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LONDON (Alliance News) - UK stock indices are lower Tuesday, with declines led by retailers after AIM giant ASOS revealed a slower-than-expected start to the year and reduced its full-year profit expectations due to increased investment spending.
By mid-morning Tuesday the FTSE 100 is down 0.1% at 6,552.31, the FTSE 250 is down 0.3% at 16,243.40, and the AIM All-Share is underperforming due to ASOS, down 0.9% at 863.33.
Potential developments in Ukraine and Russia are unlikely to be far from investors minds, but in the absence of any further updates so far Tuesday, the markets have been focused on corporate news and economic data, which have largely had a negative bias.
Traders also may be in a consolidation mood with the Federal Reserve about to begin the monthly meeting of the policy-setting Federal Open Market Committee which will likely result in a further USD10 billion reduction of the Fed's monthly asset-buying programme.
"An expectation that the Federal Reserve will subtract an additional USD10 billion from the current quantitative easing programme has led to a notably softer start in European trade today," said IG Markets chief market strategist Brenda Kelly.
As well as the falls on the London markets, major European markets also are lower, with the CAC 40 down 0.2% and the DAX 30 down 0.5%.
While there have been no updates yet Tuesday, the Crimea situation seems to have had a heavy impact on both the eurozone and German ZEW surveys, which have recorded a bigger drop in economic sentiment than expected this month. The eurozone sentiment index fell to 61.5 in March from 68.5 in February, missing economist expectations of 67.3. the German survey dropped to 46.6 in March, from 55.7 previously, missing expectations of 53.0.
The disappointing readings sent the euro to a low of the session against the dollar of USD1.3887.
The single currency found no extra support from the news that the German Constitutional Court has confirmed the legality of the European Central Bank's European Stability Mechanism. The ECB's EUR700 billion bond-buying programme was widely credited with saving the euro at the peak of the financial crisis, and the lodging of the court complaint last month led to a sharp drop in the euro. The Constitutional Court's confirmation of legality was well flagged, and the euro remained lower against the dollar after the announcement.
The pound also is a little softer against the dollar as the greenback strengthens a little across the board as the FOMC sits for their March meeting.
Although there is no UK data Tuesday, the Bank of England has announced its two new deputy governors. Ben Broadbent will succeed Charlie Bean as deputy governor responsible for monetary policy on 1 July, and International Monetary Fund official Nemat Shafik will take the newly created role of deputy governor for markets and banking from August 1.
Within UK equities, ASOS shares opened about 20% lower after the online retailer announced an increase in capital expenditure for the year. The investment is focused on the company's Chinese operations and is expected to lead to a squeeze on margins over 2014, in what Jefferies analyst David Reynolds says is "clearly a year for investment". The shares continue to trade down 14%, weighing significantly on the AIM index.
The general retailers are the fastest falling FTSE 350 sector, down 1.1%, following the ASOS profit warning. The read-across sees most of the retailers lower, with both Next and Debenhams down about 1.7.
Sainsbury's is the latest of the big UK supermarkets to update the market and has reported its first sales fall in nine years in its fourth-quarter. Despite the drop, Chief Executive Justin King said the grocer will not get caught up in the price war within the supermarket sector at the moment. Following the recent heavy share price falls in the sector, the food and drug retailers are actually outperforming, with Sainsbury and Tesco both up 0.5%.
Next up Tuesday, US CPI data will be in focus. Released at 1230 GMT, growth in consumer prices is expected to have slowed to 1.2% year-on-year in February, from 1.6% recorded in January.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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