LONDON (Alliance News) - The major UK stock indices are edging higher Wednesday, with corporate updates providing a number of stand-out stock movers as markets in general enjoy a rebound from Tuesday's sell-off.
Broad market positivity is being supported by the results of the US midterm elections, from which the Republicans gained control of the Senate. The Republicans already had control of the House of Representatives, which means the party seen as more pro-business now controls the whole of Congress for the first time in eight years. While the result will make it harder for President Barack Obama to implement new policies during his last two years in office, commentators have noted that stock markets tend to have a positive reaction to a Republican-controlled Congress.
The pound, meanwhile, has fallen to a three-week low against the dollar after the UK service sector PMI fell to a 17-month low in October.
By mid-morning Monday, the FTSE 100 is up 0.9% at 6,513.13, the FTSE 250 is up 0.5% at 15,474.23, while the AIM All-Share is down 0.2% at 714.02.
Major European markets are also higher, with the French CAC 40 up 1.2%, and the German DAX 30 up 1.3%.
On the London market, Marks & Spencer Group leads FTSE 100 gainers, up 8.1% after reporting interim results slightly ahead of analyst expectations, with growth in underlying profit recorded for the first time in four years. Investors have been impressed that the retailer's gross margins have held up well in the face of a difficult period for UK retailers in general, with an ongoing price war in the food sector and unseasonably warm weather hurting high street clothing sales.
Meggit also is a strong blue chip gainer, up 6.5% after saying it will start a share buyback on November 6. The engineering group said its organic revenue increased in the third quarter, buoyed in particular by growth in its civil aerospace markets, but its total revenue declined as it took a hit from currency movements and as sales declined at its energy business.
Tullow Oil is up 3.4%, despite a continued fall in oil prices, after the Wall Street Journal reported that India's state-owned oil producer ONGC Videsh has been involved in recent takeover talks.
Howden Joinery is the best gainer in the mid-cap FTSE 250 index, up 7.7% after releasing a positive interim management statement a week ahead of schedule. The kitchen and joinery group company said its full-year numbers will be ahead of expectations. Numis has upgraded its full-year revenue estimate by 12%.
FirstGroup is up 3.4% after the transport operator released interim numbers in line with expectations and maintained its full-year estimates. The group tends to see most of its revenue in the second half due to the long school summer holiday weighing on its bus operator business in the first half.
Stock Spirits Group has plunged 23% after warning that third-quarter revenue growth had fallen short of expectations. Stock Spirits said it was hit by aggressive pricing by competitors and heavy promotional activity in the trade market in the latter half of the quarter, and its full-year results could miss expectations as a result.
Another disappointing round of PMI data has seen the eurozone service sector PMI for October revised fractionally lower to 52.3 from the flash estimate of 52.4, confirming a slight slowdown from the 52.4 recorded in September. That came as the German number was revised down to 54.4 from the flash for October of 54.8, confirming a fall from 55.7 in September. The Italian service sector saw an unexpected expansion in October, with the PMI rising to 50.8 from 48.8 in September, beating the estimate for a print of 49.2, and dragging the sector out of contraction for the first time since June.
Eurozone retail sales have also disappointed, contracting 1.3% in the month of September, faster than the 0.8% contraction that had been expected and reversing the 0.9% rise recorded in August. On an annual basis, retail sales in the single currency block were up 0.6% in September, just half of the expected rise.
The UK service sector slowed more than expected to a seventeen-month low in October, according to Markit PMI data. The reading came in at 56.2, down from 58.7 in September and missing expectations for a print of 58.5.
Markit cited market uncertainty creeping into client decision-making as a reason for the slowing activity. While the UK remains well ahead of eurozone countries, the service sector accounts for a large part of the UK economy and the fall in the PMI was enough to give a knock to the pound. Sterling fell against the dollar to a near one-year low of USD1.5873, matching the low made three weeks ago. Against the euro, which is also lower against the dollar, the pound has fallen to EUR1.2717.
Still to come Wednesday, the US ADP employment change report will provide the usual warm-up to Friday's non-farm payroll data. At 1315 GMT the ADP report is expected to show an additional 220,000 jobs in October, which would be an improvement from 213,000 in September. US Markit service sector PMI data is also due at 1445 GMT, with the ISM PMI due at 1500 GMT. The ISM number is expected to fall to 58.0 in October from 58.6 in September.
President Obama alsois expected to give a response to his party's defeat in the mid-term elections.
US futures currently indicate a positive reaction to those election results, with the DJIA, the S&P 500, and the Nasdaq Composite all pointing 0.4% higher.
"Stocks in the US look to start Wednesday in a positive fashion thanks to a clear Republican party victory in the mid-term elections brushing aside disappointing service sector data from China and Europe," says Jasper Lawler, market analyst at CMC Markets.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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Tullow Oil (TLW)
Howden Joinery (HWDN)
Marks & Spencer (MKS)
Firstgroup (FGP)