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LONDON (Alliance News) - UK stocks traded in a relatively tight range Wednesday, while strong economic data boosted the pound, ahead of the major risk events still to come this week.
The FTSE 100 has closed down 0.1% at 6,741.69, the FTSE 250 has closed up 0.2% at 15,403.83 and the AIM All-Share has closed up 0.4% at 814.78.
The marginally lower close to the FTSE 100 is slightly skewed by a number of stocks going ex-dividend Thursday. According to a Reuters calculation, the adjustments to share prices on the date that investors no longer qualify for the latest dividend payout is calculated to have taken about 6 points off the closing price of the Index. Stocks going ex-div Included Barclays, BP and Unilever.
British industrial production bounced back in September after two consecutive monthly declines, according to the latest figures from the Office for National Statistics. Total production rose 2.2% year-on-year in September following a 1.5% fall in August and a 1.1% decline in July. Manufacturing output also grew annually in September, by 0.8%. This comes after a 0.2% fall in August and a 0.4% drop in July. On a monthly basis, industrial production increased 0.9% compared with forecast for a 0.5% rise and manufacturing output increased 1.2%, faster than the 1.1% expected.
The pace of the recovery in the UK housing market has been confirmed Wednesday, with a survey showing house prices rising at the fastest rate for over three years. Halifax said house prices increased 6.9% on an annual basis in the three months to October, the fastest increase since May 2010. Prices were up 0.7% on the month, the ninth consecutive monthly increase.
The country's biggest housebuilder, Persimmon said sales activity has picked up further since August, with visitor levels up 20% on last year as phase 1 of the government's Help to Buy scheme proved "particularly attractive." It has sold 3,000 homes under the scheme. Despite the positive sentiment, Liberum analyst Charlie Campell says a lot of the good news for Persimmon was already priced in, and shares have closed down 2.4%. London estate agent Foxtons said it was too early to say whether phase II of the government mortgage scheme will lead to a further pickup in transactions, but the company reported an 18% rise in revenues in the three months to end-September to GBP41.1 million, with revenue from property sales up 28.7%. Foxtons shares closed up 0.5%.
The fresh raft of positive UK economic data helped edge the pound higher against other majors Wednesday. The pound recorded a high of USD1.6118 and now trades just below the USD1.61 level.
Within UK equity sectors, Autos and Parts, Construction and Materials, Media, and Travel stocks all performed well, encouraged by strong industrial production, house price data, new UK car registrations and air traffic statistics, all released earlier in the morning.
EasyJet released its latest traffic statistics Wednesday, showing a 5.4% increase in passenger numbers on the year during October. The airline also filled more seats on its planes, even though cancellations were up due to air traffic control strikes in France and Italy. The load factor, a measure of how full its planes are, rose to 89.1%, from 88.4% a year earlier. The airline sector rebounded from a drop on Monday that followed a profit warning from Ryanair. Easyjet close up 0.9% and International Consolidated Airlines closed up 1.7%. Tui Travel also received a boost, closing up 2.3%.
Experian was the heaviest blue chip faller of the day, closing down 6.4% despite reporting strong first-half results. Experian announced that it has signed an agreement to acquire US-based Passport Health Communications, Inc., a specialist in the fast growing US healthcare payments market. Shore Capital expects the company's share buy-back programme, which has been supporting the share price, to be curtailed as a result of the cost of the acquisition.
In the FTSE 250, Moneysupermarket.com was the standout mover. Shares rocketed higher to close up nearly 17% after the group said significant numbers of people are switching UK energy suppliers because of price hikes boosted its revenues. The price-comparison website now is expecting its full-year earnings to come in ahead of forecasts. In October, major UK energy suppliers, such as RWE npower, Centrica PLC's British Gas and SSE PLC, increased prices by eight to ten percent, prompting a surge in visitors the the site.
European stocks have been buoyed by strong PMI data. The EU Markit Services PMI came in at 51.6, beating a forecast 50.9 and the Composite PMI came in at 51.9, beating a forecast 51.5. "An increase in European PMI figures is helping to soften the blow of yesterday's cut to 2014 growth forecasts", says CMC Markets Senior Trader Toby Morris.
German factor orders also recorded a much better than expected increase in September. New business placed with German manufacturers climbed 3.3% in September, versus a 0.3% decline in August and beating the 0.5% increase expected.
The CAC40 finished the day up 0.8% and the DAX closed up 0.4%.
After the European close, US equities are trading mixed. The DJIA is up 0.6% and the S&P500 is up 0.2%, while the Nasdaq Composite is down 0.3%.
Twitter is expected to price its initial public offering on Wednesday evening and begin trading Thursday. The much-hyped IPO has seen the share price range recently increase to USD23-25 from USD17-20. The company continues to make headlines ahead of the float, with revelations last night that it has been sued by IBM over three patent infringements. Twitter looks set to be valued at as much as USD17 billion, which as Citi analyst Lee Oliver puts it, is "not bad for a company that has never made a penny and lost USD133 million in the first 9-months of the year."
The euro regained some of its recent losses against the dollar Wednesday as the pick up in macro data dampened ideas of a rate cut at the ECB meeting Thursday. The euro has seen a lot of volatility around data releases as trades try to second guess the central banks movement, but has overall gained against the dollar, currently trading at USD1.3520. According to the latest CitiFX Poll, just 16% now think the central bank will cut this week, although economists at Berenberg Bank say there is a 60% likelihood that rates will come down before the end of the year.
From the Bank of England, which also makes its latest policy announcement on Thursday, a "no change" decision is widely expected, both in regard to the interest rates and size of the central bank's asset purchase program. However, with the UK economic recovery continuing to gather pace and the central banks quarterly report due next week, questions remain over the validity of the banks forward guidance measures and any statement accompanying the monthly policy decision will be watched closely.
"A combination of continued decent UK economic data and more active inflation expectations would almost certainly result in forecasts for the first BoE move to shift. There is some talk that the release of the Quarterly Inflation Report next week could signal that the BoE may be prepared to hike interest rates at the start of 2016 rather than later that year," says Rabobank Senior Strategist Jane Foley.
A very busy day in the corporate calendar ahead Thursday as UK earnings season hits its peak. Big names reporting include Aviva, Cable & Wireless, Eurasian Natural Resources, Morrisons, Tate and Lyle and Randgold Resources.
With the BoE at midday and the ECB at 1245 GMT, the central bank meetings will provide the main focus of the day. Before that, a monthly economic survey from Japan is released overnight and German industrial production numbers are released at 1100 GMT.
In the afternoon the focus will shift across the pond. At 1330 GMT not only are the latest initial jobless claims numbers due but we will also get further insight to the effect of the 16-day government shutdown, with the release of advance estimates of third quarter GDP from the US Bureau of Economic Analysis.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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