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FTSE fades amid thirst for more bullish US data
Investors await fresh signals from the US on the direction of the global recovery, looking for more reasons to believe recent optimism.
Britain’s FTSE 100 slipped on Tuesday as investors awaited fresh signals from the United States as to the direction of the global recovery and ahead of negotiations between Italy's government and unions.
Mario Monti, the Italian prime minister, is to meet with union bosses on key labour reforms seen as essential to turning around the eurozone's fourth-largest economy.
A deal ought to provide further support for the Italian bond market, noted Chris Scicluna, economist at Daiwa Capital Markets, as Italy’s borrowing costs hovered close to eight-month lows.
Meanwhile, the UK index of blue-chip shares faded 0.44%, or 26 points, to 5,935 and the All Share index softened 0.45%, or 14 points, to 3,082. See the FTSE’s performance and the index’s top winners and losers.
Simon Furlong, trader at Spreadex, pointed to an ‘underlying feeling of caution’ among investors struggling to find reasons to lift the rally in risk assets higher. ‘The “risk-on” trading the markets have experienced recently, fuelled by liquidity and a more positive outlook for the US economy seems to be losing some steam,’ he added.
Investors awaited data on US housing starts later in the day, as well as a testimony by Timothy Geithner, US treasury secretary.
Other stock markets in Europe also weakened: Germany’s DAX index slipped 0.67% to 7,106, France's CAC 40 index lost 0.71% to 3,552, and the FTSEurofirst 300 index of top European shares slid 0.53% to 1,100.
Resources stocks were among the biggest fallers on the FTSE 100, as commodity prices pulled back. Kazakhmys (KAZ.L) lost 32p to 933, Rio Tinto (RIO.L) shed 120p to £34.94 and Fresnillo (FRES.L) gave up 56p to £17.20.
Banks also dominated the loser board, as optimism that Europe will avoid a double-dip recession tapered off and ahead of Wednesday’s UK Budget. Lloyds (LLOY.L) fell 0.7p to 36.6p and Barclays (BARC.L) dropped 4p to 248p.
ARM (ARM.L) was the top gainer on the index, adding 10p to 590p, after positive broker comment on the chip designer from Barclays Capital and Investec.
On the FTSE 250, Debenhams (DEB.L) added 1.4p to 77.1p after a solid first-half trading update from the department store group. Sales at stores open for at least a year climbed 0.3%, excluding VAT, in the 26 weeks to 3 March, Debenhams said.
‘Given the volatility in the fashion market in February... we think this is a strong update from Debenhams that is likely to represent outperformance versus the market,’ said Sanjay Vidyarthi, analyst at Espirito Santo Investment Bank.
Elsewhere, sterling weakened 0.2% versus the dollar to $1.586 and edged up 0.01% versus the euro to €1.999 ahead of data on UK consumer price inflation.
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by David Kempton on May 24, 2016 at 17:15