News Column

MARKET COMMENT: FTSE 100 Higher But Set To End June With Loss

June 30, 2014

James Kemp



LONDON (Alliance News) - London'sFTSE 100 index is fractionally higher for the third consecutive day Monday, but still looks set to end the month of June firmly in negative territory.


By mid-morning, the FTSE 100 is up 0.01% at 6,758.55, the FTSE 250 is up 0.3% at 15,721.12, and the AIM All-Share index is up 0.2% at 783.18.


The FTSE 100 ended May at 6,844.51, up 1% on April.


It is a similar story in Europe, where the DAX 30 in Frankfurt is up 0.4%, and the CAC 40 in Paris is up 0.03%.


"The summer lull seems to have started in earnest this morning, as early gains for the London market were given back," said Chris Beauchamp, a market analyst at IG.


Despite managing to hold onto some of those gains, London's major indices all look set to post significant losses in the month of June.


In data recently released, the Bank of England revealed that UK mortgage approvals for house purchases fell for the fourth consecutive month in May, slipping to 61,707 from 62,806 in April, but were still stronger than the larger decrease to 61,600 that economists had been forecasting.


"Housing activity is steadying after the temporary hit from the more demanding mortgage regulations introduced in April," said Robert Wood, chief UK economist at Berenberg. "After the temporary disruption from tighter regulations has passed, we expect approvals to return to their upward trend and we look for house prices to gain 10% in 2014 and 2015," he added.


At the same time, the BoE said UK consumer credit increased by GBP0.74 billion in May, in line with the average monthly increase over the last six months, and slightly higher than the GBP0.65 billion increase seen in April. Net lending to individuals rose by GBP2.7 billion in May versus a GBP2.4 billion rise in April.


On the continent, eurozone inflation remained stable at 0.5% month-on-month in June, the preliminary reading from Eurostat revealed, coming in below the 0.6% that had been expected. This is the seventeenth consecutive month that inflation in the single currency area has come in below the European Central Bank's target of "below, but close to, 2%".


In the forex market, the pound and the euro were little changed in the aftermath of the data. Sterling currently trades at USD1.7018, while the euro trades at USD1.3656.


At the individual UK equity level, Shire up 1.6%, is currently the leading gainer in the blue-chip index. The pharmaceutical company's shares have moved sharply higher after it said it has received a USD248 million cash refund from the Canadian revenue authorities, and said it expects a further USD162 million in late 2014. Shire added that it intends to use the cash to repay debt, giving it increased capacity to invest in business development activities


Additionally, according to a report by the Financial Times late on Sunday, US-based drugmaker AbbVie Inc's Chief Executive Richard Gonzalez is set to hold talks with Shire's investors when he flies to London this week. Gonzalez will speak to shareholders in an effort to increase pressure on Shire's board to enter negotiations, after it rejected three indicative offers. AbbVie first approached Shire in early May with a GBP39.50 cash and shares offer, that would have valued Shire at GBP23.3 billion. Its third and latest offer was GBP46.26 a share in cash and shares, it said, valuing Shire's share capital at GBP27.2 billion.


Coca-Cola HBC AG, up 1%, is another big riser in the FTSE 100. The company, which is Europe's largest bottler of Coca-Cola products, said it intends to delist its American depositary receipts from the New York Stock Exchange, ending the programme because most trading of its shares takes place on the London Stock Exchange.


The company said that the UK has become the main trading market for its shares, accounting for more than 85% of total volume in the 12 months ended June 18. In contrast, only 1.4% of its shares were held as ADRs at the end of that period, with trading volume in the US accounting for just 1.3% of the total.


At the other end of the spectrum, easyJet, down 4.8%, is the index's heaviest faller. Bank of American Merrill Lynch has downgraded the company to Underperform from Neutral, lowering its price target by 36% to 1,150 pence from 1,800p.


Sports Direct International, down 2%, is the second biggest loser. The company said that it is not considering an offer to acquire UK footwear retailer, Office, following recent trade speculation.


The sports retailer quashed the rumours, saying that such speculation was "unhelpful to the customers, staff, suppliers and other stakeholders of both companies."


In the FTSE 250, Imagination Technologies Group is the biggest riser, up 4.2%. The technology company's shares have rebounded somewhat after a steep sell-off at the end of last week. The company's share price fell 5.8% on Friday after Intel Capital Corp, the investment arm of chip giant Intel Corp, sold a 9.3% stake in the business.


Premier Oil is up 1.1%. The oil company has sold its non-operated interests in the producing Scott, Telford and Rochelle fields to MOL Group for a cash consideration of USD130 million. It said that MOL Group will assume the liabilities for future abandonment costs.


The transaction, which comprises six UK North Sea licences, has an effective date of January 1, 2014 and is subject to certain pre-emption rights. Completion is subject to receipt of government approval, said the company. Year-to-date production at the Scott, Telford and Rochelle fields has averaged approximately 3,700 barrels of oil equivalent per year net to Premier.


Still to come in the data calendar Monday, the Chicago purchasing managers' index is released at 1445 BST, with US home sales data shortly after at 1500 BST. The Dallas Fed manufacturing index is released at 1530 BST. Federal Reserve Bank of San Francisco John Williams gives a speech at 1810 BST.


Federal Reserve Bank of San Francisco John Williams gives a speech at 1810 BST.


US futures trading currently indicates that Wall Street will open slightly lower Monday. The DJIA, S&P 500, and NASDAQ Composite are all expected to open down 0.1%.







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Source: Alliance News


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