Market overview: Miners hammered after weak corporate reports
Tue 23 Oct 2012
LONDON (SHARECAST) - 1630:Close UK shares have closed sharply lower, weighed down by weak corporate results out Stateside today and after poor guidance this morning from Europe’s third largest aluminium maker, Norsk Hydro. Miners were thus the worst performing group on the top share index, although companies such as Weir also took a beating on account of the recent sharp drops in crude futures. Profit warnings were also to be seen in Britain however. Thus, Whitbread warned of a second half slowdown in sales. Luxury hand-bag maker Mulberry plummeted after warning of lower sales in Asia, although some commentators were sceptical. On the upside, chip designer ARM Holdings rose after reporting a 19 per cent jump in quarterly sales. Investors smiled on Experian’s decision to acquire the 29.6 per cent interest in Serasa which it did not yet own for about 1.5bn dollars. FTSE 100 closed down 85 to 5,798.
1515: Mining stocks continue to take a hammering, with Chemring the only odd-one-out in the five biggest losers on the FTSE350. The defence firm has been hit by rumours surrounding the resignation of its Chief Executive. Diggers, including Kenmare, Lonmin and Kazakhmys, are being hit by fears over "slowing China and a weakening commodities super-cycle [which] are manifesting through the continued underperformance of basic materials," according to David White at Spread Ex. FTSE 100 down 78 to 5805.
1505: The FTSE 100 is now down 1.32 per cent, a 77-point fall, at 5,806 with mining stocks continuing to bear the brunt of the sell-off: Kazakhmys, ENRC and Antofagasta are losing heavily. Growth-sensitive Burberry is also falling sharply, weighed down further after a profit warning from sector peer and luxury handbag maker Mulberry. The latter is down over 20 per cent this afternoon after saying that wholesale revenues have been hit by tough comps and a challenging environment in Asia.
1448: Amongst the factors that may be weighing on stocks are remarks out of Germany's Finance Minister Wolfgang Schaeuble to the effect that his government will not back measures for Greece which the markets consider to be unsustainable. As well, he has added that there is no certainty that the worst has past. FTSE 100 down 74 to 5,809.
1340: Speculation in the market is that the exit of the Chemring's chief executive signals that Carlyle's take-over bid is collapsing. Nevertheless, this is what analysts at Oriel are saying on the matter: "We continue to see value in Chemring. If the deal collapses and the stock drops, we would see this as an opportunity. With strong management and a good recovery story we see significant medium term value based on a fundamentally sound business. The Q3 IMS guided to a 10 per cent downgrade however we cut our forecasts by 27%, this still leaves the group trading on less than 9x price-to-earnings. If strong management can implement a recovery, value remains at this level with or without a bid. We reiterate our ADD recommendation." FTSE 100 down 76 to 5,807.
1318: The Footsie is now near its worst levels of the day following a string of weaker than expected quarterly corporate results out this morning Stateside. Chief amongst these has been chemicals maker DuPont, after which industrial conglomerate 3M and Xerox have lowered their earnings per share guidance for the year. Results out of United Technologies and Regions Financial have also come in below forecasts. FTSE 100 down 74 to 5,808.
1210: The UKFI's Chief Executive has said that the most likely scenario is for the first sales of RBS shares to be a market transaction with institutions. He is reported to have added that there is not yet the level of demand to make an outright sale of RBS and Lloyds shares successful. FTSE 100 down 63 to 5,820.
1050: ITV, the commercial television network, received an upgrade from Standard & Poor’s (S&P) rating services with its outlook improved from 'stable' to ‘positive’. Meanwhile, AA insurance has said that on average home insurance has leapt 2.4 per cent to 181 pounds during the three months ended September 30th. Over a 12 month period this increased to 5.2 per cent. Contents insurance over three months climbed 1 per cent, and over 12 months rose 7.2 per cent. The FTSE 100 is down 40 points at 5,843.
0954: Spain has sold 3.53bn euros in Treasury Bills, versus the 3.5bn expected. Yields on the three month debt on offer rose a tad, but so did bid-to-cover ratios. No big surprises are immediately apparent at first glance.
0930: Loans for house purchase rose to 31,175 in September (Consensus: 30,840), from 30,533 in the month before, according to the latest data from the British Bankers' Association (BBA). That is the highest reading since April of this year.
0903: Wireless technology firm CSR has said revenues were up in the third quarter and that it has successfully completed a deal with Samsung, paving the way for a big investor pay out. The company is now leading gainers on the FTSE 350. Trinity Mirror's share price is cratering following allegations of telephone hacking. FTSE 100 down 46 to 5,839.
0857: Losses on the top flight index are now being led by shares of Burberry. The firm is being dragged down by shares of upmarket handbags and leather accessories Mulberry, which have gone into freefall after the company said revenue growth for the year to March 2013 31st is expected to fall below market expectations. Experian, on the other hand, is the best performer after announcing that it will pay a group of banks the equivalent of 1.5bn dollars for another 29.6 per cent stake in Serasa which it did not yet own. Analysts at Seymour Pierce however are continuing to tell clients to REDUCE shares of Experian. FTSE 100 down 35 to 5,848.
0830: The top share index started the day higher but has since moved lower, in synch with equities in the rest of the Continent. That following weak guidance out overnight by US tech giant Texas Instruments. Of interest, some market commentary holds that Spain is now further away from asking for a bail-out, following the positive results obtained by the ruling PP party seen in regional elections, in the province of Galicia, over the weekend. Back in the UK, the BBA publishes lending data for September at 9:30, while Bank of England Governor Mervyn King is set to speak in Cardiff at 20:00. FTSE 100 is now down 24 to 5,859.