UK markets were trading broadly flat on Thursday morning as investors digested recent developments in Syria some disappointing industrial production figures from the Eurozone.
Traders were also showing caution as eyes begin to turn to the upcoming policy meeting at the Federal Reserve.
The FTSE 100 was pausing for breath after hitting a one-month high the day before. Yesterday's finish of 6,588.43 was its highest closing price since August 13th when it ended the day at 6,611.94.
Fed, Syria in focus
A September 'tapering' of Fed stimulus had looked almost certain - according to the majority of economists - up until last week when a worse-than-expected US jobs report cast doubt on analysts' expectations. Given that the Fed said that reduction in asset purchases would be largely tied to the recovery in the labour market, there is now speculation that policymakers could wait until later on in the year before pulling the plug.
Fears over an impending US strike on Syria have eased over recent days after it accepted a Russian proposal to hand over all chemical weapons to international control in an attempt to avoid US military action. In a nationally televised speech on Tuesday night, US President Barack Obama asked Congress to delay a vote on military action against Bashar al-Assad's regime in light of recent diplomatic developments.
Meanwhile, Russian President Vladimir Putin on Wednesday called on the US not to intervene in Syria, especially if action is not approved by the United Nations first. In a commentary in The New York Times, he said: "The potential strike by the United States against Syria, despite strong opposition from many countries and major political and religious leaders, including the pope, will result in more innocent victims and escalation."
Eurozone data disappoints
Markets across the Eurozone were broadly lower this morning after factory output in the single-currency region dropped 1.5% compared to a small increase in June, according to Eurostat. This was much worse than the 0.3% decline expected. In Germany, Europe's largest economy, industrial production was down 2.3% in July from June.
It came as European Central Bank President Mario Draghi reaffirmed the monetary authority's forward guidance on interest rates, saying it expected them to remain "at present or lower levels for an extended period". The bank left its key rate unchanged at 0.5% last week but Draghi said policymakers had toyed with a possible rate cut, due to concern about money market rates and the uncertain nature of the recovery.
Meanwhile, Bank of England Governor Mark Carney told the Treasury Select Committee today that the UK economy is "picking up and the stimulus is working". He said: "while it's early days, we expect as well that we are consistent with the path to returning inflation to 2%."
FTSE 100: Morrisons rises after first-half results
Supermarket group Morrisons was on the rise early on after a broadly in-line set of first-half results. Profits fell 21.8% to £344m while total turnover was flat at £8.9bn. Analysts at Jefferies said it was a "mixed" first half, but an "undemanding valuation and a clear reduction in capes intensity from here onwards point to an improving outlook".
AMEC rose after saying that it is considering additional cash returns in the fourth quarter after walking away from making a firm offer for FTSE 250 engineering peer Kentz Corporation. The company also said that it continues to see "attractive opportunities to extend its geographic footprint in the growth regions".
Fashion retailer Next edged higher after it hiked its interim dividend payout after driving up half-year profits by 8.2% despite a fall in sales. The company said it was able to sell more clothes at full price and few clothes in its sale.
Leading the downside was temporary power and temperature control group Aggreko after Deutsche Bank lowered its target price for the stock from 2,100p to 1,870p. The bank kept its 'buy' rating but said that it now expects underlying profits to be flat next year.
Industrial group Melrose was also in the red after Citigroup downgraded the stock to 'neutral' on valuation grounds after a strong outperformance so far this year. The bank said: "While we continue the see attractions on a long-term view, driven by a management team, which has strong record of creating value, we believe the near-term catalysts are appropriately captured in today's share price."
Meanwhile, SABMiller was taken down a peg by Nomura which cut its rating to 'reduce'. The broker said that the exceptional profit growth across the industry since 2005 is "unlikely to be matched".
Silver and gold prices
were heading lower this morning, causing shares
of precious metals producers Randgold and Fresnillo to take a hit.
FTSE 250: Dialight and Kentz provide a drag
Delays in the signing of large contracts has forced industrial lighting group Dialight to warn that profits will be flat for the full year, causing shares to drop sharply this morning.
Kentz was also a heavy faller after AMEC said it would not make a firm offer for the company after its £700m proposal was rejected. Kentz Chief Executive Christian Brown said: "I would like to take this opportunity to reiterate our focus on delivering value to our shareholders. Naturally, while we have every confidence in our ability to deliver further value to our shareholders as an independent company, the board fully understands its responsibilities to all our shareholders."
FTSE 100 - Risers
Morrison (Wm) Supermarkets (MRW) 305.30p +2.73%
Amec (AMEC) 1,085.00p +2.55%
William Hill (WMH) 427.00p +1.91%
Wood Group (John) (WG.) 835.00p +1.89%
Sainsbury (J) (SBRY) 400.00p +0.98%
British Sky Broadcasting Group (BSY) 857.50p +0.94%
Anglo American (AAL) 1,624.00p +0.90%
Smiths Group (SMIN) 1,371.00p +0.88%
Tate & Lyle (TATE) 786.50p +0.83%
Carnival (CCL) 2,443.00p +0.83%
FTSE 100 - Fallers
Aggreko (AGK) 1,597.00p -3.27%
Melrose Industries (MRO) 303.70p -2.88%
Fresnillo (FRES) 1,197.00p -1.72%
Aberdeen Asset Management (ADN) 374.70p -1.34%
Burberry Group (BRBY) 1,618.00p -1.34%
SABMiller (SAB) 3,098.50p -1.32%
Legal & General Group (LGEN) 197.20p -1.30%
Randgold Resources Ltd. (RRS) 4,555.00p -1.28%
Resolution Ltd. (RSL) 323.00p -1.25%
ITV (ITV) 179.10p -1.21%
FTSE 250 - Risers
Perform Group (PER) 571.00p +4.29%
Home Retail Group (HOME) 169.50p +3.42%
Countrywide (CWD) 562.00p +2.18%
Dunelm Group (DNLM) 949.00p +2.04%
BH Global Ltd. USD Shares (BHGU) 11.83 +1.98%
Informa (INF) 546.50p +1.86%
Derwent London (DLN) 2,352.00p +1.69%
Playtech (PTEC) 712.50p +1.42%
Enterprise Inns (ETI) 153.50p +1.39%
Go-Ahead Group (GOG) 1,536.00p +1.39%
FTSE 250 - Fallers
Dialight (DIA) 1,145.00p -16.73%
Kentz Corporation Ltd. (KENZ) 489.60p -10.90%
Mitchells & Butlers (MAB) 440.00p -4.35%
International Personal Finance (IPF) 616.00p -3.22%
Taylor Wimpey (TW.) 102.70p -3.20%
Hays (HAS) 110.60p -2.90%
Oxford Instruments (OXIG) 1,330.00p -2.85%
Spirax-Sarco Engineering (SPX) 2,995.00p -2.82%
Kier Group (KIE) 1,620.00p -2.82%
Elementis (ELM) 250.30p -2.76%