LONDON MARKET MIDDAY: NY Seen Down As Investors Await US Data, Yellen

LONDON (Alliance News) - London shares were lower Thursday midday, while Wall Street was called for a negative open, as investors showed caution as they await economic data from the US and a speech by US Federal Reserve Chair Janet Yellen after the London close.

The FTSE 100 index was down 0.7% at 5,986.72 points, the FTSE 250 down 0.5% at 16,584.33, and the AIM All-Share down 0.1% at 730.07. In Europe, the CAC 40 index in Paris was off 1.0%, and the DAX 30 in Frankfurt was down 1.7%.

In Asia, the Tokyo stock market returned to trade after a five-day holiday, with the Nikkei 225 index closing down 2.8%. In China, the Hang Seng in Hong Kong ended down 1.0%, while the Shanghai Composite closed up 0.9%.

US stock futures are pointed lower, with the Dow 30 index seen down 0.5%, the S&P 500 down 0.6% and the Nasdaq 100 pointed down 0.7%. Wall Street ended lower Wednesday, having showed a lack of direction throughout much of the trading day.

"Ever since Black Monday [August 24] dealers have been extremely careful not to rush in and buy the market without good reason, and even when they do, the buying tends to taper off fairly quickly," said IG analyst David Madden.

"We have had two days of serious declines in the last month and there is a feeling that some traders are scared to get back into the water. Equity markets are meandering along for now, but without extra encouraging news traders won’t stay in buying mode," added Madden.

Markets are looking ahead to a speech by Fed Chair Janet Yellen, who will be speaking at 2200 BST at the University of Massachusetts Amherst about inflation dynamics and monetary policy.

Craig Erlam, senior market analyst at Oanda, said that volatility can be expected during the Yellen speech as investors seem "more confused than ever" about when the Fed will raise interest rates.

But a busy economic calendar in the US also will be of interest. There are US continuing and initial jobless claims at 1330 BST alongside durable goods orders and the Chicago Fed national activity index. Following this are US new home sales at 1500 BST and Kansas Fed manufacturing survey at 1600 BST.

According to FXStreet.com, US initial jobless claims are expected to increase slightly to 271,000 in the week ended in September 18 from a previous reading of 264,000. Continuing jobless claims are expected to slightly decrease to 2.235 million for the week ended in September 11 from 2.237 million.

Meanwhile, economists expect US durable goods to decline by 2% in August, following a 2% rise in July. Core orders for August are expected to rise 0.1%, down from a revised July rise of 0.4%.

Outside the US, German business sentiment improved unexpectedly in September, the Munich-based Ifo Institute said on Thursday. The Ifo Business Climate Index rose to 108.5 in September from 108.3 in August. It was forecast to fall to 107.9.

However, CMC Markets chief market analyst Michael Hewson warned that this survey was done before the Volkwagen scandal broke. Hewson said that "given the repercussions this event is likely to have on German supply chains...if the survey were done now, the result would quite likely be very different."

Volkswagen shares were up 5.1%, with investors still responding to the resignation of Chief Executive Martin Winterkom, who took responsibility for the emissions testing scandal that has played havoc with its reputation and market value.

Shares in VW peer BMW were down 6.4% in Frankfurt after a German magazine, Auto Bild, reported that the X3 xDrive 20d sport utility vehicle emitted as much as 11 times the European limit for air pollution in a road test, Bloomberg reported.

BMW said there is no system in its cars that responds to tests differently than it would operate on the road, according to the Bloomberg article.

In London, shares in Next were among the FTSE 100 gainers, up 0.8%, after Nomura upgraded the fashion retailer to Buy from Neutral. The broker said the fashion retailer has multiple growth opportunities which could drive shareholder return.

Meanwhile, FTSE 250 sugar and sweeteners company Tate and Lyle led the mid-cap risers, up 3.2% after Liberum upgraded it to Buy from Sell.

Thomas Cook Group shares were up 1.4%. The company said that summer holiday sales were in line with expectations and that it has had an encouraging start to winter trading.

The travel operator said that all markets performed in line, with Northern Europe achieving particularly strong trading in the second half of the year. The summer season is 91% sold, in line with the same time last year, and all major source markets have seen improved bookings for the winter season, Thomas Cook said.

Among mid-cap fallers was Poundland Group, down 7.6%. The discount retailer said it will raise GBP50 million through the placing of shares in order to fund its acquisition of 99p Stores, and said that it expects core pretax profit for its full financial year to meet market expectations, although it will be weighted towards the second half.

In the AIM All-Share index, security and risk management consultancy Falanx Group shares were trading 15% higher after the company announced a slew of new contract wins for its cyber security and corporate intelligence businesses.

It said its cyber arm has entered into deal with three financial services companies, which it did not name, to become their preferred cyber security provider. One of the bank is an international trading house, while the others are boutique advisory firms, it said.

Meanwhile, Independent Oil & Gas shares were up 13% after it said it has made significant progress on its Skipper licence in the North Sea and said it has reached an agreement to extend its funding deal with Darwin Strategic.

Independent Oil & Gas said planning work on the Skipper well is now at an advanced stage and essential long-lead items have been ordered in order to facilitate the start of drilling later in the year.

By Daniel Ruiz; danielruiz@alliancenews.com

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