LONDON (Alliance News) - London's main equity indices closed lower Monday, continuing to slip back from the big gains made last Thursday in the wake of the US Fed decision to keep its stimulus programme at current levels, as US manufacturing data came in below expectations.
Investors are also waiting to see who will join German Chancellor Angela Merkel in a coalition government.
Sunday's German elections saw Merkel and her Christian Democratic Union emerge as run away winners, surging to the party's best result in 20 years. However, the right-wing political bloc missed obtaining an overall victory by five seats and Merkel said Monday she had contacted the leader of the Social Democrats about forming a coalition with her victorious Christian Democratic bloc.
By tradition, German coalitions takes about two months to form, with parties first agreeing joint policies in exacting detail. Merkel said there would be no changes in policy on the eurozone during her next chancellorship.
The last coalition with the Social Democrats collapsed in 2009.
Purchasing Managers' data from across Europe showed the region's private sector recovery gathered momentum, the Markit PMI for the eurozone's manufacturing and service sectors rising to 52.1 points in September, its highest level in 27 months.
Still, the euro lost ground against its major rivals and was trading at USD1.3493 at the close of the London equity markets.
Conversely, US manufacturing data disappointed, with PMI data for September falling to a three-month low of 52.8, from 53.1 in August, missing a consensus forecast of 54.0 according to FXstreet.com.
At the UK close, Wall Street was also in retreat, with the Nasdaq down 0.6% at 3,750.84, the S&P down 0.6% at 1,699.47, and the DJIA down 0.4% at 15,385.68.
The FTSE 100 closed down 0.6% at 6,557.37, the FTSE 250 closed down 0.7% at 14,920.9, and the AIM All-Share closed down 0.6% at 789.63.
Ariana Resources were big gainers, closing up 53% at 1.38 pence. The AIM-listed stock said it had discovered four highly mineralised gold-silver zones within the Kepez and Karakavak prospect areas at its Red Rabbit Gold Project in Western Turkey and substantially increased the number of gold-silver bearing veins mapped in the region.
Imaginatik also made large gains, up 53% at 0.13p on the AIM All-Share index after the company said that it had signed a three-year deal with Shell to construct an innovation challenge platform for the oil giant's graduate programme, and is in talks on a number of other potentially "significant" contracts.
Savile Group is the AIM index's biggest loser, down 48% at 6p after the company said that it was seeking new funding and moving immediately to cut costs. Savile said the lower sales and losses had hit its cash reserves, and it is therefore looking at ways of getting additional funding.
News from the blue chips was light.
The price of gold recovered somewhat in the aftermath of the disappointing US PMI figures, strengthening to USD1329.38 per ounce at the close of UK equity markets. The price of gold had been declining since early morning Friday.
Tuesday's data calendar sees German IFO data at 0900 BST, before UK BBA mortgage approval numbers. US Redbook figures are scheduled for 1355 BST, with housing price index data at 1400 BST. Consumer confidence and Richmond Fed manufacturing index will be released at 1500 BST.
By James Kemp; jameskemp@alliancenews.com
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Ariana (AAU)