MARKET COMMENT: Banks Lead Mixed Stocks As Market Awaits US GDP

LONDON (Alliance News) - Stock indices across the UK and Europe are drifting between positive and negative territory without any clear direction Wednesday, as investors weigh up the consequences of a new round of sanctions imposed on Russia by the US and EU and await some all-important economic data to come later in the session.

US second quarter GDP at 1330 BST is the clear calendar highlight for markets Wednesday.

By mid-morning Wednesday the FTSE 100 is flat at 6,808.78, the FTSE 250 is fractionally lower at 15,685.38, and the AIM All-Share is down 0.1% at 770.44.

Within European majors, the German DAX is flat, and the French CAC 40 is down 0.1%.

The banking sector leads the gains after Barclays became the second of the big banks to beat analysts expectations in the first half. Following Royal Bank of Scotland's surprise announcement last week, Barclays said it made a GBP3.35 billion adjusted pretax profit in the first six months of 2014, down from a GBP3.59 billion in the year before but ahead of the GBP2.96 billion consensus forecast. Barclays also updated as to its progress on capital ratios, with the CET1 ratio increasing to 9.9% and the PRA leverage ratio increasing to 3.4% in the first half.

"The shares have been terrible performers of late so the profit beat and good progress on capital should come as a welcome relief to the market," said shore Capital analyst Gary Greenwood.

Barclays shares lead the FTSE 100 gainers, up 3.4%, while RBS is up 2.2%. Lloyds, which reports its own results on Thursday, is up 0.8%, although TSB, which also reports Thursday, is down 0.5%.

The building and housing-related stocks also are performing well after a number of positive updates. Housebuilder Taylor Wimpey is up 2.1% after reporting a rise in pretax profit in the first half of the year to GBP178.4 million from GBP109.0 million a year earlier, as it continues to benefit from the strength of London's housing market.

Builders merchant Travis Perkins is up 3.3% after reporting a rise in pretax profit to GBP153.7 million in the first half, up 14% from the previous year, with the company citing improving market conditions and increased customer confidence. The group's consumer division, which incorporates DIY chain Wickes, saw revenue rise 8.8%.

Rightmove shares are up 2.1% after the property search website said its revenue rose by 20% in the first half of the year, leading to a rise in pretax profit to GBP58.68 million from GBP44.6 million a year earlier. Rightmove increased its interim dividend to 13 pence from 11 pence on the back of the strong performance.

The miners are providing a drag on indices Wednesday, with Antofagasta leading the FTSE 100 fallers, down 2.6% after reporting production values in line with expectations, but also a 16% rise in its net cash costs. Antofagasta has generally underperformed the other copper miners so far this year, which analysts atribute to its significant cost inflation.

The eurozone economic sentiment indicator ticked fractionally higher in July, reaching 102.2, up from 102.1 in June and beating economists expectations for a fall to 101.8.

The euro has done nothing but continue its recent slow decline in response to the survey, however, as the currency markets wait for the main economic event of the day, US second quarter GDP at 1330 BST.

Ahead of the data release, the euro trades at USD1.3400, and the pound trades at USD1.6935.

Futures trading indicates that a marginally higher open can currently be expected on Wall Street, with the DJIA and the S&P 500 both pointing 0.1% higher, and the Nasdaq Composite pointing 0.2% higher following Twitter's encouraging results after the close on Tuesday.

Economists are looking for US GDP to have rebounded by 3.0% at an annualised rate in the second quarter of the year, after its disappointing 2.9% fall in the first quarter.

Ahead of that, German inflation data is released at 1300 BST, where consumer prices are expected to be up by 0.8% year-on-year in July, which would be slower than the 1.0% inflation in June.

By Jon Darby; jondarby@alliancenews.com; @jondarby100

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