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London open: Markets edge higher despite growing UK concerns

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UK stocks edged higher on Friday morning with markets hitting their highest levels in December despite growing concerns about the UK economy.

The FTSE 100 was trading up 0.16% at 6,595.4 early on after a 1.4% surge the day before as investors reacted to the Federal Reserve’s move to scale back stimulus, ending months of uncertainty that has plagued financial markets worldwide.

London’s benchmark index has not closed above this level since November 29th when it ended the session at 6,650.57.

Just as the Bank of England (BoE) has become more cautious on its economic forecasts, data released this morning showed that consumer confidence deteriorated this month. The GfK Consumer Confidence Survey fell from -12 to -13 in December, surprising analysts who had expected a small tick-up to -11.

This was the third straight fall in the sentiment index, its longest decline since 2010, signalling a clear “downwards trend”, according to Nick Moon, Managing Director of Social Research at GfK. He said that while the fall was not nearly enough to reverse massive gains made earlier in the year, “the explanation for the last quarter of declining confidence most likely results from people’s sense of how well- or rather badly-off they personally feel”.

This comes after the BoE admitted in its quarterly bulletin that its economic estimates have been poor since the start of the financial crisis, and have “tended to overpredict growth and underpredict inflation”.

“With a number of economic data being released for the UK at 09:30 – current account and final gross domestic product figures headlining – speculators could latch onto this story should the figures miss forecasts,” said Alex Conroy, Financial Sales Trader at Spreadex.

Markets on the whole were broadly higher across Europe this morning despite the news that Standard & Poor’s has downgraded its long-term debt rating for the European Union from ‘AAA’ to ‘AA+’. The agency said in a statement that the “financial profile of the EU has deteriorated, and that cohesion among EU members has lessened”.

Asian markets finished mixed overnight amid continuing volatility in China’s money-market rates, which have risen higher for a third straight day. Renewed concerns about another credit crunch prompted the People’s Bank of China to make an emergency liquidity injection, while the Shanghai Composite fell for its ninth consecutive session, its worst losing streak since 1994, according to Bloomberg.

BAE Systems was a heavy faller this morning after the United Arab Emirates withdrew its interest in buying 60 Eurofighter Typhoon jet fighters, a major blow for the defence group which had been in talks regarding the £6bn contract for over a year.

Retailers M&S, Tesco, Sainsbury and Morrison were among the best performers early on, recovering after a poor performance in recent days.

Cruise operator Carnival was extending gains after impressing the market with its full-year results yesterday afternoon. Analysts at Numis this morning said that the better-than-expected results mean that “investor sentiment for the stock may now be near an inflection point”.

Oil majors BP and Shell were in demand after West Texas crude futures hit a two-month high yesterday following the Fed move.

Natural gas firm BG Group, however, was in the red despite the news that its partner on block BM-S-9 in the Santos Basin, offshore Brazil, has submitted a Declaration of Commerciality to the Brazilian authorites.

FTSE 100 – Risers
Carnival (CCL) 2,393.00p +3.50%
International Consolidated Airlines Group SA (CDI) (IAG) 395.40p +1.59%
RSA Insurance Group (RSA) 92.00p +1.49%
Schroders (SDR) 2,491.00p +1.18%
Tesco (TSCO) 327.60p +1.16%
GlaxoSmithKline (GSK) 1,587.50p +0.92%
Coca-Cola HBC AG (CDI) (CCH) 1,694.00p +0.89%
Marks & Spencer Group (MKS) 448.00p +0.86%
Aggreko (AGK) 1,649.00p +0.73%
Admiral Group (ADM) 1,276.00p +0.71%

FTSE 100 – Fallers
BAE Systems (BA.) 422.20p -4.48%
Petrofac Ltd. (PFC) 1,125.00p -1.32%
BG Group (BG.) 1,242.00p -1.23%
Anglo American (AAL) 1,269.00p -1.09%
TUI Travel (TT.) 396.30p -1.05%
Severn Trent (SVT) 1,676.00p -0.89%
William Hill (WMH) 387.70p -0.89%
Antofagasta (ANTO) 793.00p -0.81%
Burberry Group (BRBY) 1,439.00p -0.76%
Fresnillo (FRES) 693.00p -0.72%

Source: ShareCast