LONDON (Alliance News) - Stocks across London and Europe reversed a modestly higher open to trade lower mid-morning Friday following disappointing data on eurozone private sector loans, while the situation in Greece also continues to suppress equity markets.
Eurozone money supply growth improved in April, but credit extended to the private sector remained flat, the European Central Bank reported. The broad monetary aggregate M3 grew 5.3% year-on-year in April, which was faster than the 4.6% expansion seen a month ago and exceeded the expected growth of 4.9%.
However, at the same time, annual growth rate of credit extended to the private sector remained unchanged, following a 0.2% fall in the prior quarter. Loans to households also showed no growth, unchanged from the prior month. The annual growth rate of lending for house purchase, the most important component of household loans, came in at 0.1% in April, compared with 0.2% a quarter ago.
European stock indices fell after the data, with the French CAC 40 currently trading down 0.9% and the German DAX 30 down 1.1%.
The FTSE 100 trades down 0.3% at 7,018.36, the FTSE 250 trades down 0.1% at 18,225.41, but the AIM All-Share index is up at 771.13.
The Greek debt saga continues. International Monetary Fund chief Christine Lagarde said she no longer rules out Greece exiting the eurozone. "Greece's exit is a possibility," Lagarde told Germany's daily Frankfurter Allgemeine Zeitung in an interview published on the newspaper's website on Thursday.
The IMF chief said that such a move would not be easy but would "probably not mean the end of the euro," adding: "It is very unlikely that we will reach a comprehensive solution in the next few days."
IG market analyst David Madden says traders are not taking any risks while bailout talks continue to bring no concrete progress.
"Traders know deep down that a deal will be reached in the nick of time, but those who don't have the stomach for it are getting out of the market while they can," the analyst says.
On the corporate front, there is another flurry of merger and acquisition news from from TeleCity Group, Synergy Health and Carillion.
Data centre operator TeleCity said it agreed terms on a GBP2.35 billion cash and share takeover offer from US peer Equinix, and terminated its previous deal to acquire Dutch data centre company Interxion Holding.
Under the terms of the deal TeleCity shareholders will receive 572.5 pence in cash and 0.0327 shares in the new company per share, which values each TeleCity share at 1,145.0 pence, based on the volume weighted average price of Equinix shares in New York over the past five days. TeleCity trades down 0.3% at 1,087.00p Thursday.
Synergy Health and STERIS said they intend to contest the US Federal Trade Commission's attempt to block STERIS's proposed USD1.9 billion cash and share takeover of Synergy Health. The FTC has informed Synergy that it intends to seek to block the acquisition. STERIS and Synergy said in a statement that they welcome "a full judicial review of the competitive effects of the combination".
Synergy Health's share price has fallen over 16% since last Friday amid speculation of a block of the acquisition by the FTC, and trades down 1.9% at 1,816.72 pence mid-morning. The offer from STERIS is worth GBP19.50 per Synergy share.
FTSE 250-listed construction and support services company Carillion said it has acquired Canadian remote-site accommodation and services business Outland Group for up to GBP63 million in cash in order to boost its operations in Canada. Carillion trades up 0.6%.
Ophir Energy is the best mid-cap performer, up 4.8% after it was upgraded to Overweight from Equal-Weight by Barclays. The bank said it believes recent stock price weakness - down by 25% in the last month, versus the peer group down 5% - combined with significant progress in Ophir's Equatorial Guinea project provides an attractive opportunity to revisit its investment case.
Associated British Foods leads the FTSE 100 gainers, up 2.6% after it was upgraded to Buy from Sell by Goldman Sachs.
Old Mutual trades down 1.4%, after it said it agreed a deal to sell the Swiss arm of its Skandia business for an undisclosed amount. The Anglo-South African group said Skandia Leben, part of its Old Mutual Wealth division, has been sold to Life Invest Holding, a company formed by the German conglomerate Mutschler Group and Hannover Re, the German reinsurer.
The focus for markets now will be US first quarter GDP at 1330 BST, as investors look for more clues as to when the US Federal Reserve will lift US interest rates. Economists expect GDP to show a 0.8% decline.
"This is a far cry from what markets had been expecting just over a month ago when we were hoping to see growth of 1%, amidst expectations of a possible June rate rise," says Michael Hewson, chief market analyst at CMC Markets. "It's also well below the 2.2% expansion seen in Q4, and thus far in May and well into Q2, market expectations of a sharp bounce back still haven?t been completely fulfilled, though we have seen some signs of a slight pickup in consumer spending."
Also ahead in the calendar is the Chicago purchasing managers' index at 1445 BST and the Reuters/Michigan Consumer Sentiment Index at 1500 BST.
Futures point to a lower open for US share prices, with the DJIA indicated down 0.4%, the S&P 500 down 0.3% and the Nasdaq 100 down 0.5%.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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