LONDON (Alliance News) - The FTSE 100 is trading slightly higher Thursday mid-morning supported by mining stocks, as UK retail sales beat expectations, while the market still digests somewhat doveish comments by the US Federal Reserve.
The FTSE 100 is up 0.1% at 7,011.31, while the FTSE 250 is down 0.1% at 18,122.23. The AIM All-Share is flat at 762.34.
UK retail sales recovered at a faster-than-expected pace in April, on the back of non-food store sales, data from the Office for National Statistics showed Thursday. The volume of retail sales including auto fuel expanded 1.2% month-on-month reversing a 0.7% fall in March. Sales were expected to grow 0.4%.
Likewise, excluding auto fuel, sales increased 1.2% after staying flat in March. Economists had forecast a 0.2% rise for April. Food store sales fell 0.1% from the prior month, while non-food store sales increased 2.4%. Including auto fuel, retail sales growth accelerated to 4.7% on a yearly basis in April from 4% in March and exceeded a 3.7% rise forecast by economists.
The pound rose following the release of the data and currently trades at USD1.5655.
European main indices are down, with the French CAC 40 down 0.2% and the German DAX 30 down 0.3%, following Markit Purchasing Managers' Index readings from both countries.
German services PMI declined to 52.9 from 54 in April, with economists forecasting a marginally fall to 53.9. Similarly, the manufacturing PMI declined to 51.4 from 52.1 a month ago and it was below the expected reading of 52. The flash composite PMI fell to 52.8 in May, a 5-month low, from 54.1 in April. Despite signalling an expansion, the rate of growth was the weakest in 2015 so far.
Meanwhile, French manufacturing PMI came in ahead of expectations at 49.3, with economists expecting a rise to 48.5 from the previous reading of 48.0. Meanwhile France's services PMI fell to 51.6, a touch short of forecasts of 51.9.
On the London Stock Exchange, miners are supporting the FTSE 100 index. Fresnillo, up 2.7%, BHP Billiton, up 2.2%, Rio Tinto, up 1.7%, Anglo American, up 1.7%, Antofagasta, up 1.6% and Glencore, up 1.2%, are amongst the biggest blue-chip gainers.
"Disappointing manufacturing from China overnight has actually helped the mining sector in London," says David Madden, market analyst at IG Markets. "Meanwhile, commodity companies are welcoming soft economic data from China, as Beijing is only too eager to throw money at the problem, and use all means necessary to boost its output."
The manufacturing sector in China remained in contraction in May, albeit at a slower pace, the latest survey from HSBC revealed on Thursday with a two-month high PMI score of 49.1. That was shy of expectations for a score of 49.3, although it was up from 48.9 in April. It also remained beneath the line of 50 that separates expansion from contraction.
Royal Mail reported higher profits for its last financial year as a better-than-expected performance in reducing costs in the UK offset lower-than-expected revenue in its parcels business, and the company said it will step up its transformation plan in the face of a challenging trading environment. It reported a pretax profit of GBP569 million for the year ended March 29, up from GBP421 million a year earlier, even though revenue declined to GBP9.42 billion from GBP9.46 billion.
However, shares in the UK's legacy postal regulator are down 1.3%. Analysts believe earnings will be under pressure as competitors in the UK parcel industry step up capacity.
"We are also concerned about employee costs (in the UK and Germany) which are forecast to continue to increase with ongoing pay rises and only partially offset by productivity improvements," says Cantor analyst Robin Byde.
United Utilities Group, down 1.5%, reported annual results that beat analyst expectations and its dividend was increased as expected, but pretax profit after exceptional items experienced a substantial fall. The water company reported a fall in pretax profit for the year ended March 31 of GBP341.6 million from GBP543.3 million a year earlier, while before exceptional items, pretax profit came in at GBP447.0 million, up from GBP388.0 million, as revenue rose to to GBP1.72 billion from GBP1.68 billion.
Booker Group is the biggest mid-cap gainer, up 10%, as it confirmed that it will buy Musgrave Retail Partners, which comprises the Londis and Budgens convenience store chains, from Irish food wholesaler Musgrave Group for GBP40 million in cash. Separately, Booker reported a pretax profit of GBP138.8 million in the year to March 27, up 14% from GBP122.1 million the prior year, boosted by a 2% increase in revenue to GBP4.8 billion from GBP4.7 billion.
QinetiQ Group is up 6.9%, after it reported a higher pretax profit for its last financial year after the previous year was hit by a big impairment, while revenue fell as it continued to be hit by the withdrawal of US military from Afghanistan. The defence services company reported a pretax profit of GBP105.4 million for the year to end-March, up from GBP84.0 million a year earlier when it had booked a GBP41.9 million goodwill impairment that wasn't repeated.
Bwin.Party Digital Entertainment shares are up 5.4%. The online gaming operator on Thursday said its revenue in the first quarter to the end of March was down, and said it expects takeover talks with its various suitors to complete in the next few weeks. Earlier this week, 888 Holdings entered the race to acquire Bwin.Party, going into competition with AIM-listed GVC Holdings, the bid from which is being backed by Canadian gaming and gambling company Amaya.
Electrocomponents is the worst performer in the FTSE 250 after the company announced that Finance Director Simon Boddie will be stepping down at the end of the first half of its current financial year. The company posted a decline in pretax profit for its recently ended financial year due to continued sales declines in the UK. It posted a pretax profit of GBP96.1 million for the year to end-March, down from GBP101.1 million a year before.
US futures point to a lower opening, with the DJIA and the S&P 500 pointed down 0.2% and the Nasdaq 100 seen down 0.3%, in the wake of the release of the minutes from the Fed's last monetary policy meeting, in which the central bank downplayed the possibility of a US rate hike in June.
Only a "few" Federal Reserve members anticipate raising US interest rates in June, the minutes said. Back in March, "several" members said the Fed was on track to raise rates in June, but policy makers appear more reluctant to tighten given the fragile nature of the US economic recovery.
April's dismal US retail sales report came out days after the meeting and was therefore not factored in. US retail sales were flat despite warm weather and pent up demand following a brutal winter, prompting a number of analyst to downwardly revise second quarter GDP estimates.
By Daniel Ruiz; danielruiz@alliancenews.com
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