CORRECT: MARKET COMMENT: FTSE 100 Continues Decline For Second Day

Wed, 07th May 2014 10:33

(Clarifying misleading headline in an item published at 10:45 BST. The correct version follows.)

LONDON (Alliance News) - The FTSE 100 is trading lower Wednesday, extending the modest losses it posted on Tuesday, as investors take their cues from a negative Asian session amid a dearth of fresh UK macroeconomic data.

By mid-morning, the FTSE 100 is down 0.4% at 6,771.74, the FTSE 250 is down 0.4% at 15,876.48, and the AIM All-Share is down 0.5% at 816.37.

"Investors are struggling for reasons to remain bullish with many markets already around highs, plenty of headwinds, the (Organization for Economic Cooperation and Development) cutting global growth expectations and a disappointing night for macroeconomic readings," says Michael van Dulken, head of research at Accendo Markets.

Overnight data showed that China's service sector growth remained weak in April. The headline HSBC services purchasing managers' index fell to 51.4 in April from 51.9 in March.

This came after the OECD lowered its 2014 global growth outlook on the back of slowing growth in emerging markets, especially China, on Tuesday. The Paris-based OECD said it now expects the global economy to grow by 3.4% this year, down from a forecast of 3.6% in its November 2013 review.

Japanese services PMI also disappointed. Markit Economics revealed that the service sector in Japan moved into contraction in April, coming in at 46.4 in April, down from 52.2 in March.

Earlier in the day, Asian indices all closed lower. The Hang Seng closed down 1.1%, the Shanghai Composite index down 0.9%, and the Nikkei in Tokyo down 2.9%.

In Europe, the CAC 40 in Paris currently trades down 0.2%, and the DAX 30 in Frankfurt is down 0.2%.

"The fact is that, with some markets at or near their highest levels in years, there appears to be a growing perception that a lot of good news may already be in the price, and that to see further gains investors need to have the confidence to look further out for the next strong catalyst to push European markets through their previous highs for this year," says Michael Hewson, chief market analyst at CMC Markets.

Within UK equities, Legal & General Group is currently the biggest winner in the FTSE 100, up 2.7%. Shares in the life insurance and investments provider have risen sharply after it said that it expects to write more than enough bulk-purchase annuities to offset an expected decline in the individual annuities market in the wake of UK regulatory changes, and it reported a 21% increase in quarterly net cash generation.

J Sainsbury, up 1.6%, is another big blue-chip riser. The British supermarket chain reported higher pretax profit for its recent financial year, as the group's convenience stores and online offering continued to drive the group forward. It posted an underlying pretax profit, which excludes any profit or loss on the disposal of properties, investment-property fair-value movements, financing fair-value movements, and one-off items, of GBP798 million for the year ended March 15, up 5.3% from GBP758 million a year earlier and beating analyst expectations for an underlying pretax profit of GBP782 million.

ITV, up 1.2%, has agreed to acquire a controlling stake in Leftfield Entertainment Group for USD360 million.

The television broadcaster said it acquired 80% of the US reality entertainment group from Founder and Chief Executive Brent Montgomery, in a deal that it expects to add to earningsfrom day one. It said that the deal has already gained regulatory approval, and that it makes ITV's US studios the largest unscripted independent producer in the US.

At the other end of the spectrum, HSBC Holdings, the blue-chip index's second-largest constituent after Royal Dutch Shell PLC, is down 0.8% after it reported a 20% drop in first-quarter pretax profit amidst a continuation of the bank's strategic efforts to cut costs and focus on businesses with good returns.

It said first-quarter pretax profit fell to USD6.79 billion, from USD8.43 billion in the corresponding quarter a year earlier. Revenue, calculated as net operating income before loan impairment charges, fell to USD15.88 billion from USD18.42 billion. Operating expenses were reduced to USD8.85 billion from USD9.35 billion.

Experian is the FTSE 100's biggest faller, down 6%. The company reported an increase in full-year pretax profit profit, but said it faces a number of constraints on growth in the short-term.

"In the short-term, we face a number of one-off headwinds, most notably a subdued trading environment in Brazil over the World Cup and the revenue impact of the changes we are driving in North American Consumer Services, which together will constrain growth in the first half," Don Robert, chief executive, said in a statement.

The group also appointed a new chief operating officer after Chris Callero decided to stand down at the company's annual general meeting in July.

Still to come in the data calendar Wednesday, the latest MBA Mortgage Applications report in the US is released at 1100 GMT, ahead of the US Bureau of Labour Statistics' preliminary reading of first quarter nonfarm productivity and unit labour costs at 1230 GMT.

US Federal Reserve Chair Janet Yellen gives a speech at 1400 GMT.

"Needless to say, the markets will be most concerned with what her comments imply about the continuity of the Fed?s quantitative easing tapering cycle and the possible timing of an eventual interest rate hike," says Ilya Spivak, currency strategist at DailyFX.

Ahead of the data, US stock futures are pointing to a mixed open Wednesday.

By James Kemp; jameskemp@alliancenews.com; @jamespkemp