News Column

MARKET COMMENT: FTSE 100 Gains On Asian Data But Lloyds Declines

June 9, 2014

Jon Darby

LONDON (Alliance News) - The FTSE 100 is modestly higher Monday, as investor sentiment remains broadly positive after a strong US jobs report on Friday, followed by some better Chinese data over the weekend and an upward revision to Japan's GDP.

By mid-morning Monday the FTSE 100 is up 0.3% at 6,878.17, the FTSE 250 is fractionally lower at 16,223.72, and the AIM All-Share is up 0.1% at 805.68.

While the introduction of negative interest rates and other unconventional monetary easing measures by the European Central Bank last week also continues to support equity values, trading remains subdued in Europe where some markets are closed in observation of Whit Monday.

The French CAC 40 and German DAX are open and both trade just fractionally higher, with the DAX trading around the 10,000 points level, through which it broke for the first time last week when the ECB made its move.

Amid the subdued trading, the eurozone Sentix investor confidence survey has had little impact on stocks, despite the reading of the current economic situation falling to a six month low in June of 8.5, down from 12.8 in May and missing economists forecasts for a rise to 13.2.

The euro remains under pressure, however, following the disappointing survey result and last week's rate cut. The single currency has fallen against the dollar from an early morning high of USD1.3670 to currently trade at USD1.3635. The euro has also lost ground against the pound, having reached a session low of GBP0.8106.

Within UK equity movers, Lloyds Banking Group has been an early loser, leading the FTSE 100 fallers for most of the morning after announcing that the IPO price of it's retail arm TSB will be at a discount to its book value. Lloyds said the range of the IPO price will be 220 pence to 290 pence per share, the mid-point of which represents a 15% discount to book value. Lloyds shares are down 1.2% at 79.16 pence.

"This just seems like another sign that UK investors have seen one too many IPOs of late and demand is fading," said CMC Market market analyst Jasper Lawler.

Support services group Capita is performing well at the other end of the FTSE 100, up 1.7% after being upgraded to Buy by Numis Securities. Numis are impressed by the additional earnings potential from a number of acquisitions made year-to-date.

Both Dixons and Carphone Warehouse have seen their shares fall Monday following reports in the weekend press that a supplier may scupper their GBP3.6 billion merger ambitions. EE, the UK's biggest mobile operator, is reviewing its consumer retail strategy, with a conclusion due "within weeks," and a complete withdrawal from Carphone Warehouse being one potential result, The Telegraph newspaper reported. Dixons is down 1.4%, and Carphone Warehouse is down 1.0%.

"EE is the UKs largest mobile provider, and the move would make Carphone Warehouse a lot less relevant," said CMC Markets market analyst Jasper Lawler.

Building materials company Hightex leads the faller on AIM Monday, with shares down more than 30% after it posted a widened pretax loss of EUR2.8 million in 2013 from EUR1.1 million the year earlier on nearly halved revenues. The company said it has made provisions to cover receivables from its joint venture in Brazil, that has been involved in building the World Cup stadiums, as difficulties in obtaining financial information has cast them into doubt.

With no data out of the UK Monday until the British Retail Consortium sales monitor, due after the markets have closed, a quiet session may be expected, at least in the run up to the open of US markets, although futures trading currently indicates an equally quiet open on Wall Street, with the S&P 500 and the DJIA set to open flat.

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Source: Alliance News

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