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LONDON (Alliance News) - Stock markets are lower across the UK and Europe Wednesday, following a sell-off late in Monday's US session and amid concerns over the deteriorating conflict in Iraq. With little in the data calendar to shift sentiment Wednesday, the FTSE 100 came close to a two-month low in early trade.
By mid-morning Wednesday, the FTSE 100 is down 0.6% at 6,748.93, the FTSE 250 down 0.5% at 15,476.51, and the AIM All-share down 0.4% at 779.74.
A similar picture in Europe sees the French CAC 40 down 0.5% at 4,493.48, and the German DAX down 0.4% at 9,895.75.
Claims continue to come in from both sides of the conflict in Iraq about the control of Baiji, the country's largest oil refinery. In the latest update, a state-run TV broadcaster posted online that Iraqi government forces are now in full control. The uncertainty over the situation, amid reports of air strikes in western Iraq by Syria and the US still weighing possible action, is taking a toll on equity sentiment. US Secretary of State John Kerry has said that Iraq's "very future" will be determined in the coming days.
"European equities this morning are suffering from a mild correction to risk appetite, after geopolitical tensions in the Middle East temper the desire to own risk," said Spreadex trader David White.
Concerns over Iraq have completely trumped a positive reading of German consumer confidence earlier in the morning. Following two consecutive days of disappointing economic data from Europe's largest economy, which included disappointing PMI's and a low ZEW survey, the Gfk survey rose to a 7.5 year high. The forward-looking consumer sentiment index rose to 8.9 in July from a revised 8.6 points in June, as economic expectations and willingness to spend strengthened after the European Central Bank lowered its key rate early this month.
The better-that-expected German data has supported the euro Wednesday, amid a broader shift to the dollar as Iraq concerns drive a flow to safety. The euro is slightly higher against the dollar over the session at USD1.3610, while the pound has slipped a little to a multi-day low of USD1.6948.
The pound has lost a lot of its shine since the Bank of England governor Mark Carney watered down his message from the previous week about an early interest rate rise. Speaking before the UK government's Treasury Select Committee on Tuesday, the BoE chief insisted there is still a lot of slack in the UK labour market to be used up, coming across considerably more dovish than he had just days earlier at his Mansion House speech. Indeed the turnaround prompted one MP to liken the central bank to an "unreliable boyfriend" that blows hot and cold.
It's not only the pound that has been affected ,however, the interest-rate-sensitive real estate investment trusts are amongst the top performers Wednesday, having been under pressure since the talk of a UK rate rise recently intensified. The FTSE 350 REIT sector is outperforming the market, currently up 0.5%.
A significant deal in the industry also has provided a boost to the sector Wednesday. Land Securities is up 0.3% after announcing the acquisition of a 30% stake of the Bluewater shopping centre in Kent from Australian property business Lease Group, in a deal worth GBP656 million in cash.
The deal comes after UK press reports that rivals British Land and Hammerson also were looking to buy the stake in the shopping destination which attracts around 27 million visitors a year. Despite having missed out on the deal, Hammerson and British Land are the two biggest FTSE 100 gainers Wednesday, up 1.3% and 1.2% respectively, as there had been concerns over the viability of the deal for the other two UK names, particularly for Hammerson, which would likely have had to carry out a share placing to finance the transaction.
Shire is up 0.9% as it made progress in proving its independent value to shareholders, after shunning a takeover offer from US company AbbVie. Shire said that it has received the backing of a US court over claims for a patent on its Vyvanse hyperactivity disorder drug. The drug is one of Shire's top selling products, and the ruling will stop other names reproducing it.
Bunzl is a big FTSE 100 faller, down 2.8% after reiterating that its results will be significantly impacted by foreign exchange revaluations.
A number of stocks going ex-dividend are lower and adding to the drag Wednesday. Experian is down 2.5%, Tate & Lyle leads the FTSE 250 fallers, down 4.1%, with Aveva down 3.2%, and Electrocomponents down 2.7%.
Still to come Wednesday, the main economic release of the day is the final reading of US first-quarter GDP at 1330 BST. The indicator is expected to be revised lower once again to show a contraction of 1.7% from the last reading that showed a 1.0% shrinkage.
"This represents a remarkable turnaround from where expectations for first-quarter GDP were at the end of April, less than two months ago, where the expectation was for growth of 1%," points out CMC Markets chief market analyst Michael Hewson.
Also of interest from the US at 1330 BST are durable goods orders, personal consumption data, and the Markit services PMI.
The UK Confederation of British Industry distributive trades survey at is released ahead of that at 1100 BST. Economists are expecting a month-on-month rise in the survey to 24 in June from 16 in May.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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