Lloyds shares fall on loss whilst US data lifts the market heading into the close

UK stocks traded in negative territory for much of the session as risk appetite decreased on the back of poor economic data from China and Europe. However, strong US manufacturing and consumer confidence reversed the downward trend going into the close with the FTSE 100 rallying 80 points in the afternoon trading session.

Lloyds reports loss

Miners and banking stocks exerted the most pressure on the FTSE. Lloyds was the biggest faller shedding over 6.5% after reporting a loss for 2012 and set aside extra provisions to cover potential claims from PPI mis-selling. The bank reported a net loss of £1.43 billion, narrower than the loss of £2.79 billion in 2011; however the bottom line was hit by £1.5 billion in charges just in Q4 to cover potential payouts, taking the yearly figure to £3.575 billion for mis-selling PPI. The rise in provisions masked an otherwise improved performance in the business and Chief executive Antonio Horta-Osorio stated that the bank was now ahead of their transformation plan. That said, the market saw little reason to cheer and sector peers also suffered with Royal Bank of Scotland down 4.7% and Barclays off 3.3%.

Miners also dragged the FTSE south after a gauge of Chinese factories showed the manufacturing sector expanded more slowly than expected in February. Furthermore the government PMI came in at 50.1, only very slightly ahead of the 50 threshold that indicates expansion.  Given the strong data that had been leaving China over the past few months, this data came as a surprise and shows that although the Chinese recovery continues, it is milder than hoped. The manufacturing data is the first set of the monthly data released by China, so investors will be paying close attention to further indicators from China as the month progresses.

Manufacturing data for the Eurozone was disappointing also and showed that the area continued to contract with a figure of 47.9, which was marginally better than the 47.8 expected. Eurozone unemployment figures also rose to 11.9% from 11.8%, reaching record highs and provoking a negative sentiment which was not broken until US manufacturing data beat expectations later in the afternoon. UK PMI data was extremely disappointing too, falling back below the 50 expansion level to 47.9, a much deeper fall than expected.

Heading into the close the FTSE managed to stay in positive territory despite the US getting closer towards the deep automatic spending cuts which threaten to hinder the economic recovery. Republicans and Democrats have still failed to agree on an alternative deficit reduction plan though an announcement by speaker Boehner that the house will move the continuing resolution to next week to help fund the government past March 27^th helped to ease immediate concerns.

US data lifts stocks into the close

Vastly better than expected US economic data triggered stronger demand for stocks going into the close with US consumer sentiment and ISM manufacturing both roundly beating market forecasts. Consumer sentiment rose to 77.6 against expectations of a small fall to 76, whilst ISM also rose unexpectedly to 54.2.

Onto next week

There is a raft of crucial economic data due out next week that needs to be watched including central bank decisions from the RBA, BoE and ECB, alongside the all important US non farm payrolls data to finish the week.