London close: Spanish concerns dampen stocks
Market Movers
- techMARK 2,138.36 +0.12%
- FTSE 100 5,809.45 -0.19%
- FTSE 250 11,894.41 +0.23%
- Moody's to reveal Spanish review this month
- Banks provide a drag on the Footsie
- Bumi and Bank of Georgia are big movers on FTSE 250
After a morning rally into the blue, the Footsie had dropped back into negative territory by the close of trade on Tuesday with uncertainty surrounding Spain continuing to weigh on investors' minds.
Markets were reacting this afternoon to news that Moody's expects to announce the decision of its review of Spain's sovereign debt rating at some point this month. The ratings agency downgraded its rating on Spain from 'A3' to 'Baa3' in June.
"Moody's review of Spain's rating is continuing to assess a number of factors, including Spanish banks' capital needs, the nature and size of support mechanisms, the recently released 2013 budget plan and the consequences for the euro area's crisis management framework of the further advancement of a banking union," a Moody's spokeswoman said today.
Spain is reportedly ready to move ahead with its bailout request to the Eurozone though Germany is now asking the government to hold off due to internal political pressure. On Friday, the southern European country received a long-awaited report noting that its financial sector needs €59.3bn in additional capital.
Australian stocks surged overnight after the Royal Bank of Australia surprised many with a rate cut, slashing its key interest rate by 25 basis points to 3.25%. Whilst highlighting concerns over the outlook for the global economy, Governor Glenn Stevens also said that investment in the mining sector next year "may be at a lower level than earlier expected".
In domestic news, the UK economy came out of recession in the third quarter, according to the British Chambers of Commerce (BCC). Its survey of 7,593 UK firms showed the economy grew by 0.5% between July and September, following three consecutive quarters of contraction.
Meanwhile, the UK construction sector purchasing managers' index for the month of September has come in at 49.5 points, up from the previous month's reading of 49 but below the consensus estimate of 49.8. FTSE 100: Banks provide a drag
Meanwhile, banking stocks were weighing on the blue-chip index today following the decision by UBS to slash their rating on shares of Lloyds, RBS and Barclays from 'buy' to 'neutral', attributing the cut to worries over the potential need of the sector to raise new capital at some point.
British Airways owner IAG was a high riser on earlier speculation that Qatar Airways was joining the Oneworld alliance, though this was later denied by the airline.
Engineering support firm Babcock was performing well after saying it was enjoying buoyant markets as customers turned to it to make cost savings. Jefferies, Seymour Pierce and Investec all hailed the first-half trading update as "in line", maintaining their 'buy' ratings for the stock saying that the business is "well positioned".
Rumours of a special dividend from Wolseley have proved to be on the money, with the plumbers' merchant paying 40p on top of the full-year divi of 60p. Nevertheless, shares fell after reported pre-tax profits fell from £391m to £198m. Irish broker Davy has downgraded its recommendation for Wolseley from 'outperform' to 'neutral', saying that "the stock is fully valued."
Pharma giant AstraZeneca was extending losses after announcing yesterday that it had suspended its share repurchase programme with immediate effect. Credit Suisse cut its forecasts for the group this morning, saying that this "will likely mark the start of further EPS downgrades at AZN".
Investec has upgraded its recommendation for retail-focused real estate investment trust Hammerson from 'sell' to 'hold', providing a lift for the shares.
FTSE 250: Bumi jumps; Bank of Georgia drops
Bumi rose on reports that the Jakarta-based miner, PT Bumi Resources, in which it owns 29%, is to raise cash by selling non-core assets, to quickly pay down debt. Bumi, founded by Nathaniel Rothschild, revealed on September 24th that it had begun investigating "potential financial and other irregularities" in the Indonesian miner.
Bank of Georgia Holdings suffered steep falls on concerns over political uncertainty in its domestic market after a surprise upset in the parliamentary elections. "The impact on Georgia in the short - term will be a higher degree of risk and uncertainty until the new government is formed and makes its policies clear," said analyst Sue Munden from Seymour Pierce.
FTSE 100 - Risers
International Consolidated Airlines Group SA (CDI) (IAG) 159.00p +3.05%
Babcock International Group (BAB) 945.00p +2.44%
BAE Systems (BA.) 334.00p +2.08%
Fresnillo (FRES) 1,920.00p +2.07%
IMI (IMI) 949.50p +1.82%
Tesco (TSCO) 336.70p +1.72%
BG Group (BG.) 1,300.00p +1.64%
Randgold Resources Ltd. (RRS) 7,770.00p +1.37%
WPP (WPP) 858.00p +1.36%
Next (NXT) 3,496.00p +1.10%
FTSE 100 - Fallers
Royal Bank of Scotland Group (RBS) 257.50p -3.34%
Evraz (EVR) 246.30p -2.92%
Lloyds Banking Group (LLOY) 39.02p -2.38%
Croda International (CRDA) 2,447.00p -2.16%
Schroders (SDR) 1,543.00p -1.84%
Standard Chartered (STAN) 1,410.50p -1.74%
ARM Holdings (ARM) 577.00p -1.54%
BHP Billiton (BLT) 1,944.50p -1.52%
Severn Trent (SVT) 1,681.00p -1.41%
Xstrata (XTA) 966.60p -1.37%
FTSE 250 - Risers
Bumi (BUMI) 159.50p +6.48%
Bwin.party Digital Entertainment (BPTY) 110.80p +5.62%
PayPoint (PAY) 770.00p +5.19%
CSR (CSR) 337.00p +3.85%
Devro (DVO) 341.20p +3.77%
Telecom Plus (TEP) 850.00p +3.53%
JD Sports Fashion (JD.) 720.00p +3.37%
Berendsen (BRSN) 568.00p +3.27%
Talvivaara Mining Company (TALV) 153.70p +3.22%
Savills (SVS) 413.50p +3.12%
FTSE 250 - Fallers
Bank of Georgia Holdings (BGEO) 1,194.00p -6.57%
NMC Health (NMC) 188.10p -3.88%
IP Group (IPO) 118.40p -3.43%
Petra Diamonds Ltd.(DI) (PDL) 116.70p -2.75%
Hunting (HTG) 828.00p -2.65%
Kentz Corporation Ltd. (KENZ) 426.90p -2.27%
St. Modwen Properties (SMP) 195.50p -2.20%
Jupiter Fund Management (JUP) 249.00p -2.05%
Daejan Holdings (DJAN) 2,874.00p -2.04%
Mitchells & Butlers (MAB) 289.50p -1.93%
| Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | European Markets Finished Mostly Higher After Volatile Trading Session
The majority of the European markets closed in positive territory Tuesday. The markets struggled to find direction ahead of the meeting of German Chancellor Angela Merkel and ECB President Mario Draghi in Berlin. The stronger than expected U.S. consumer confidence number and the positive home price index result provided a boost to the European markets in the afternoon.
Rating agency Standard & Poor's cut Eurozone's economic forecasts for this year and next on Tuesday, saying the 17-nation economy is entering a new period of recession.
The firm expects the euro area economy to shrink 0.8 percent this year, which is worse than the 0.7 percent contraction forecast in July. For 2013, S&P sees flat growth in the single currency bloc, compared to 0.3 percent forecast in July.
Germany cannot decouple from Europe and the global economy, Chancellor Angela Merkel said Tuesday. Germany is not an island, but a strong exporting nation, she said at a conference organized by the German Industry Association in Berlin.
She observed that there is a lack of confidence in financial markets about the ability of the governments to repay its debt. It would have been better if the European Court of Justice had been granted powers to monitor the fiscal pact, Merkel noted.
Spanish short-term borrowing costs increased at a debt auction on Tuesday as it remains uncertain if the embattled country would seek a bailout for its economy. The Spanish Treasury raised nearly EUR 4 billion from the sale of its 3 and 6 month bills. The target set for the sale was between EUR 3 billion and EUR 4 billion.
The yield on the three-month paper rose to 1.203 percent from 0.946 percent on August 28. The bid-to-cover ratio, which shows demand, dipped to 3.29 from 3.35. The 6-month treasury bill fetched a yield of 2.213 percent, up from 2.026 percent on August 28.
Italy saw its two-year borrowing costs decline at an auction on Tuesday. The Italian Treasury raised EUR 3.937 billion from the sale of its zero coupon bonds known as CTZ, which was close to the top target of EUR 4 billion set for the sale. The yield on the zero-interest bearing security fell to 2.53 percent from 3.064 percent in the previous sale on August 28.
The euro Stoxx 50 index of eurozone bluechip stocks increased by 0.39 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.29 percent.
The DAX of Germany climbed by 0.16 percent and the CAC 40 of France advanced by 0.47 percent. The FTSE 100 of the U.K. rose by 0.36 percent and the SMI of Switzerland gained 0.25 percent.
In Frankfurt, Volkswagen declined by 1.71 percent. Daimler fell by 1.82 percent and BMW lost 1.68 percent. Goldman Sachs cut its price targets on the automakers.
Deutsche Telekom decreased by 1.68 percent, after Jefferies reduced its rating on the stock to "Hold" from "Buy."
UBS removed E.ON from its 'Most Preferred List' European utilities. The stock closed up by 0.34 percent. RWE finished higher by 1.33 percent after UBS removed it from 'Least Preferred List' European utilities.
In Paris, Credit Agricole gained 0.07 percent. Goldman Sachs downgraded the stock to "Neutral" from "Buy." BNP Paribas climbed by 1.14 percent and Societe Generale rose by 2.35 percent.
Deutsche Bank cut Schneider Electric to "Hold" from "Buy." The stock finished higher by 0.39 percent.
HSBC initiated STMicroelectronics with a "Neutral" rating. The stock closed lower by 1.61 percent.
In London, BAE Systems declined by 1.94 percent, amid worries about its merger with EADS.
Royal Bank of Scotland fell by 0.55 percent. A Bloomberg report said RBS managers condoned and took part in the manipulation of global interest rates, which suggests that more than four people fired by the bank were involved in wrong doing. Standard Chartered is also lost 1.55 percent.
Cairn Energy has reached an agreement to sell an 8 percent stake in its Indian unit for $910 million. The stock decreased by 0.81 percent.
Diageo climbed by 1.74 percent, after confirming that it is in talks to acquire an interest in United Spirits.
Germany's consumer confidence is set to remain unchanged in October, survey results from market research groupGfK showed Tuesday, which slightly eased fears of the economy slipping into a recession. The forward-looking consumer sentiment index came in at 5.9 in October, unchanged from September and matched economists' expectations.
French business confidence remained unchanged in September, but was markedly below its long-term average, a report from the statistical office Insee showed Tuesday. The headline synthetic index was at 90 in September, unchanged from August. Economists expected the reading to edge down to 89.
Home prices in major U.S. metropolitan areas showed a notable annual rate of growth in the month of July, according to a report released by Standard & Poor's on Tuesday.
The report showed that the S&P/Case-Shiller 20-City Composite Home Price Index rose by 1.2 percent in July compared to the same month a year ago. Economists had been expecting the index to increase by about 1.1 percent year-over-year.
With consumers considerably more optimistic about the short-term outlook, the Conference Board released a report on Tuesday showing a much bigger than expected improvement in U.S. consumer confidence in the month of September.
The Conference Board said its consumer confidence index jumped to 70.3 in September from a revised 61.3 in August. Economists had expected the index to climb to 64.8 from the 60.6 originally reported for the previous month.
| US Market Report | US pre-open: Firm start expected as market waits for Spain
US markets are set to open higher as hopes rise - not for the first time - that a bailout request from Spain is imminent.
However, Spanish press agency Europa Press cited the country's Prime Minister, Mariano Rajoy, as having said that he will not call for a rescue this weekend. Be that as it may, many market commentators seem to be of the opinion that Spain must ask for aid quickly if it wishes to retain access to capital markets.
Spread betting quotes suggest that the Dow Jones will open around 20 points up from last night's close of 13,515 while the broader based S&P 500 is tipped to start four points firmer.
Banks could be in focus early on after Credit Suisse turned bullish on the sector. US banking giant JP Morgan Chase, meanwhile, has been hit with a lawsuit by the New York Attorney General for allegedly defrauding investors of more than 20 billion dollars through mortgage-backed securities sold by Bear Stearns.
JP Morgan, which bought ailing investment bank Bear Stearns in March 2008, said it would contest the allegations, which are based on deals done between 2005 and 2007.
It said the civil action related entirely to Bear Stearns, which it acquired "over the course of a weekend at the behest of the US government".
Mortgage-backed securities were the financial products that were at the heart of the global financial crisis. |
| Broker Tips | Jefferies reiterated its 'buy' recommendation and 970p target price for Babcock, saying that the business is "holding a steady course".
"While the bid pipeline remains at £13bn, more opportunities are emerging at tracking stage including equipment support and training for the MOD. Babcock is a major beneficiary of MOD outsourcing and nuclear decommissioning, and we believe a return to 10%+ organic revenue is possible," Jefferies said.
Credit Suisse has reduced its forecasts for pharmaceuticals group AstraZeneca after the firm announced on Monday that it had suspended its share repurchase programme with immediate effect.
"We believe today will likely mark the start of further EPS downgrades at AZN. The company will need to manage increasing generic competition in H2 and increased pressure on US Crestor with multi-generic Lipitor. We remain more cautious than consensus on the gross margin impact from the loss of Seroquel, the Brilinta launch, and growth in emerging markets," Credit Suisse said.
"With limited pipeline, patent losses, uncertainly over whether the slimmed down group has the firepower to market new drugs, and how they can restock their portfolio we reiterate our 'underperform' rating."
Investec has upgraded its recommendation for retail-focused real estate investment trust Hammerson from 'sell' to 'hold' following a recent tour of the 'Value Retail' discount shopping outlet, Bicester Village, Oxfordshire.
The broker has raised its net asset value-based target price from 415p to 465p to reflect the current sector rating and potential positive corporate newsflow. |
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