The FTSE 100 crept upwards as reports showing growth in the Eurozone and increased business confidence in Japan counteracted a downbeat update on China’s manufacturing sector and angst over US stimulus.
After having fallen for six weeks in a row, Britain’s blue chip index started the last full week of trading before Christmas with small gains, up 0.3% to 6,426. Other major European indices were similarly higher.
Investors were chewing over several major economic updates.
In China, the unofficial preliminary manufacturing purchasing managers’ index fell to 50.5 in December, down from 50.8 in November. This ‘leaves little doubt that the manufacturing sector is now cooling,’ said Mark Williams of Capital Economics.
The news from Japan was better, with the Bank of Japan's latest Tankan survey showing Japanese business confidence leaping to a six year high.
In the Eurozone the preliminary Markit PMI index rose to 52.1 in December, up from 51.7 in November. Though this growth was a ‘relief’ according to Martin van Vliet, an economist at ING Bank, ‘the still-low level of the overall index is a firm reminder that this recovery is still very fragile and sluggish.’
Overriding today’s updates though was nervousness ahead of a decision on the future of the huge US stimulus programme that has been supporting markets.
Though on balance most economists believe the US Federal Reserve’s FOMC decision-making board will keep its $85 billion monthly bond buying programme unchanged at its December meeting, starting tomorrow, there is enough of a chance of the start of ‘tapering’ that markets have been edgy for weeks.
In anticipation of the meeting the gold price slipped back 0.8% to $1,228 per ounce.
Among London shares Aggreko (AGGK.L) was the top FTSE gainer, up 5.2% to £15.95 after the provider of temporary power told investors it expected full year results to beat expectations.
Panmure Gordon remained buyers of Aggreko stock, they said, but in reference to competitor APR ‘the absence of large contract wins is likely to cause concern in some quarters given those announced by APR elsewhere.'
At the other end of the index, RSA Insurance (RSA.L) added to Friday's sharp losses when investors were spooked by the sudden resignation of the company's chief executive, alongside a profit warning. This morning the Financial Times reported that RSA's chairman was to hold urgent talks with ratings agencies. RSA dropped 2.6% to 90p.