London close: Markets nervous ahead of Jackson Hole
Market Movers
- techMARK 2,099.57 +0.08%
- FTSE 100 5,743.53 -0.56%
- FTSE 250 11,387.69 +0.11%
- Stocks look to Jackson Hole summit for a boost
- Draghi hints at action ahead of ECB meeting
- Glencore leads fallers on growing opposition to merger
Global stock markets were mostly trading in the red on Wednesday afternoon in spite an upwards revision to US economic growth as investors showed caution ahead of a meeting of central bankers this Friday.
Investors are hoping that the Jackson Hole summit this week will see the US Federal Reserve hint at further stimulus measures like it has done in the past. However, in spite of an upwards revision to US gross domestic product (GDP) growth figures for the second quarter today – adjusted to an annual rate of 1.7% from 1.5% - US benchmarks slipped after the opening bell.
Analyst Craig Erlam from Alpari said: "While [the data] in itself is unlikely to cause too much of a stir, the fact that the number has been revised higher since the last meeting is not going to work in the favour of those hoping the Fed loosen monetary policy next month."
European Central Bank (ECB) President Mario Draghi is being forced to miss the Jackson Hole conference due to "a heavy workload", increasing speculation that he could be putting the finishes touches to plans for strong action ahead of an ECB meeting next week.
Draghi hit back at German criticism of his bond-buying proposal today, sparking rumours that something big is on the horizon in Europe. The ECB "will always act within the limits of its mandate," Draghi said in German newspaper Die Zeit. "Yet it should be understood that fulfilling our mandate sometimes requires us to go beyond standard monetary policy tools."
Alpari's Erlam said this afternoon: "I don't think there's any doubt any more than Draghi will announce their bond buying programme at the ECB press conference in September."
In other news, German Chancellor Angela Merkel reiterated her opposition to the European Stability Mechanism being granted a banking licence, saying that the idea is "not compatible with the treaties". However, Italian Prime Minister Mario Monti argued that "modifications to the treaties can be asked for".
FTSE 100: Glencore provides a drag on merger risk
Commodities marketer and producer Glencore was leading the decline on the Footsie today, not only because it went ex-dividend today but as a result of reports that its proposed merger with mining giant Xstrata could be at risk. Xstrata shareholder Norges Bank Investment Management has raised its stake in the miner in the last few weeks, fuelling concerns that the Norwegian fund could join forces with Qatari Holdings to vote to block the merger.
Miners on the whole were out of favour today as risk appetite waned. Rio Tinto, Kazakhmys, Anglo American and Vedanta Resources were registering moderate losses by the close. Copper producer Antofagasta was also lower despite beating earnings estimates in the first half as a decrease in copper prices was offset by higher levels of production.
Outsourcing group Serco was higher after saying that it expects good growth in full-year organic revenues in 2012 despite a 2.1% fall in the first half.
Utilities giant SSE was among the risers after Bank of America Merrill Lynch lifted its recommendation from 'neutral' to 'buy', explaining that the company's tariff increase announced last week has erased a downside risk to earnings. "The move underpins the profitability of the supply division and gives us greater confidence in the medium-term outlook for EPS and DPS progression," the broker said.
Shares in Marks and Spencer were in red once again as takeover speculation continues to fade. The stock jumped on Friday after Bloomberg reported that private equity firm CVC was considering making an offer. However, analysts at Investec have said this morning that a successful bid is unlikely and the "bid spec bubble" is expected to burst.
FTSE 250: RusPetro drops after swinging into the red
West Siberia-focused oil and gas firm RusPetro was a heavy faller after reporting a pre-tax loss of $26.4m, compared with a profit of $0.6m in the first half of last year. Revenues, however, tripled as production ramps up.
A host of second-tier stocks went ex-dividend today and were trading in the red, such as African Barrick Gold, Devro, Ferrexpo, Henderson, Hikma, Lancashire Holdings, Wood Group, Micro Focus, Rank Group and Stagecoach.
FTSE 100 - Risers
Reed Elsevier (REL) 589.00p +1.90%
Admiral Group (ADM) 1,196.00p +1.61%
Babcock International Group (BAB) 914.00p +1.50%
Whitbread (WTB) 2,133.00p +1.38%
Compass Group (CPG) 717.00p +1.20%
SSE (SSE) 1,372.00p +1.11%
Aberdeen Asset Management (ADN) 277.50p +1.06%
Bunzl (BNZL) 1,115.00p +1.00%
Next (NXT) 3,625.00p +0.95%
Sage Group (SGE) 298.70p +0.88%
FTSE 100 - Fallers
Glencore International (GLEN) 368.50p -4.04%
Rio Tinto (RIO) 2,773.50p -3.09%
Weir Group (WEIR) 1,635.00p -2.79%
Kazakhmys (KAZ) 617.00p -2.68%
Anglo American (AAL) 1,816.00p -2.65%
Vedanta Resources (VED) 889.00p -1.66%
Lloyds Banking Group (LLOY) 33.49p -1.64%
Xstrata (XTA) 924.10p -1.61%
International Consolidated Airlines Group SA (CDI) (IAG) 142.70p -1.52%
BHP Billiton (BLT) 1,904.00p -1.47%
FTSE 250 - Risers
Carpetright (CPR) 670.00p +4.69%
Yule Catto & Co (YULC) 165.00p +4.43%
Dialight (DIA) 1,140.00p +3.92%
Homeserve (HSV) 220.60p +3.81%
Ophir Energy (OPHR) 550.00p +3.58%
Brewin Dolphin Holdings (BRW) 149.10p +3.11%
SVG Capital (SVI) 279.10p +2.84%
Afren (AFR) 128.20p +2.81%
Cape (CIU) 192.60p +2.61%
Euromoney Institutional Investor (ERM) 768.00p +2.26%
FTSE 250 - Fallers
Ruspetro (RPO) 125.50p -11.31%
New World Resources A Shares (NWR) 276.00p -6.76%
Bumi (BUMI) 321.30p -5.50%
Ferrexpo (FXPO) 172.60p -4.11%
Centamin (DI) (CEY) 76.15p -3.73%
Talvivaara Mining Company (TALV) 130.00p -3.56%
Lonmin (LMI) 608.00p -3.49%
Rank Group (RNK) 135.70p -3.42%
Henderson Group (HGG) 104.80p -2.69%
| Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Europe close: Europe plays ECB waiting game
- Europe down as markets wait for ECB move
- L'Oreal plunges after missing targets
- US growth revised upwards
FTSE 100: -0.56%
Dax 30:+0.11%
Stoxx 600: -0.17%
Cac 40: -0.51%
Ibex 35: -0.37%
FTSE MIB: -0.33%
European stocks were mostly down on Wednesday as investors waited for intervention by the European Central Bank (ECB) in the ongoing Eurozone debt crisis.
The ECB said today that its President, Mario Draghi, would not be attending the Jackson Hole economic symposium, cancelling a previous commitment to attend the conference taking place this week. The implication is that Europe will not begin buying of the debt of Spain and Italy in the secondary market before the next ECB policy meeting on September 6th.
In the US, Commerce Department figures revealed the American economy had grown at a 1.7% annualised rate between April and June, better than the initial estimate of 1.5%.
COMPANIES
The strongest sector on the Stoxx Europe 600 index was chemicals, which rose 0.36%, the weakest was basic resources which fell 1.62%.
French cosmetics giant L'Oreal dropped 4.4% after earnings missed analysts' expectations.
Also in Paris, Bouygues, the building, media and technology conglomerate, fell 9% after warning profits would drop at its phones division.
OTHER MARKETS
The euro dropped 0.19% against the dollar to stand at $1.2541 by 16:41.
Futures contracts on a barrel of Brent crude were down 0.02% by 16:42 at $112.56.
| US Market Report | US open: Stocks start the day on a mixed note
The main US equity benchmarks have begun today's session trading 'mixed' as investors hold out for this evening's Beige Book from the Federal Reserve, not to mention the start of the Jackson Hole Symposium next Friday.
Ahead of those events, The US Commerce Department has today revealed a small upwards revision to second quarter GDP growth estimates, to 1.7% year-on-year, versus an earlier estimate of 1.5%.
Mining equipment maker Joy Global is moving lower after cutting its financial guidance. Eli Lilly, on the other hand, is dropping after stopping work on an experimental treatment.
Front month West Texas crude futures are now 0.56% lower at the moment, trading at 95.79 dollars on the NYMEX.
10 year US Treasuries are now losing 4/32 dollars, with yields at 1.65%.
| Broker Tips | Broker tips: G4S, Cairn, 888
Jefferies has reduced its target for security group G4S from 285p to 275p and maintained its 'hold' rating, saying that reputational repair following the Olympics contract issues could take some time.
"Rehabilitation from Olympics issues is likely to take some time and we suspect G4S's valuation multiple will be subdued by fears that the reputational negative may impair trend EPS growth," Jefferies said.
"Until uncertainty recedes, the PE [price-to-earnings ratio] multiple is likely to remain rooted in the bottom quartile of its 9-17x through the cycle range."
UBS has maintained its 'neutral' rating for oil giant Cairn Energy, saying that while the company is going in the right direction, there's still 'some way to go'.
"Following Cairn's 1H we feel the company is now well on the way to having the foundations for becoming a full cycle E&P with exposures to various levels of risk: low risk development in the North Sea, low/medium risk exploration in the North Sea, and higher risk, and frontier exploration in Greenland, Spain, Morocco, and potentially Cyprus," the broker said on Wednesday.
"Yet with development and high impact exploration not kicking in until late 2013/2014, we are still of the view that it is too soon to change our 'neutral' view on the stock."
Investec has upgraded its rating for 888 Holdings from 'sell' to 'buy' and hiked its target from 18p to 95p after the online gaining group's first-half results.
"888 has made significant progress in driving the business forward over the past 18 months, with a change in CEO and subsequent strategic direction, more effectively targeting a higher volume of actives with a materially improved product offering," said analyst James Hollins. |
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