Date: Thursday 21 Jun 2012
- Chinese, Eurozone PMIs paint gloomy picture
- Spanish banking-sector audits due today
- Miners, oil stocks fall
Disappointing economic data, a negative revision to US growth and rising bond yields in Spain combined to put downward pressure on UK stocks on Thursday, with the Footsie trading firmly in the red by lunchtime.
The Chinese manufacturing sector purchasing managers' index (PMI) for the month of June compiled by Markit fell from 48.4 to 48.1 in June, a seven-month low. Many observers believe that the Asian powerhouse will bottom-out in the current quarter.
Furthermore, Markit's composite PMI for the Eurozone was 46.0 in June, unchanged from May's 35-month low. "With the exception of a marginal increase in January, the survey has recorded continual contraction since last September, with the rate of decline having gathered significant momentum in the second quarter," Markit said.
The keenly-awaited policy decision in the US last night failed to boost markets as was hoped, after the Federal Reserve also downgraded its growth expectations for the world's largest economy. While the Federal Open Market Committee decided to extend its 'Operation Twist' programme, which involving the sale of short-term debt in exchange for long-term securities with the intention of flattening the interest rate curve, the central bank said it expects US GDP to grow by 1.9-2.4% in 2012, down from earlier predictions of a 2.4-2.9% expansion.
Meanwhile, Spain managed to sell €2.22bn in debt, topping its €2bn top-end target. However, borrowing costs surged again compared with the previous auction. Consultancy groups Oliver Wyman and Roland Berger are expected to present their evaluations of the Spanish banking sector at some point today. Fitch calculates a potential capital shortfall of €90-100bn under a "Irish stress scenario".
Concerns over the Chinese economy pressured sharp falls in the mining sector this morning as investors expressed worries about slowing demand. Anglo American, Kazakhmys, Vedanta and Xstrata were among the worst performers.
Meanwhile, surging oil inventories in the US and concerns over the Eurozone sent oil futures tumbling, meaning that both BP and BG Group were registering losses.
Unilever was making gains after Investec warned investors not to look too much into the profit warnings across the sector, reassuring that the UK-listed company is not like peers P&G and Danone. "For us, ULVR is a company that is gaining momentum rather than losing it, whose input pressures are getting better rather than worse, who is relatively less exposed to slowing geographies and who is less of a hostage to guidance fortune."
Water company Severn Trent fell after announcing the launch of a 10-year sterling bond with a coupon linked to the retail prices index. The bonds will pay interest semi-annually at a real rate of interest of 1.3% per annum adjusted to take account of changes in the level of the UK Retail Prices Index (RPI). The bonds, to be issued at £100 a throw, could, however, end up paying less than 1.3% per year if the UK experiences deflation.
Bid talks which got the market excited on Wednesday about Invensys, the maker of rail signalling and industrial automation systems, have hit the buffers already causing shares to pull back. In response to press speculation about an approach from Emerson Electric for some of the company'sassets, news of which leaked out on Wednesday, Invensys said talks with Emerson are no longer taking place.
Legacy software specialist Micro Focus delivered full-year results in line with guidance, with licence fee growth offsetting a foreseen decline in maintenance revenues. Merchant Securities initiated coverage on the stock with a 'buy' rating this morning, saying that it was impressed with its "excellent" cash generation.
Construction equipment leasing firm Ashtead Group jumped after reporting record profits as tight cost control and strong demand in the US helped the firm beat analyst expectations.
FTSE 100 - Risers
Lloyds Banking Group (LLOY) 31.55p +1.11%
International Consolidated Airlines Group SA (CDI) (IAG) 160.00p +1.07%
Reckitt Benckiser Group (RB.) 3,400.00p +0.98%
Standard Life (SL.) 230.40p +0.66%
Carnival (CCL) 2,293.00p +0.66%
ITV (ITV) 77.00p +0.65%
Sage Group (SGE) 269.20p +0.64%
Old Mutual (OML) 159.60p +0.63%
Admiral Group (ADM) 1,186.00p +0.59%
RSA Insurance Group (RSA) 107.10p +0.56%
FTSE 100 - Fallers
Vedanta Resources (VED) 953.00p -2.56%
Anglo American (AAL) 2,159.50p -2.51%
Kazakhmys (KAZ) 737.00p -2.45%
BP (BP.) 415.50p -2.38%
Xstrata (XTA) 850.10p -2.30%
Glencore International (GLEN) 325.60p -2.30%
Morrison (Wm) Supermarkets (MRW) 266.90p -2.20%
Weir Group (WEIR) 1,528.00p -1.93%
Evraz (EVR) 276.10p -1.92%
BG Group (BG.) 1,262.50p -1.83%
FTSE 250 - Risers
Ruspetro (RPO) 140.70p +5.79%
Micro Focus International (MCRO) 472.30p +4.49%
Ashtead Group (AHT) 259.30p +3.55%
JD Sports Fashion (JD.) 645.00p +3.12%
Stobart Group Ltd. (STOB) 121.60p +2.79%
Daejan Holdings (DJAN) 2,640.00p +2.33%
Regus (RGU) 91.55p +2.23%
Spectris (SXS) 1,590.00p +2.19%
Redrow (RDW) 119.00p +2.15%
ITE Group (ITE) 195.60p +2.03%
FTSE 250 - Fallers
Invensys (ISYS) 214.90p -16.38%
Aquarius Platinum Ltd. (AQP) 53.30p -10.72%
New World Resources A Shares (NWR) 314.60p -4.41%
Afren (AFR) 105.00p -4.20%
Betfair Group (BET) 763.50p -3.84%
EnQuest (ENQ) 112.60p -3.01%
Man Group (EMG) 75.55p -2.95%
Centamin (DI) (CEY) 67.25p -2.68%
Talvivaara Mining Company (TALV) 166.20p -2.52%
Computacenter (CCC) 300.80p -2.40%
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