Lloyds Share News (LLOY)

LONDON (Alliance News) - The major UK stock indices are trading modestly lower Friday as investors exercise caution ahead of a weekend that brings the results of the EU bank stress tests, and concerns remain about the health of the wider global economy and the spread of the Ebola virus.

By mid-morning Friday, the FTSE 100 is down 0.2% at 6,405.25, the FTSE 250 is fractionally lower at 15,130.00, while the AIM All-Share is fractionally higher at 709.11.

Major European equity markets are also a little lower, with the French CAC 40 and the German DAX both down 0.3%.

The UK economy grew by 0.7% in the third quarter, according to the initial estimate from the Office for National Statistics Friday. That's a slow-down from the 0.9% growth recorded in the second quarter, but in line with expectations. On an annual basis, the ONS said growth was 3.0%, down from 3.2% in the second quarter, also in line with expectations.

The data did little to boost the stock market, but did provide a small boost to to the pound which pushed to intra-day highs of USD1.6057 and EUR1.2687.

The results of the EU Asset Quality Review, or bank stress tests, will be released on Sunday. Capital hoarding by the banks ahead of the tests has for months been widely blamed as part of the reason behind a lack of lending in the Eurozone. The possibility that some banks have failed is leading to caution in the markets, after a report from Spanish news agency Efe earlier in the week that 11 banks have failed. Bloomberg reported Friday that Irish bank TSB Group Holdings PLC failed the stress tests under the adverse scenario being assessed by regulators, citing a person with knowledge of the matter.

Before the European markets opened Friday, official data from China showed a 1.3% slowdown in the housing market there in September, with almost all major cities experiencing a fall in prices. Evidence of a slowdown in the Chinese economy almost always has a negative effect on global equity markets.

Investors are also contending with concerns over the continued spread of Ebola, after another case of the deadly virus was confirmed in New York. A doctor returning from West Africa is the latest American victim.

BT Group is the worst performing blue chip stock in London, down 2.3% after Morgan Stanley downgraded the stock to Underweight, from Equal-weight.

Publishing group Pearson is down 2.2% after announcing that its Chief Financial officer Robin Freestone will step down by the end of 2015 to explore other interests. Pearson reported a 1% rise in sales over the first nine months of the year at constant exchange rates and reiterated its full year guidance. Numis analyst Gareth Davies said that Freestone has been a strong CFO for the group and will be a loss.

Tesco is a heavy faller once again, down 1.3% at 169p. After confirming Thursday that the error in its first half accounts was bigger than initially thought, the troubled supermarket suffered a negative note from JP Morgan Friday. The bank cut its price target on the stock to 145p from 165p, reiterating an underweight rating.

FTSE 250-listed bank TSB Group is performing well, up 1.5%, after reporting a solid set of third quarter results. TSB said it made GBP33.1 million pretax profit in the third quarter, up from GBP25.7 million in the previous three months. There was no consensus expectations for the quarterly results, but Jefferies says it would categorise the numbers as "fine". Lloyds Banking Group, which still owns 50% of TSB, is up 0.7%.

Electronics group Spectris is up 3.5% despite saying its full year results will be a little below consensus. The instrumentation and controls company said sales in its third quarter to end-September fell 5%, as growth contributed by acquisitions of 2% was offset by the strength of sterling, which had a negative effect of 7%. Jefferies says that a heavy share price fall in recent months had priced in an even worse outcome, and the actual result was better than feared.

Pets At Home is up 3.3% after reporting sales growth of 4.2% in both the second quarter and first half, in line with expectations.

Hikma Pharmaceuticals is under pressure at the other end of the FTSE 250, down 5.6%, after saying it received a warning letter from the US Food and Drug Administration related to a March inspection of its manufacturing facility in Portugal, although it stressed it does not believe this will impact its financial guidance for the full year. In the letter, the FDA raised issues related to investigations and environmental monitoring at the the facility, Hikma said.

Still to come Friday, Irish drug maker Shire will publish its third quarter results midday.

The US technology sector will also be in focus when Wall Street opens after both Amazon.com Inc and Microsoft Corp reported results after the closing bell on Thursday. Amazon reported a net loss of USD437 million for the third quarter, compared with a USD41 million loss a year earlier. The stock is more than 10% lower in pre-market. Microsoft, on the other hand, is up 3.0% in pre-market after reporting a profit of USD4.5 billion in the third quarter, down from USD5.2 billion a year earlier but beating Wall Street expectations.

US stock markets are currently set to follow Europe fractionally lower, with DJIA futures flat, but the S&P 500 pointing down 0.1%, and the Nasdaq Composite pointing down 0.2%.

By Jon Darby; jondarby@alliancenews.com; @jondarby100

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