MARKET COMMENT: UK Shares Weak As Investors Await ECB Decision

LONDON (Alliance News) - UK shares are lacking support Thursday morning, as investors avoid risk ahead of the European Central Bank monetary policy decision at midday and as corporate earnings take the spotlight in the meantime.

At mid-morning, the FTSE 100 is trading down 0.3% to 6,519.07, the FTSE 250 is down 0.3% to 15,474.14, and the AIM All-Share is down 0.2% at 715.13.

European equities are also lower, with the CAC 40 in Paris trading 0.5% lower and the DAX 30 in Frankfurt down 0.3%.

Wm Morrison Supermarkets is the stand out performer in the FTSE 100, with its shares up 6.0%. The UK grocer said it was making progress in its three-year turnaround plan, cutting long-term prices and focusing less on promotions, and it narrowed its full-year profit guidance range as third quarter sales continued to slide, albeit at a slower pace.

The company said it expects to meet its full-year profit target and narrowed its target range for underlying pretax profit to between GBP335 million and GBP365 million, from between GBP325 million and GBP375 million previously but still around half the profit of GBP785 million in the year to February 2, 2014. The figures comes before an expected GBP65 million in development costs are taken out and it books GBP70 million in other costs.

The news has had a positive effect for other grocers, with J Sainsbury up 5.2% and Tesco is up 3.3%. Marks and Spencer Group, which had a strong update itself on Wednesday and since has received broker upgrades, is up 4.4%.

RSA Insurance Group is the heaviest faller in the FTSE 100, down 2.9%. The company reported a decline in premiums as a result of weak insurance market conditions and the group's restructuring plan being led by Chief Executive Stephen Hester. In a statement, RSA said net written premiums fell to GBP5.68 billion in the first nine months of the year, compared with GBP6.74 billion in the corresponding period last year.

Pharmaceuticals also are amongst the worst performers in the blue-chip index. AstraZeneca said it expects core earnings per share to be hit by currency effects in the region of 5% in its full-year. "That means core EPS is likely to be USD4.30, versus consensus at USD4.55," says Berenberg analyst Alistair Campbell.

AstraZeneca is down 2.4%, and GlaxoSmithKline is down 2.2%, while the FTSE 350 pharmaceuticals and biotechnology index is down 2.0%, making it the heaviest falling sector index.

Also warning of currency effects is FTSE 250-listed trading software and services provider Fidessa Group. The company said it has returned to underlying growth but warned that it expects the "exceptional" strength of sterling during the year to more than offset that and affect reported numbers. Fidessa is one of the biggest fallers in the mid-cap index, trading 2.0% lower.

UK industrial production growth exceeded expectations in September. Industrial output grew 0.6% from August, when it was down by 0.1%, the Office for National Statistics reported. Production was forecast to grow only 0.4%. Manufacturing output advanced at a pace of 0.4% month-on-month in September after rising 0.2% in August. It was slightly faster than an expected 0.3% increase.

Investors eyes will be firmly fixed on central banks with the Bank of England first to release its monetary policy decision at 1200 GMT. This will be followed by the European Central Bank decision at 1245 GMT and its press conference with President Mario Draghi at 1330 GMT.

In the afternoon, there will be US initial and continuing weekly jobless claims at 1330 GMT and the UK National Institute of Economic and Social Research estimate for UK GDP for the three months to October at 1500 GMT.

Futures point to a lower opening on Wall Street, with the DJIA and S&P 500 both pointed down 0.1%, while the Nasdaq Composite is indicated to open 0.2% lower.

By Neil Thakrar; neilthakrar@alliancenews.com

Copyright 2014 Alliance News Limited. All Rights Reserved.