UK and European stock markets took a souring in the crucial US fiscal cliff talks into their stride and hung on to the gains of recent days.
After falling in early trading, the FTSE 100 regained its poise in quiet pre-Christmas markets to trade just four points higher at 5,965, despite the release of poor UK retail sales figures.
The Euronext 100 index also rebounded to trade fractionally lower at 686.5.
This followed falls overnight on Wall Street and in Asia triggered by US Republican plans to put an alternative tax plan to a vote this week. This broke the positive mood that has seen the ‘Grand Old Party’ and its Democrat opponents both make concessions in their urgent budget talks this week.
Yen dips on BoJ move
There was a similar mood of uncertainty on currency markets where the yen initially strengthened as traders expressed disappointment at the scale of the Bank of Japan’s latest shot of monetary stimulus.
However, the yen subsequently slipped 0.4% to 84 yen against the dollar, continuing a trend of recent weeks as traders took the view that the 10 trillion yen of asset purchases, a form of quantitative easing comparable to similar policies by the Bank of England and US Federal Reserve, were in line with expectations.
This is the third time in four months the BoJ has tried to stimulate inflation and weaken the yen in a bid to help the nation’s exporters lift the country out of recession.
Retail sales disappoint
The pound rose against the dollar, despite retail sales rising at an annual rate of just 0.9% in November, well below inflation.
Analysts said the disappointing figures, which followed a shock fall in October, increased the likelihood that the UK economy will have shrunk in the last quarter of the year.
The only bright spot was a 3.8% monthly rise in sales at household goods stores, boosted by Apple’s launch of its iPad Mini tablet computer.
Weir leads the way
Weir (WEIR.L) led the FTSE 100 with a 2.9% or 52p rise to £18.64 after splashing $240 million on its latest acquisition, US oil equipment firm Mathena. The shares were boosted by analysts at Investec raising their target price for shares in the pump and valves manufacturer to £21 from £20.20.
This has been a difficult year for Weir, a Citywire Top Stock due to its top 10 position in the AXA Framlington UK Select Opportunities fund run by Nigel Thomas. Its shares have fallen 8% over concerns at the slowdown in the US oil sector caused by the boom in shale gas.
There was no clear theme in the big risers with Aggreko (AGGK.L), the provider of temporary power generators, gaining 2.6% or 44p to £17.45 and fund manager Aberdeen Asset Management (AND.L) 1.7% or 6.3p better at 364.7p.
Meanwhile Bunzl (BNZL.L) was the biggest FTSE 100 faller for a second day, down a further 2.3% or 23.5p to 996.8p after yesterday’s trading statement prompted profit taking in the distribution specialist.
Thomas Cook (TCG.L) edged over a penny higher to 43.8p after broker Peel Hunt caught up with events and upgraded the travel agency to ‘hold’ from ‘sell’ and raised its target price to 41p from 10p. This has been a great year for Thomas Cook, with its shares up 198% in response to the recovery plan brought in by new chief executive Harriet Green.
Go-Ahead (GOG.L) shares shrugged off the corporate embarrassment of a ‘yellow card’ from the government over chronic delays on its London Midlands franchise, dipping 0.8p to £12.88. The Department of Transport is forcing the company to spend £7 million on compensating passengers for the poor service.