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LONDON (Alliance News) - Stocks across the UK and Europe edged higher Tuesday, while the euro fell to to a fresh two-year low against the dollar and the pound after the latest eurozone inflation data put extra pressure on the European Central Bank to take further monetary easing action at its policy meeting on Thursday.
The last trading day of the third quarter has brought a raft of UK corporate updates. Within the equity sectors, the banks are buoyed by an unexpected and positive update from Royal Bank of Scotland, while clothing retailers are underperforming following a profit warning from Next.
By mid-morning Tuesday, UK stock indices continue to struggle for direction, with the FTSE 100 off its earlier lows to trade broadly flat at 6,644.50, the FTSE 250 is fractionally higher at 15,397.10, while the AIM All-Share is underperforming, down 0.1% at 748.75.
Major European markers are a little higher in light if the inflation data, with the French CAC 40 up 0.9%, and the German DAX up 0.5%.
Consumer price growth in the eurozone slowed to 0.3% year-on-year in September from 0.4% in August, in line with expectations. The ECB has consistently pointed out its preference for looking at the core index when considering monetary policy, and in September core CPI fell notably to 0.7% year-on-year from 0.9% in August.
The headline eurozone unemployment rate remained stable at 11.5% in August, although some of the regional numbers are much more concerning, such as the Italian youth unemployment rate reaching an all-time high of 44.2%.
The continuing deterioration of the overall picture in the eurozone puts extra pressure on ECB President Mario Draghi to take further monetary easing measures at the central bank's meeting on Thursday.
The euro has fallen to a fresh two-year low against the dollar of USD1.2604, as well as a fresh two-year low against the pound of GBP0.7779. Against the dollar, the pound has slipped to a session low of USD1.6195 following a mixed bag of UK economic data.
UK GDP increased by 0.9% quarter-on-quarter in the second quarter, faster than the 0.8% that had been estimated, according to the final numbers from the Office for National Statistics Tuesday.
Analysts have urged caution when comparing the numbers, given that these are the first to include the contribution to the economy from the charitable sector and the sex and illegal drugs industries, under new European rules.
Numbers from mortgage lender Nationwide earlier Tuesday indicated that the UK housing market has started to cool, with a month-on-month house price fall of 0.2% in September, compared to a rise of 0.8% in August and expectations for a continued rise of 0.5%.
Moreover, rather than improving as expected, the UK current account deficit widened in the second quarter to GBP23.1 billion from 20.5 billion in the first quarter. Economists had predicted a narrowing of the deficit to GBP17 billion.
Within the UK equity movers, the housebuilders are underperforming following the soft data from Nationwide, with Bellway down 1.6%, Bovis down 1.5%, Persimmon down 1.3%, and Redrow down 1.0%.
Royal Bank of Scotland shares are up 3.6% after the largely-state-owned bank unexpectedly released a third quarter trading update saying that it expects to "significantly outperform" its previous impairment guidance for the full year, supported by an improvement in economic conditions and asset prices in the UK.
RBS is making a habit of surprising the market, with this unexpected update coming two months after it released it's first half results ahead of schedule, which boosted its shares by 14% at the time.
The clothing retailers are underperforming following a profit warning from the biggest name in the sector, Next. The chain store said that its third quarter sales are only ahead by 6.0% year-on-year in the quarter, which is below the previous guidance of 10% sales growth. Next blamed the long hot UK summer for delaying people from adding to their autumn wardrobes. While full-year guidance was maintained, management warned that if the weather stays warm through October, it may need to revise the range lower.
Next is the heaviest FTSE 100 faller, down 3.9%, with sector peers Marks & Spencer, Sports Direct, and Debenhams also lower, down 2.5%, 1.2%, and 3.0%, respectively.
Meanwhile, Inchcape's loss has been Intertek's gain Tuesday. Intertek is the best FTSE 100 performer, up 3.8% following the announcement it has appointed André Lacroix as chief executive with effect from May 16, 2015. The incoming chief executive joins from FTSE 250-listed Inchcape where he has served as group CEO for nearly 10 years. Inchcape shares are down 3.8%.
RPC group leads the FTSE 250 gainers, up 4.7% after saying that it expects revenue to come in significantly ahead of last year due to the contribution from recent acquisitions as well as good growth in the USA, coffee capsules and UK DIY markets.
AO World shares are up 2.9% after the online kitchen appliance retailer said it is ready to launch its German website six months ahead of schedule.
Still to come Tuesday, the US consumer confidence reading from the Conference Board is due at 1500 BST, economists are looking for a marginal improvement in the level of confidence to 92.5 in September from 92.4 in August.
US futures currently point to a higher open on Wall Street, with the DJIA up 0.3%, the S&P 500 up 0.3%, and the Nasdaq Composite up almost 0.4%.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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