FTSE 100 stumbles ahead of key economic data
UK blue-chips slipped into the red as investors await tomorrow's US jobs report; mid-caps gained on M&A and housing market news
The FTSE 100 index shed 20.1 points to close down 0.4% at 4,796.8, while the FTSE 250 index, which is widely seen as a fairer representation of UK economic sentiment, took on 84.9 points or 1.0% to settle at 8,604.8.
Britain’s Gordon Brown, France’s Nicolas Sarkozy and Germany’s Angela Merkel underlined that the global economic crisis has not yet come to an end and warned that unemployment is still set to rise over the final part of 2009. Speaking in a joint letter ahead of the G20 meeting in London this weekend, the European leaders highlighted the need for coordinated exit strategies from their current stimulus packages once the crisis is over.
European Central Bank President Jean-Claude Trichet echoed these comments from Frankfurt today when he followed the ECB’s decision to keep eurozone interest rates at at 1% by saying that “prudence and caution are still of the essence."
But more upbeat comments came from the Organisation for Economic Co-operation and Development (OECD) today, which reported the global recession is winding up quicker than previously thought and could in fact be over already. The OECD forecasts the eurozone, the US and Japan to each achieve economic expansion to the tune of 0.3%, 1.6% and 1.1%, respectively, in the third quarter of the year.
Investors remained twitchy, however, ahead of Friday’s US labour report, which is expected to show 225,000 jobs were lost in August—the lowest number of cuts in a year.
Among UK economic news out today, the British services sector saw its fastest pace of growth in almost two years last month, with PMI rising to a higher-than-expected 54.1—a figure above 50 represents expansion.
In the stock markets, UK-listed miners dominated the blue-chip leaderboard as prices of precious metals gained strength amid hopes that the global economic recovery is just around the corner. Randgold Resources jumped 9.0%, followed by Fresnillo, Lonmin, Xstrata and Vedanta Resources, each of which added 3.6%-8.6%.
A select few banks attracted those buyers looking to pick up stocks that have recently suffered, with Royal Bank of Scotland climbing 3.2%, HSBC up 0.6% and Lloyds Banking Group rising 0.3%.
Insurers Prudential and Legal & General both rebounded from Wednesday’s falls, 1.9% and 0.1% firmer, respectively, while British retailers continued to find strength in yesterday’s Banc of America-Merrill Lynch sector note.
The main excitement was on the second tier, where bus and train operator National Express surged 13.1% ahead on news it is considering an improved takeover proposal from a consortium led by its largest shareholder, Spain’s Cosmen family, that values the beleaguered transport group at £765 million.
The consortium today raised its proposed offer to 500p per share from the 450p that National Express last week rejected. The firm has until next Friday to recommend the proposal or the consortium will be forced to walk away.
Housebuilders also saw some action after Bovis Homes Group announced a 10% share placing to fund new land acquisitions, signaling the UK housing market is edging out of the doldrums. Barratt Developments, Redrow and Bellway added 1.9%-4.2%, though shares in Bovis itself dropped 2.3% as the news shares entered the market.
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