London open: Syria, taper uncertainty weigh on stocks
With the economic data calendar for Europe and the US looking pretty thin for Monday, investors are likely to focus on figures from China where trade and inflation numbers brightened the third-quarter outlook for the world’s second-largest economy. Chinese exports rose by a stronger-than-expected 7.2% in August and imports jumped by 7%, while the annual rate of consumer price inflation eased from 2.7% to 2.6%.
Meanwhile, second-quarter growth estimates in Japanwere revised higher from 0.6% to 0.9%, as confidence grows in Prime Minister Shinzo Abe’s so-called ‘Abenomics’. This data – along with the news that Tokyo will host the 2020 Olympics – gave stock markets across Asia a boost overnight.
Nevertheless, a close eye will be kept on tensions overSyria this week ahead of a vote by US Congress over whether or not to proceed with a military attack after last month’s alleged use of chemical weapons by Bashar Al-Assad’s regime.
Tensions at the G20 Summit escalated last week after Vladimir Putin said Russia would “assist” Syria if it was attacked by the US, just as President Barack Obamawas trying to rally for support from global leaders for an intervention.
Uncertainty regarding Federal Reserve monetary policy also prompted traders to adopt a cautious approach in the aftermath of Friday’s disappointing jobs report. A worse-than-expected rise in non-farm payrolls in August sparked speculation that the US central bank could hold off from tapering its quantitative easing (QE) programme until later on in the year. However, the unemployment rate fell last month from 7.4% to 7.3%.
Market Strategist Ishaq Siddiqi from ETX Capital said that the August jobs report was a “mixed result leaving the market feeling none the wiser to second guess the Fed’s next move”.
Oil and gas group BG was a heavy faller this morning after lowering its 2014 production milestones due to the instability in Egypt, delays to the start-up of production in Norway and low natural gas prices in the US.
Sugar and food group Tate & Lyle was also in the red after UBS downgraded the stock from ‘neutral’ to ‘sell’, saying that its current valuation is too high and does not reflect that “sucralose prices continue to decline as ‘generic’ competitors improve product quality and access greater scale”.
Food ingredients peer and retail group Associated British Foods was lower despite saying a strong finish to the year from Primark will help it deliver adjusted operating profit ahead of expectations for the second half.
GlaxoSmithKline declined after confirming it has reached an agreement to sell its Lucozade and Ribena brands to Japanese firm Suntory Beverage & Food for £1.35bn in cash. The company said that now is the right time to sell “as we increase the focus of our Consumer Healthcare business and execute the delivery of our late stage pipeline of pharmaceuticals and vaccines”.
Engineering and project management group AMEC was subdued despite winning a five-year extension to its gas mains replacement contract with Wales & West Utilities (WWU), worth £40m per annum to its joint venture with Morrison Utility Services.