London close: Stocks dampened by global growth concerns
Market Movers
- techMARK 2,145.98 -0.70%
- FTSE 100 5,841.74 -0.50%
- FTSE 250 11,974.63 -0.72%
- Miners fall on global growth concerns
- Supermarkets perform well after broker comments
- World Bank cuts Chinese growth forecasts
Cyclical stocks suffered falls on Monday as growing uncertainty about the Eurozone and concerns over global growth dampened the mood.
"Stocks traded lower today as investors risk appetite faded ahead of the US corporate earnings season," said market analyst Craig Erlam from Alpari. Aluminium giant Alcoa kicks off results announcement after the close this evening.
Erlam said: "There is also growing fears in the Eurozone that progress is not being made quickly enough to have any impact in the shorter term. Spain has still shown no signs of requesting a bailout and Greece look no closer to agreeing another round of cuts with the Troika in order to receive the next tranche of the bailout."
Eurozone Finance and Economic Ministers are meeting in Luxembourg today to discuss the region's top issues with Madrid and Athens at the top of the agenda. European Central Bank (ECB) governing council member Jorg Asmussen was cited over the weekend as saying that Greece cannot be given more time by the ECB to meet its commitments as that would amount to state financing.
A gloomy outlook from British Chancellor of the Exchequer George Osborne also helped to weigh on sentiment today. Speaking at the Conservative Party conference in Birmingham today, he said: "the future prosperity of our country the stability of Europe is in question in a way it has not been before in my lifetime."
The World Bank cut its 2012 growth estimate for China from 8.2% to 7.7%, saying that the economy has been hit by weak export demand and investment growth. "China's slowdown this year has been significant, and some fear it could still accelerate," the World Bank said.
This follows the leaked estimates of the International Monetary Fund (IMF) forecasts last week. The IMF is expected to announce tomorrow that it has revised down its global growth expectations for this year and the next. FTSE 100: Miners drop as supermarkets gain
Steel giant Evraz was a heavy faller after Nomura revised its steel demand growth forecast from 3% to 0% for 2013, saying that it expects "further weakness" in the sector. "We expect continued weakness in the sector as investors are unlikely to buy the equities into what is already expected to be a challenging 3Q results season," the broker said. Mining peers Vedanta, ENRC and Kazakhmys were also firmly out of favour.
Xstrata also finished lower on reports that employees at its Eland platinum mine in South Africa are on an "illegal strike". According to Reuters, a company has said that the strikes begun last Friday and operations are running on a skeleton staff.
Supermarket giants Tesco, Sainsbury and Morrisons were among the few stocks to finish in the blue today after Panmure Gordon said that the food retail sector is in for a re-rating "as it becomes investable again". The broker said that it expects "significant, unstoppable strategic changes to unfold over the next six to 12 months in the food retail sector".
BP finished flat after announcing that it is selling its Texas refinery and associated assets to American peer Marathon Petroleum for a total of $2.5bn, as it continues to reposition its business in the US.
Shares in BAE Systems were slightly lower after its largest shareholder Invesco (which owns 13.3%) highlighted "significant reservations" it has about the group's potential merger with aerospace giant EADS.
Imperial Tobacco was trading lower after Nomura downgraded its rating on the stock from 'neutral' to 'reduce' as part of its sector review on the European tobacco sector.
FTSE 250: Cookson drops on slowdown concerns; Halfords jumps
Cookson, which provides materials and know-how to the steel production, foundry castings and eletronics markets, has warned on full-year profits after a sticky third quarter for its Engineered Ceramics division. Investec said this morning that 10% downgrades to consensus earnings estimates are now likely.
Halfords was continuing its impressive rise after HSBC hiked its target for the stock from 215p to 330p, keeping its 'neutral' rating. The share price is now up over a fifth over the last week after announcing on Thursday that it had appointed former Pets at Home CEO as its new frontman and full-year profits will be at the top end of guidance.
Bacon and sausage supplier Cranswick was lower after saying that sales were up just 5% in the first half as a whole, down from the 7.4% growth seen in the first three months of the year.
FTSE 100 - Risers
Morrison (Wm) Supermarkets (MRW) 283.90p +2.05%
Hargreaves Lansdown (HL.) 672.00p +0.90%
Carnival (CCL) 2,376.00p +0.68%
Tesco (TSCO) 317.35p +0.63%
BG Group (BG.) 1,308.00p +0.58%
Sainsbury (J) (SBRY) 355.00p +0.51%
Babcock International Group (BAB) 969.00p +0.47%
Pennon Group (PNN) 733.50p +0.34%
Unilever (ULVR) 2,327.00p +0.30%
Intertek Group (ITRK) 2,749.00p +0.29%
FTSE 100 - Fallers
GKN (GKN) 216.90p -4.15%
Evraz (EVR) 244.70p -3.70%
Melrose (MRO) 238.40p -3.25%
Croda International (CRDA) 2,290.00p -3.09%
BT Group (BT.A) 226.90p -3.03%
Vedanta Resources (VED) 1,068.00p -3.00%
Amec (AMEC) 1,113.00p -2.54%
Weir Group (WEIR) 1,806.00p -2.48%
Barclays (BARC) 222.35p -2.41%
IMI (IMI) 948.00p -2.37%
FTSE 250 - Risers
Halfords Group (HFD) 314.60p +3.97%
Oxford Instruments (OXIG) 1,390.00p +2.73%
Dixons Retail (DXNS) 21.53p +2.62%
Victrex (VCT) 1,411.00p +2.25%
Telecity Group (TCY) 957.00p +1.92%
Perform Group (PER) 436.00p +1.73%
Ted Baker (TED) 935.00p +1.52%
COLT Group SA (COLT) 120.70p +1.51%
Diploma (DPLM) 497.90p +1.43%
Rank Group (RNK) 151.40p +1.27%
FTSE 250 - Fallers
Cookson Group (CKSN) 539.00p -12.36%
Morgan Crucible Co (MGCR) 257.80p -7.76%
Lonmin (LMI) 516.50p -5.92%
Cranswick (CWK) 745.00p -5.87%
Yule Catto & Co (YULC) 167.40p -5.26%
Bodycote (BOY) 391.00p -4.89%
Ocado Group (OCDO) 65.60p -4.51%
Homeserve (HSV) 219.20p -4.45%
Hays (HAS) 75.20p -4.39%
IP Group (IPO) 119.40p -4.33%
| Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Weidmann (ECB): Monetary policy cannot address causes of debt crisis
-Buba´s Dombret believes IMF over-emphasizes role of monetary policy in crisis
-ECB says further major labour and product market reforms needed
-Asmussen (ECB): Calm on financial markets is deceptive
-Asmussen (ECB): Cannot give Greece more time
-Spanish 10 year bond yields up 3bp to 5.71%
FTSE-100: -0.50%
Dax-30: -1.44%
Cac-40: -1.46%
FTSE Mibtel: -1.98%
Ibex 35: -1.80%
Stoxx 600: -0.98%
Shares have finished at their worst levels of the day as investors keyed in on the prospects for economic growth and company profits world wide. Not to be missed in that regard, Alcoa will kick-off the US quarterly earnings season tomorrow.
Also contributing to the above is the fact that in its semi-annual World Economic Outlook (WEO) –which is slated for release tomorrow- the International Monetary Fund (IMF) is expected to cut its forecast for world growth. This as some observers worry that “global rebalancing” is proceeding too slowly.
In the same vein, much was made this morning of the fact that the World Bank has cut its growth forecast for economic growth in “developing East Asia” this year to 7.2% from 8.3% in 2011, its slowest pace since 2011 and below the 7.6% forecast in May. Although similar downwards revisions for growth in China were announced by the Asian Development Bank last Wednesday investors chose to focus on market commentary regarding the risks for a further slowing down in economic activity.
Of more immediate concern, investors were closely watching events in Greece and Spain. More specifically, European Central Bank (ECB) governing council member Jorg Asmussen was cited over the weekend as saying that Greece cannot be given more time –by the central bank- to meet its commitments, as that would amount to state financing (although Eurozone states do have that option at their disposal).
Meantime, Merkel’s chief spokesman, Steffen Seibert, reiterated that Greece must implement the measures agreed with the IMF and EU within the established timelines.
As if all of the above were not enough, the Financial Times´ Wolfgang Munchau wrote today that Spain may well follow in Greece´s footsteps as excessive austerity weighs on growth, creating a negative feed-back loop.
That comes before German Chancellor Angela Merkel visits Greece tomorrow.
Greek banking M&A dominates headlinesGreek lenders National Bank of Greece and Eurobank Ergasias led gains this morning on reports of a possible merger.
From a sector stand-point, and on the corporate front, the worst performance was to be seen in the following industrial groups within the DJ Stoxx 600: Automobiles (-2.47%), Banks (-1.65%) and Construction (-1.36%).
German industrial production ahead of forecasts, but flat GDP expectedGerman industrial production fell by 0.5% month-on-month in August (Consensus: -0.6%). However, economists at Barclays Research had this to say: "Today’s release, despite being better than expected, mirrors the decrease in German factory orders in August as well as the current deterioration of sentiment at a global level. Data in the coming months will be crucial in order to access how well the German economy is able to weather the generalised slowdown in activity and trade expected in H2 12. We continue to forecast a flat reading for GDP in Q3."
The Sentix survey of Eurozone investors´ confidence has come in at -22.2 for November (Consensus: -20.9), versus -23.2 for the month before.
The Swiss consumer price index for the month of September has come in at -0.4% year-on-year, as expected, and above last month´s reading of -0.5%.
The French central bank´s business confidence index for the month of September has come in at 92 points, versus 93 for the previous month (Consensus: 91).
The German trade surplus for the month of August rose to €16.3bn; ahead of the €15.3bn forecast by the consensus, that on the back of a 2.4% month-on-month increase in exports (Consensus: -0.5%).
Germany´s current account surplus on the other hand fell back towards €11.1bn in August, versus the €11.7bn seen in July.
Swiss unemployment remained unchanged at 2.8% in September.
Slight retreat in the single currencyThe euro/dollar is now down by 0.47% to 1.2972.
Front month Brent crude futures are falling by 0.313 dollars to the 111.67 dollar mark on the ICE.
| US Market Report | US pre-open: Global growth fears to weigh
Concerns about the global economy look set to weigh on US equities.
The World Bank has cut its 2012 growth estimate for China from 8.2% to 7.7%, saying that the economy has been hit by weak export demand and investment growth. "China's slowdown this year has been significant, and some fear it could still accelerate," the World Bank said.
This follows the leaked estimates of the International Monetary Fund (IMF) forecasts last week. The IMF is expected to announce tomorrow that it has revised down its global growth expectations for this year and the next.
Car maker General Motors (GM) has added to the air of gloom by revealing that its sales in September in China grew at the slowest rate in eight months. Deliveries of GM cars and mini-vans in the People's Republic rose 1.7% in September.
Social network giant Zynga could come under selling pressure early on after its downbeat trading update on Friday.
One bright spot could be media streaming firm Netflix which has been upgraded by Morgan Stanley to "overweight" from "equal weight".
Judging by spread betting quotes, the Dow Jones 30-share index could open 50 points lower and the broader-based S&P six points easier. |
| Broker Tips | Seymour Pierce has reiterated its 'hold' rating and 1,200p target price for luxury brand Burberry ahead of the group's pre-close trading update for the second quarter on Thursday.
"While other luxury players have also spoken about a slowdown, there is concern from some quarters that there is a brand issue and management has pushed some of its prices too high," analyst Kate Calvert said.
"Ultimately, this slowdown is nothing like the brick wall that impacted the sector in 2008 when the financial crisis hit. Indeed, Burberry is in a much stronger position, brand and infrastructure wise, to react to a slowdown given recent systems investment so is unlikely to have the same stock issues. However, we can not see Burberry’s shares performing until there is better news on demand."
Panmure Gordon has retained its 'buy' rating and 163p target price for FTSE 250 mining group Aquarius Platinum (AQP), but says that Monday's change in leadership presents a 'further challenge for the company already facing difficult market conditions'.
Analyst Alison Turner said that the company must "navigate the current precarious labour relations environment and the pressures on its balance sheet in the absence of a CEO".
Shares in Cookson sank on Monday after the materials science group warned about weaker trading in the Engineered Ceramics division, which will lead to consensus downgrades, according to Investec.
"Ahead of a conference call that could bring greater clarity, we estimate that consensus EPS estimates are likely to fall by over 10% (but maybe by less than 15%), which is likely to have a negative impact on valuation," the broker said. |
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