(Alliance News) - Stocks in London ended mostly lower on Wednesday as investors shrugged off dovish tones from the US Federal Reserve and robust PMI data.
Federal Reserve Chair Jerome Powell attempted to ease concerns on Tuesday over the timing of higher interest rates.
The FTSE 100 index closed down 15.95 points, or 0.2%, at 7,074.06. The mid-cap FTSE 250 index ended down 20.22 points, or 0.1%, at 22,659.42. The AIM All-Share index rose 8.94 points, or 0.7%, to close at 1,231.09.
The Cboe UK 100 index closed down 0.1% at 705.80. The Cboe 250 ended up 0.1% at 20,372.60, the Cboe Small Companies gained 0.8% at 15,403.10.
In Paris the CAC 40 ended down 0.9%, while the DAX 30 in Frankfurt ended down 1.2%.
"The rebound in risk appetite continues to fizzle out, with equity indices mostly unimpressed by the ongoing high PMI readings that signal a continued economic rebound. Good data is still perhaps to be viewed as bad news, since it pushes central banks towards gradually tightening policy, while the swings and roundabouts of Fed pronouncements over the past week have left markets dazed and confused," said IG Group's Chris Beauchamp.
In the FTSE 100, Royal Dutch Shell 'A' and 'B' shares closed up 1.5% and 1.4% respectively after Societe Generale upgraded the oil major to Buy from Hold.
BP closed up 0.5% after the oil major said it has invested USD7 million in electric vehicle charging firm IoTecha.
Brent oil was quoted at USD75.65 a barrel at the equities close, up from USD74.91 at the close Tuesday. The North Sea benchmark touched an intraday high of USD76.02 in afternoon trade - its highest level since late 2018.
GlaxoSmithKline closed up 1.0% after the drugmaker outlined plans for a spin-off of its consumer health division and future growth.
The Brentford, England-based company said that, between 2021 and 2026, it expects a compound annual growth rate, at constant exchange rates, of 5% for sales and 10% for adjusted operating profit.
The firm said it expects cash generated from operations to exceed GBP10 billion by 2026, with plans to hit over GBP33 billion in sales by 2031.
On the separation of its Consumer Healthcare arm, it plans to do this via a demerger of at least 80% of GSK's 68% holding in the business to GSK shareholders, with the new Consumer Healthcare company shares expected to attain a premium listing on the London Stock Exchange and ADRs to be listed in the US.
The firm has identified a further GBP200 million of annual savings from its separation preparation restructuring programme, bringing the target up to GBP1.0 billion, with no additional delivery costs.
At the other end of the large-caps, Phoenix Group closed down 2.5% at 676.00p. Swiss Re said it has sold a 6.6% stake in the UK life insurer for GBP437 million, offloading half the stake it acquired after selling its ReAssure Group subsidiary to Phoenix last summer. Swiss Re offloaded 66.2 million shares in Phoenix at 660 pence each.
The housebuilding sector ended lower. Barratt Developments fell 1.8%, Taylor Wimpey gave back 2.3% and Persimmon fell 1.7%.
The UK Competition & Markets Authority said Persimmon and insurer Aviva have committed to refund leasehold homeowners following an industry probe.
Persimmon will allow homeowners to buy the freehold of their home at a discount, while Aviva will remove certain clauses from leasehold contracts and repay those who were affected by them, the regulator said.
Persimmon said all homeowners who have bought a leasehold property since 2000 will be allowed to buy their freehold, for a price capped at GBP2,000. The company also will reimburse customers who already bought their freehold for more than GBP2,000 under an existing scheme.
Aviva, which buys leasehold contracts from housebuilders, has agreed to remove "doubling clauses" and refund those who were affected by them. It will also end ground rents that rise with inflation, meaning those rents will revert to their original price.
Aviva shares ended 0.3% lower.
Berkeley Group closed down 0.2%. The housebuilder reported higher profit and revenue in the 2021 financial year as the UK housing market boomed.
The Cobham-based company reported pretax profit of GBP518.1 million for the financial year that ended April 30, up 2.9% from GBP503.7 million the year before. Revenue grew by 15% year-on-year based on the strength of new home sales in London and the South East, with revenues hitting GBP2.20 billion, up from GBP1.92 billion.
Total buybacks and dividends were 19% higher at GBP334.1 million from GBP280.3 million. The company restated its pledge to make annual shareholder returns of GBP281 million until September 2025.
Sterling was finding support from dollar weakness and the latest UK purchasing managers' index data, as investors look ahead to the Bank of England's interest rate decision at midday on Thursday.
The pound was quoted at USD1.3965 at the London equities close, higher from USD1.3927 at the close Tuesday.
The UK private sector's expansion continued in June, according to preliminary figures on Wednesday, though both the manufacturing and services industries face accelerating inflation and signs that growth has peaked.
The IHS Markit/CIPS UK flash composite output index, a weighted average of the services and manufacturing readings, fell to a two-month low of 61.7 points in June, from May's 62.9 tally. The figure showed the industry remained comfortably in growth territory, however, as it was above the 50.0 no change mark.
The manufacturing purchasing managers' index slipped to 64.2 points, from May's 65.6. The services activity index fell to 61.7 points from 62.9. Both figures were also two-month lows, but well above the 50.0 neutral mark.
"Healthy PMIs tally with just about every other UK indicator, which point to economic activity above last summer's levels, when restrictions were comparably low. The biggest danger now comes from the Delta Covid-19 variant, and in particular whether it dampens buoyant confidence levels," said ING.
"None of this is likely to prompt a departure from the Bank of England’s recent cautious optimistic stance when it meets this week. However rising cases add uncertainty, which coupled with the fact that market rate hike expectations have risen since the May meeting, suggests that the Bank won’t offer any firmer hints on when it will begin the process of tightening this week," ING added.
The euro stood at USD1.1947 at the European equities close, up from USD1.1905 late Tuesday, following robust economic data from the continent.
The private sector in the eurozone is poised to post its sharpest monthly growth in 15 years, flash data from Markit showed.
The headline Markit eurozone composite purchasing managers' index increased to 59.2 in June from 57.1 in May, its highest since June 2006. Any figure above the 50.0 mark indicates expansion.
The latest reading indicated a third successive month of accelerating output growth as the economy continued to open up from Covid-19 related restrictions.
The flash eurozone services PMI activity index improved to 58.0 in June from 55.2 in May, a 41-month high. The flash manufacturing PMI was unchanged month-on-month at 63.1.
"Eurozone PMI surveys saw another jump in the services sector as the bloc gears up its reopening in response to the vaccination roll out and declining infections. While the manufacturing survey has been above 60 since March, the closer-contact services sector has lagged as the eurozone continued to struggle with Covid-19 infections. With the percentage of the population receiving a first jab now approaching 50% in the EU, confidence is clearly returning to the most stricken parts of the eurozone economy," commented Oliver Blackbourn, portfolio manager at Janus Henderson.
Against the yen, the dollar was trading at JPY110.85, up from JPY110.73 late Tuesday.
Stocks in New York were marginally higher at the London equities close after data showed US private sector growth remained robust in June.
The DJIA was flat, the S&P 500 index up 0.1% and the Nasdaq Composite up 0.2%.
US manufacturing sector activity rose to a fresh record high in June, while the services sector expanded at a slower pace, the latest figures from IHS Markit showed.
The US services purchasing managers' index print was 64.8 points in June, down from the previous month's all-time high of 70.4. The latest reading missed the market forecast, cited by FXStreet, of 70.0. However, it was still second-sharpest expansion in the service sector since data collection began in October 2009.
The US manufacturing PMI print jumped to 62.6 points in June from 62.1 in May, well above market forecasts of 61.5, preliminary estimates showed. The latest reading pointed to another record growth in factory activity amid further easing of Covid-19 restrictions, Markit said.
However, the US composite PMI score fell sharply to 63.9 points in June, from a record high of 68.7 set in May. All three prints remained well above the 50.0 mark which separates expansion from contraction.
Markit said US private sector businesses registered a further marked expansion in activity during June, as the further easing of Covid-19 restrictions boosted new orders. The rate of expansion softened slightly from the high seen in May, but remained substantial overall.
Gold was quoted at USD1,788.30 an ounce at the London equities close, higher against USD1,780.60 late Tuesday.
The economic events calendar on Thursday has Germany Ifo business climate index at 0900 BST and US GDP, jobless claims and quarterly personal consumption expenditure readings at 1330 BST - the core PCE index print is the Fed's preferred gauge of inflation.
The UK corporate calendar on Thursday has interim results from housebuilder Crest Nicholson Holdings and second-quarter results from cruise line operator Carnival.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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