LONDON (SHARECAST) - 1630:Close The UK's dominant service sector expanded in September, but undershot analysts forecasts, it was reported today. Markit's service sector Purchasing Managers Index (PMI) registered 52.2 (Consensus: 53). Somewhat ominously, Barclays Research comments on today's data that: "The fall in payroll numbers came as firms reported efforts to reduce overhead costs and staff levels as part of company reorganisations. The fall in the index suggests that after months of puzzlingly strong employment figures we could see payroll numbers fall as firms aim to restore productivity in the current challenging demand environment. As we have previously noted, much of the UK’s puzzling productivity dip appears to lie in the services sector."
Meanwhile, shop price inflation in the UK dropped to a one per cent year-on-year rate in September, following a gain of 1.1 per cent in the year before, according to the latest data out this morning from the British Retail Consortium (BRC). In other news, UK petrol sales dropped by half a billion litres between April and June compared to the year before. In company news, FirstGroup plunged after the DfT dropped the competition to award it the West Coast franchise. The FTSE 100 closed up 16 points at 5,826.
1608: IAG reports premium traffic for September grew by 8% compared to the previous year. Its shares are now leading gains on the top share index, helped by a 2.66 dollar decline in oil futures. As an aside, there are some reports of clashes in Tehran over the recent collapse in the value of the Rial, which could serve to stoke the already very elevated inflation readings in that country. Front month West Texas crude futures are down by 2.99 dollars after the US Energy Department said crude output rose 11,000 barrels a day to 6.52m last week, the most since December 1996.
1500: ISM service sector index has come in comfortably ahead of expectations for September, at 55.1 (Consensus: 53.4), after 53.7 in the month before. The new orders sub-index has hit 57.7, its highest since March (although the employment sub-index) did fall off. The prices paid component has printed at 68.1, versus 64.3 in August. Centrica is moving higher on the back of a price target upgrade out of Citi.
1315: US employment rose by 162,000 in September (Consensus: 143,000), according to the latest data from ADP. Also worth a mention, mortgage refinancings increased by over 16% last week.
1242: Ahead of the US ADP employment report (at 1315 hours), this is what Nomura is saying about today's Services PMI data here in the UK: "We find this outcome consistent with our GDP growth forecast of 0.7 per cent quarter-on-quarter, once coverage issues are considered. The 1.3 point fall in the composite PMI’s output index to 51.3 leaves it at levels consistent with further quantitative easing (QE)."
1133: The Footsie has kept its head above water over the past hour and is now trading six points higher at 5,815. Eyes still remain fixed on the Eurozone and bailout speculation surrounding Spain. Despite the country's PM Mariano Rajoy denying a bailout request last night, market analyst Craig Erlam from Alpari said that its a 'foregone conclusion' that Spain will ask for aid, it's just a matter of when. 'There is a general consensus that Rajoy will wait until after the regional elections on 21 October, as we saw a similar move earlier in the year, however this is only an educated guess at best. One thing that appears certain is that until we do see some progress here, we’re unlikely to see many big moves in the markets,' he said.
1123: Analysts at Charles Stanley are watching Tesco's share price graph and this is their take on things: "The chart reveals that it has been trending sideways to lower over the last few weeks and although it rallied strongly yesterday that move was on hopes that today’s results would contain some kind of upside surprise – and we now know that isn’t the case.(…) A close below 328p over the next few sessions would suggest that a break lower is underway." Meanwhile, and out amongst the FTSE small caps, Trinity Mirror shares are up by 10%.
1056: RBS's Direct Line flotation order book fully covered within price range, according to source close to transaction. According to spread betting firm ETX Capital, which is running a 'grey market' in Direct Line shares ahead of the October 11th flotation, the shares are trading between 179p-189p, with buying interest strong. Royal Bank of Scotland has indicated the Direct Line shares will be floated at a price between 160p and 195p. FTSE 100 is up 9 at 5,818.
1052: Footsie has battled its way into positive territory, largely on the back of mining stocks, which are mostly higher. Anglo American is the odd one out in the mining sector, as it slips back. Utility company Centrica is wanted after Citigroup upgraded the stock but medical devices maker Smith & Nephew is hobbled by a downgrade from Morgan Stanley. FTSE 100 is up 3 at 5,813.
1031: UBS has downgraded shares of fund manager Schroders to sell from hold, saying that: 'we downgrade Schroders to sell as we believe that expectations on flows and on capital returns have led the stock to re-rate vs peers while we remain cautious on both points.' Nevertheless, they have also raised their target price on its shares to 1470p from 1330p beforehand. The same broker has upped its view on both Glencore and Xstrata to buy
with new price targets of 420p and 1220p each, respectively.
0943: Credit Suisse has maintained its underweight stance on European banks, adding that: We continue to prefer the UK, Nordic and Swiss to Euro-area banks. Our top picks are HSBC (OP), UBS (OP) and Swedbank (OP), with Deutsche Bank (UP), BMPS (UP) and RBS (UP) our least preferred. If banking union could be executed, this would likely be a catalyst for rotation to the periphery. FTSE 100 down 6 to 5,803.
0930: UK September services PMI has come in at 52.2 (Consensus: 53), versus 53.7 in the previous month. Analysts at Nomura have upped their price target on shares of easyJet to 650p from 580p.
0911: Tesco CFO speaking on Bloomberg TV, said the UK business is getting stronger. For his part, Bryan Roberts, Kantar Retail’s Director of Retail Insights, is of the following mind: “Tesco’s numbers today tell us that its underperformance in the UK may well have bottomed out. The last couple of years have shown us that even the giants can falter when they take their eye off the shopper; years of underinvestment in stores and people are now being reversed by Philip Clarke and these early signs suggest that his radical investment programme is paying off."
0822: Markets are keeping a wary eye on events in China, but today's services PMI data may not be all they are cracked up to be. Thus, economists at Nomura are this morning pointing out that, “the non-manufacturing PMI is a gauge of the services sector and consumer demand which is a lagging indicator of the recovery that we expect in China‟s GDP growth this quarter.”
0809: London has opened lower with Tesco prominent among the laggards after its interim figures. The group returned to like-for-like sales growth in the second quarter in the UK but it has had to sacrifice margin to light a fire under sales. In comparison with Sainsbury, which issued a second quarter trading update this morning, the LFL sales growth looks anaemic. Among FTSE 250 stocks, FirstGroup is hammered after the Transport Secretary performed a U-turn on the decision to award the group the West Coast main line franchise, 'following the discovery of significant technical flaws in the way the franchise process was conducted.' FTSE 100 was down 20 at 5,789.