London close: Markets may be underestimating deflation risks in euro area

2nd Apr 2014 17:15

- Stocks extend three-week high- ECB, US data ahead- Antofagasta unharmed by Chile quaketechMARK 2,782.92 -0.04%FTSE 100 6,659.04 +0.10%FTSE 250 16,415.96 +0.05%The Footsie ended the day slightly in the blue after the release of largely in-line data on US manufacturing orders alongside a slightly stronger-than-expected reading on private payrolls. Yet in the end any positive reaction was likely to be muted given traders' innate cautiousness ahead of the release of the monthly non-farm payrolls report, next Friday, and tomorrow's meeting of the European Central Bank's governing council. No change is expected in the Eurozone's monetary policy, above all because the single currency area's policy-makers seem to have clearly flagged their intentions. Be that as it may, and as Barclays Research explained in a note to clients last Friday, there is a real possibility that markets might not be fully pricing in deflation risks. Amongst other reasons, that is because of the possibility that China will export disinflation as it slows down (lower than expected price pressures are also considered to be a risk in Japan) and the strength in the euro.One key element in the ECB's rationale is likely the fact that inflation expectations, as measured by so-called 'inflation break-evens' are currently in line with its definition of price stability. US private sector payrolls increased by 191,000 in March, according to consultancy ADP, slightly below the 195,000 forecast. The previous month's estimate was revised higher, to 171,000 from a preliminary print of 139,000. Antofagasta gains despite Chile quakeShares in International Consolidated Airlines Group gained after the International Air Transport Association said global air freight grew at a 2.9% clip during February.Mining stocks were on the rise this morning as metals prices gained across the board. Copper miner Antofagasta was among the best performers despite reports of an 8.2 magnitude earthquake in Chile, where the company is based. According to Reuters, the company has said that its copper operations were unharmed by the disaster. Resource peers Fresnillo and Randgold were also making gains early on.Sports Direct rose sharply after Liberum Capital said on Tuesday the company could expand its "limited scale" in Europe. Analyst Sanjay Vidyarthi said that organic growth alone is not viable, but identified "potential [acquisition] targets which equate to over 1,000 stores across Europe and around €2bn of sales".Domino's Pizza advanced after a 10% increase in like-for-like sales at its 725 UK stores in the first quarter, driven by improved weather and the success of its Winter Survival meal deal. Online fashion retailer ASOS moved higher after a 22% drop in first-half profits was not as bad as feared, while revenues jumped by 34%.GlaxoSmithKline declined after saying it was "disappointed" with having to call an end to its clinical trial for its treatment for non-small cell lung cancer after results failed to meet expectations.Centrica dipped after Credit Suisse said that a price rise at British Gas is unlikely before 2016, with the group likely to follow suit after SSE's price freeze.A raft of companies went ex-dividend, including Aviva, Jardine Lloyds Thompson, Phoenix, Resolution, Pearson, Tullow Oil, DS Smith, Wolseley, 888 Holdings, Next and Interserve.FTSE 100 - RisersFresnillo (FRES) 877.00p +3.66%Mondi (MNDI) 1,073.00p +3.07%International Consolidated Airlines Group SA (CDI) (IAG) 436.50p +2.83%Randgold Resources Ltd. (RRS) 4,617.00p +2.28%Barclays (BARC) 242.75p +2.23%Marks & Spencer Group (MKS) 469.90p +2.20%IMI (IMI) 1,522.00p +2.15%Standard Life (SL.) 389.10p +2.07%Antofagasta (ANTO) 856.50p +2.02%Hammerson (HMSO) 564.00p +1.99%FTSE 100 - FallersResolution Ltd. (RSL) 288.40p -5.04%Pearson (PSON) 1,014.00p -2.87%Hargreaves Lansdown (HL.) 1,424.00p -1.79%Morrison (Wm) Supermarkets (MRW) 207.20p -1.71%ARM Holdings (ARM) 1,031.00p -1.53%Whitbread (WTB) 4,182.00p -1.23%Diageo (DGE) 1,832.00p -1.05%Petrofac Ltd. (PFC) 1,425.00p -1.04%Reckitt Benckiser Group (RB.) 4,855.00p -1.04%Smiths Group (SMIN) 1,272.00p -1.01%FTSE 250 - RisersLadbrokes (LAD) 141.50p +4.20%Imagination Technologies Group (IMG) 213.20p +3.39%Intermediate Capital Group (ICP) 449.90p +3.38%Jupiter Fund Management (JUP) 427.50p +3.14%Kazakhmys (KAZ) 268.20p +3.04%COLT Group SA (COLT) 153.90p +2.87%Rank Group (RNK) 161.10p +2.68%Rathbone Brothers (RAT) 1,940.00p +2.65%Northgate (NTG) 544.00p +2.64%Foxtons Group (FOXT) 365.00p +2.53%FTSE 250 - FallersInterserve (IRV) 707.00p -5.10%Phoenix Group Holdings (DI) (PHNX) 652.00p -4.75%888 Holdings (888) 147.70p -4.15%AL Noor Hospitals Group (ANH) 1,127.00p -3.26%Stagecoach Group (SGC) 378.00p -2.95%Infinis Energy (INFI) 235.50p -2.89%John Laing Infrastructure Fund Ltd (JLIF) 115.10p -2.79%Computacenter (CCC) 650.50p -2.47%Just Retirement Group (JRG) 138.10p -2.33%Heritage Oil (HOIL) 248.50p -2.17%AB