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London open: Stocks edge lower on weak US and Asian cues
Stocks in London slipped in early trade, tracking losses in the US and Asia. At 0910 GMT, the FTSE 100 was down 0.2% to 6,087.69.
“With the US rate rise finally out of the way this appears to be another classic example of buy on rumour, sell on fact,” said Mike McCudden, head of derivatives at stockbroker Interactive Investor.
“The backdrop of weak commodities and Asian economic concerns will not go away any time soon and the rate hike in the US has led to a raft of panic adjustments from many of the world’s central banks. However, once markets have settled down and the fog has lifted we should expect to see some cash coming in from the sidelines.”
London’s equity markets saw strong gains in the previous session as investors welcomed the Federal Reserve’s first rate hike in nearly a decade, which was accompanied by reassurance from chairwoman Janet Yellen that the tightening path would be gradual.
“While Wednesday’s Fed rate hike removed one cloud of uncertainty from the markets thinking in 2015, speculation about when the next one is likely to occur is not expected to remain too far away, given the divergence between what policymakers expect to occur one year on from here, on their dot plot expectations, and what investors expect to happen,” said Michael Hewson, chief market analyst at CMC Markets.
On Friday, Asian news was in focus after China’s Beige Book showed conditions in the world’s second-largest economy worsened in the fourth quarter.
According to a private survey by China Beige Book International, national sales revenue, volumes, output, prices, profits, hiring, borrowing, and capital expenditure were all weaker than the previous quarter.
Meanwhile, the Bank of Japan kept its base money target under the stimulus programme but set up a new one to buy exchange-traded funds, extend the maturity of bonds its own and up its purchase of key risky assets.
Markets in Japan briefly rallied on the news, but BoJ governor Haruhiko Kuroda said at the press conference following the announcement that the latest policy changes did not amount to additional easing and were designed to give flexibility to adjust policy.
“Initially, this appeared to be a surprising addition to the current stimulus measures and the yen slid against the dollar, while the Nikkei rallied in response to the news, but these moves were short-lived,” said Craig Erlam, senior market analyst at Oanda.
“In reality, the measures were negligible, especially as the ETF purchases came alongside a commitment to sell stock it has purchased since 2002, also at a rate of 300 billion yen per year, creating zero net purchases. The only marginal boost comes from the kind of stocks the BoJ is now targeting, but again, this is negligible. Moreover, the 300 billion yen in purchases comes on top of its 3 trillion yen of ETF purchases and 80 trillion yen of asset purchases under its QQE program. So, hardly anything to write home about.”
In corporate news, BG nudged higher after receiving approval from the US Federal Energy Regulatory Commission to construct and operate a natural gas liquefaction and export facility in Lake Charles, Louisiana.
Sports Direct was a little higher after it put out a statement hitting back at allegations made in the Guardian last week about the way it treats its staff.
GlaxoSmithKline was in focus after its HIV business reached a couple of deals with Bristol-Myers Squibb to acquire its late-stage HIV research and development assets as well as its portfolio of pre-clinical and discovery stage HIV research assets.
