London close: Stocks drop as protests to Greece's austerity deal intensify
Fri 10 Feb 2012
LONDON (SHARECAST) - - Another Greek minister resigns.
- Miners drag Footsie lower as copper prices fall.
- Barclays pares gains as profits drop.
Stocks finished the session at their lowest levels of the day as the political situation in Greece took a turn for the worse with another minister handing in her resignation before a parliamentary vote at the weekend. Some weaker-than-expected consumer confidence data Stateside didn't help either, as US benchmarks took a hit in mid-morning trading.
Greece's deputy foreign minister resigned this afternoon in protest over the new austerity measures that leaders will attempt to win a parliamentary vote for on Sunday. Marilisa Xenogiannakopoulou, from the Pasok socialist party, is the sixth minister to call it quits over the last two days.
Meanwhile, there were reports that George Karatzaferis, leader of the LAOS party in Greece, said that he wouldn't support the austerity measures that other party heads agreed to yesterday afternoon. While his party only holds 16 seats in the 300-seat parliament, this adds to the growing amount of people who have stood up against the agreement.
It wasn't just politicians who expressed their anger over the austerity measures, as Greek workers took to the streets as part of a 48-hour protest to challenge the new package, causing major disruptions to public transport.
Aggravating matters, German Finance Minister Wolfgang Schaeuble told lawmakers today that Greece’s plans would leave its debt as high as 136% of gross domestic product by 2020, according to two people who took part in the meeting and who spoke on condition of anonymity because it was private. That compares with the 120% foreseen in a €130bn bailout being negotiated, Bloomberg News reported.
BARCLAYS GIVES UP GAINS, WHILE MINERS TUMBLE
Barclays pared gains but was still in the blue by the close despite reporting falling profits and revenues in 2011. Investors seemed to take little notice of the bank saying it may not reach its return on equity (RoE) target of 13% next year. They may be taking more comfort in the fact that the bonus pool at Barclays Capital, its underperforming investment banking arm, was cut by 32%. Prime Markets said that despite the fall in revenues and profits, Barclays still remains the "pick of the UK banking sector", noting that the company has improved its core tier-one ratio to 11% (well above the Basel III requirements) and diversified its operations to take up the slack from the BarCap operation.
However, it was the mining sector that was dominating the direction of the FTSE 100 today, falling on the back of macroeconomic concerns. Copper prices were on the decline after China's copper imports in January totalled 413,964 metric tons. While this was 14% higher year-on-year, it was some 19% below December record-high levels and broke a seven-month streak of increasing figures. A strengthening dollar against the euro didn't help prices either. Copper miner Kazakhmys was the worst hit, while sector peers Anglo American, ENRC and BHP Billiton were also out of favour.
Interdealer broker ICAP took a tumble after the stock was downgraded by Goldman Sachs from buy to neutral. The US investment banks believes that within the diversified financials space, investors will be better off favouring asset managers over market structure companies.
Tate & Lyle was a high riser, appearing to be rebounding after yesterday's mixed third quarter statement disappointed investors. Meanwhile, Holiday Inn and Crowne Plaza owner InterContinental Hotels (IHG) was in demand after Credit Suisse upped its target price by almost a third saying that resilience in the US has driven a 12% upgrade to earnings per share (EPS) forecasts.
FTSE 250: C&W COMMS DROPS ON PROFIT WARNING
Cable & Wireless Communications was the big mover of the day, falling over 16%. The revival of the telecoms firm, which provides services to islands and smaller countries, came to an abrupt halt as the company warned on profits due to difficulties in trading in Panama and the Caribbean.
The protracted courtship of closed life fund consolidator Phoenix Group by private equity firm CVC Capital Partners has ended with both parties agreeing it is best to go their separate ways. Phoenix finished the day in the red.