Stocks fall on growth concerns again
Market Movers
techMARK 2,118.51 -0.48%
FTSE 100 5,799.28 -0.19%
FTSE 250 11,882.31 -0.25% The FTSE 100 was heading for its third consecutive day in the red, starting Wednesday's session on the back foot with global growth concerns continuing to weigh on sentiment.
Trader Simon Furlong said this morning that today looks like "another down day for the markets unless some positive news flow is received".
Stocks slipped yesterday after the International Monetary Fund (IMF) cut its global growth forecasts for this year and the next. On Monday, the World Bank lowered its growth estimates for East Asia, warning of a deceleration in the Chinese economy.
Meanwhile, US aluminium giant Alcoa kicked off third-quarter earnings season last night after the closing bell on Wall Street. While the firm beat earnings and sales forecasts, the company cut its full-year aluminium demand growth forecast from 7% to 6%, saying that a slowdown in China "slightly impacts the second-half outlook".
Risks to global financial stability have increased and financial markets have been volatile as European policymakers grapple with the ongoing crisis, the IMF said in its latest assessment of the global financial sector. The Fund notes that failing to deal with the current issues could end up forcing Eurozone banks into an asset shrinkage of anywhere from $2.8tn to $4.5tn by the end of next year. Ex-div stocks take a hit
Smith & Nephew, Kingfisher and Wolseley were among the falls early on after going ex-dividend. From today, investors will not be able to get hold of their latest dividend payments.
Banking groups were in demand in the opening hour with Lloyds, RBS and Barclays making gains. RBS has agreed to sell two building in Frankfurt and Berlin to Axa Investment Managers, the largest German commercial real estate transaction this year, according to reports.
Outsourcing group Capita was a heavy faller after both RBC Capital Markets and Panmure Gordon downgraded their ratings for the stock. Panmure said that the Capita's premium rating "is at odds with concerns over the quality of future earnings, above average financial leverage and on-going reliance on M&A."
Drinks giant SABMiller edged higher after expanding its African beer brand, Chibuku, into ten countries across the continent.
On the FTSE 250, N Brown, the internet and catalogue home shopping firm, was a heavy faller after Panmure Gordon downgraded its recommendation to 'hold' ahead of the group's interim results next week. "We move to a 'hold' rating from 'buy', following sector outperformance and consequent multiple expansion towards our target multiple on the back of the July trading statement," the broker said.
| AIM/Small Cap Report | FTSE 100 - Risers
Lloyds Banking Group (LLOY) 38.33p +3.57%
Royal Bank of Scotland Group (RBS) 263.10p +2.25%
Anglo American (AAL) 1,840.50p +1.49%
Evraz (EVR) 250.40p +1.21%
Barclays (BARC) 224.00p +1.11%
Kazakhmys (KAZ) 736.00p +0.96%
InterContinental Hotels Group (IHG) 1,657.00p +0.91%
BT Group (BT.A) 223.50p +0.81%
Rio Tinto (RIO) 3,053.00p +0.76%
Eurasian Natural Resources Corp. (ENRC) 328.20p +0.71%
FTSE 100 - Fallers
Smith & Nephew (SN.) 654.00p -2.75%
Aggreko (AGK) 2,198.00p -1.88%
WPP (WPP) 857.50p -1.61%
Wolseley (WOS) 2,644.00p -1.60%
Capita (CPI) 730.00p -1.35%
Tesco (TSCO) 310.65p -1.21%
Rexam (REX) 448.10p -1.21%
Kingfisher (KGF) 268.00p -1.18%
Marks & Spencer Group (MKS) 377.00p -1.13%
Compass Group (CPG) 684.00p -1.08%
FTSE 250 - Risers
Man Group (EMG) 95.05p +5.67%
Ruspetro (RPO) 104.40p +2.15%
Bumi (BUMI) 169.50p +2.05%
Fidessa Group (FDSA) 1,377.00p +2.00%
Lonmin (LMI) 516.00p +1.98%
Petropavlovsk (POG) 442.40p +1.70%
Stobart Group Ltd. (STOB) 115.00p +1.68%
Lancashire Holdings (LRE) 843.00p +1.63%
Bank of Georgia Holdings (BGEO) 1,173.00p +1.21%
Ted Baker (TED) 920.00p +1.10%
FTSE 250 - Fallers
COLT Group SA (COLT) 116.70p -2.59%
Brown (N.) Group (BWNG) 271.80p -2.51%
Senior (SNR) 196.10p -2.44%
JD Sports Fashion (JD.) 757.00p -2.13%
Micro Focus International (MCRO) 572.00p -1.89%
Heritage Oil (HOIL) 187.00p -1.84%
Balfour Beatty (BBY) 301.60p -1.76%
Cranswick (CWK) 720.00p -1.71%
Sports Direct International (SPD) 392.20p -1.58%
Oxford Instruments (OXIG) 1,351.00p -1.53% |
| UK Event Calendar |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | INTERIMS
JZ Capital Partners Ltd
INTERIM DIVIDEND PAYMENT DATE
Braime (T.F.& J.H.) Holdings, Braime (T.F.& J.H.) Holdings (Non-Voting), Dairy Farm International Holdings Ltd. (Singapore), Hongkong Land Holding Ltd. (Singapore), Jardine Matheson Holdings Ltd (Singapore), Jardine Strategic Holdingd Ltd. (Singapore), Mandarin Oriental International (Singapore), Restaurant Group
INTERIM EX-DIVIDEND DATE
Amiad Water Systems Ltd, Balfour Beatty, British American Inv Trust, Cenkos Securities, Cobham, Dillistone Group, Hydrogen Group, Johnson Service Group, Keller Group, Kingfisher, Maven Income & Growth 2 VCT, Nationwide Accident Repair Services, Rightmove, SIG, Smith & Nephew, Spirax-Sarco Engineering, StatPro Group, Tesco, Travis Perkins, Unite Group, Yule Catto & Co
QUARTERLY PAYMENT DATE
Africa Opportunity Fund Ltd.
QUARTERLY EX-DIVIDEND DATE
Assura Group Ltd., Dcg Iris Ltd Red Sterling
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Beige Book Fed Survey (US) (19:00)
MBA Mortgage Applications (US) (12:00)
Wholesales Inventories (US) (15:00)
FINALS
Avanti Communications Group
ANNUAL REPORT
Galliford Try
EGMS
Matrix European Real Estate Inv Trust Ltd.
AGMS
IPPlus
FINAL EX-DIVIDEND DATE
Begbies Traynor Group, CPL Resources, Daejan Holdings, Haynes Publishing Group, Hays, Murgitroyd Group, Pacific Horizon Inv Trust, Penna Consulting, Produce Investment, TP70 2008 (I) VCT, TP70 2008 (II) VCT, Wolseley |
| US Market Report | Stocks Fall Sharply After IMF Lowers Global Growth Forecast
Stocks moved sharply lower over the course of the trading day, as traders expressed continued concerns about the outlook for the global economy. The losses on the day extended the downward move that was seen during the previous session.
The major averages all ended the day firmly in negative territory, with the Nasdaq setting a one-month closing low. While the Nasdaq tumbled 47.33 points or 1.5 percent to 3,065.02, the Dow slid 110.12 points or 0.8 percent to 13,473.53 and the S&P 500 fell 14.40 points or 1 percent to 1,441.48.
Much of the weakness on Wall Street stemmed from news that the International Monetary Fund lowered its global growth forecast, with the lender warning that the risks for a serious global slowdown are alarmingly high.
In its World Economic Outlook, the IMF lowered its global growth forecast for 2012 to 3.3 percent from 3.5 percent, while its 2013 forecast was trimmed 0.3 percentage points to 3.6 percent.
Peter Boockvar, managing director at Miller Tabak, noted that the lower forecast is not a surprise but said it "highlights the growing economic risks that were temporarily put aside by the actions of central bankers over the past few months."
"For U.S. investors, earnings/guidance over the next 3 weeks will certainly bring the reality front and center for better or worse," he added.
After the close of trading, aluminum giant Alcoa (AA) will kick off the earnings reporting season with the release of its third quarter results.
Analysts expect Alcoa's third quarter earnings to fall to $0.01 per share from $0.15 per share in the year-ago quarter amid forecasts for a 13 percent drop in revenues to $5.6 billion.
A research note from Capital Economics said the earnings news is "likely to be downbeat, with the annual growth rate of profits reportedly expected to be negative for the first time since 2009."
"In recent months investors have shrugged off this prospect and sought solace in the Fed and the ECB," the firm added. "But history is not on the side of those who expect the market to continue to prosper once the earnings cycle has turned."
Traders also kept an eye on Europe, where finance ministers held a second day of meetings after formally launching the European Stability Mechanism on Monday.
Along with the finance ministers meeting in Luxembourg, German Chancellor Angela Merkel made a brief trip to Athens, where she was greeted by thousands of protesters.
Sector News
Technology stocks turned in some of the market's worst performances on the day, as reflected by the steep drop by the tech-heavy Nasdaq.
Within the tech sector, computer hardware stocks saw substantial weakness, dragging the NYSE Arca Computer Hardware Index down by 3.2 percent. The loss pulled the index down to its lowest closing level in over two months.
Housing stocks also posted notable losses on the day, resulting in a 2.7 percent drop by the Philadelphia Housing Sector Index. With the loss, the index added to the 1.5 percent loss posted on Monday.
Gold, biotech, tobacco, and airline stocks also came under considerable pressure, moving to the downside along with most of the major sectors. |
| Wednesday newspaper round-up | Angela Merkel, the German chancellor, has stamped her seal of approval on Greece's austerity plan and vowed to stand by the country as "partner and friend", signalling almost certain approval for the next tranche of EU-IMF Troika aid. The German leader – protected by 6,000 police – braved hostile crowds in Syntagma Square and Nazi insults in the Greek press as she made her first visit to Athens since the debt crisis erupted three years ago. The Frankfurter Allgemeine newspaper said Chancellor Konrad Adenauer had an easier time visiting Greece in 1954, just a decade after Wehrmacht occupation, according to The Telegraph.
Russian president Vladimir Putin backs BP’s plan to sell its 50% stake in TNK-BP to the state oil group Rosneft and use some of the proceeds to buy Rosneft shares, a close presidential ally said in an interview. Igor Sechin, Rosneft’s chief executive, told the Financial Times that Mr Putin endorsed the idea at a meeting in Russia last month with BP’s top brass, which Mr Sechin also attended. “ will have the opportunity to acquire a strategic investor,” he said, “so we do support this, and the president also spoke in support of this.” But Mr Putin stressed that it was ultimately “up to BP shareholders” to decide, he said.
Capital and liquidity rules for the biggest UK banks have been quietly relaxed in an effort to stimulate lending, a move that puts Britain at the forefront of a global experiment to use bank regulation to moderate the economic cycle. The Financial Services Authority recently informed banks that they will not be required to hold any extra capital against new UK loans they make that qualify for a “funding for lending” scheme targeted at increasing money for corporate borrowers. London regulators have also stepped back from tough overall capital rules they imposed after the Basel III reform package was adopted. No longer will UK banks be required to achieve and maintain a core ratio equal to 10% of their assets, adjusted for risk by the end of next year, The Financial Times reports.
Royal Bank of Scotland last night narrowed the price range on Direct Line shares to between 170p and 177.5p as stockbrokers reported strong interest in the flotation from small-time investors. The deadline for those wanting to take part in the insurer's float passed at 12pm yesterday and retail investors seemed to have ignored warnings from some analysts and investment advisers to steer clear of the listing. Royal Bank of Scotland was forced by politicians in Brussels to offload the insurance subsidiary, which also owns Churchill, as a condition of receiving a £45bn bailout from taxpayers during the financial crisis. Richard Hunter, the head of equities at Hargreaves Lansdown, said that applications had "run into the thousands", while rival broker the Share Centre said demand had soared over the weekend, The Independent explains.
The UK has pulled out of its double-dip recession at a rapid growth rate of 0.8%, says respected forecaster NIESR, but it warns that progress will be slower without one-off boosts. The Olympics helped the UK economy grow at its fastest pace in five years in the last quarter, taking the country out of double-dip recession, according to a leading forecaster. In the quarter to the end of September, the economy grew 0.8%, the National Institute of Economic and Social Research estimated. “Unless output turns down again, the recession is over,” NIESR said. However, the think tank cautioned that the underlying rate of growth was weaker, at close to 0.2% or 0.3%, The Telegraph says.
Ryanair has pulled out of the £1bn battle to buy Stansted amid accusations it has been excluded from the sale process by the airport’s owners. The low-cost carrier, which is Stansted’s biggest customer, had been seeking to take a 25% stake in the Essex airport as part of a consortium. The airline said on Tuesday it had been forced to withdraw from the race “having been advised by BAA Stansted’s owner, Ferrovial, that it will exclude Ryanair [and any Ryanair related consortium] from the Stansted sale process”. Michael O’Leary, the carrier’s chief executive, has held talks with a number of potential partners but the airline said it had decided to no longer pursue a minority stake as it “does not wish to prejudice other potential investors” in the airport, The Telegraph explains.
The £28bn merger between BAE Systems and EADS was teetering last night as the chief executive of the British group flew into Toulouse ahead of an expected plea for more time to thrash out a deal. The creation of the world’s largest aerospace and defence company was on a knife edge as it entered the last 24 hours before a deadline of 5pm this evening to come up with substantive merger proposals. The deadline was set 28 days ago by the Takeover Panel under its “put up or shut up” rule, under which companies making a bid must clarify their intentions with a firm offer announcement or say that they have no intention of carrying on. Sources close to the negotiations last night indicated that the companies could ask for an extension of at least a fortnight to the panel’s initial deadline as they were not yet in a position to put up but neither do they want to walk away The Times holds.
About 220 staff are to lose their jobs as part of a head office shake-up at B&Q. Britain’s biggest DIY chain, owned by Kingfisher, said that an overhaul, which is intended to eliminate duplication, would make it more agile and better equipped to integrate its online and store presences. The restructuring means that about 15% of B&Q’s head office workforce will be made redundant after a 90-day consultation period. The company will also create 100 jobs at its headquarters in Eastleigh, Hampshire, The Times reports.
The shake-up at Thomas Cook gathered pace yesterday as the embattled travel group announced a further 430 job losses at its British airline operation.The decision to shed another four of its 35 aircraft comes less than two weeks after Harriet Green, the new chief executive, warned employees to expect big changes as she set about “removing some of the walls, silos and barriers” that permeate the business. The cuts come on top of the recent shedding of six aircraft with the loss of 300 jobs and news that an administrative centre in Bradford will close in March with a further 468 redundancies. The group is also in the middle of a two-year programme to close 200 high street travel agencies, costing an estimated 1,000 jobs, writes The Times. |
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