News Column

MARKET COMMENT: UK Stocks Fall Amid Low Volume, UK Data Remains Strong

June 10, 2014

Jon Darby

LONDON (Alliance News) - London's stock indices are lower across the board Tuesday amid more thin volumes, even though equities markets in Asia and the US closed mostly higher overnight, and major European peers have also made slim gains.

The FTSE 100 came close to a fresh all-time high on Monday, but failed to make it for the second time in a month. Volumes in London remain low.

By mid-morning Tuesday the FTSE 100 was down 0.5% at 6,836.17, the FTSE 250 down 0.3% at 16,178.46, and the AIM All-Share down 0.2% at 803.35.

The major European indexes received a boost last week when the European Central Bank eased monetary policy. The German DAX 40 is up a further 0.1% Tuesday morning, holding above the 10,000 point level it hit in the wake of the ECB announcement. The French CAC 30 is also up 0.1%.

The FTSE 100 made an all-time intra-day high of 6,894.88 on May 15. Since then, trading volumes have been fairly light and ranges have been tight. The leading index came close to that high again on May 29, reaching 6,882.14, and on Monday it peaked at 6,878.96, before once again failing to push to a fresh high, despite stocks in the US and Europe breaking new ground in recent sessions.

"They say 'still waters run deep' and the same could be said of stock markets in the past few weeks, as volatility hits multi year lows and volumes languish in the doldrums," said CMC markets chief market analyst Michael Hewson.

"Low volatility is flashing amber for traders, while the lack of a major correction will mean that nervousness will be rising over the summer, even if volume isnít," said IG market analyst Alistair McCaig.

BT Group has dropped to the bottom of the FTSE 100, and is weighing on the Fixed Line Telecommunications sector index, after BSkyB said it will launch a new sports channel dedicated to European football and offer two years of free broadband to customers that sign up for it.

"We do not see the channel as a driver of customer growth or upgrades, but regard the aggressive broadband offer as confirmation that Sky is upping the ante against a resurgent BT," says Berenberg analyst Sarah Simon.

Amid the intensifying competition for market share, BT is down 2.7%, and BSkyB is down 1.1%.

At the other end of the FTSE 100, Imperial Tobacco shares are up 0.4% after the company said it will float its European logistics business, Logista, on the Spanish stock exchanges.

Oxford Instruments leads the FTSE 250 gainers, up 2.5%, after releasing its full-year profits. Although the technology group's pretax profit was lower due to costs relating to the acquisition of Andor Technology in January, its orders for the first two months of its current year are ahead of last year.

Lonmin leads the mid-cap fallers, down 4.6%, after talks brokered by the South African government aimed at halting a mining strike in South Africa ended without resolution Monday evening.

The pound regained ground against the dollar after UK industrial and manufacturing data were better-than-expected. The pound had slipped a little in early trade, reaching a three-day low of USD1.6770, but has since recovered to flat at USD1.6800.

UK Industrial production increased by 3.0% year-on-year in April, the fastest pace since January 2011, while manufacturing production increased by 4.45 on an annual basis, also the fastest pace since 2011. On a monthly basis, the reading were each up by 0.4%, in line with expectations.

"Manufacturing is benefiting from gradually returning growth in the Eurozone and solid underlying momentum in the US, as well as the strong UK domestic recovery which is increasingly spreading to investment," said Berenberg chief UK economist Rob Wood. "The UK economy is increasingly firing on all cylinders, setting up the second quarter for another strong growth reading."

Still to come Tuesday, the National Institute of Economic and Social Research will release its estimate of UK GDP growth over the three months to May at 1500 BST. From the US, there is the NFIB business optimism index from May at 1230 BST, and wholesale inventories data for April at 1300 BST. Inventories are expected to have risen by 0.6% over the month, less that the 1.1% recorded in March.

Ahead of the US maker open, futures trading indicates a softer open on Wall Street, with the S&P 500 and the DJIA both pointing down between 0.1% and 0.2%.

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Source: Alliance News

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