Date: Wednesday 23 May 2012
- Market Movers
- techMARK 1,907.17 -1.47%
- FTSE 100 5,266.41 -2.53%
- FTSE 250 10,375.72 -1.93%
LONDON (ShareCast) - - Officials warn Eurozone to prepare for Greek exit
- BoE policy makers ‘finely balanced’ on more QE
- CBO warns of US recession
The FTSE 100 sunk to its lowest levels of the day by the end of trade on Wednesday as investors looked ahead to this evening’s EU summit with caution as speculation increases over a Greek exit from the Eurozone.
International pressure has been mounting on Eurozone leaders to take quick action to stave off the recession that threatens the region. The European Council is holding an informal dinner Wednesday evening at 18:00 London time, where the members are expected to discuss both the situation in Greece and measures to increase growth.
Former Greek Prime Minister Lucas Papademos has said that although a Greek exit is unlikely, “it cannot be excluded that preparations are being made to contain the potential consequences” of such a scenario. He later clarified that he has no specific knowledge of any countries of institutions making contingency plans but could not “exclude the possibility”.
According to an article by Reuters this afternoon, three officials of the Eurogroup Working Group (EWG) have said that countries should be planning for a Greek exit. "The EWG agreed that each Eurozone country should prepare a contingency plan, individually, for the potential consequences of a Greek exit from the euro," one official said. Germany’s Bundesbank has said that a withdrawal from the single currency would be “considerable but manageable”.
Gloomy comments from the US Congressional Budget Office (CBO) were also dampening the mood today. The CBO warned of a risk of recession for the world's largest economy in 2013 if the Bush-era tax reductions were allowed to expire at the same time as spending cuts come into effect. It said that the US economy could contract by 1.3% in the first half of next year as the government falls off a "fiscal cliff".
In domestic news, the Bank of England's top decision makers indicated that more of them were on the verge of voting to increase stimulus measures at their lasting meeting. While the Monetary Policy Committee voted 8-to-1 to keep the Bank's quantitative easing programme steady at £325bn, the minutes of the meeting showed that "for several members, the decision not to expand the asset purchase programme at this meeting was finely balanced".
UK retail sales registered their biggest monthly fall in April, with fuel sales tailing off dramatically after the panic buying in March, when motorists were encouraged by the government to stock up on petrol.
FTSE 100: Miners bear the brunt of risk aversion
The blue-chip miners were dominating the fallers list on the Footsie as metals prices dropped on concerns that the Chinese economy may be affected greatly by Greece leaving the euro: investment bank China International Capital Corp said today that the world's second-largest economy could see its lowest levels of growth in more than two decades in this scenario. Mining peers Vedanta Resources, Kazakhmys, Polymetal, Xstrata, Glencore, Fresnillo, Rio Tinto, and Antofagasta were all suffering heavy losses.
Financials were also unwanted due to risk aversion. Barclays was out of favour after it announced the pricing details of the open offer part of its recently announced sale of its stake in US wealth management giant Blackrock. Meanwhile, there were rumours that the lender could be thinking about a shake-up in Italy, which could involve the sale of branches or a restructuring. Sector peers RBS, Lloyds and HSBC also finished lower.
Iconic British luxury brand Burberry dropped despite reporting solid profit growth in the year ended March 31st. Adjusted profit before tax increased by 26% from £298m to £376m, broadly in line with estimates. Analysts at Investec said this morning that bears make "take issue" today given the lack of upgrades following the results.
There were only a few stocks that finished with their head above water today: British Sky Broadcasting (BSkyB) rose after the Competition Commission announced that it was no longer concerned that 'Sky Movies' has an unfair advantage over its competitors; while Smith & Nephew was benefiting from renewed bid speculation.
FTSE 250: LSE falls after Italian banks sell up
Italian banks UniCredit and Intesa Sanpaolo have announced that they have sold their combined 11.5% stake of market operator London Stock Exchange (LSE), causing shares to take a tumble today. The banks made the transaction via an "accelerated bookbuild" at 960p per share, a discount to Tuesday's closing price.
Second-tier miners were firmly lower, like their FTSE 100 counterparts – Ferrexpo, Petropavlovsk and Avocet registered significant losses by the close. Aquarius Platinum was also under pressure due to the news of a fire at its Mimosa mine in Zimbabwe. "At this stage, the extent of the damage and impact on production cannot be ascertained," Aquarius said.
Buses and trains operator FirstGroup was a high riser after saying that it is to shake up its UK bus operations to focus on those areas that offer the greatest potential for growth. The group announced full-year results for the year to the end of March that were slightly ahead of expectations.
FTSE 100 - Risers
Smith & Nephew (SN.) 594.50p +0.42%
British Sky Broadcasting Group (BSY) 693.00p +0.36%
Aberdeen Asset Management (ADN) 241.30p +0.04%
FTSE 100 - Fallers
Vedanta Resources (VED) 951.50p -9.12%
Kazakhmys (KAZ) 679.50p -7.86%
Man Group (EMG) 73.10p -5.86%
Polymetal International (POLY) 794.00p -5.42%
Fresnillo (FRES) 1,312.00p -5.41%
Aviva (AV.) 263.90p -5.14%
Tullow Oil (TLW) 1,337.00p -5.04%
Rio Tinto (RIO) 2,790.50p -4.97%
Glencore International (GLEN) 343.65p -4.96%
Xstrata (XTA) 926.20p -4.80%
FTSE 250 - Risers
FirstGroup (FGP) 220.10p +7.42%
Ocado Group (OCDO) 107.80p +5.89%
COLT Group SA (COLT) 118.70p +5.14%
Great Portland Estates (GPOR) 392.90p +2.80%
Petra Diamonds Ltd.(DI) (PDL) 128.80p +2.79%
Paragon Group Of Companies (PAG) 160.80p +2.42%
Spirent Communications (SPT) 157.30p +2.28%
KCOM Group (KCOM) 69.00p +2.22%
Daejan Holdings (DJAN) 2,725.00p +2.14%
Lamprell (LAM) 103.00p +1.98%
FTSE 250 - Fallers
Ferrexpo (FXPO) 204.40p -10.82%
Aquarius Platinum Ltd. (AQP) 74.80p -10.10%
Petropavlovsk (POG) 380.50p -9.10%
London Stock Exchange Group (LSE) 947.00p -7.25%
Essar Energy (ESSR) 112.80p -6.70%
Kenmare Resources (KMR) 41.39p -6.48%
Avocet Mining (AVM) 143.50p -6.45%
New World Resources A Shares (NWR) 316.30p -6.42%
Talvivaara Mining Company (TALV) 146.90p -6.25%
Lonmin (LMI) 736.00p -6.18%
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