Marks & Spencer Share News (MKS)

LONDON (Alliance News) - Stocks in the UK and Europe have closed modestly higher Wednesday, while those in the US also trade just slightly higher, despite an improving trend of US economic data, as markets appear to enter wait-and-see mode ahead of the European Central Bank meeting on Thursday and the US non-farm payroll report on Friday.

The FTSE 100 has closed up 0.1% at 6,659.04, the FTSE 250 has closed marginally higher at 16,415.96, and the AIM All-Share has closed up 0.3% at 851.46.

Major European markets have been similarly muted as the latest eurozone inflation data puts increased focus on Thursday's ECB meeting. The CAC 40 has closed up 0.2%, while the DAX 30 has closed up 0.3%.

Producer prices in the eurozone fell by 1.7% year-on-year in February, accelerating the decline from the 1.4% drop recorded in January. The latest worrying sign of deflation in the eurozone area was worse than the 1.6% drop expected by economists and the fastest fall since December 2009.

All eyes will therefore be on Mario Draghi at 1230 GMT Thursday when he delivers the ECB's latest policy decision. Although the consensus is for no action Thursday, analysts see a growing risk that the central bank will introduce quantitative easing or make a further cut to euro interest in an attempt to stem falling inflation and a rising euro.

The euro did soften a little against the dollar Wednesday, the single currency trading at USD1.3768 after the equity market close. The pound gained very slightly against the dollar over the session to trade at USD1.6635 in response to some strong UK data.

Confidence in the twelve-month outlook of the UK construction industry reached its highest level since January 2007 in March, according to the latest Markit construction PMI report, which analysts suggest is an important sign that the UK recovery is becoming more sustainable.

The Markit construction PMI actually slipped slightly to 62.5 in March from 62.6 in February, missing economists forecasts for faster expansion to 63.0. Although the headline missed forecasts, it has now registered above the 50.0 no-change value for eleven consecutive months.

The booming UK housing market and the effect of Help to Buy was in evidence, with Markit saying housing activity regained its place as the best performing category of construction in March, driven by improving underlying demand.

"Construction is roaring ahead amid extremely supportive conditions for the sector. Housebuilding in particular is rising fast, driven by surging prices and government subsidies," said Berenberg chief UK economist Rob Wood.

Indeed the PMI data came shortly after Nationwide said Wednesday that UK house prices increased at the fastest pace since May 2010 over the last month, recording a 9.5% year-on-year rise in March, up from 9.4% in February.

Data from the US Wednesday has served to back up the theory that the recent run of disappointing data has indeed been weather effected, and expectations are therefore building for an acceleration in data improvements from here.

A total of 191,000 jobs were added to the US economy in March, while the February number was revised up to 178,000 from 139,000, according to the latest ADP jobs report. While economists had expected slightly more jobs to be added in March, with the consensus estimate of 195,000, analysts suggest the strong revision bodes well for the important US non-farm jobs report on Friday.

Further supporting the theory that the harsh US winter kept the economy suppressed, US car sales rose year-on-year for the first time since November last month, according to data released Tuesday from the the country's biggest car makers.

Given that the S&P 500 closed at an all-time high on Tuesday, and that traders are beginning to look ahead to Friday's jobs report, there has been little reaction the Wednesday's data. After the European market close, the DJIA, the S&P 500 and the Nasdaq Composite are all about 0.2% higher.

The price of oil has continued to fall sharply Wednesday, with Brent making a low below USD104.00 per barrel at the European equity market close, down more than 3% over the week so far. While the easing of geopolitical tensions in the Ukraine will have helped ease prices, analyst suggest the big fall is due to hopes of rising oil supply from Libya.

"The price slide was triggered by reports that rebels in Libya allegedly intend within days to open up oil terminals that have been occupied for months," said strategists at Commerzbank. The terminals in question reportedly have a daily export capacity of 600,000 barrels, which Commerzbank says would increase Libya's oil shipments by six-fold.

The price drop appeared to weigh on Royal Dutch Shell Wednesday, with the shares closing down 0.9%. While the percentage move is not huge, Accendo Research estimates that Shell's 8% index weighting provided a 3.6 point drag on the FTSE 100.

Real Estate Investment Trusts performed well Wednesday on the back of the strong property and construction data, with the FTSE 350 sector gaining more than 1.0%. British Land gained 1.0%, while Hammerson gained 2.0%, and Land Securities gained 1.3%.

Marks & Spencer shares gained Wednesday, closing up 2.2%, on the news that it plans to open 250 new stores outside the UK over the next three years. M&S, which held an investor day in Paris on Tuesday, said 60% of the new stores will be franchised.

Fellow retailer, AIM listed ASOS, gained 0.9% after saying it is now targeting GBP2.5 billion in annual sales as its next staging post. The online clothing retailer reported a drop in profits for the first-half of the year as it increased its investment to achieve those boosted future sales.

Looking to Thursday, investors will be looking to find out how much of the UK housing boom has fed through to the home improvement retailer Dunelm Group, which is due to release a trading statement. Statements are also due from Tate & Lyle, Electrocomponents, Booker Group, and Hyder Consulting.

Another busy day in the economic calendar starts with a round of service sector PMI's. China's numbers are out long before the European market open and may provide some early direction for markets.

The individual European Markit Services numbers for March are released throughout the morning, with the eurozone wide print released at 0800 GMT, followed by the UK number at 0830 GMT.

Eurozone's February retail sales data is released at 0900 GMT and will be the last piece of economic news for the ECB to consider before the main market focus Thursday - The ECB rate decision at 1145 GMT, followed by Draghi's press conference at 1230 GMT.

In the afternoon Thursday, the US services PMI's will be released, along with weekly initial jobless claims.

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

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