(UPDATE) Gold surged, building on its steady gains so far in 2014, while a barrage of economic data shoved global stock markets sharply lower on Thursday afternoon.
The 2% rise in the gold price to $1,261 per ounce came after speculation that India may lift import restrictions. The weaker dollar also helped lift the precious metal, which has climbed steadily higher so far in 2014.
Global shares dropped, with benchmark indices in the US and Europe down around 1%. A 0.8% decline on the FTSE 100 to 6,773 marked the sharpest decline since mid-December, bucking a trend so far in January of limited moves in either direction for the blue chip index.
Traders attributed the sharp decline to data earlier today showing that China’s manufacturing growth slowed in January (see report below). US data did little to lift the mood, with December US existing home sales growing only slightly in December, and manufacturing growth slowing in January.
Europe’s upbeat PMI data (see report below) helped the euro up 1% to $1.3675.
Pearson in the bad books, Easyjet grounded as FTSE stalls (10:24 am)
Pearson was the day’s biggest loser, the education provider dropping nearly 8% to £12.00 after the costs of its restructuring programme forced it to deliver a profit warning to shareholders.
John Fallon, the owner of the company that counts Penguin and the Financial Times among its assets, said North America had been particularly weak as he announced operating profits after restructuring of £735 million last year.
Ian Whittaker, an analyst at Liberum, says ‘sell’ the shares. ‘While the company is clinging to the message of a FY15 rebound, it increasingly looks a repeat of other structurally challenged businesses’ performance in the past – restructuring charges being higher than expected, benefits delayed and the challenges being deeper’.
Rivals brokers Investec had a more positive spin. ‘This looks like overall ‘hope deferred’ rather than a fundamental change,’ commented Steve Liechti, while acknowledging that ‘some may lose faith given continuing challenges’. Liechti rates the shares as ‘add’.
EasyJet’s figures were more impressive, with the budget airline delivering a 7.7% rise in quarterly revenues. But a slightly less rosy outlook from the airline’s management for the first half of 2014 led some brokers to call time on the airline’s strong share price run.
‘Whilst we continue to remain hugely optimistic about the long term prospects of this business, in the near term we expect the shares to pause for breath,’ said Gert Zonneveld, who was among analysts switching from a ‘buy’ to ‘hold’ recommendation for Easyjet.
At the other end of the index, Marks & Spencer gained 3.2% to 496p after analysts at BNP Paribas upgraded the stock to ‘outperform’
SSE managed a small gain, up 0.6% to £13.24, after the energy provider said it expects its profits to increase by 8.8% to £1.54 billion this year.
Thankfully, there was some decent European economic data to offset these poorly-received corporate updates.
The euro shot up by 0.6% to $1.3634 after the euro-zone composite PMI rose again in January, up by 1.2 points to 53.9, suggesting that the region’s weak recovery is slowly gathering pace.
Less positive was a report showing Spain's already high unemployment rate inched up in the fourth quarter.
Christoph Weil, economist at Commerzbank, said the currency was bloc was still recovering ‘painfully slowly’, although today’s PMI reading ‘should put a slight damper on the expectations of further monetary policy easing by the ECB.’
There was more poor economic news from China, with HSBC’s Flash PMI Index for the manufacturing sector in China falling sharply in January to 49.6. That takes it below the 50 figure which indicates expansion, and adds to other recent disappointing data on the Chinese economy suggest a faltering of momentum ahead of the Chinese New Year.
The FTSE 100 has barely budged over recent days, maintaining that trend on Thursday, flat at 6,822. So far in 2014, the index has gained 1.2% despite concerns about whether company earnings will justify high stock valuations, China’s growth and the path the US Federal Reserve will take towards ending its stimulus scheme.
The pound continued to rise, up 0.1% to $1.6597 to add to yesterday’s strong gains after a sharp fall in the UK unemployment rate potentially laid the ground for an earlier end to rock-bottom interest rates than previously expected.
Investors are looking ahead to this afternoon’s data on US existing homes sales for December.