Date: Tuesday 12 Jun 2012
- Stimulus speculation from the Fed fuels stocks late on
- Investors continue to mull Spanish aid plea
- Bond yields surge in Spain and Italy
The markets shrugged off surging bond yields in the Eurozone periphery on Tuesday to rally in afternoon trade as hopes of new stimulus measures in the US lifted sentiment late on.
New York’s benchmarks started on the front foot on the back of comments from Federal Reserve Bank of Chicago President Charles Evans who has thrown his weight behind the Fed kick-starting the US economy. In an interview with Bloomberg TV, he said: "I've been favour of pretty much any accommodative policy I've heard about […] Extending the Twist would be useful […] More asset purchases would be useful. More mortgage-backed securities purchases would be good.”
In London, the Footsie was struggling to find direction for most of the day as investors were still digesting Spain’s request for a credit line of up to €100bn to help recapitalise its banks. After falling to just below the 6% mark yesterday, the yield on a 10-year Spanish bond hit a euro-era high of 6.8% earlier today as Fitch providing warned that Spain will miss its short-term deficit targets. The ratings agency also downgraded 18 of the country’s banks.
The borrowing rate on Italian debt has also spooked investors today – yields were up 13.9bp at 6.171% - who worry that Rome will be the next to fall victim to the European debt crisis contagion and also need a rescue.
Fitch also hinted that all Eurozone countries with coveted triple-A ratings were at risk of a downgrade. Michael Hewson, an analyst at spread-betting firm CMC Markets, believes it is highly likely the UK will lose its AAA rating, but it may not be the end of the world. “When you look at all the countries in the world struggling with debt, we are among the best of a bad bunch,” Hewson said.
In other domestic news, UK manufacturing production fell 0.7% in April compared with the month before, whereas analysts had pencilled in no change.
Interdealer broker ICAP was the high riser of the day, jumping nearly 3%. Faraday Research labelled the stock as a buy this morning, saying that the Greek election this coming weekend is the catalyst "to really get things moving" - ICAP tends to benefit from increased volatility in markets. Analyst David Lowery said that while a Greek exit from the Eurozone may be back for the global economy, "it would probably be fantastic news for ICAP".
Mining stocks were mixed today. Precious metal producers Randgold Resources and Fresnillo were making strong gains tracking gold and silver prices higher. However, sector peer Polymetal was lower with Nomura saying that the tightening of FTSE reweight rules is putting the stock under selling pressure.
Glencore and Xstrata were making gains with the potential merger partners being boosted by positive comments from Jefferies. The broker said that certain factors have reduced the pressure on Glencore to bump up its offer for Xstrata and said that the merger on the original terms has a high probability of success.
Supermarket firm Sainsbury was on the up after making a surprise move into the e-book retail market with the acquisition of HMV's stake in online venture Anobii. The stock is to report its first-quarter trading update tomorrow morning.
Shares in plastic packaging firm RPC Group dropped despite the firm hiking its dividend after the successful acquisition of food packaging firm Superfos helped drive up profit in the year to the end of March. However, the firm noted that in the short term it was facing a difficult and uncertain macro-economic environment.
Like-for-like sales growth slowed at Spirit as the pubs group ran into stronger comparatives from a year earlier, while things are getting worse in the group's leased estate, causing shares to fall.
FTSE 100 - Risers
Randgold Resources Ltd. (RRS) 5,765.00p +2.95%
ICAP (IAP) 346.50p +2.73%
Fresnillo (FRES) 1,429.00p +2.36%
Lloyds Banking Group (LLOY) 29.16p +2.32%
Admiral Group (ADM) 1,099.00p +2.23%
Standard Chartered (STAN) 1,376.50p +2.15%
Vodafone Group (VOD) 174.70p +2.13%
Aggreko (AGK) 2,229.00p +2.11%
BT Group (BT.A) 211.60p +2.07%
Rolls-Royce Holdings (RR.) 836.00p +1.77%
FTSE 100 - Fallers
Man Group (EMG) 74.50p -2.87%
Polymetal International (POLY) 790.00p -2.41%
Evraz (EVR) 266.70p -2.16%
Whitbread (WTB) 1,849.00p -2.01%
International Consolidated Airlines Group SA (CDI) (IAG) 143.00p -1.79%
Weir Group (WEIR) 1,423.00p -1.79%
Marks & Spencer Group (MKS) 325.90p -1.69%
Kingfisher (KGF) 274.50p -1.54%
Schroders (Non-Voting) (SDRC) 968.00p -1.53%
Petrofac Ltd. (PFC) 1,509.00p -1.50%
FTSE 250 - Risers
Perform Group (PER) 375.00p +6.23%
TalkTalk Telecom Group (TALK) 164.50p +4.78%
Centamin (DI) (CEY) 70.25p +4.69%
Hochschild Mining (HOC) 457.10p +3.79%
Essar Energy (ESSR) 116.70p +3.18%
IG Group Holdings (IGG) 458.20p +2.37%
Kesa Electricals (KESA) 48.60p +2.32%
Anglo Pacific Group (APF) 246.00p +1.74%
Dixons Retail (DXNS) 13.20p +1.54%
JPMorgan Russian Securities (JRS) 472.00p +1.40%
FTSE 250 - Fallers
Bumi (BUMI) 330.00p -9.59%
RPC Group (RPC) 365.40p -7.96%
JD Sports Fashion (JD.) 612.00p -7.34%
International Personal Finance (IPF) 230.40p -5.46%
Supergroup (SGP) 265.40p -5.38%
Regus (RGU) 84.90p -5.35%
Oxford Instruments (OXIG) 1,149.00p -4.88%
Spirit Pub Company (SPRT) 45.50p -4.71%
Yule Catto & Co (YULC) 175.70p -4.20%
Kier Group (KIE) 1,167.00p -4.03%
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