MARKET COMMENT: UK Stocks Make Slim Gains, US Retail Sales In Focus

LONDON (Alliance News) - UK stock indices are holding on to slim gains Friday, recovering a little of Thursday's losses as investors trade with cautious optimism after the latest YouGov poll of Scottish voters showed the vote swinging marginally in favour of the unionists.

By mid-morning Friday, the FTSE 100 is up 0.1% at 6,805.53, the FTSE 250 is up 0.4% at 15,677.95, and the AIM All-Share is up 0.1% at 776.91.

Major European markets are a little softer, with sentiment hurt by the introduction Friday of a fresh round of EU sanctions against Russia targeting key players in the oil industry. The French CAC 40 and the German DAX 30 are both down 0.2%.

AVEVA is the stand out mover in the London market. Shares in the FTSE 250-listed IT company have plummeted more than 20% after it warned that its full year revenue is now likely to be between GBP84 million and GBP90 million, significantly lower than the GBP107 million that had been expected. Analysts have pointed out that AVEVA's fortunes are very closely linked to the expenditure of the oil and gas majors. In fact, Liberum Capital calculates that this revenue stream accounted for 95% of the group's total revenue growth over the last five years.

"The recent focus that oil majors have put on capital discipline may be the high level driver of AVEVA's weaker than expected performance in the first half," says Liberum analyst Eoin Lambe.

Barclays has seen its shares gain 1.3% after it ended months of speculation by announcing that John Mcfarlane will be the bank's next chairman. Mcfarlane will step down as Chair of Aviva and FirstGroup, and replace outgoing Barclays Chair David Walker after the bank's 2015 annual general meeting. Barclays' gain is Aviva's loss Friday, with the insurer's shares down 0.8%. FirstGroup is little moved, down 0.1%.

Anglo American leads the FTSE 100 fallers, down 1.3% amid reports that it will suspend its Canadian coal operations at the end of the year due to a continued slump in coking coal prices.

UK construction output remained flat in July compared to June, according to data released by the office for national statistics Friday.

The data has taken some of the shine off of the pound, which received a boost late last night after the latest opinion poll gave the unionists a 4 point lead in the upcoming Scotland independence vote. Having peaked at USD1.6277 last night, sterling is back down to USD1.6245.

The recent strength of the dollar is also continuing to outstrip the pound in the run up to next week's Federal Reserve policy meeting, at which many are expecting are expecting a shift in wording from the Fed over its timetable for the first interest rate rise. The key issue will be whether the Fed removes the words "considerable time" from the statement that indicates how long it will be appropriate to maintain emergency interest rates for.

The next key data that the Fed will be watching comes later Friday, when US retail sales numbers for August are released at 1330 BST. Given the heavy reliance of the US economy on the consumer, and the fact that these figures cover the summer holiday season, analysts see them as a key indicator of the economy's strength. Economists are expecting a rise of 0.6% month-on-month in August, up from flat growth in July.

Ahead of the data, futures markets indicate that Wall Street will make a slightly softer start to the session, with the DJIA and the S&P 500 both pointing down 0.1%.

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

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