Bloomberg news report that China's foreign exchange regulator tightened restrictions on purchases of insurance products overseas.
However, analysts and Societe Generale and UBS said the share price fall on Tuesday was an overreaction to the news. UBS analyst James Shuck said the life insurer's mainland China sales are mostly regular premium and therefore are unlikely to be materially caught up by the change.
"We believe any regulatory change in China would be unhelpful given the potential direction of travel, but this particular issue is overplayed in our view," Shuck said.
ARM Holdings was another strong performer in the blue-chip index, up 3.5%. The company, which designs semiconductors that are used in Apple's iPhones, was trading higher after reports that the US tech giant will announce a new smaller iPhone next month, in an effort to boost its slowing iPhone sales.
Apple is expected to launch a new iPhone - iPhone 5SE - a 4-inch smartphone that will look a lot similar like iPhone 5S but will sport features from the iPhone 6 and 6S on March 15 in a product launch event. The new phone will run on an A9 processing chip and will support Apple Pay.
Shares in GlaxoSmithKline were firm, up 0.2%, after reporting 2015 earnings at midday in London. Glaxo declared an 80p final dividend and a 20p special dividend. It said it expects to meet its GBP6 billion new product revenue target two years early.
Johnston Press was the best performer in the FTSE All-Share, up 14%. The newspaper publisher said the study conducted with a view to cutting its pension scheme liabilities is set to result in a reduction.
The company said the study is expected to reduce the present value of the Johnston Press Pension Plan by around GBP50.0 million. In addition, following a change to the scheme rules by the trustee, Johnston Press will be entitled to participate in any surplus when the scheme closes. As a result of this, an additional liability of GBP3.0 million will no longer be required.
Waste management company Shanks Group revealed it has struck a deal to sell a non-core financial asset for around GBP30.0 million as it said tough market conditions had continued to put pressure on its business, meaning it expects to miss expectations for the full year.
Shanks said it will sell all of the debt and a 49.99% equity stake in the Wakefield private finance initiative project to Equitix, the infrastructure investor. Shanks said the sale is in line with its strategy to actively manage its business portfolio and said it would retain its stake in the Wakefield project.
The company was the worst performer in the FTSE All-Share, down 6.9%.
The delayed initial public offering of CYBG, the owner of the Clydesdale and Yorkshire retail banking brands in the UK, was priced at the lower end of the expected range amid volatility in financial markets, valuing the lender at GBP1.58 billion.
At 180.0 pence per share, the IPO price was towards the bottom of the guided range of between 175.0p and 235p per share. However, at midday the company traded higher at 188.13p.
Still ahead in the economic calendar are US ADP employment for January at 1315 GMT, and trade balance at 1330 GMT. Markit services and composite PMI for the US are at 1445 GMT, ISM non-manufacturing PMI is at 1500 GMT, just before Energy Information Administration crude oil stocks at 1530 GMT.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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8 Jul 2016 09:12
