London open: Stocks slip before US data
Market Movers
- techMARK 2,097.31 -0.47%
- FTSE 100 5,733.86 -0.43%
- FTSE 250 11,500.77 -0.02%
- Moody's lower EU rating to 'negative'
- Markets await US ISM data
- Investors keep eyes pinned on ECB
UK stocks pulled back on Tuesday morning following a strong performance the day before as some gloomy comments from Moody's and caution ahead of some US economic data dampened sentiment.
Yesterday, "the FTSE bounced off support at 5,700 as traders piled back into high -beta stocks. A push towards 5,900 looks likely but a conviction buy requires an increase in volume, which is currently lacking," said Manoj Ladwa from TJ Markets this morning.
Credit ratings agency Moody's last night maintained the European Union's 'Aaa' rating but lowered its outlook for the region from 'stable' to 'negative' to reflect "the negative outlooks now assigned to the Aaa sovereign ratings of key contributors to the EU budget: Germany, France, the UK and the Netherlands, which together account for around 45% of the EU's budget revenue".
Investors were also nervous about some manufacturing data due out Stateside this afternoon. The US ISM manufacturing index is expected to improve from 49.8 last month to 50.0, the level that separates expansion and contraction. A better-than-expected figure may ease the Federal Reserve's concerns about the economy, disrupting hopes that the central bank will launch another round of quantitative easing at its meeting next week.
The big day on equity markets this week will undoubtedly be Thursday when the monetary policy decisions from the Bank of England and the European Central Bank (ECB) are due. However, the latter will take centre stage as ECB President Mario Draghi is widely expected to unveil plans for buying sovereign debt in order to bring down bond yields in peripheral nations.
REIT stocks and RBS hit by downgrades
Real estate investment trust (REIT) Land Securities was among the worst performers early on after both JP Morgan Cazenove and UBS downgraded their ratings on the stock to 'neutral' this morning. UBS said that the stock's valuation reflects "fair value after a strong run".
UBS also cut its ratings for sector peers British Land and SEGRO from 'buy' to 'neutral'. In contrast, the broker upgraded REIT peer Hammerson from 'neutral' to 'buy', saying that the low risk associated with the company is "underappreciated".
Banking group Royal Bank of Scotland (RBS) was lower as the threat of a bruising legal battle with angry shareholders continues to hang over the company. Investec this morning lowered its recommendation on the shares from 'buy' to 'hold', saying that "after another modest rally, we throw in the towel".
High-flying plant hire firm Ashtead jumped after raising profits guidance again as its new financial year got off to a strong start.
Veterinary pharmaceuticals firm Dechra rose after revealing growing sales across all its major brands and profits ahead of market forecasts for the full year to the end of June.
Recycled packing company DS Smith was in demand after saying it was trading in line with market expectations and expected substantial year-on-year growth in earnings per share.
Also on the rise was Old Speckled Hen brewer Greene King which shrugged off the Olympics and the poor weather to make a robust start to the financial year.
| UK Event Calendar | Tuesday September 04
INTERIMS
Abbey Protection, Hydro International, Johnson Service Group, Lupus Capital, Quindell Portfolio, Stadium Group, Ubisense Group Plc
INTERIM DIVIDEND PAYMENT DATE
Inchcape, Man Group, Rexam
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Construction Spending (US) (15:00)
ISM Prices Paid (US) (15:00)
Producer Price Index (EU) (10:00)
FINALS
Alumasc Group, Craneware, Dechra Pharmaceuticals, Genus, Mcbride, Monitise
AGMS
Ashtead Group, Essar Energy , Greene King, Midas Income & Growth Trust, Polar Capital Technology Trust, Smith (DS), Tricorn Group
UK ECONOMIC ANNOUNCEMENTS
BRC Sales Monitor (00:01)
PMI Construction (09:30) |
| Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Europe open: Investors cautious after Moody´s lowers outlook on EU
-Rehn: Fiscal union only possible in long-term
-Members of EU Economic affairs committee chastised for leaks
-Moody´s cuts outlook on EU to negative from stable
-Dutch Socialists may favour granting ESM a banking license
-Italian and Spanish 3 year bonds rise
FTSE-100: -0.46%
Dax-30: -0.36%
Cac-40: -0.32%
FTSE-Mibtel 30: 0.21%
Ibex 35: 0.27%
Stoxx 600: -0.31%
The main European equity benchmarks have started the day on a mixed footing, with falls in most cases but small gains in the periphery. That following remarks attributed to European Central Bank President, Mario Draghi, to the effect that he may feel comfortable buying sovereign debt with a maturity of up to 3 years.
Possibly worth pointing out however, at least one well-known commentator seems to believe that Draghi´s remarks may have been a little bit misrepresented. In any case, those embarrassing leaks from yesterday´s closed door meeting of the European Union parliament´s Economic Affairs Committee drew a sharp rebuke from the group´s chairwoman.
Acting as a backdrop, credit ratings agency Moody's last night maintained the EU's 'Aaa' rating but lowered its outlook for the region from 'stable' to 'negative' to reflect "the negative outlooks now assigned to the Aaa sovereign ratings of key contributors to the EU budget: Germany, France, the UK and the Netherlands, which together account for around 45% of the EU's budget revenue".
Lufthansa hit by strikes
From a sector stand-point the weakest performance is now to be seen in the following industrial groups within the DJ Stoxx 600: personal goods (-0.69%), automobiles (-0.07%) and technology (-0.58%).
Deutsche Lufthansa has canceled flights from Berlin, Frankfurt and Munich because of strikes this morning.
Swiss data comes in well below estimates
Swiss gross domestic product contracted at a 0.1% quarter-on-quarter rate in the second quarter, below the 0.2% gain forecast.
Spanish unemployment rose by 38,200 in August, after the previous month´s 27,800 person fall.
Eurozone producer price data for the month of July is due out at 10:00.
Slight gains in the Euro and oil
The euro/dollar is now edging higher by 0.18% to the 1.2610 dollar mark. |
| US Market Report | Markets Closed
| Newspaper Round Up | Tuesday newspaper round-up: Fragmentation, EU, Tax-cuts
Interest rates paid by companies in the Eurozone's weaker economies have surged, highlighting the bloc's fragmentation as the European Central Bank loses control of borrowing costs. ECB data on Monday showed Spanish small businesses face the highest bank borrowing costs in almost four years – while interest rates paid by German rivals are at record lows. The sharply diverging interest rates have put southern European companies increasingly at a competitive disadvantage to their northern European rivals. They provide a gloomy backdrop to this week's ECB governing council meeting, which will discuss plans for intervening in Eurozone government debt markets, as investors price in the chance of a break-up of the 14-year old monetary union, The Financial Times says.
Moody's has lowered the European Union's long-term issuer rating outlook from stable to negative, saying the move reflected credit risks of the bloc's key budget contributors. "It is reasonable to assume that the EU's creditworthiness should move in line with the creditworthiness of its strongest key member states," it said, citing negative outlooks for Britain, France, Germany and the Netherlands. Despite Moody's pronouncement, the euro rose to a two-month high of $1.2618 in Asian trading on Tuesday, compared with $1.2598 late Monday in London trade, AFP reported. Nevertheless, Moody's maintained the EU's triple-A rating, saying its "two key rationales" for assigning the bloc its highest rating remained unchanged: its "conservative budget management" and "the creditworthiness and support provided by its 27 member states," The Telegraph explains.
A senior Conservative has called on George Osborne to administer emergency "shock therapy" to the economy or risk delivering decades of decline. David Davis called for a swath of tax cuts and the scrapping of business red tape as he warned the Chancellor that he would not be excused if he failed to take drastic measures to kick-start growth. In a withering critique of the Government's economic performance, Mr Davis accused ministers of seeking excuses, such as the Eurozone crisis and the debt inheritance from Labour, rather than solutions. "An alibi is not a policy," he said. "There is a risk that by focusing on parcelling out blame we accept our circumstances with too much fatalism," The Times reports.
BP is being sued for tens of millions of dollars in the US by institutional investors who allege the oil major misled them over its safety policies and the scale of the spill in the Gulf of Mexico. The company's shares more than halved – wiping billions of pounds off the value of the group – in the wake of the April 2010 disaster, which killed 11 men and caused the worst offshore spill in US history. Six investors who bought shares in BP in London prior to the accident or in its immediate aftermath claim that they would not have done so at the price they did "had they known the truth". They include the South Yorkshire Pensions Authority, Skandia Global Funds and GAM Fund Management. The funds allege that they lost "substantial sums as a result of BP's misleading statements", and are suing under Texas law for common law fraud and negligent misrepresentation, and for statutory fraud. That after the US Supreme Court blocked foreign investors seeking damages in federal courts, The Telegraph says.
David Cameron will reboot the Conservative machine today as he uses a wide-ranging reshuffle to force the pace of government reforms. The Prime Minister has appointed a disciplinarian to tame rebellious Tory MPs and will announce a new public face of the party to take it on the uphill path to the 2015 election. Andrew Mitchell, Mr Cameron's new chief whip, spent yesterday helping the Prime Minister to plot his first reshuffle, which may see more than 20 ministers leave government. Mr Cameron is expected to name either Jeremy Hunt or Grant Shapps as the new Tory chairman, charged with energising a dwindling activist base and representing the party on the airwaves, writes The Times.
Leni Gas & Oil is threatening court action against Mediterranean Oil & Gas (MOG), raising questions over whether it may have been misled before selling its interests in Malta at a low price. Leni said that on August 1 it sold its 10% stake in the Malta licence to MOG, which already owned 90%, for the nominal figure of $1 (63p) plus $19,050 in past costs. Leni said it would write off £1.9m in costs related to the licence. On August 23 MOG said it had sold 75% of its Maltese blocks for $10m to Genel Energy, whose chief executive is former BP chief executive Tony Hayward, prompting a statement from Leni expressing "surprise". Analysts said the deal, under which Genel will also pay for drilling two wells, could imply Leni's stake had been worth $9m, according to The Telegraph.
A group of eight MPs have written to Barclays's new chief executive in protest at the bank's "deeply disappointing" action over the mis-selling of interest rate swaps. In a letter to Anthony Jenkins, seen by The Daily Telegraph, the MPs accuse the bank of failing to tackle the "difficult and distressing problem" which they claim is "threatening the long-term viability" of hundreds of small and medium-sized companies. The MPs call for Mr Jenkins, who was appointed only five days ago, to clarify how the bank intends to release companies from swap arrangements and to guard them from "punitive measures" if they claim compensation. |
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