LONDON (Alliance News) - UK stocks ended lower Thursday after an initial boost provided by surprisingly doveish minutes from the last US Federal Reserve meeting gave way to ongoing concerns about economic weakness in the eurozone.
The FTSE 100 closed down 0.7% at 6,435.84 points, the FTSE 250 down 0.8% at 14,811.33, and the AIM All-Share down 0.7% at 722.84.
Major European markets ended more mixed, with the French CAC 40 down 0.5% but the German DAX up 0.2%. US markets were lower, with the DJIA down 0.8%, the S&P 500 down 0.7%, and the Nasdaq Composite down 0.5% at the London close.
The September Fed meeting had been surrounded by speculation that US policy makers were about to make a more hawkish shift in the wording of their policy statement. However, Wednesday's minutes retained all of the same forward guidance, including there being "considerable time" until the first interest rate rise can be expected.
The minutes were therefore taken as accommodative, pushing back rate-rise expectations, which sent stocks up and the dollar lower. In fact, the S&P 500 recorded its best day so far in 2014 on Wednesday, gaining almost 1.8%. The positivity towards equities initially carried into the European session Thursday, and the FTSE 100 gapped 1.0% higher at the open.
The early gains were slowly eroded throughout the day, however, as investors refocused on the worrying signals of economic slowdown across the eurozone.
"Markets turned lower on a combination of concerns about the German economy, as well as concerns about the European banking system," said chief market analyst at CMC Markets Michael Hewson.
German economic data Thursday showed exports from Europe's largest economy fell by 5.8% in the month of August, the sharpest fall since January 2009. The disappointing data follows a warning from the International Monetary Fund on Wednesday that the whole eurozone is at 40% risk of slipping back into recession, amid continued price pressures and a series of global crises.
Further adding to concerns within the eurozone Thursday, Portugal's Espírito Santo Financial Group said it has filed for bankruptcy after its request for "controlled management" was turned down by a court in Luxembourg. The entity's main asset was a 20% stake in the collapsed bank Espirito Santo, so although the bankruptcy is not a surprise, it serves as a timely reminder of the fragility of the European banking system, analysts said.
German government bond yields reportedly hit an all-time low Thursday, as the flight to quality seen in the markets this week so far continued, amid further signs of economic weakness.
Around the time of the European market close, European Central Bank President Mario Draghi was talking in Washington about the European economic recovery and reform within the euro area. Draghi has been a strong critic of euro nations such as France and Italy that have not undertaken recommended reform, and on Thursday underlined the urgent need to raise potential output in the euro area through reforms.
"Put simply, I cannot see any way out of the crisis unless we create more confidence in the future potential of our economies," Draghi said, adding that "given demographic trends, raising structural growth will have to take place primarily through productivity."
A defensive play was evident within UK equities Thursday, with the tobacco, beverage, and utility stocks all holding up, while the travel and leisure stocks came under continued pressure amid ongoing concerns of the spread of the Ebola virus.
The mining stocks were the best performers on the London market, boosted by the higher price of precious metals, which rose strongly as the dollar fell.
The price of gold peaked at a two-week high of USD1,233.37 per ounce Thursday, while silver touched a near-two week high of USD17.72. The dollar fell against other major currencies, with the pound peaking at USD1.6227 and the euro hitting a near-two week high of USD1.2729, although the dollar has regained some strength towards the European equity close.
At the individual equity level, all of the best performing stocks were miners. Fresnillo was the best FTSE 100 performer, up 6.4%, with Randgold Resources up 6.1%, and Rio Tinto up 2.1%. Kazakhmys ended as the best FTSE 250 gainer, up 4.2%, with African Barrick gold up 3.3%, Polymetal International up 3.3%, and Vedanta Resources up 3.4%.
Vodafone was a big faller Thursday, closing down 2.6% after being downgraded to Reduce from Neutral by analysts at Nomura on Wednesday. Nomura is concerned by the increasing competition it sees in many of the markets where Vodafone is currently dominant.
FTSE 250-listed catalogue retailer N Brown fell heavily, closing down after it issued a profit warning, reducing its full-year pretax profit guidance to the range of GBP88 million to GBP92 million, compared to the market's previous expectation of about GBP103 million. The market reaction has been particularly negative given that the warning comes just three weeks after the company had guided "confidence in achieving the full year outturn".
The housebuilders underperformed after the latest survey from the Royal Institution of Chartered Surveyors showed a moderation in UK house prices, with the worst falls suffered in London. House prices in the UK as a whole were down in September, RICS said, with a seasonally adjusted index score of 30%. That was shy of forecasts for 36% following the downwardly revised reading of 39% in August.
Persimmon ended down 3.5%, with Barratt Developments down 3.4%, Taylor Wimpey down 4.2%, Bovis Homes down 3.7%, and property search site Zoopla down 4.1%.
The Bank of England Thursday kept UK interest rates on hold at 0.5% and maintained its stock of purchased assets at GBP375 billion, as expected.
The economic calendar looks a little quiet Friday, with just August trade balance data of note from the UK. In the UK corporate calendar, Vedanta Resources is scheduled to release a second quarter production update, while Jupiter Fund Management is due to release an interim statement.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
Copyright 2014 Alliance News Limited. All Rights Reserved.
UK dividends calendar - next 7 days
Monday 6 May | |
no events scheduled | |
Tuesday 7 May | |
Begbies Traynor Group PLC | dividend payment date |
Ferguson PLC | dividend payment date |
Manchester & London Investment Trust PLC | dividend payment date |
Mobius Investment Trust PLC | dividend payment date |
Nexus Infrastructure PLC | dividend payment date |
Pebble Group PLC | dividend payment date |
Pinewood Technologies Group PLC | special dividend payment date |
Thungela Resources Ltd | dividend payment date |
Volution Group PLC | dividend payment date |
Wednesday 8 May | |
Melrose Industries PLC | dividend payment date |
Personal Group Holdings PLC | dividend payment date |
Thursday 9 May | |
Admiral Group PLC | ex-dividend payment date |
AG Barr PLC | ex-dividend payment date |
Aurora Investment Trust PLC | ex-dividend payment date |
Balanced Commercial Property Trust Ltd | ex-dividend payment date |
Bank of Ireland Group PLC | ex-dividend payment date |
Bellevue Healthcare Trust PLC | ex-dividend payment date |
Braime Group PLC | ex-dividend payment date |
Centaur Media PLC | ex-dividend payment date |
Chenavari Toro Income Fund Ltd | ex-dividend payment date |
Clarkson PLC | ex-dividend payment date |
Coca-Cola Europacific Partners PLC | ex-dividend payment date |
Custodian Property Income REIT PLC | ex-dividend payment date |
CVC Income & Growth Ltd EURO | ex-dividend payment date |
CVC Income & Growth Ltd GBP | ex-dividend payment date |
Domino's Pizza Group PLC | dividend payment date |
Epwin Group PLC | ex-dividend payment date |
F&C Investment Trust PLC | dividend payment date |
Fidelity Special Values PLC | ex-dividend payment date |
Focusrite PLC | ex-dividend payment date |
Grafton Group PLC | dividend payment date |
Gresham Technologies PLC | ex-dividend payment date |
Headlam Group PLC | ex-dividend payment date |
Henderson International Income Trust PLC | ex-dividend payment date |
HSBC Holdings PLC | ex-dividend payment date |
Ibstock PLC | ex-dividend payment date |
Invesco Perpetual UK Smaller Cos Investment Trust PLC | ex-dividend payment date |
JPMorgan Global Core Real Assets Ltd | ex-dividend payment date |
Lancashire Holdings Ltd | ex-dividend payment date |
LSL Property Services PLC | ex-dividend payment date |
M&C Saatchi PLC | ex-dividend payment date |
M&G PLC | dividend payment date |
Macfarlane Group PLC | ex-dividend payment date |
Marwyn Value Investors Ltd | ex-dividend payment date |
Midwich Group PLC | ex-dividend payment date |
Montanaro UK Smaller Cos Investments Trust PLC | dividend payment date |
Octopus Titan VCT PLC | ex-dividend payment date |
One Media iP Group PLC | ex-dividend payment date |
Petershill Partners PLC | ex-dividend payment date |
Picton Property Income Ltd | ex-dividend payment date |
PRS REIT PLC | ex-dividend payment date |
Reach PLC | ex-dividend payment date |
Sherborne Investors Guernsey C Ltd | ex-dividend payment date |
Sthree PLC | ex-dividend payment date |
Sylvania Platinum Ltd | ex-dividend payment date |
Taylor Maritime Investments Ltd | ex-dividend payment date |
Tracsis PLC | ex-dividend payment date |
Travis Perkins PLC | dividend payment date |
UIL Ltd | ex-dividend payment date |
Friday 10 May | |
AIB Group PLC | dividend payment date |
Alpha Group International PLC | dividend payment date |
Antofagasta PLC | dividend payment date |
Hammerson PLC | dividend payment date |
Hunting PLC | dividend payment date |
International Personal Finance PLC | dividend payment date |
Invesco Select Trust Global Equity Income PLC | dividend payment date |
Invesco Select Trust UK Equity PLC | dividend payment date |
Johnson Service Group PLC | dividend payment date |
Kerry Group PLC | dividend payment date |
Moneysupermarket.com Group PLC | dividend payment date |
Schroder Asian Total Return Inv Co PLC | dividend payment date |
Schroder European Real Estate Investments Trust PLC | dividend payment date |
Schroder Oriental Income Fund Ltd | dividend payment date |
Serco Group PLC | dividend payment date |
Smurfit Kappa Group PLC | dividend payment date |
Somero Enterprises Inc | special dividend payment date |
Taylor Wimpey PLC | dividend payment date |
Tufton Oceanic Assets Ltd | dividend payment date |
VPC Specialty Lending Investments PLC | dividend payment date |
Comments and questions to newsroom@alliancenews.com | |
A full 14-day events calendar is provided each day with a subscription to Alliance News UK Professional. | |
Copyright 2024 Alliance News Ltd. All Rights Reserved. |