LONDON (SHARECAST) - - Miners gain, but Footsie finishes firmly lower
techMARK 2,128.68 -0.81%
FTSE 100 5,810.25 -0.54%
FTSE 250 11,911.76 -0.53%
- IMF cuts forecasts; investors nervous ahead of Alcoa
- UK economic data paints gloomy picture
- Crude rises on Mid-East tensions
With the International Monetary Fund (IMF) cutting its growth forecasts and Wall Street starting on the back foot ahead of third-quarter earnings season, the Footsie slid to an intraday low by the close in London on Tuesday.
“European financial markets dropped today, as global growth concerns prompted caution ahead of the upcoming US 3Q earnings season. Traders demonstrated nerves over faltering global economic contraction feeding through into the corporate sector before Alcoa kicked off the season later this evening,” said market strategist Ishaq Siddiqi from ETX Capital.
However despite the slump, the heavyweight mining sector held up relatively well today, as hopes for economic stimulus in China lifted shares in afternoon trade.
China’s central bank injected 265bn yuan (£26bn) into the world’s second-largest economy in reverse repurchase agreements overnight. Meanwhile, Zhou Xiaochuan, the governor of the People’s Bank of China, said that while the external environment for China’s economic growth is “very grim”, the central bank will keep the continuity and stability in monetary policy and will “make policy more pre-emptive, targeted and effective”.
The IMF has cut global economic growth forecasts for this year and next because "prospects have deteriorated further and risks increased". According to its “World Economic Outlook”, the IMF now expects the world economy to grow 3.3% in 2012 compared to the prior 3.5% July estimate and just 3.6% in 2013, down from the previous 3.9% forecast. Forecasts for the Eurozone, UK and emerging markets were all cut.
Economic figures from the UK also added to the gloom today. The British deficit in visible goods widened from £7.3bn to £9.8bn in August, according to the Office for National Statistics (ONS). The consensus estimate had been for a smaller increase to £8.5bn.
The ONS also said that domestic industrial output fell 0.5% in the same month, in line with forecasts. However, analysts at Barclays Research said the data is consistent with its view that industrial and manufacturing output is likely to rebound during this period after the Jubilee holiday-related weakness observed during the second quarter.”
German Chancellor Angela Merkel flew to Greece today - her first trip to the country in five years – to keep the pressure on Athens to stick with its harsh austerity measures. Merkel expressed her support for Greece, signalling that the country has gone a long way. Her arrival was met with protests by an estimated 25,000 people today.
IMF Managing Director Christine Lagarde said today that Greece must do more “on all fronts” before the IMF could consider paying out the next tranche of aid worth €31bn.
As if all of the above were not enough, news that Turkey has sent more weapons to the Syrian border stoked buying in crude futures. Those tensions in the Mid-East also buoyed the US dollar.
FTSE 100: Miners hold up well; Capita & Aggreko hit by downgrades
Mining stocks were being lifted by stimulus hopes in China today. Vedanta was near the top of the risers list despite reporting sluggish production figures in the second quarter. The miner said that output and sales of iron ore from Goa dropped in the period as the government’s ban on mining activities took its toll.
Rio Tinto was making gains after UBS raised its target price on the stock and reiterated its 'buy' recommendation, saying that the company "offers the greatest leverage [within the UK diversified mining sector] to a recovery in commodity demand in China, which we expect to occur from Q4 12 as large infrastructure projects approved earlier in 2012 take hold."
Sector peer BHP Billiton was also in demand after pricing a five-year one billion Australian dollar note, its first return to the Australian bond market in 11 years. The issue was heavily oversubscribed, according to Reuters.
Heading the other way was outsourcing company Capita after Seymour Pierce downgraded its recommendation on the stock to 'hold'. Meanwhile, temporary power solutions provider Aggreko was also hit by a ratings cut from HSBC to 'neutral'. In contrast, asset manager Schroders was given a lift by Morgan Stanley which upgraded the shares to 'equal weight' and lifted its target price from 1,535p to 1,665p.
Banking group Barclays finished in the red after announcing to say that it is to acquire the deposits, mortgages and business assets of ING Direct UK from Dutch finance house ING.
Defence group BAE Systems continues to trade lower as opposition to its proposed merger with European aerospace giant EADS mounts. According to the Financial Times this morning, more than 30% of shareholders in BAE have expressed "significant concerns" with the deal.
FTSE 250: Hays jumps 6% after beating forecasts
Recruitment firm Hays saw shares rise strongly today after saying that group net fee income fall by 1% year-on-year in the first quarter, better than the 4% decline expected by the consensus. Seymour Pierce upgraded its rating from ‘hold’ to ‘buy’ today, saying it is better placed than its peers to weather the current challenging market conditions”.
Pubs group Greene King was the heaviest faller on the FTSE 350 after Deutsche Bank cut its recommendation for the shares to ‘equal weight’.
FTSE 100 - Risers
Marks & Spencer Group (MKS) 381.30p +3.19%
Vedanta Resources (VED) 1,090.00p +2.06%
Rio Tinto (RIO) 3,030.00p +1.52%
Aberdeen Asset Management (ADN) 325.50p +1.43%
Evraz (EVR) 247.40p +1.10%
Xstrata (XTA) 958.40p +0.86%
Next (NXT) 3,571.00p +0.85%
Fresnillo (FRES) 1,973.00p +0.77%
BHP Billiton (BLT) 1,935.50p +0.65%
Anglo American (AAL) 1,813.50p +0.61%
FTSE 100 - Fallers
Capita (CPI) 740.00p -3.71%
Aggreko (AGK) 2,240.00p -3.41%
CRH (CRH) 1,143.00p -3.38%
BT Group (BT.A) 221.70p -2.29%
Sage Group (SGE) 306.00p -2.17%
British American Tobacco (BATS) 3,218.00p -2.11%
Resolution Ltd. (RSL) 214.30p -2.01%
SABMiller (SAB) 2,679.00p -1.98%
G4S (GFS) 263.80p -1.90%
Morrison (Wm) Supermarkets (MRW) 278.90p -1.76%
FTSE 250 - Risers
Hays (HAS) 79.50p +5.72%
Home Retail Group (HOME) 97.30p +3.18%
Homeserve (HSV) 225.90p +3.06%
IP Group (IPO) 122.50p +2.60%
Sports Direct International (SPD) 398.50p +2.47%
Debenhams (DEB) 107.20p +2.10%
Man Group (EMG) 89.95p +2.04%
Essar Energy (ESSR) 125.50p +2.03%
Mitchells & Butlers (MAB) 308.70p +1.71%
JD Sports Fashion (JD.) 773.50p +1.38%
FTSE 250 - Fallers
Greene King (GNK) 599.00p -4.08%
Petra Diamonds Ltd.(DI) (PDL) 106.20p -3.98%
Diploma (DPLM) 479.30p -3.74%
Fidessa Group (FDSA) 1,350.00p -3.36%
Berkeley Group Holdings (The) (BKG) 1,387.00p -3.07%
Stobart Group Ltd. (STOB) 113.10p -2.84%
Ted Baker (TED) 910.00p -2.67%
Ophir Energy (OPHR) 597.00p -2.61%
Telecity Group (TCY) 933.00p -2.51%
Atkins (WS) (ATK) 683.00p -2.50%