Date: Friday 06 Jul 2012
- US non-farm payrolls disappoint
- Miners drag the Footsie lower
- IMF to cut global GDP forecast
After treading water for the morning session, the Footsie dropped in afternoon trade after a disappointing employment report from the US dampened the outlook for the global economy.
The US Labor Department revealed that 80,000 non-farm payrolls were added in June, less than the 100,000 expected by analysts. The jobless rate was unchanged at 8.2%.
“We continue to believe that higher uncertainty from events in Europe and, to a lesser degree, the potential for significant fiscal tightening in the US early next year are causing firms to postpone investment and hiring decisions,” said analyst Michael Gapen from Barclays Capital.
Investors were still digesting yesterday’s news that the Bank of England (BoE) ramped up its asset purchase programme and the European Central Bank (ECB) and the People's Bank of China (PBoC) both slashed their benchmark interest rates.
Critics to the BoE move said that the £50bn increase in quantitative easing will only have a marginal effect on the real economy. ECB governing council member Erkki Liikanen said that the European rate cut should not be expected to save the day. Meanwhile, some say that the Chinese decision reflects policymakers' concerns about a 'hard-landing'.
In other news, the International Monetary Fund (IMF) has warned that it is planning to lower its global growth forecast of 3.5% this year in light of the economic situation becoming "more worrisome".
The gloomy figures from the Labor Department dented stocks in London with the mining sector bearing the brunt of the risk aversion. Yesterday’s surprise interest rate cut by the People’s Bank of China has also scared the industry that Chinese policymakers are worried about a ‘hard-landing’ for the world’s second-largest economy. Kazakhmys, Evraz, Vedanta and Polymetal were suffering heavy losses this afternoon while luxury brand Burberry, a business heavily exposed and heavily dependent on growth in China, also slumped.
With relatively ‘riskier’ assets out of favour, electricity, telecoms and utilities stocks were among the best performers: Pennon, SSE, Severn Trent, Centrica and BT were making gains late on.
Having promised on Thursday that it would raise money from disposals, insurance giant Aviva moved quickly to act on that pledge by saying it will sell more of its stake in Delta Lloyd than originally intended, prompting a rise in its share price. Providing a lift was Societe Generale which upgraded the stock from 'sell' to 'hold'.
Food, ingredients and retail firm Associated British Foods rose after saying that it is to buy ethnic flour brand Elephant Atta from Premier Foods for £34m. Analysts at Panmure Gordon said this morning that the acquisition is a "perfect fit" for AB Foods.
Pharmaceuticals giant AstraZeneca was in the red after Jefferies downgraded its rating on the stock from 'buy' to 'hold', following the recent strong performance in the shares. Jefferies says that it sees "major fundamental challenges" for the group, including its clinical and business development capabilities/decision making.
Engineering software firm AVEVA was a high riser after Berenberg upgraded the stock to 'buy' and lifted its target price from 1,660p to 1,927p. Also benefiting from broker commentary was homewares retailer Dunelm after Nomura said that given the group’s strong cash generation, a cash return to shareholders is “appearing more likely”.
In contrast, support services firm Carillion was a heavy faller after UBS downgraded the stock from 'neutral' to 'sell' and cut its target price from 285p to 230p. UBS said that the firm's first-half trading update showed a "deterioration in growth prospects" and that UK construction margins are "clearly not sustainable".
FTSE 100 - Risers
International Consolidated Airlines Group SA (CDI) (IAG) 159.20p +2.25%
SSE (SSE) 1,416.00p +1.58%
Imperial Tobacco Group (IMT) 2,579.00p +1.58%
Pennon Group (PNN) 770.00p +1.45%
G4S (GFS) 290.30p +1.33%
Severn Trent (SVT) 1,689.00p +1.32%
Aviva (AV.) 288.00p +1.19%
Centrica (CNA) 319.10p +1.17%
Shire Plc (SHP) 1,820.00p +1.00%
BT Group (BT.A) 215.20p +0.99%
FTSE 100 - Fallers
CRH (CRH) 1,151.00p -5.19%
Evraz (EVR) 246.20p -4.50%
Kazakhmys (KAZ) 725.00p -4.35%
Weir Group (WEIR) 1,547.00p -4.21%
ICAP (IAP) 313.60p -3.77%
Burberry Group (BRBY) 1,289.00p -3.73%
Marks & Spencer Group (MKS) 318.00p -3.40%
Polymetal International (POLY) 864.50p -3.30%
Vedanta Resources (VED) 914.50p -3.18%
Rio Tinto (RIO) 3,069.00p -2.76%
FTSE 250 - Risers
Dunelm Group (DNLM) 550.00p +3.58%
Aveva Group (AVV) 1,745.00p +2.83%
Rank Group (RNK) 119.00p +2.15%
Micro Focus International (MCRO) 549.00p +2.14%
Spirent Communications (SPT) 170.00p +2.10%
Kier Group (KIE) 1,216.00p +1.84%
JD Sports Fashion (JD.) 740.00p +1.79%
Chemring Group (CHG) 283.50p +1.72%
Soco International (SIA) 331.60p +1.69%
Go-Ahead Group (GOG) 1,247.00p +1.63%
FTSE 250 - Fallers
Carillion (CLLN) 251.40p -6.16%
Talvivaara Mining Company (TALV) 141.20p -4.79%
Petropavlovsk (POG) 458.80p -3.94%
Ocado Group (OCDO) 70.40p -3.89%
Jupiter Fund Management (JUP) 211.00p -3.61%
Imagination Technologies Group (IMG) 466.80p -3.37%
SIG (SHI) 98.30p -2.96%
Ashtead Group (AHT) 262.40p -2.92%
Afren (AFR) 106.60p -2.91%
Aquarius Platinum Ltd. (AQP) 46.11p -2.80%
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