London open: Stocks bounce even as analysts warn on emerging markets

The selling pressure on stocks abated as investors waited on the US Federal Reserve’s policy announcement on Wednesday, but worries regarding the outlook for China, Greece and the possibility of interest rate increases were still very much on investors’ minds.

As of 08:47 the FTSE 100 was higher by 25.74 points to the 6,531.46 mark.

Acting as a backdrop, the Shanghai Stock Exchange’s Composite Index closed 1.68% lower at 3,663.002 after having hit an intra-day minimum below the 3,550 point mark.

In parallel, front month Brent crude futures started the morning off by 1.65% to $52.60 per barrel on the ICE, with Deutsche Bank pointing out that export data showing record oil production from southern Iraq had "added to the weakness."

Some analysts dismissed Monday’s weakness in Chinese stocks as a fluke. Other however, such as those at Rabobank, warned of the effects which a potentially explosive cocktail of worries around China, Greece and interest rate rises Stateside.

“If the Fed wants to continue to take the ‘glass half full’ view, a negative reaction from emerging markets can be expected to continue, especially with the Chinese engine clearly sputtering: that is a major concern in our increasingly-integrated global economy,” the Dutch bank said in a research note e-mailed to clients.

As regards the UK, on Tuesday morning analysts at Credit Suisse lowered their year-end target for the FTSE 100 to 7,000 points from 7,450 due multiple factors: sterling resilience (only 21% of profits come from the UK); exposure to emerging markets (26% of market cap); a negative view on oil (the UK has an even larger exposure to oil than to emerging markets); UK equities modestly underperform when UK rates initially rise; they were not clearly cheap excluding resources; and the UK market was overweight bond proxies.

That came amid a flurry of reports regarding foreign acquisition of assets in the UK.

The Office for National Statistics was set to publish its latest data on UK gross domestic product at 09:30.

RSA, Hikma and Melrose Industries lead gains on Stoxx 600

Shares in RSA Insurance surged 12% after Zurich Insurance confirmed on Tuesday that it is evaluating a potential offer for the company. Zurich said the announcement does not amount to a firm intention to make an offer and there can be no assurance any offer will be made.

Drug developer Hikma Pharmaceuticals signed a deal to buy two firms from Boehringer Ingelheim in transactions worth a total of $2.25bn. FTSE 100 listed Hikma planned to buy Roxane Laboratories and associated company Boehringer Ingelheim Roxane in a cash and shares deal that would make Hikma the sixth biggest company by revenue in the US generics market.

Melrose Industries rocketed 15% after saying it has entered into an agreement to dispose of its Elster business to Honeywell International for a cash consideration of £3.3bn and announcing plans to return over £2bn to shareholders.

Second-quarter profits from BP missed analysts' forecasts, with adjusted profit of $1.31bn falling 63% on the previous year and short of the $1.66bn expected. A dividend of 10c arrived as predicted.

First-half profits from Mondi will be well ahead of those from last year, the paper and packaging maker said in a short trading statement. Basic underlying earnings per share will be up roughly 25-35%, with headline EPS up around 18-28%.

Clothing retailer Next has raised its sales and profit guidance for the year as warmer weather at the end of the season boosted second-quarter sales. The company raised its full-year pre-tax profit guidance to between £805m and £845m from a previous range of £785m to £835m and lifted its sales guidance range to between 3.5% and 6% from previous guidance of between 1.5% and 5.5%.

Market Movers
techMARK 3,138.45 +0.04%
FTSE 100 6,531.27 +0.40%
FTSE 250 17,323.43 +0.32%

FTSE 100 - Risers
RSA Insurance Group (RSA) 489.80p +11.88%
GKN (GKN) 313.60p +6.31%
Hikma Pharmaceuticals (HIK) 2,205.00p +6.01%
ITV (ITV) 271.20p +2.84%
Next (NXT) 7,630.00p +1.73%
Reckitt Benckiser Group (RB.) 6,091.00p +1.64%
Ashtead Group (AHT) 952.50p +1.60%
HSBC Holdings (HSBA) 571.80p +1.36%
Admiral Group (ADM) 1,484.00p +1.23%
Aberdeen Asset Management (ADN) 360.10p +1.09%

FTSE 100 - Fallers
Royal Mail (RMG) 489.00p -2.98%
Weir Group (WEIR) 1,457.00p -1.22%
Sky (SKY) 1,106.00p -1.16%
St James's Place (STJ) 941.50p -1.15%
Randgold Resources Ltd. (RRS) 3,761.00p -0.87%
CRH (CRH) 1,824.00p -0.87%
Fresnillo (FRES) 621.00p -0.72%
Bunzl (BNZL) 1,780.00p -0.61%
Kingfisher (KGF) 358.70p -0.58%
ARM Holdings (ARM) 990.50p -0.50%

FTSE 250 - Risers
Melrose Industries (MRO) 280.70p +10.34%
Drax Group (DRX) 277.40p +9.86%
Virgin Money Holdings (UK) (VM.) 399.00p +6.57%
Informa (INF) 574.50p +5.90%
Hellermanntyton Group (HTY) 349.10p +5.66%
NMC Health (NMC) 874.00p +4.92%
Domino's Pizza Group (DOM) 833.50p +3.73%
Indivior (INDV) 264.40p +1.97%
Zoopla Property Group (WI) (ZPLA) 243.90p +1.92%
Beazley (BEZ) 334.20p +1.77%

FTSE 250 - Fallers
Polymetal International (POLY) 429.40p -2.85%
Saga (SAGA) 207.00p -2.77%
Euromoney Institutional Investor (ERM) 1,060.00p -2.03%
Cranswick (CWK) 1,609.00p -1.65%
Riverstone Energy Limited (RSE) 970.00p -1.52%
Daejan Holdings (DJAN) 6,475.00p -1.52%
Fidelity China Special Situations (FCSS) 135.10p -1.46%
Hays (HAS) 165.00p -1.37%
CLS Holdings (CLI) 1,908.00p -1.14%
John Laing Group (JLG) 218.80p -1.13%