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LONDON (Alliance News) - UK shares are lower Monday midday dragged down by the mining sector, while US futures point to a positive open amid expectations of further economic stimulus in China following disappointing trade and producer price data.
The FTSE 100 is down 0.7% at 6,668.87, the FTSE 250 is down 0.1% at 17,647.19, and the AIM All-Share is down 0.2% at 751.45. European major indices are outperforming London, with the CAC 40 in Paris and the DAX 30 in Frankfurt both up 0.4%.
In the US, Wall Street is called for a firm open, with the DJIA seen up 0.3% after six consecutive sessions ending lower. Meanwhile, the S&P 500 is pointed up 0.3% and the Nasdaq 100 up 0.4%.
Warren Buffett's Berkshire Hathaway confirmed it has agreed to buy Precision Castparts for USD37.2 billion in cash and assumed debt.
Chinese exports declined at a faster-than-expected pace in July, figures from the General Administration of Customs showed on Saturday. Exports decreased 8.3% year-on-year in July, reversing the 2.8% increase in the previous month. Economists had expected exports to decline 1.5%. At the same time, imports were down 8.1% in July and had been forecast to fall 8%. The trade surplus totalled USD43.03 billion, below the expected surplus of USD54.7 billion.
China's consumer prices increased at a faster rate for the second straight month in July, with inflation exceeding the consensus estimate, figures from the National Bureau of Statistics showed on Sunday. Consumer prices increased 1.6% year-on-year in July following the 1.4% rise in June. In May, prices had risen 1.2%. Economists had expected a 1.5% growth for the month.
However, producer prices fell at a steeper-than-expected pace and declined by the most in six years. In a separate report released by the agency, producer prices were reported to have contracted by 5.4% annually in July, following a 4.8% drop in the previous month.
"The trade data is an indication that easing from the People’s Bank of China to date may not have been enough to stabilise the economy". says CMC Markets analyst Jasper Lawler. "With a benchmark interest rate of 4.85%, China has plenty more room to cut. Another cut of 50 basis points before the end of year looks entirely likely."
The Shanghai Composite ended up 4.9% Monday, the biggest rise in a month on expectation the Chinese government will step in with further stimulus.
Following last week's US payrolls report, a speech from President of the Federal Reserve of Atlanta Dennis Lockhart, due at 1400 BST in Atlanta, is expected to grab the market's attention Monday.
Job growth in the US slowed for the second consecutive month in July, according to the Labor Department, although its report on Friday still showed a notable increase in employment. It said non-farm payroll employment rose by 215,000 jobs in July following an upwardly revised increase of 231,000 jobs in June and a jump of 260,000 jobs in May. The consensus according to FXStreet.com predicted jobs to rise by 222,000, compared to the original 223,000 growth seen in June.
Lockhart previously has said that he will probably vote for a rate rise in September unless the US economic data deteriorates significantly. The next US Fed meeting is scheduled for September 16 and 17. Following the jobs data, the pound weakened against the dollar, touching a low of USD1.5423 it hadn't seen in more than a month.
The pound recovered some ground afterwards, but Monday morning is again lower against the dollar at USD1.5469.
Still ahead in the economic calendar Monday is the US labour market conditions index at 1500 BST.
The poor economic data from China is weighing on London mining stocks which dominate the fallers list in the FTSE 100. Anglo American is down 2.2%, Antofagasta down 1.9% and BHP Billiton down 1.7%. In the FTSE 250, Centamin is down 2.1%, and Lonmin is off 1.8%.
Oil-related companies continue to feel the pressure from weak oil prices. Brent oil hit a new six-month low overnight of USD48.20 a barrel and currently trades at USD48.94 a barrel. US benchmark West Texas Intermediate hit a five-month low at USD43.35 a barrel.
In the FTSE 100, Royal Dutch Shell 'A' is down 1.5%, and BP is down 1.0%. In the FTSE 250, Petrofac is down 3.0%, Ophir Energy trades down 2.9%, and Premier Oil is down 2.5%.
Meanwhile, UK housebuilders are performing well, with market commentators suggesting they were getting a boost from renewed optimism in the sector that the Bank of England will keep interest rates at record lows for longer. Taylor Wimpey is up 1.5%, Barratt Developments up 1.2% and Persimmon up 1.2%.
Meanwhile, Meggitt shares trade up 0.3%. It said it has agreed to buy the advanced composites unit of FTSE 250-listed aerospace and defence manufacturer Cobham.
Aerospace and engineering group Meggitt will pay USD200 million in cash to acquire the Cobham division, which makes a range of engineering aerospace components and secondary structures and which made USD81.1 million in revenue in 2014. It will be integrated into Meggitt's Polymers & Composites division. The deal will be backed by a USD300 million credit facility, Meggitt said.
Cobham shares trade up 0.5%.
In the AIM All-Share, Industrial Multi Property Trust is up 126%. The investment trust said it is planning a refinancing late in 2016 in order to improve its prospects and to allow it to meet its goal of paying a sustainable dividend. The trust, which also had refinanced back in December 2013, said it thinks its current share price, at a 76% discount to its net asset value on March 31, reflects its high gearing and lack of a dividend under its current capital structure, rather than the quality of its portfolio.
Newmark Security is down 25%. The security company said its pretax profit increased in the financial year to the end of April, but said profit in its current financial year will be lower. Newmark warned that profit in the current financial year will be lower than in the last year as it builds up new markets and products, although it said that benefits of this will be seen in the following year and said it is optimistic about the future with various opportunities in the pipeline.
Independent Oil & Gas is down 45%. After the close on Friday, the company said the "internationally listed group" that was set to inject USD10 million of equity funding into the company and provide a large debt facility has pulled out "due to the renewed fall in commodity prices". The collapse of the deal leaves the company less than a month to find an alternative funding deal before it has to repay its loan and could place its acquisition of a stake in the Skipper license offshore the Shetland Islands at risk.
By Daniel Ruiz; danielruiz@alliancenews.com
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