Kingfisher Share News (KGF)

LONDON (Alliance News) - Major European stocks indices, including the UK's FTSE 100, closed firmly in the red Monday as investors shrugged off strong gains in Asia amid intensifying concerns over the health of the Chinese economy and the crisis in Crimea.

Tensions in Ukraine continued to rise on Monday as Russian troops stormed a Ukrainian navy base in Crimea and fears grew that Russia may be looking to annex more Russian-speaking regions in eastern and southern Ukraine, despite a declaration by Russian President Vladimir Putin that he has no plans for military action.

Moreover, fears that the world's second largest economy is slowing down continued to weigh heavy on traders' shoulders.

The latest flash purchasing managers index from HSBC and Markit Economics showed that China's manufacturing sector contracted further in March. The preliminary reading of the index came in at a seasonally adjusted 48.1, hitting its lowest level for eight months, having recorded 48.5 in February.

The reading was also well below the 48.7 that economists had been expecting and moves the index further below the 50 mark, which separates expansion from contraction.

"With increasing reports about bad loans and defaults, there are growing concerns in the market over how Chinese banks will weather the current slowdown," said Maarten-Jan Bakkum, senior emerging markets strategist at ING Investment Management.

Nevertheless, "outflows from Chinese equities paused last night in spite of manufacturing softening more-than-expected," said Spreadex analyst David White. "Traders waged bets amid stimulus talks, hoping to front-run an increase in liquidity," he added.

The Shanghai Composite index closed up 0.9%, while the Nikkei in Tokyo closed up 1.8% and the Hang Seng closed up 1.9%.

This optimism, however, was not translated into the UK session. The FTSE 100 closed down 0.6% at 6,520.39, the FTSE 250 closed down 0.9% at 16,019.41, and the AIM All-share closed down 1.3% at 845.66, having slipped to a low for 2014 of 844.88 earlier in the session.

Similarly, the CAC 40 in Paris closed down 1.4%, while the DAX 30 in Frankfurt closed down 1.7%.

The indices moved away from their daily lows following a strong open on Wall Street, before retreating again quickly after.

The reversal in sentiment can be partly attributed to the release of a disappointing report from Markit Economics which showed that US manufacturing activity fell by more than expected in March.

Markit said the flash estimate of its manufacturing purchasing managers' index for March came in at 55.5, down from 57.1 in February, and below economist estimates of 56.5.

This also saw US stocks turn negative. At the UK equity market close, the DJIA is down 0.3%, the S&P 500 is down 0.7%, and the NASDAQ Composite is down 1.6%.

In Europe, preliminary data released by Markit Economics showed that France's manufacturing sector returned to growth in March for the first time since February 2012. The index rose to 51.9 from February's 49.7, and came in ahead of economists' expectations of a more modest rise to 49.8. Its services sector rose to 51.4 in March, ahead of both the 47.2 recorded in the previous month and economists' expectations of 47.5, as the preliminary results indicated that the sector expanded for the first time since October 2013.

However, equivalent readings from Germany and the eurozone fell short of economists' expectations.

Shortly after the French data, preliminary data showed that the German services sector growth slowed by more than expected in March, coming in at 54.0, down from 55.9 in February, and missing economists' estimates of a more modest decline to 55.5. The country's flash manufacturing PMI came in at 53.8 points, down from 54.8 in February and below the expected reading of 54.5.

The euro area economy expanded for the ninth consecutive month in March, but the rate of growth slowed marginally.

The eurozone composite output index came in at 53.2 in March. The score was slightly lower than February's 32-month high of 53.3, from which it had been expected to be unchanged. The flash services PMI fell to 52.4 from 52.6 in February, when it was expected to remain steady at 52.6. The manufacturing PMI slid to 53.0, in line with expectations, from 53.2 in February.

The data meant it was a choppy day for the euro Monday. The single currency rose sharply following the release of the unexpectedly strong French PMIs, before reversing these gains and then some in the wake of the disappointing German and eurozone data.

At the close of the UK equity market, the euro trades at USD1.3787, while the pound trades at EUR1.1956.

At the individual stock level, SSE and Centrica were amongst the heaviest fallers in the FTSE 100. The energy companies closed down 2.3% and 1.9%, respectively, after the BBC reported that two major consumer groups are calling for regulators to further investigate the UK's "broken" energy market.

Both Which? and the Federation of Small Businesses have said that nine out of 10 consumers think the firms need further probing.

The news comes as the big six energy suppliers in the UK, which includes SSE and Centrica, are already awaiting notice of whether they will face a full competition enquiry after the three leading regulators spent the last three months reviewing the market, with the conclusions being reported within days.

Barratt Developments, closing down 2.4%, was another big blue-chip loser. Following the quarterly FTSE review on March 4, Monday was the first day of trading in a new index for the stocks that moved. Traditionally, stocks that move up an index tend to underperform immediately after joining the new index, while stocks that move down tend to outperform.

Although this was not necessarily the case for all of the companies moving index Monday, Barratt, which was moved up to the FTSE 100 from the FTSE 250, was certainly a stand-out faller in its new index.

Further weighing on the stock, Davy Research downgraded the housebuilder to Neutral.

In the FTSE 250, Diploma was the biggest loser, closing down 7.7%. Shares in the company tumbled after it said it had been hit hard by the recent rise in sterling as well as the fall in Canadian and Australian dollar, meaning its key profit measure will only be flat this year.

The company, which makes about 75% of its revenues outside the UK, said its revenues in the six months to the end of March are expected to be up by about 7% on the year excluding the impact of acquisitions and at constant currencies. However, half-year revenues will be up only 5% including currency movements and acquisitions, while its adjusted pretax profit is expected to be flat on the year.

Conversely, Centamin, closing up 9.9%, was the mid-cap index's biggest winner. The metals and minerals producer's shares rose sharply despite saying that its pretax profit fell 7.4% in 2013 as it was hit by a large exceptional cost.

However, excluding exceptional items, the company would have posted a pretax profit increase of 1.4% to USD235.0 million from USD231.7 million in 2012. It also said its revenues increased 18% to USD503.8 million from USD426.1 million the previous year, as production increases offset lower gold prices during the period.

Kentz Corporation was another big riser in the FTSE 250. The major oil and gas engineering company closed up 6.2% after it posted pretax profit of USD109.7 million in 2013, up from the USD104.8 million recorded in the previous year, as revenue increased to USD1.66 billion from USD1.56 billion in 2012.

It also said that it now forecasts 2014 performance ahead of previous expectations, with all three of its business units to perform strongly during the period.

In the data calendar Tuesday, German IFO data are released at 0900 GMT. UK mortgage approvals information is released at 0930 GMT, at the same time as consumer, retail, and producer price inflation data. The UK CBI distributive trades survey is released at 1100 GMT.

In the US, housing data are scheduled for 1300 GMT, ahead of consumer confidence and new home sales information at 1400 GMT. The Richmond Fed manufacturing index also is published at 1400 GMT.

Later in the day, Atlanta Federal Reserve Chief Dennis Lockhart gives a speech at 2000 GMT. Philadelphia Fed Chief Charles Plosser speaks at 2300 GMT.

In the data calendar, FTSE 100-listed Kingfisher, Carnival and Wolseley are joined by FTSE 250-constituents 888 Holdings and AG Barr in releasing full-year results for 2013.

Blue-chip easyJet releases a trading statement.


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

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