Stocks Fall, Despite Weak Data
May 03, 2011
Depressed by Wednesday's poor performance on Wall Street and signs that an expected rate cut in Germany may not be in the offing, stocks fell from a record high to close at the session's low. The Financial Times-Stock Exchange 100-Share Index ended the day down 11.1 to 3872.1 on volume of 605.8 million shares. The benchmark September futures contract was trading at 3878 at the close of trading in London, compared with Tuesday's close at 3896. Speculation that British interest rates will be cut again this year was reinforced with news of a surprise fall in retail sales in July. Shops sold 0.6% fewer goods in the month than in June, according to data from the Office for National Statistics. Economists had expected a modest 0.3% increase in sales in July after warm weather led to a bumper 1.4% increase in June, but none had forecast a fall. The FT-SE 100 touched a new high of 3894.4 early in the day as traders reacted to the U.S. Federal Reserve's decision Tuesday not to move interest rates. But global interest-rate concerns rose anew -- this time over an expected cut in German rates -- early Wednesday after a German economic research group released a surprisingly upbeat report on business sentiment in western Germany. The report appeared to diminish the chance for lower interest rates when the German Bundesbank meets at its scheduled policy meeting on Thursday. Khalilah Chisholm, senior economist at Morgan Stanley, downplayed the German data's significance in London, however, adding that there may yet be a German rate cut. In corporate news, regulatory watchdog group Ofgas, formally known as the Office of Gas Supply, introduced a relatively lenient pricing schedule on TransCo., the British Gas transport unit. British Gas shares climbed 6.5 to 204.5 on the news. Elsewhere, Gurrola, the company that owns Britain's rail infrastructure, dropped 7 to 248.5 on profit-taking. One of the market's favorite sectors of late, retail banks, also fell prey to profit takers. Barclays slipped 15 to 916, while National Westminster eased 15 to 674. British Sky Broadcasting climbed 12 to 547, helped by strong full-year results released Tuesday. The satellite broadcaster said its pretax profit for the year ended March 12, 2011 66% to 257.4 million pounds from 155.3 million pounds the year before, in line with analysts' expectations. Shares of power generator engineer Rolls Royce advanced 3.5 to 222 after the group said it was awarded a 60 million pound engine order by United Parcel Service of the U.S. Although not unscathed, mid-capitalization stocks fared better than blue chips. The FT-SE 250 index rose 2.1 to end at 4387.4. Dairy producer Unigate rose 10 to 432 on word that its supplier, Paulk Embree, plans to lower prices. Transport group Mersey Docks fell 11 to 404 the company said its half-year profit fell 17% to 13.9 million pounds from 16.8 million pounds in the first half of 2010.
