News Column

MARKET COMMENT: FTSE 100 Hits 14-Year High On Rising ECB Expectations

September 3, 2014

LONDON (Alliance News) - The FTSE 100 rose to its highest point of 2014 on Wednesday morning as lower-than-expected economic indicators from the eurozone raised investors' hope for European Central Bank action ahead of its inflation meeting on Thursday.

At mid-morning, the FTSE 100 is trading up 0.7% at 6,877.04, having touched a more-than 14-year high of 6,898.62. Mid-cap and small-cap stocks are trailing somewhat. The FTSE 250 is up 0.3% at 16,007.44 and the AIM All-Share up 0.2% at 781.1.

European stocks are posting even stronger gains, with the CAC 40 gaining 1.1% and the DAX up 1.2%.

The FTSE 100 was propelled by weak European Markit services-sector purchasing managers' index readings for August. PMI data from key eurozone countries were revised below their respective July and consensus figures. Germany, the region's biggest economy, posted a reading of 54.9, down from July's figure of 56.7 and below the market forecast of 56.4. The eurozone as a whole came in at at 52.5 in August, less than the flash estimate of 52.8. In July, the index was at 53.8.

Investors will be hoping that further signs of weakness in the European economy will force the ECB to initiate quantitative easing to give it a much-needed boost.

Also supporting the London market Wednesday, the UK services PMI for August showed a strong, coming in ahead of expectations at 60.5, above the July figure of 59.1 and outstripping the consensus of 58.5. This result builds on Tuesday's positive construction PMI results to show improved recovery in the UK economy.

However, chief economist at Berenberg, Rob Wood says that there could be a near-term slowdown in the sector. "Service sector firmsí confidence in future growth fell to a 15-month low in August, while firms raised payrolls at the slowest rate since March," he says. " It may be that Ukrainian tensions and still weak Eurozone growth are also taking a toll on services firmsí outlook, while the possibility of a UK interest rate hike soon may have caused some short-term confidence wobbles."

The tensions between Ukraine and Russia made big steps of improvement as reports suggested that Ukraine and Russia reached a deal on a permanent ceasefire" in eastern Ukraine's Donbass region. During a telephone conversation, Russian President Vladimir Putin agreed a permanent ceasefire with Ukraine President Petro Poroshenko for Donbass, where pro-Russian separatists have been fighting with Ukrainian forces since April.

On the London Stock Exchange, Ashtead Group is one of the top risers in the FTSE 100. The company said it expects its full-year results to be above previous expectations, after a strong first-quarter performance in both its US and UK businesses, driven by new store openings and bolt-on acquisitions, continued into August. The company also increased its capital expenditure plans for the year as a whole, pledging to continue investing in organic growth thanks to the momentum it is seeing in the business. Ashtead reported a pretax profit of GBP117.5 million for the three months to July 31, up from GBP97.4 million a year earlier, as revenue rose to GBP457.9 million, from GBP410.5 million. The company's shares are up 1.9%.

Meanwhile, retail stockbroker Hargreaves Lansdown has sunk to the bottom of the blue-chip index, falling by 5.1%. The company said it made a GBP209.8 million pretax profit in the year ended June 30, compared with GBP195.2 million in the corresponding period last year. Revenue increased to GBP358.4 million from GBP292.4 million, due to growth in complementary services such as stockbroking, fund management, discretionary management and pension drawdown services, the company said. However, according to Liberum, the company is facing severe margin pressure as a result of the recently implemented UK Retail Distribution Review.

The rest of Wednesday will see releases from the US including the Federal Reserve's Beige Book at 1900 BST, and FTSE Indices will announce the results of its index review at the close of London trade.

By Neil Thakrar;

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Source: Alliance News

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