Marks & Spencer Share News (MKS)

LONDON (Alliance News) - UK shares on Wednesday recovered all their losses from the day before, gaining support from strong corporate updates ahead of a much-anticipated European Central Bank monetary policy decision on Thursday.

The FTSE 100 closed the day up 1.3% at 6,539.14, and the FTSE 250 ended up 0.9% at 15,526.33, while the AIM All-Share underperformed for the second day in a row, only managing a 0.2% rise to 716.20.

European indices also posted strong gains with the French CAC 40 gaining 1.9% and the German DAX 30 adding 1.6%.

At the close of European equity trade, Wall Street was making headway, with the DJIA and S&P 500 both up 0.4%, but with the Nasdaq Composite lagging, up only 0.1%.

Stock markets had been supported by the midterm election results in the US, from which Republicans gained control of the Senate. The Republicans already had control of the House of Representatives, which means the party seen as more pro-business now controls the whole of Congress for the first time in eight years.

However, the FTSE 100's gains were curbed somewhat in the afternoon when US services purchasing managers' index in October came in below expectation. The Institute for Supply Management said its non-manufacturing index dropped to 57.1 from 58.6 in September, although a reading above 50 indicates continued growth in the service sector. Economists had expected the index to show a more modest drop to 58.0.

European services PMI further highlighted the weakness in the region. Eurozone service sector PMI for October was revised fractionally lower to 52.3 from the flash estimate of 52.4, confirming a slight slowdown from the 52.4 recorded in September. That came as the German number was revised down to 54.4 from the flash reading for October of 54.8, confirming a fall from 55.7 in September. The Italian service sector saw an unexpected expansion in October, with the PMI rising to 50.8 from 48.8 in September, beating the estimate for a print of 49.2, and dragging the sector out of contraction for the first time since June.

The UK also saw a slowdown in its service sector growth to a seventeen-month low in October, according to Markit PMI data. The reading came in at 56.2, down from 58.7 in September and missing expectations for a print of 58.5.

"Keep some perspective, the PMI is still strong and the sharp slowdown may be a flash in the pan. New business flows remain very strong, and firms are sufficiently enamoured with the UK’s prospects that they are still hiring strongly," said Rob Wood, chief UK economist at Berenberg.

The price of oil rose off of its four-year lows after US EIA crude oil stocks grew by less than expected. The figure for the week ending October 31 showed stocks rose by 500,000 barrels compared to the consensus of a 1.8 million barrel rise. Brent oil had been trading at a fresh four-year low of USD81.59 Wednesday.

On the London Stock Exchange, Marks and Spencer Group was the star blue-chip performer Wednesday. The high-street retailer closed the day 9.7% higher after it reported a slight dip in its first-half pretax profit, after seeing a slowdown in food sales growth in the second quarter and citing a warm autumn in the UK as the reason for weaker clothing sales. But the company said its gross margins in the UK held up well in the period, especially in its struggling general merchandise business, and it delivered its first rise in underlying pretax profit for four years.

Meggitt also put in a strong performance, closing up 7.6%. The maker of components for aerospace, defence and energy markets said its organic revenue increased in the third quarter, buoyed in particular by growth in its civil aerospace markets, but its total revenue declined as it took a hit from currency movements and as sales declined at its energy business.

The company also cautioned that its organic growth rate is set to slow in the fourth quarter. However, its shares rose after it announced a new share buyback programme, and analysts deemed the third quarter statement to be better than the low expectations priced in by the company's recent share performance.

Gold meanwhile fell to its lowest price since April 2010. The yellow metal hit a low of USD1,137.30 an ounce Wednesday. Gold miners Fresnillo, down 1.9%, and Randgold Resources, down 1.1% were both amongst the FTSE 100 losers, of which there were fewer than 10.

Kingfisher, down 2.2% was also a heavy faller after Deutsche Bank downgraded it to Hold from Buy with a cut in its price target to 340.00 pence from 400.00p. The German bank said it expects Kingfisher's retail profit to be lower in the third quarter due to weak end markets and adverse currency effects. The stock closed trade at 286.72164p.

In the FTSE 250, branded spirits producer Stock Spirits Group lost a quarter of its value after it said that third quarter revenue growth had fallen short of expectations due to aggressive pricing by competitors and heavy promotional activity in the trade market in the latter half of the quarter, and that its full-year results could miss expectations as a result.

Thursday's economic calendar is headlined by the monetary policy decision from the European Central Bank at 1245 GMT, and a subsequent monetary policy statement at 1330 GMT. Pressure has been mounting on ECB President Mario Draghi to initiate quantitative easing to support the weak economy in the region.

Before the ECB statement, the Bank of England will be in the spotlight, as it releases its monetary policy decision at 1200 GMT. Many analysts forecast this to be a non-event with interest rates and asset purchases both likely to remain unchanged.

Thursday's data calendar gets underway early with Japanese Markit services PMI for October at 0135 GMT, followed by Japanese leading economic index and coincident index, both at 0500 GMT. Also before the London equity market opens is German factory orders for September at 0700 GMT.

UK industrial production and manufacturing production will be released at 0930, while US initial and continuing weekly jobless claims will be released at 1330 GMT.

The corporate calendar is busy on Thursday, with third-quarter results from FTSE 100-listed companies Randgold Resources, AstraZeneca, and Coca-Cola HBC. Supermarket chain WM Morrison Supermarkets will be releasing an interim management statement, as will asset manager Schroders, and RSA Insurance Group, amongst others.

By Neil Thakrar; neilthakrar@alliancenews.com

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