LONDON (Alliance News) - UK stocks closed lower Monday as the global equity sell-off continued amid growing concerns about both the Chinese and US economies. Meanwhile, the pound was hit following weaker-than-expected UK PMI manufacturing data.
UK stocks opened fractionally lower Monday after yet more disappointing data was released from China overnight. In another sign that the world's second largest economy is slowing, the non-manufacturing purchasing managers' index declined to 53.4 in January, from 54.6 in December.
Although the reading still indicates expansion in the sector, "this is another blow in what is becoming a long line of missed forecasts and poor data," said Max Cohen, financial sales trader at Spreadex.
UK PMI data also disappointed somewhat. The reading came in at 56.7 in January, from 57.2 in December, and short of forecasts of a more modest drop to 57.0.
However, "despite missing forecasts, PMI is still running at one of the highest levels on record and signifies a good start for the UK economy to the New Year," said Alex Conroy, financial trader at Spreadex.
In contrast to the UK, European Markit manufacturing PMI's largely exceeded expectations, continuing the trend of strong German growth supporting weaker but improving number elsewhere in the eurozone.
Italian growth, however, which slowed to 53.1 in January from 53.3 in December, was an exception to this rule.
UK stocks momentarily creeped into positive territory in the aftermath of the data, before global equities were sent spiralling back into the red in the wake of much-weaker-than expected US ISM manufacturing data.
Although the Institute for Supply Management released a report showing modest growth in US manufacturing activity in January, the pace of growth slowed much more than economists had expected. The ISM said its purchasing managers index fell to 51.3, from the 57.0 recorded in December, falling well-short of the more modest decrease to 56.0 that had been forecast.
While Bradley Holcomb, chair of the ISM Manufacturing Business Survey Committee, reported that, "a number of comments from the panel cite adverse weather conditions as a factor negatively impacting their businesses in January," the release pushed stocks around the world lower, as investors grew increasingly concerned about the outlook of the US economy.
The FTSE 100 closed lower for a fourth consecutive day, ending down 0.7% at 6,465.66, the FTSE 250 closed down 0.7% at 15,558.23, and the AIM All-Share index closed down 0.1% at 856.57.
Similarly, the CAC 40 in Paris closed down 1.4%, with Frankfurt's DAX 30 closing down 1.3%. Wall Street is also lower; the DJIA is down 1.5%, the S&P 500 is down 1.6%, and the Nasdaq Composite is down 1.9% at the UK equity market close.
In the forex market, the pound was smashed Monday.
Sterling tumbled in the aftermath of the weaker-than-expected UK PMI data, falling to multi-day lows against many of its major rivals.
At the London stock market close, the currency trades at its lowest level for over two months against the Japanese Yen, at JPY164.94. It also trades at 1.6306 against the dollar, having hit its lowest level since mid-December 2013 earlier in the day, 1.4692 against the Swiss franc, its lowest point since the turn of the year, and EUR1.2055.
Although at first-glance, the data is soft, "dig a little deeper and new orders continued to grow at their highest levels in three years, while the employment component rose for the ninth month in a row, suggesting that Monday?s sell-off may be a little overdone," said Michael Hewson, Chief Market Analyst at CMC Markets.
At the individual UK stock level, Lloyds Banking Group, closing down 3.4%, ended the day as one of the biggest FTSE 100 losers. The fall came after the bank added a further GBP1.93 billion to the amount it has set aside to cover claims for previous sales of payment protection insurance and interest rate hedging products.
Nevertheless, Lloyds still expects to make a small pretax profit in 2013, and said it hopes to start paying a small dividend in the second-half of the year.
At the other end of the spectrum, Randgold Resources, closing up 6.3%, was the index's leading riser. In a challenging environment for gold miners, Randgold said it has managed to achieve record production in 2013, while costs were in line with guidance during the year. The company also maintained its annual dividend of USD0.50 per share.
The mining company said its full-year production increased 15% to 910,374 ounces of gold from 794,844 ounces the previous year and its quarterly production increased 31% to 281,477 ounces in the fourth quarter compared from the same quarter in 2012. It also announced a full-year 2014 production target of between 1.13 million and 1.2 million ounces, which is an increase of 24% to 30%.
It was not all good news, however, as the company said pretax profit and total revenues fell, due largely to the decline in gold price.
Smith & Nephew, closing up 1.1%, was another big blue-chip winner. The group announced that it will acquire Texas-based medical devices company ArthroCare Corp for USD1.7 billion, paying USD48.25 per share for the firm. Smith & Nephew is confident that cost and revenue synergies from the acquisition will add approximately USD85 million to its annual trading profit in the third full-year.
BBA Aviation, closing up 1.6%, was one of the FTSE 250's biggest risers. The company said it is considering returning some cash to shareholders after it completed the sale of its APPH operations for USD128 million in cash, a move that disposes of most of its manufacturing operations, leaving it focused on airport and airline services.
AIM All-Share-listed Rurelec closed down 26%, making it one of the biggest fallers in the small-cap index. The Permanent Court of Arbitration in The Hague awarded the company much less than it had hoped for under the company's Bolivian compensation claim. The court granted immediate compensation of USD35.5 million to Rurelec, higher than the GBP20.6 million paid to acquire its controlling stake in Guaracachi in 2006, with a further USD5.5 million due to be paid back to Rurelec by Guaracachi itself.
This, however, was well short of expectations. In April 2013, the company's independent valuation experts said the return from the expropriation claim could have been as large as USD142.3 million, while Chief Executive Peter Ear has often mentioned the figure of USD75 million, excluding costs and interest.
In the data calendar Tuesday, UK PMI construction information is released at 0930 GMT. Italian consumer price index information is scheduled for 1000 GMT, at the same time as EU PPI data. In the US, the Redbook index is released at 1355 GMT, with the ISM New York index scheduled at 1445 GMT, and factory orders data at 1500 GMT.
In the corporate calendar, FTSE 100-constituents BG Group and ARM Holdings are joined by FTSE 250-listed St. Modwen Properties and Ocado Group in releasing full-year 2013 results. Also in the FTSE 250, Victrex and TalkTalk Telecom Group provide interim management statements. Blue-chip BP releases fourth quarter results.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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