LONDON (SHARECAST) - London’s FTSE 100 index registered its third consecutive day in negative territory as uncertainty surrounding the outlook for the global economy continued to weigh on investor sentiment.
techMARK 2,101.76 -1.26%
FTSE 100 5,776.71 -0.58%
FTSE 250 11,828.32 -0.70%
“Financial markets struggled to find direction today, drifting into the red as persistent fears over slowing global growth, combined with a worrying outlook in US aluminium giant Alcoa’s 3Q results, prompted investors to book some profits,” said market strategist Ishaq Siddiqi from ETX Capital.
Meanwhile, the IMF said that risks to global financial stability have increased and financial markets have been volatile as European policymakers grapple with the ongoing crisis. 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.
To make matters worse, David Riley, the global head of sovereign ratings at Fitch Ratings, warned of the possibility of additional rating cuts for Eurozone members. Riley indicated that the recession in Spain and Italy appears to be intensifying and stated that the European sovereign debt crisis in tandem with the US fiscal cliff and a Chinese 'hard landing' pose the biggest risks for the global economy.
Siddiqi added: “That’s three days of constant warnings about downside risks facing the global economy, so it isn’t a surprise that investors’ enthusiasm has been whacked. Moreover, the warnings are not so much new news to traders, but more a reconfirmation that more needs to be done by global policymakers to avert another major crisis.”
On a more positive note, following his meetings yesterday with the German Chancellor Angela Merkel, the Greek Prime Minister Antonis Samaras has said that he is confident that the next tranche of Greece's bailout will arrive on time. Meanwhile, public- and private-sector labour unions in Greece have called for a 24-hour general strike on October 18th as a result of the harsh austerity measures tied with the bailout, according to reports.
FTSE 100: Banking stocks gain as FSA eases capital buffers
Lloyds, RBS and Barclays finished strongly this afternoon after the Financial Services Authority (FSA) eased capital buffers for banks, meaning that loans given through the government’s ‘Funding for Lending’ (FLS) scheme can be effectively be classed as risk-free. Banks will now not need to hold extra capital against lending that qualifies for the government scheme.
The FT said that the FSA has also allowed banks to hold a fixed “numerical target” for capital instead of the 10% core capital ratio imposed by the Basel III rules.
Mining stocks were out of favour today after Goldman Sachs said it expects a slowdown in demand for industrial metals in the world’s second-largest economy, China. Vedanta, Fresnillo and Antofagasta closed with moderate losses
Defence group BAE Systems finished lower after officially announcing that the merger between it and aerospace firm EADS is off. "Discussions with the relevant governments had not reached a point where both companies could fully disclose the benefits and detailed business case for this merger," the firm said.
Randgold was lower after Nomura reiterated its 'reduce' rating on the shares. While the broker said that gold equities have the potential for further outperformance, it said that Randgold is "fully priced (for now)".
Outsourcing group Capita fell after both RBC Capital Markets and Panmure Gordon downgraded their ratings for the stock. Panmure said that 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."
Aggreko was off following a profit warning from US outfit Cummins, which was also weighing on the likes of GKN and IMI. Meanwhile, chip group ARM Holdings was a heavy faller after Credit Suisse started coverage with a 'neutral' rating.
FTSE 250: Imagination drops 9%
Chip designer Imagination Technologies suffered steep falls after Credit Suisse initiated coverage of the stock with a ‘sell’ rating on the back of “increased competitive pressures”. The broker said today: “Imagination is a $2bn system on chip graphics provider that has seen its share price rise 10-fold over the past four years on supplying graphics processors to the smartphone and tablet industry. However, we see ARM Holdings increasing its relevance as a competitor in this space with a full complement of graphics capabilities at half the price.”
N Brown, the internet and catalogue home shopping firm, was out of favour 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.
Fashion retailer SuperGroup jumped after Seymour Pierce said that the shares are in for a re-rating. "The new management has ‘steadied the ship’. With confidence returning, we believe the stock is oversold at 12.9 times FY13 earnings, considering the operational gearing in the earnings and possible step up in the growth rate," the broker said.
FTSE 100 - Risers
Lloyds Banking Group (LLOY) 38.48p +3.99%
Royal Bank of Scotland Group (RBS) 262.70p +2.10%
United Utilities Group (UU.) 729.00p +1.60%
Tate & Lyle (TATE) 688.50p +0.81%
Anglo American (AAL) 1,825.50p +0.66%
Next (NXT) 3,593.00p +0.62%
Hargreaves Lansdown (HL.) 679.00p +0.59%
Severn Trent (SVT) 1,674.00p +0.48%
Amec (AMEC) 1,113.00p +0.45%
RSA Insurance Group (RSA) 112.90p +0.44%
FTSE 100 - Fallers
ARM Holdings (ARM) 578.50p -2.85%
Vedanta Resources (VED) 1,060.00p -2.75%
Smith & Nephew (SN.) 655.00p -2.60%
IMI (IMI) 920.00p -2.49%
CRH (CRH) 1,115.00p -2.45%
Fresnillo (FRES) 1,926.00p -2.38%
Croda International (CRDA) 2,221.00p -2.29%
Polymetal International (POLY) 1,130.00p -2.25%
Evraz (EVR) 242.20p -2.10%
Weir Group (WEIR) 1,738.00p -2.08%
FTSE 250 - Risers
Bumi (BUMI) 185.70p +11.80%
Man Group (EMG) 93.40p +3.84%
Ted Baker (TED) 940.00p +3.30%
Lancashire Holdings (LRE) 855.00p +3.07%
Halfords Group (HFD) 323.50p +2.86%
New World Resources A Shares (NWR) 275.00p +2.73%
Cranswick (CWK) 748.50p +2.18%
Ultra Electronics Holdings (ULE) 1,620.00p +1.95%
Supergroup (SGP) 672.00p +1.82%
Carpetright (CPR) 674.00p +1.74%
FTSE 250 - Fallers
Imagination Technologies Group (IMG) 455.50p -9.35%
Ferrexpo (FXPO) 193.10p -4.69%
Fenner (FENR) 380.00p -4.59%
Brown (N.) Group (BWNG) 266.40p -4.45%
Talvivaara Mining Company (TALV) 151.20p -3.76%
Spirax-Sarco Engineering (SPX) 2,035.00p -3.46%
Hays (HAS) 76.75p -3.46%
Yule Catto & Co (YULC) 162.90p -3.32%
COLT Group SA (COLT) 115.90p -3.26%
Bodycote (BOY) 372.90p -3.14%