FTSE 100 watch: Footsie drops as pre-ECB caution continues
iNVEZZ.com, Wednesday, June 4: The UK benchmark index has slipped into the red for a second day with investors continuing to shy away from riskier assets ahead of tomorrow’s meeting of the European Central Bank (ECB).
Shares in Tesco (LON:TSCO) have declined today with the supermarket posting a third consecutive quarter of falling sales.
**Footsie in the red for second day**
As of 12:34 BST, Britain’s blue-chip index had lost 23.94 points to be 0.35 percent down at 6,812.36.
Investors are staying on the sidelines waiting for the ECB to unveil stimulus measures at its Governing Council meeting tomorrow. The need for fresh stimulus was highlighted yesterday when data showed that inflation in the Eurozone had grown at a slower rate than anticipated.
“Clearly investors are awaiting key developments over the next few days and as a consequence volumes are very thin,” Jeremy Batstone-Carr, head of private client research at Charles Stanley, told Reuters. “Weak regional inflation data out of the Eurozone seems certain to force the ECB’s hand, although nobody knows exactly what form of (policy) easing will be announced.”
CNBC quoted analysts at brokerage Capital Spreads as saying in a note that “with no one in a rush to do anything, markets are still hovering near their recent highs but with no one willing to bet big ahead of the central bank meetings and payrolls, the natural position squaring is leading to a consolidation of price action”.
Today, the final reading of Markit’s composite Purchasing Managers’ Index (PMI) for the Eurozone came in at 53.5 for May, down only slightly from April’s near-three year high of 54.0.
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Shares in Tesco have taken a hit after the supermarket released its first-quarter results statement, reporting that like-for-like sales at its UK stores, excluding fuel and VAT sales tax, had fallen 3.8 percent in the three months to May 24. (Tesco share price: Grocer reports 3.8% fall in Q1 sales ) The numbers were better than some analysts had feared, which sent Tesco’s share price nearly two percent higher at the opening bell this morning.
The shares, however, have given up their earlier gains with the results still marking the worst quarterly drop in underlying sales in the supermarket’s home market since CEO Phil Clarke took the helm in 2011. Reuters reported that while brokerages Cantor Fitzgerald and Shore Capital both kept ‘sell’ ratings on Tesco, Strand Capital managing director Kyri Kangellaris noted that the drop in Tesco’s share price made the supermarket worth buying as a long-term investment. Tesco’s shares are currently trading 1.30 percent lower at 293.63p.
Shares in Smith & Nephew (LON:SN) have soared today, propped up by a research note from JP Morgan. Reuters quoted the analysts as saying that speculation of a possible bid from rival Stryker Corp (NYSE:SYK) could provide support for the stock over the next three to six months. Smith & Nephew’s share price currently stands two percent higher at 1,050.64p.
**The FTSE 100 was 0.30 percent down at 6,815.59 points as of 13:01 BST on June 4, 2014.**