LONDON (Alliance News) - Stock indices across the UK and Europe trade lower Monday as manufacturing and services PMI data from across the region have failed to live up to expectations, while the mining stocks are the best performers after similar data from China was notably better.
Futures trading had been indicating a marginally stronger start for UK stocks after the HSBC Chinese manufacturing PMI recorded the first expansion of the sector for six months in June, and a similar PMI from Japan also indicated expansion there for the first time in three-months. However, equity sentiment has quickly turned negative after numbers from across Europe have been less positive.
By mid-morning Monday the FTSE 100 is down 0.3% at 6,804.68, the FTSE 250 is down 0.6% at 15,692.45, and the AIM All-share is just fractionally lower at 785.13.
Within European majors the French CAC 40 is down 0.7% at 4,512.01, and the German DAX 30 is down 0.7% at 9,915.21.
The French Markit manufacturing PMI slipped to 47.8 in June from 49.6 in May, missing economists expectations for only a small drop to 49.5. The French service sector number was also worse than expected, falling to 48.2 in June from 49.1 in May, against an expectation for a rise to 49.4. The flash estimates mark the second consecutive month of contraction in both sectors in the struggling French economy.
"There remained little sign of any turnaround in the performance of Franceís economy at the end of Q2, with output falling for a second successive month and at a faster rate," said Markit senior economist Paul Smith. "On these trends, the economic underperformance of France seems set to persist well into the second half of 2014."
In Germany, the Markit data shows the manufacturing sector continuing to expand, but at a slightly slower rate than expected, with a reading of 52.4 in June, up from 52.3 in May, missing forecasts of 52.5. The service sector PMI in Europe's largest economy slipped to 54.8 in June from 56.0 in May, missing economist expectations for a print of 55.7.
The overall composite PMI for the whole eurozone slipped to 52.8 in June from 53.5 in May, missing economist expectations for the reading to remain stable.
"China saw a positive turnaround in manufacturing but sentiment took a knock when the data from Europe missed already pretty low expectations," said CMC Markets market analyst Jasper Lawler. "The ECBís latest stimulus measures arenít expected to have any effect for the next few months so with the deteriorating situation in Iraq, the economic data needed to be strong in Europe to fend of the selling pressure."
News flow from Iraq, where US Secretary of State John Kerry has arrived in Baghdad for talks with Iraqi officials, continues to weigh on investor sentiment Monday. As Kerry prepares to meet with officials including the Iraqi prime minister, there are reports that at least fifty seven people have been killed in clashed between police forces and militants, who attacked a security convoy transporting prisoners in Iraq's Hilla city.
The better picture in China, which is the biggest source of demand for many of the FTSE-listed miners, sees the sector outperform Monday. In the leading index, Rio Tinto is up 2.3%, BHP Billiton is up 1.7%, and Anglo American has gained 0.9%. Ferrexpo leads the FTSE 250 gainers, up 2.9%.
ARM Holdings leads the FTSE 100 gainers, up 2.3%. Morgan Stanley on Monday said that following sector under-performance so far this year, momentum could be turning for the micro-chip maker. ARM makes chips for Apple products, and in a morning note to clients, Morgan Stanley said that due to a strong Apple product cycle in the second half of the year, ARM's royalty growth could be about to accelerate. However, analysts at Morgan Stanley left their rating at Equal-Weight, saying it's not yet time for an upgrade.
The housebuilders are underperforming Monday after a Bank of England rate setter indicated at the weekend that he is likely to vote for an interest rate rise by next May. Writing in the Sunday Telegraph, David Miles said the strength of the UK economic recovery meant that he was increasingly likely to vote for a hike before he steps down from the Monetary Policy Committee in May next year.
Barratt Developments and Persimmon lead the falls in the FTSE 100, down 3.1% and 2.6% respectively. London-based estate agent Foxtons leads the FTSE 250 faller after having analysis coverage initiated by Goldman Sachs with a Neutral rating.
With nothing remaining in the European calendar Monday, attention will soon switch to the US and whether markets there can manage to change the morning sentiment after recording further all-time highs on Friday. Futures trading currently indicates this is unlikely, with a marginally lower open expected for the DJIA and the S& 500.
In the US data calendar, the Chicago Fed national activity index for May is due at 1330 BST, followed by the Markit manufacturing PMI at 1445 BST, and existing home sales data at 1300 BST.