LONDON (Alliance News) - Serco Group PLC shares ended higher Friday after Chief Executive Christopher Hyman resigned in the wake of the botched UK prisoner transport contract, but the broader London equities markets ended mixed after trading in a tight range all day.
Not even positive UK GDP data could rouse the stock markets, although the pound got a temporary boost before dropping back again.
The British economy grew by 0.8% in the third quarter, preliminary estimates released by the Office for National Statistics showed Friday, its fastest rate since the second quarter of 2010 and in line with analyst's expectations. The quarter-on-quarter increase was powered by the country's service sector, which grew by 0.7% and represents three quarters of the economy. All of the four main sectors of the economy grew, with the 2.5% increase in construction contributing 0.15 percentage points to the increase, the ONS said.
In the wake of the data release, UK Chancellor George Osborne tweeted; "0.8% growth. This shows that Britain's hard work is paying off & the country is on the path to prosperity."
Michael Saunders, Citi's UK Economist, echoed this sentiment. "GDP is rising at an annualised pace of about 3% quarter-on-quarter in the last couple of quarters. I expect it will remain about that pace in coming quarters. My forecasts for 2014 growth is 3.0%. Business surveys suggest it could be even better. The consensus for 2014 GDP growth is just 2.2%, which requires the economy to slow significantly. I think the consensus is way too low. The UK is set for strong and above-consensus growth."
Others, however, were less willing to get carried away by the data. "These numbers are the best we have seen since 2010, but now is no time for celebration," said Kathleen Brooks, research director at FOREX.com. "From peak to trough in 2009 the economy shrank by 7.2%, it has been a steep uphill climb since then, and although the worst leg of the journey may be behind us we still have further to go: the UK economy remains 2.5% below the peak in the first quarter of 2008."
In Germany, business confidence fell for the first time in six months in October amid concerns about the outlook for Europe's biggest economy, a survey showed. The indicator measuring the mood in boardrooms across the nation posted a surprise fall to 107.4 points this month from 107.7 points in September, the Munich-based Ifo economic institute said. It was the first monthly decline since April.
The FTSE 100 closed up 0.1% at 6,721.34, the FTSE 250 closed down 0.2% at 15,491.63, and the AIM All-Share index closed up 0.4% at 803.28. The same pattern repeated in the weekly changes, with the FTSE 100 ending up 1.5% from last Friday's close, the FTSE 250 down 0.7%, and the AIM All-Share up 0.5%.
Wall Street was faring better when the London markets closed, with the DJIA up 0.2% at 15,537.33, the S&P up 0.2% at 1,755.9, and the Nasdaq up 0.4% at 3,942.59, lifted by strong earnings reports from the likes of Microsoft and Amazon and dismissing disappointing consumer sentiment data.
The Reuters/University of Michigan's final consumer sentiment index for October was revised to 73.2 in October from 77.5, coming in behind forecasts of a drop to 75.
At the individual UK stock level, Serco ended up 0.9% at 557.5 pence after Hyman fell on his sword. "Given the overriding objective of the renewal programme, Christopher Hyman believes that the company will have the greatest chance of success with new leadership at the helm and he has, therefore, decided to step down with immediate effect," the company said in a statement. It's going to look outside the company for a replacement and has already started searching.
Serco said it had also decided to separate its UK & Europe division into two, with one focused on UK Government contracts, and the other on its other business in the wider public sector. It said it will strengthen its contract oversight and transparency, establish a board committee to oversee corporate responsibility and ethics and update its code of conduct for employees, backed by training and performance management.
Elementis, closing up 9.1% at 266.4 pence, was the biggest riser on the FTSE 250. The specialty chemicals company posted 12% sales growth for the three months ended September 30, driven by strong growth in its coatings segment and personal-care division, and said it expects full-year earnings per share to be in line with market expectations. Elementis said that its trading performance has been resilient despite slower growth than generally anticipated.
Centamin, closing up 1.1% at 50.85p, was also a relatively big mover on the FTSE 250, after Nyota Minerals reported that Centamin has further reduced its shareholding in the company, a move that comes a day after Nyota detailed the structure of a sales agreement with another exploration company. Centamin sold 9.4 million shares in Nyota over Monday and Tuesday this week, lowering its holding to 141.6 million shares or 16.1% of the company's issued share capital, down from 17.2%. The move comes only five days after Nyota announced that Centamin sold 20 million shares in Nyota last week.
The deal saw AIM-listed Nyota close the day at 0.67p, down 11%, a big faller. Nyota's share price has fallen by 45% over the week.
In the data calendar Monday, the UK hometrack house price survey results are set to be released at 0001 GMT. German retail sales are expected at 0600 GMT, ahead of Italian business confidence at 0900 GMT. US industrial production data is scheduled for 1315 GMT, with US home sales at 1400 GMT, and Dallas Fed manufacturing business index information at 1430. A raft of Japanese figures are released at 2330 GMT and 2350 GMT, including jobs/applicants ratio and the unemployment rate.
In the corporate calendar, Aggreko and BH Macro report interim management statements.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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