By This Is Money Reporters
17.30 (CLOSE): Better-than-expected European growth figures helped markets edge higher today as investors cheered signs the region’s recovery is finally gathering pace.
The 17-nation eurozone bloc, which came out of recession at the beginning of last year, posted gross domestic product growth of 0.3 per cent in the final quarter of 2013, compared with 0.1 per cent in the previous three month period and forecasts for a rise of 0.2 per cent.
Germany’s Dax closed 0.7 per cent higher, while the Cac 40 in France lifted 0.6 per cent, but there was a more lacklustre response on London’s FTSE 100 Index despite hopes surrounding Britain’s major trading partner, with the top tier finishing just 4.2 points higher at 6663.6.
Struggle: Morrisons was one of the biggest fallers after a ratings downgrade.
On Wall Street, the Dow Jones Industrial Average also shook off data showing a steep drop in factory output in January as it rose nearly 80 points in early trading ahead of the Presidents’ Day bank holiday weekend in the United States.
The eurozone figures showed Germany’s output rose 0.4 per cent in the final quarter of 2013 following a boost for its exporters, while the French economy grew by 0.3 per cent in the same period.
The pound maintained its rally seen after Wednesday’s sharp growth forecast upgrade from the Bank of England and amid reinforced expectations for an interest rate hike next year.
Sterling climbed another cent higher to 1.67 US dollars – its highest level since April 2011 – and held firm at 1.22 euros.
Mining stocks dominated the FTSE 100 risers board thanks to forecast-beating results from Anglo American and rising metals prices.
But a bout of profit taking saw Anglo’s shares lose early session gains, closing 14p lower at 1519.5p, despite its lower-than-feared 7 per cent slide in underlying earnings to 2.7 billion US dollars (1.6 billion).
Morrisons was one of the biggest fallers in the top flight after this week’s latest disappointing market share figures from Kantar Worldpanel prompted a ratings downgrade from analysts at Exane BNP Paribas.
Kantar’s till-roll figures showed Morrisons sales were down 2.5 per cent in the 12 weeks to February 2. Morrisons shares fell 2.3p to 233.8p, while Sainsbury’s lost 6.8p to 345.2p.
Other fallers included Vodafone after it said it will pay 1.9 billion on additional spectrum licences to boost mobile services in India. Shares fell 3.1p to 218.4p.
Shares in Severn Trent were 22p higher at 1772p as it said there was currently no material financial impact from the floods which have affected large parts of its region.
It said its trading performance for the year to March 31 had been in line with expectations, with consumption slightly higher than a year earlier and bad debt levels maintained at around 2.2% of turnover.
The biggest FTSE 100 risers were Fresnillo up 49p to 971.5p, Mondi 48.5p higher at 1028p, Petrofac ahead 52p at 1317p and Antofagasta 33p stronger at 938.5p.
The biggest FTSE 100 fallers were Coca-Cola HBC down 36p to 1553p, Imperial Tobacco off 51p to 2300p, Sainsbury’s 6.8p lower at 345.2p and Rolls-Royce down 20p to 1025p.
15.30: London shares held modest gains in late afternoon trade as US stocks made a volatile start to the final session of the week following some mixed economic data.
With a hour of trading to go, the FTSE 100 index was up 2.7 points at 6,662.1, recovering from a dip lower having reached as high as 6,672.2 in the morning session.
In New York, the Dow Jones Industrial Average opened lower following the publication of weaker than expected US industrial production numbers, but the index rallied higher following the release of a better than expected consumer sentiment report, adding 56.9 points at 16,084.5.
Volatile open: US stocks started lower today but rallied strongly after a consumer sentiment index reading beat forecasts
The closely-watched University of Michigan sentiment index held steady in January at 81.2, unchanged from the December reading, confounding expectations for a fall back to 80.0.
Earlier, official data said US industrial production dropped 0.3 per cent in January, having been forecast to rise 0.2 per cent, although commentators pointed to the severe winter weather in North America as likely to have had a big impact.
The data painted a mixed picture of the health of the world’s biggest economy, following on from weak January retail sales numbers and a bigger than forecast rise in weekly jobless claims yesterday, and backed up the assessment of new Federal Reserve chairman in her first testimony’s to Congress delivered this week.
In her first public comments as Fed chief, Yellen said the labour market recovery is ‘far from complete’ despite a drop in unemployment, but she said the US central bank expects to continue trimming policy stimulus in measured steps due to broader improvements in the economy.
Giving a balanced testimony to a House of Representatives committee on Tuesday, Yellen also noted the recent volatility in global financial markets, but said at this stage it does ‘not pose a substantial risk to the US economic outlook.’
12.45: London shares held firm at lunchtime as European markets posted modest gains today as signs of a tentative recovery for the region’s beleaguered economy – Britain’s biggest trading partner – shored up confidence.
The FTSE 100 index was 8.9 points higher at 6,668.4, and markets in Frankfurt and Paris rose by around 0.5 per cent.
The 17 country Eurozone, which came out of recession at the beginning of last year, showed a better-than-expected growth of 0.3 per cent in the final quarter of 2013, an improvement on growth of 0.1 per cent in the previous three month period.
Anglo shines: Global miner Anglo American – which owns diamond firm De Beers – posted better than expected results today
Anita Paluch, trader at Varengold Bank said: ‘On the surface the numbers came through slightly better than expected mostly on the back of rising export – France, which was flirting with recession, avoided it growing merely 0.3 per cent and Germany 0.4 per cent obviously turned out to be better than 0.3 per cent Eurozone, Italy back in black by 0.1 per cent- but can this be called a speedy recovery or vivid pick up in economic activity, if those numbers are not too distant from zero?
‘Clearly it’s not spectacular and lack any real strong momentum. More encouraging data are coming from the Eastern part of Europe, with growth well above one per cent in Romania and Czech Republic,’ shed added.
The wider 28-nation EU, which includes Britain and other countries that do not use the euro, grew by 0.4 per cent compared with the previous quarter.
The UK posted estimated growth of 0.7 per cent for the final quarter of 2013. However an upward revision to December construction output data today would not be enough to impact that growth number, the Office for National Statistics said today.
Construction output rose by 0.2 per cent in the three months to the end of December, the ONS said, significantly down on the 2.6 per cent seen in the previous three months but stronger than the 0.3 per cent fall in construction reported in the preliminary GDP data for the same quarter.
The ONS said strong housebuilding led the revision, with total housing construction in the last three months of 2013 19.8 per cent higher than a year earlier – the strongest increase since 2010.
The pound reflected the stronger pace of the UK economic recovery as it climbed to 1.67 against the US dollar for the first time since April 2011.
Mining stocks dominated the FTSE 100 risers board after full-year results from Anglo American showing a 7 per cent slide in underlying earnings to 2.7billion came in ahead of market expectations.
Anglo’s shares were 7.5p higher at 1,541p, while BHP Billiton added 28p to 1,899p and Antofagasta lifted 22p to 927.5p.
International Airlines Group, owner of British Airways and Iberia, was also in demand, up 8.4p to 450.4p after it announced an agreement yesterday with its Spanish pilots to end strike action.
In reaction, Deutsche Bank raised its target price for IAG to 506p from 430p and reiterated its buy rating on the stock.
‘IAG is successfully going through its restructuring and its valuation, most importantly, is still compelling. Clearly one needs to keep the risk/reward under review but for us it is simply too early to bail out,’ Deutsche Bank analysts said in a note.
GlaxoSmithKline added 17.5p to 1,670.5p amid reports it could bid for US biopharma group Arena, with support from Barclays which raised its target price for the drug maker to 1,575p from 1,545p.
On the downside, food retailer William Morrison was the biggest blue chip faller after this week’s latest disappointing market share figures from Kantar Worldpanel prompted a ratings downgrade from analysts at Exane BNP Paribas.
The broker also lowered their target price from 230p to 200p and said the supermarket chain’s dividend no longer looked secure.
Kantar’s till-roll figures showed Morrisons sales fell 2.5 per cent in the 12 weeks to February 2.
Other fallers included Vodafone, which fell 2.5p to 218.9p after it said it will pay 1.9billion on additional spectrum licences to boost mobile services in India.
10.50: Slightly better than expected growth from the Eurozone, Britain’s biggest trading partner in the final quarter of 2013 helped keep the Footsie on a firmer tack in late morning trade, although overall enthusiasm was muted.
The FTSE 100 index was up 9.4 points at 6,668.8, recovering after falls in the previous session, while in Europe Germany’s Dax 30 index gained 0.6 per cent and France’s CAC 40 index added 0.4 per cent.
The euro zone economy grew more than expected in the fourth quarter of 2013 thanks to stronger expansion in its biggest countries France and Germany, the first estimate from the European Union’s Statistics Office showed.
Eurozone grows: The euro zone economy grew more than expected in the fourth quarter of 2013 thanks to stronger expansion in its biggest countries France and Germany
The economy of the 17 countries that shared the single currency in the last quarter rose 0.3 per cent in the three months to December against the previous three months, after a 0.1 per cent rise in the third quarter.
Analysts had expected a 0.2 per cent quarterly rise. In the same period last year, euro zone gross domestic product rose 0.5 per cent, also above market expectations of a 0.4 per cent rise.
Howard Archer, chief economist at IHS Global said: ‘While still far from dynamic, It was a step back in the right direction after growth had slowed to just 0.1 per cent in the second quarter. Furthermore, it marked a third successive quarter of expansion following six quarters of contraction through to the first quarter of 2013.
‘The modestly better-than-expected pick-up in Eurozone GDP growth in the fourth quarter of 2013 slightly eases some of the appreciable pressure on the ECB to take immediate further stimulative action to counter the renewed dip in Eurozone consumer price inflation to just 0.7 per cent in January as well as still falling bank lending to businesses.
‘Nevertheless, we expect persistent very low Eurozone consumer price inflation, ongoing difficulties in building growth momentum, and still tight Eurozone credit conditions will prompt further action from the ECB,’ Archer added.
Separately, Eurostat data showed the bloc’s December foreign trade surplus grew to 13.9 billion euros from 9.8 billion euros in the same period last year, driven by a 4 per cent year-on-year rise in exports, while imports rose only 1 per cent.
In London, strength in heavyweight mining stocks helped keep the UK blue chip index on track for a second straight weekly gain after strong results from global player Anglo Anglo.
Anglo’s stock rose 21.0p to 1,554.5p after the firm beat consensus with its 2013 operating profit and reported a profit at its platinum unit. ‘The results from Anglo platinum are pretty good and… they’re getting costs down,’ said Matthew Hasson, director of mining equity sales at Numis Securities.
But on the downside, food ingredients firm Tate & Lyle and engine maker Rolls Royce, which both fell sharply yesterday after warning on 2014 profits, went in opposite directions today.
Tate shares fell a further 1.2p to 658.8p, while Rolls-Royce rallied 11.0p higher to 1,056.0p.
09.55: The Footsie ticked higher as the morning session progressed today supported by strength in mining stocks although European markets struggled to make headway amid more worries over the slow pace of the global economic recovery.
The FTSE 100 Index was up 10.8 points lower at 6,670.2, while markets in Frankfurt and Paris stuck close to their opening marks following GDP figures from both countries, with overall Eurozone growth numbers due at 10.00am.
Germany’s output rose 0.4 per cent in the final quarter of 2013 following a boost for its exporters, while the French economy grew by 0.3 per cent in the same period.
Miners lead: Better than expected results from Anglo American provided a spur for the blue chip miners today
The European updates came a day after it emerged retail sales in the United States dropped for a second straight month as people spent less on cars and clothing.
Mining stocks dominated on the FTSE 100 risers board after full-year results from Anglo American showing a 7 per cent slide in underlying earnings to $ 2.7billion came in ahead of market expectations.
Anglo’s shares were 21.25p higher at 1554.75p, while BHP Billiton added 22.75p to 1893.75p and Antofagasta lifted 12.5p to 918p.
Elsewhere, shares in Severn Trent were 5p higher at 1,755p after it said there was currently no material financial impact from the floods which have affected large parts of its region.
It said its trading performance for the year to March 31 had been in line with expectations, with consumption slightly higher than a year earlier and bad debt levels maintained at around 2.2 per cent of turnover.
On the second line, fellow water firm Pennon Group – which owns South West Water – added 0.5p at 688.0p said today that it continued to ‘deliver effective operational performance and high standards of customer service’, despite the flooding and exceptional weather in the area.
08.30: The Footsie drifted lower in early trade today, extending yesterday’s weak showing despite firmer showings overnight on Wall Street and in Asia with traders seeking fresh direction at the end of a roller coaster week.
In opening deals, the FTSE 100 index was 2.7 points lower at 6,656.7, having closed down 15.61 points on Thursday to snap a six session winning streak.
Jonathan Sudaria, dealer at London Capital Group said: ‘Despite the recent run up in equities over the last few days, the signals from the real economy seem to suggest that there is a dislocation between the two.
Weak open: The Footsie was easier in early deals in spite of gains overnight on Wall street and in Asia
‘Following on from yesterday’s continuing string of weak US economic data, overnight also saw some subdued Chinese inflation data pointing to weak domestic demand.’
China’s consumer inflation remained at a seven-month low in January while factory gate prices fell for a 23rd consecutive month, broadly in line with market expectations and consistent with other recent data showing economic weakness.
‘The macro environment is set to get even murkier as today sees the release of the euro zone Q4 GDP data and expectations are for an anaemic 0.2 per cent. With such negative headwinds hanging over markets, traders will be rightly questioning if the current level of equities is justified,’ Sudaria added.
Ahead of the official Eurozone growth figures, Germany said its economic growth unexpectedly accelerated to 0.4 per cent in the fourth quarter of 2013 thanks to a rise in exports and capital investment, seasonally-adjusted data showed on Friday, suggesting Europe’s largest economy will pick up steam in 2014.
Meanwhile, the French economy grew slightly faster than expected in the final quarter of last year, boosted by investment and household spending, official data showed today.
On the domestic data front, official UK construction output numbers will be released at 9.30am.
An industry survey at the start of this month showed unexpected growth in the British construction sector confirming hopes that the UK recovery is looking sustainable.
The Markit/CIPS purchasing managers index rose to 64.6 in January from December’s reading of 62.1, its highest level since the financial crisis and far exceeding forecasts for a reading of 61.5.
It was the sharpest expansion in UK construction activity since August 2007, and well above the 50 mark that separates growth from contraction. Construction accounts for around 7 per cent of Britain’s economy.
Stocks to Watch include:
ANGLO AMERICAN – The global miner said its large Minas Rio project was on track to deliver iron ore by the end of the year, as it posted a forecast-beating increase in 2013 operating profit.
ROYAL DUTCH SHELL – The oil major is planning to sell three oil and gas producing assets in the North Sea, according to reports in the British press.
BP – A US. appeals court on Thursday revived a shareholder lawsuit against BP over statements the company made in the wake of a 2006 oil spill in Alaska.
VODAFONE – The telecoms group said on Friday that its Indian unit has acquired spectrum licences in 11 telecom circles in India for 1.9billion.
PENNON GROUP – The water and waste firm said it remains on track to meet management expectations.
SEVERN TRENT – The water company said it plans to raise its dividend for 2013/14 by 6 per cent to 80.40p.