MARKET COMMENT: UK Gains Held Back By Miners

LONDON (Alliance News) - UK stocks made gains on Thursday as equity markets across Europe and the US also made strong gains, but the FTSE 100 was held back by mining stocks which were hit by concerns about growth in China.

In the US, the DJIA moved back above 17,000 points, while the S&P 500 hit a new record intraday high, after strong economic data was released. In particular, the US manufacturing PMI came in at 58, up from 55.8 in June and well above economists' expectations for 55.7. It was the highest reading since April 2010.

After the European market close, the DJIA was up 0.4%, the S&P 500 up 0.3%, although the Nasdaq Composite was flat.

European equity markets posted even stronger gains, with the CAC 40 ending up 1.2% and the DAX up 0.9%, despite mixed PMI data.

The eurozone composite PMI slipped to 52.8 in August, from 53.8 in July, missing expectations of 53.4, and the services PMI dropped to 53.5, from 54.2 in July. In Germany, the region's biggest economy, output slowed fractionally. The manufacturing sector PMI came in at 52.0, down from 52.4, but beating expectations of 51.8, while the service sector print was 56.4, down from 56.7, also beating expectations of 55.5.

In the context of the gains in Europe, the London market underperformed as its high number of mining sector constituents weighed. The FTSE 100 ended up 0.3% at 6,777.66, while the FTSE 250 finished up 0.6% at 15,838.57 and the AIM All Share index ended down 0.1% at 763.96.

Mining stocks fell after the Chinese manufacturing PMI slipped to a three month low at 50.3, down from 51.7 in July and missing the market consensus of 51.5. The FTSE 350 mining sector index ended the day down 0.6% with Fresnillo down 3.6%, Randgold Resources down 1.9% and Anglo American down 1.3%.

In the FTSE 250, miner Kazakhmys was the biggest faller, ending down 5.6%. Its pretax loss narrowed in the first-half due to lower write-offs and impairment charges and as its cost cutting programme and efficiency improvements offset lower metals prices and boosted margins. However, revenue fell as it reduced output at several higher cost, lower grade operations as part of its restructuring programme.

Pharmaceuticals led the gainers on the FTSE 100.

AstraZeneca, up 3%, ended the day as the blue-chip index's biggest gainer after it said it has partnered with Illumina to develop a gene-sequencing platform for companion diagnostic tests, applicable across AstraZeneca's oncology portfolio.

The company said Illumina's technology allows gene sequencing that is faster and cheaper than traditional methods, and will be used to screen a panel of several gene sequences, scanning for possible genetic variants, rather than specified mutations from a single tumour sample. This information can then be used to help predict which patients will respond to which treatments.

GlaxoSmithKline ended the day 1.2% higher after the company said late Wednesday that the US Food and Drug Administration has approved its Arnuity Ellipta treatment for asthma in patients aged 12 years and older. It was approved for 100 microgram and 200 microgram doses, and is administered daily via the Ellipta dry powder inhaler, which is also used for a range of other respiratory medicines in Glaxo's portfolio.

The pound dropped Thursday after UK retail sales grew 2.6% on the year in July, down from 3.4% annual growth in June and below economists' forecasts for 3% growth. Sales were up just 0.1% on the month in July, down from 0.2% growth in June and missing the consensus of 0.4% growth.

"There had been some hope that the weakness seen in May and June was a temporary blip for UK consumers but the weakness is persisting into July with only 0.1% growth in the month. Employment is rising but stagnating wages against a backdrop of modest inflation means confidence in future spending ability is being hampered by a short-term squeeze in the cost of living," said Jasper Lawler, an analyst at CMC Markets.

Sterling initially fell sharply in reaction to the news, but recovered throughout the day and was trading at USD1.6590 when the equity markets closed.

Friday's economic calendar is dominated by the Jackson Hole Symposium and speeches by Federal Reserve chief Janet Yellen and European Central Bank President Mario Dragi at 1500 BST and 1930 BST, respectively.

In the corporate calendar, FTSE 250-listed HellermannTyton Group will release interim results.

By Neil Thakrar; neilthakrar@alliancenews.com

Copyright 2014 Alliance News Limited. All Rights Reserved.