| London close: Stocks drop on concerns over Greece
Market Movers
techMARK 2,084.22 -0.19%
FTSE 100 5,776.05 -0.27%
FTSE 250 11,895.66 -0.55% After solid gains in the morning session, equity markets in London swung into the red in afternoon trade, after dreary comments from Mario Draghi and concerns about a bailout delay in Greece weighed on sentiment.
The FTSE 100 started the day firmer, rebounding after a 1.6% drop after ‘fiscal cliff’ worries in the US and gloomy growth forecasts in the Eurozone sparked a sell-off on Wednesday.
As expected, the Bank of England’s Monetary Policy Committee (MPC) at noon voted in favour of keeping the key interest rate and level of asset purchases unchanged for November, as expected. The Bank Rate was left at the record-low level of 0.5% for the 44th straight month in a row, while its asset purchase programme was maintained at £375bn.
Analyst Simon Hayes from Barclays Research said today: “Although this was in line with expectations, it is only a few weeks since there was a widespread view that QE would be increased, and it is likely that the committee gave active consideration to an expansion.”
The European Central Bank (ECB) also decided to keeps its key interest rates unchanged today, in line with predictions, but the following press conference with President Mario Draghi spooked markets in afternoon trade.
He said: “Economic activity in the euro area is expected to remain weak It is essential for governments to support confidence by forcefully implementing the necessary steps to reduce both fiscal and structural imbalances and to proceed with financial sector restructuring.”
In Greece, policy-makers last night voted in favour of the country’s proposed austerity measures, albeit by a narrow margin, leaving the parliamentary vote on next year’s budget on Sunday to unlock the next round of financial aid.
However, stocks went into reverse late on after Bloomberg reported that the next tranche of the Greek bailout won’t come next week. The agency cited an EU official as saying that ministers will not make a decision on aid until late November as they wait for a final report from the Troika on how Greece is complying with the terms of its bailout.
"This headline prompted a huge bout of risk aversion which saw investors dump risk assets and instead favour core government bonds with German bunds getting a nice little lift," said market strategist Ishaq Siddiq from ETX Capital.
"Typical flight to safety move as fears that EU ministers will leave Greece virtually broke in their delay to unlock funds." FTSE 100: Burberry and Rangold claw their way back Burberry and Randgold, two of the worst performers from yesterday's session after reporting results, were among the highest risers today. Burberry was being helped higher by Barclays Capital, which raised its target on the stock from 1,100p to 1,200p and maintained its 'overweight' rating.
Also in demand was insurance group Aviva after saying that it nearing the sale of its US life and annuities business, as it reported a slight rise in net asset value.
Experian gained after hiking its dividend and reporting strong revenue grout in the first half. The company also announced an efficiency programme designed to save the firm $75m a year.
Meanwhile, security group G4S was leading the fallers on reports that it has lost the contract to operate the Wolds prison as the jail returns to public-sector management next year.
Mining group ENRC fell after saying that revenue declined in the first nine months of 2012 due to lower selling prices for its principal commodities.
Utilities peers Pennon and Severn Trent were out of favour after Nomura cut its target for both stocks and retained ‘neutral’ ratings. United Utilties fell by a lesser amount but still finished in the red after the same broker downgraded its recommendation from ‘buy’ to ‘neutral’. FTSE 250: Balfour Beatty plummets after profit warning Construction group Balfour Beatty dropped after saying in its third-quarter trading update that profitability this year will be "slightly lower than expected at the time of the half-year results". However, this will be slightly offset by a lower tax rate.
BTG, the specialist healthcare company, rose after saying that it is likely to meet or beat consensus forecasts and is on the hunt for further acquisitions.
Chemicals group Yule Catto surged after saying that it is trading in line with expectations and is going to change its name to Synthomer.
Cable and Wireless Communications, which owns telecoms operators, gained after maintaining its full-year guidance, saying group EBITDA will be similar to 2011/12.
Light-emitting diode firm Dialight fell after it reported delays to a major contract had hit trading in its signal lighting division. The firm said trading in that business was below expectations due to a hold-up in the award of a significant new contract for obstruction lighting.
| AIM/Small Cap Report | FTSE 100 - Risers
Randgold Resources Ltd. (RRS) 7,070.00p +1.73%
Croda International (CRDA) 2,210.00p +1.33%
British American Tobacco (BATS) 3,174.00p +1.26%
Burberry Group (BRBY) 1,214.00p +1.25%
Carnival (CCL) 2,521.00p +1.16%
Resolution Ltd. (RSL) 237.70p +1.02%
Royal Bank of Scotland Group (RBS) 274.40p +0.66%
ARM Holdings (ARM) 709.50p +0.64%
Tullow Oil (TLW) 1,401.00p +0.57%
Aviva (AV.) 330.30p +0.55%
FTSE 100 - Fallers
Eurasian Natural Resources Corp. (ENRC) 294.60p -3.41%
G4S (GFS) 259.20p -3.14%
CRH (CRH) 1,130.00p -2.33%
Kazakhmys (KAZ) 686.50p -2.28%
Pennon Group (PNN) 677.50p -2.17%
Land Securities Group (LAND) 794.50p -2.03%
Evraz (EVR) 242.40p -1.86%
Serco Group (SRP) 558.00p -1.85%
ITV (ITV) 85.80p -1.61%
Meggitt (MGGT) 372.50p -1.56%
FTSE 250 - Risers
BTG (BTG) 352.40p +7.57%
Yule Catto & Co (YULC) 165.60p +6.98%
Cable & Wireless Communications (CWC) 38.00p +5.76%
Spirent Communications (SPT) 146.00p +4.89%
Supergroup (SGP) 690.00p +4.62%
Ruspetro (RPO) 103.00p +3.00%
Pace (PIC) 193.40p +2.82%
Redrow (RDW) 161.60p +2.80%
Mitchells & Butlers (MAB) 329.40p +2.62%
Dixons Retail (DXNS) 24.72p +2.36%
FTSE 250 - Fallers
Balfour Beatty (BBY) 250.10p -18.27%
Chemring Group (CHG) 242.80p -5.89%
Genus (GNS) 1,366.00p -5.79%
Dialight (DIA) 1,115.00p -5.67%
Atkins (WS) (ATK) 677.50p -5.57%
Interserve (IRV) 368.20p -5.54%
Talvivaara Mining Company (TALV) 121.60p -4.63%
Carillion (CLLN) 296.70p -4.29%
FirstGroup (FGP) 186.60p -4.26%
Booker Group (BOK) 100.50p -3.74% |
| Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | | European Markets Finished Mixed After Greek Vote
The European markets finished with mixed results on Thursday. The European Central Bank and the Bank of England both decided to leave interest rates unchanged today. The Spanish bond auction showed weak demand for 5-year government bonds, while debt yields increased. There was some also confusion in late trading regarding the Greek bailout. The markets initially sold-off, but later recovered following an announcement that Greece may not receive its new aid as quickly as they had hoped.
Greek lawmakers have backed a crucial austerity bill by a thin majority in the 300-member Parliament, clearing the way for the country to secure the next bailout tranche worth EUR 31.5 billion. Reports said a total of 153 members backed the new austerity package, while 128 voted against it. Meanwhile, 18 members voted "present", which is in effect a blank vote.
"Greece today has taken a big step, decisive and optimistic," Prime Minister Antonis Samaras said Thursday after the passage of the bill. This is the first step towards recovery, he said.
The European Central Bank left its key interest rates unchanged for the fourth consecutive month on Thursday amid signs of an increasingly deteriorating euro area economy with record high unemployment.
The central bank of 17 nations held the refinancing rate unchanged at 0.75 percent for a fourth consecutive month following the Governing Council meeting in Frankfurt. The deposit rate, which is already at zero, was left unchanged and the marginal lending facility was held at 1.50 percent.
European Central Bank President Mario Draghi said on Thursday that the bank is ready to undertake the newly announced bond purchase programme that may help to calm market concerns.
"We are ready to undertake OMTs, which will help to avoid extreme scenarios, thereby clearly reducing concerns about the materialization of destructive forces," he said in the press conference in Frankfurt following the announcement of the interest rate decision.
The Bank of England decided not to provide another cash injection, as the economy exited a double-dip recession and the positive impact of the Funding for Lending Scheme is yet to fully filter into the economy.
The nine-member Monetary Policy Committee governed by Mervyn King maintained its quantitative easing at GBP 375 billion. The previous GBP 50 billion-increase was announced in July and has been fully utilized, bringing the programme to a temporary halt.
The nine-member committee also left the interest rates unchanged at 0.50 percent, the lowest level since the bank was established in 1694. The rate has not been changed since early 2009.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.18 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.11 percent.
The DAX of Germany dropped by 0.39 percent and the FTSE 100 of the U.K. fell by 0.27 percent. The CAC 40 of France dipped by 0.06 percent, but the SMI of Switzerland gained 0.24 percent.
In Frankfurt, Siemens increased by 2.13 percent. The company said it is targeting total sectors profit margin of at least 12 percent by 2014 and expects productivity gains of 6 billion euros over the coming two years. The industrial conglomerate posted an increase in profit for the fourth quarter, amid a modest growth in revenues.
HeidelbergCement rose by 3.59 percent, after the company announced quarterly results. The company also affirmed its guidance for improved revenue for the full year.
Deutsche Telekom finished lower by 0.44 percent, after reporting a third-quarter loss. Commerzbank, which reported third-quarter results, declined by 5.91 percent. Adidas dropped by 1.38 percent. The sports goods giant reported a rise in third-quarter profit and adjusted its sales guidance.
Dialog Semiconductor fell by 3.31 percent, following a broker downgrade.
In Paris, Societe Generale closed up by 1.65 percent. The lender recorded about 130 million euros loss in the third quarter after it agreed last month to sell its Greek unit Geniki Bank to Greek lender Piraeus Bank.
STMicroelectronics dipped 0.09 percent after UBS removed the stock from its "Least Preferred List" in tech shares. Michelin fell by 0.95 percent. UBS added the stock to "Most Preferred List'' in European automobiles.
EADS decreased by 4.15 percent. The company reported a marginally lower profit in the third quarter. Renault lost 1.66 percent, after UBS removed the stock from its "Most Preferred List'' in European automobiles.
In London, Eurasian Natural Resources dropped by 3.41 percent, after it issued an Interim Management Statement. Tate & Lyle declined by 0.54 percent, after the company reported a decrease in its profit for the first half of the year.
Wm. Morrison Supermarkets fell by 1.50 percent. The company reported a drop in comparable store sales for the third quarter.
Balfour Beatty sank by 18.27 percent. The company warned that its full year profit will be lower than expected. Swiss Re climbed by 1.90 percent in Zurich, after reporting a higher quarterly profit. |
| US Market Report | | Stocks Adding To Yesterday's Steep Losses - U.S. Commentary
Stocks have turned lower over the course of the trading day on Tuesday, extending the substantial downward move that was seen in the previous session. The downturn comes as continued worries about Europe have overshadowed some upbeat U.S. economic data.
The major averages currently remain stuck in negative territory, posting modest losses. The Dow is down 17.66 points or 0.1 percent at 12,915.07, the Nasdaq is down 7.27 points or 0.3 percent at 2,930.02 and the S&P 500 is down 2.55 points or 0.2 percent at 1,391.98.
The initial strength on Wall Street was partly due to bargain hunting, with traders picking up stocks at reduced levels after Wednesday's sell-off pulled the major averages down to three-month closing lows.
Buying interest was also generated by some relatively upbeat U.S. economic data, including a report from the Labor Department showing an unexpected drop by initial jobless claims.
The report said jobless claims fell to 355,000 in the week ended November 3rd, a decrease of 8,000 from the previous week's unrevised figure of 363,000. The drop surprised economists, who had expected jobless claims to climb to 370,000.
However, the data was likely skewed as a result of Hurricane Sandy, which wreaked havoc along the East Coast and likely prevented some people from filing claims.
A separate report from the Commerce Department showed that the U.S. trade deficit unexpectedly narrowed in the month of September, as the value of exports rose at a faster rate than the value of imports.
Buying interest waned not long after the start of trading, however, with concerns about the looming fiscal cliff and the outlook for the global economy limiting the upside for the markets.
Stocks subsequently moved back to the downside on the heels of a report from Bloomberg News indicting that the European finance ministers have delayed a decision on unlocking Greek bailout funds.
Citing an anonymous European Union official, Bloomberg said the finance chiefs won't make the call to release the aid when they meet next Monday, with the decision potentially delayed until November 26th.
Sector News
Oil service stocks have shown a notable move to the downside on the day, adding to the steep losses posted in the previous session. The Philadelphia Oil Service Index is down by 1.8 percent, falling to its lowest intraday level in over three months.
The continued weakness among oil service stocks comes in spite of an increase by the price of crude oil, which is regaining some ground after falling sharply on Wednesday.
Significant weakness has also emerged among housing stocks, as reflected by the 1.6 percent loss being posted by the Philadelphia Housing Sector Index. With the loss, the index is pulling back further off the five-year closing high it set on Tuesday.
Healthcare provider, health insurance, and steel stocks have also come under pressure, while strength remains visible among telecom, networking, and airline stocks.
Within the telecom sector, Qualcomm (QCOM) continues to post strong gain, with the wireless giant up by 6.6 percent after reporting better than expected quarterly results and providing upbeat guidance.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region saw considerable weakness following the overnight sell-off on Wall Street. Japan's Nikkei 225 Index fell by 1.5 percent, while Hong Kong's Hang Seng Index tumbled by 2.4 percent.
In the bond market, treasuries are giving back some ground after ending the previous session sharply higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 4.1 basis points at 1.673 percent. |
| Broker tips | | United Utilities, Chemring, Balfour Beatty Nomura has downgraded its rating for United Utilities (UU) from 'buy' to 'neutral', saying that the stock is now a fully valued take-out option.
Analyst Jonathan Constable said: "We estimate that the shares are pricing in an acquisition in the next six months with a probability of one-fifth for each of UU and SVT [Severn Trent] (equivalent to a 36% probability of at least one of the two companies being acquired)."
Credit Suisse reiterated its 'neutral' rating and 330p target for defence contractor Chemring following The Carlyle Group's announcement last night that it will not be making an offer for the company. The broker said: "We see slim chance of other bids in the short-term."
While the shares trade at just 7.8 times forward estimated earrings, Credit Suisse said it is staying cautious, saying that the stock is "clearly volatile given earnings uncertainty".
Panmure Gordon has chosen to remain upbeat about prospects at construction firm Balfour Beatty in spite of the group tanking on Thursday after a profit warning. Panmure Gordon reiterated its 'buy' rating and 310p target for the shares this morning.
"We have a positive stance on Balfour Beatty due to its broad international infrastructure positioning. It has a strong Professional Services presence which along with its Support Services operations complements its core Construction activity. Both these areas enhance the group margin potential, so improve the quality of earnings. The valuation is attractive." |
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