News Column

MARKET COMMENT: UK Shares Hold Gains As Construction PMI Beats View

September 2, 2014

LONDON (Alliance News) - UK shares are higher at mid-morning Tuesday, after starting strongly on hopes for European Central Bank action later in the week and then being supported by a UK construction PMI reading that came in ahead of economists' predictions.

The FTSE 100 is up 0.3% at 6,845.83, the FTSE 250 up 0.1% at 15,975.16, and AIM All-Share up 0.3% at 781.59.

European stocks are performing even better with the CAC 40 up 0.5% and the DAX up 0.9%.

UK construction PMI reading for August was the highest since January, coming in at 64.0, ahead of July's 62.4 and a consensus of 61.4. Whilst the construction sector is less influential on GDP than manufacturing or services, the result shows confidence in the property market in the UK.

"The surge in Augustís construction PMI, published today, suggests continued buoyant confidence at least among those buying houses and investing in infrastructure and premises," says chief economist at Berenberg Rob Wood.

Wood also highlights that "the strength of output has raised capacity pressures, which were reflected in further rises in sub-contractor charges. If that trend of falling capacity is reflected in other sectors in the coming months it could become an issue for the [Bank of England], who are currently assuming there is still enough slack in the economy to allow interest rates to stay on hold until next year."

The ECB holds its highly anticipated interest rate meeting on Thursday. The latest economic indicator that could influence thinking was the eurozone producer price index, which was reported Tuesday down 1.1% year-on-year in July, in line with expectations.

Among individual stocks, Weir Group's shares have gained 2.7% and lead the FTSE 100 after Credit Suisse upped its rating for the company to Outperform from Neutral with a price increase to 3,060 pence from 2540p. The stock is currently quoted at 2,710p.

Credit Suisse also cut IMI's rating to Neutral from Outperform with a price target of 1,500p, down from 1,640p. The company's shares are down 0.4% at 1,348.89p.

In the FTSE 250, Playtech are amongst the biggest fallers after it said it has struck a deal to buy video lottery terminal (VLT) businesses Aristocrat Lotteries AB and Aristocrat Lotteries Italia SRL from Australia-based Aristocrat Leisure Ltd. The online gaming and sports betting software provider will pay EUR10.5 million for the Sweden- and Italy-based units, which provide a server-based gaming platform for VLTs and Casino (Class III) markets for two leading retail VLT operators in Norway and Italy under the TruServ brand. The company's shares are down 1%.

Looking ahead to the afternoon trading session, economic data focuses on the US manufacturing sector, with the Markit manufacturing PMI due at 1445 BST and the ISM manufacturing PMI at 1500 BST.

The quarterly FTSE index review will be announced after the close of trade on Wednesday. The review will be based on closing prices on Tuesday and will be implemented on September 22.

By Neil Thakrar;

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Alliance News

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