Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

FTSE dips on US slump despite manufacturing boost

FTSE dips on US slump despite manufacturing boost

The FTSE dipped again as a fresh sell-off in the US and escalating political tensions between Russia and Ukraine outweighed strong UK manufacturing and industrial production data.

The FTSE 100 shed 34 points or 0.5% to 6,588 points in choppy trading, while the pound surged to $1.6712 against the dollar after the Office for National Statistics released much stronger figures than the market had expected.

Industrial production in February rose 0.9% on January levels, ahead of the 0.3% jump the market had been expecting, and 2.7% up on the same period last year, ahead of the 2.2% that had been anticipated.

Manufacturing output figures were also strong, up 1% on January, versus a 0.3% expected rise, and 3.8% year-on-year, compared to the 3.1% that had been forecast.

Howard Archer, chief UK and European economist at HIS Global Insight, labelled the data ‘a very welcome and encouraging upward surprise’.

‘While decent manufacturing growth had been expected in February, it came in way above expectations. Buoyant manufacturing output in February lifts first quarter growth prospects and supports hopes that manufacturing can make a sustained healthy contribution to UK growth,’ he said.

Alex Edwards, head of the corporate desk at UKForex, added the surprise was likely to lend medium-term support for the pound, which could push towards $1.68. ‘These are very impressive numbers and will serve to boost expectations for an early rate hike by the Bank of England, perhaps even as early as January or February next year, and certainly before the UK general election in May 2015.’

The FTSE had been trading under the weight of another day of losses in US markets, with tech stocks hammered as investors took another look at lofty valuations.

The UK blue-chip index opened lower, but losses were more modest than those on the S&P 500, which erased its yearly gains with the biggest three-day drop in two months, suggesting UK stocks haven’t been pushed to the elevated levels of their US counterparts.

‘The surprise is that it’s taken investors so long to catch on to the fact that a lot of high growth stocks are trading on stupidly high valuations as companies like Twitter, Facebook, Pandora and Zynga continue to get pummelled,’ said Michael Hewson, analyst at CMC Markets UK.

Escalating tensions between Russia and Ukraine have also taken their toll on sentiment, after pro-Russian demonstrators seized government buildings in three Ukrainian cities and rebels declared independence in the Donetsk region, calling for a referendum in May.

‘Markets again are on edge as this fresh escalation of the crisis could see further turbulence in financial markets and more worrying, this crisis is now becoming a protracted affair which stands to further dent the West’s relations with Russia to the point where the damage could be irreparable for some time,’ said Ishaq Siddiqi, analyst at ETX Capital.

Sports Direct (SPD.L) was the biggest faller, shedding 61p, or 6.8%, to 832.5p after founder Mike Ashley sold around £200 million of his shares to Goldman Sachs. The disposal of 25 million shares represents around 7% of Ashley’s stake, taking his holding to around 55%.

Associated British Foods (ABF.L) slid 88p, or 3.2% lower at 265.5p, with some traders attributing the drop to a profit warning by German sugar producer Suedzucker, according to Reuters.

Insurers endured further losses after yesterday’s sell-off, as their recovery following the damage inflicted by Budget changes and a regulatory review of pensions sales was dealt a further setback. Resolution (RSL.L) was the worst hit, dropping 12.8p, or 4.4%, to 275p. Prudential (PRU.L) shed 25p, or 1.9%, to £12.93, Standard Life (SL.L) fell 5.4p, or 1.4%, to 387.4p, Legal & General (LGEN.L) dropped 3.5p, or 1.6%, to 212.9p and Aviva (AV.L) traded 5.6p, or 1.1% lower, at 485.5p.

Miners bucked the trend of losses, with Rio Tinto (RIO.L) and Fresnillo (FRES.L) up 1% and 0.7% at £33.64 and 900p respectively. Randgold (RRS.L) rose 24p, or 0.5%, to £46.99 while Antofagasta (ANTO.L) added 3p, or 0.4%, to trade at 854.5p.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play HSBC's Stephen King warns of 'enormous' Brexit deficit danger

HSBC's Stephen King warns of 'enormous' Brexit deficit danger

Brexit will weaken the economy, fail to boost exports and lessen the country's ability to fund its 'enormous' deficit, according to HSBC's senior economic adviser Stephen King.

Play Premier's Smith: electricity and water can be a good mix

Premier's Smith: electricity and water can be a good mix

Exposing your person to electricity and water simultaneously is ill-advised, but what about your portfolio?

Play Citywire 10k: video highlights

Citywire 10k: video highlights

Citywire held its sixth annual charity run last week, which hosted over 200 people and raised £14,000. Here are the video highlights.

Your Business: Cover Star Club

Profile: gearing up for the shift from consolidation to start-ups

Profile: gearing up for the shift from consolidation to start-ups

‘I think the industry is evolving rapidly, but not necessarily as a whole,’ says the head of recently launched Charles Nicholson AM

Wealth Manager on Twitter