Date: Wednesday 30 May 2012
- Spain in focus, bond yields surge
- Eurozone economic sentiment slips
- Miners fall on euro, Chinese concerns
London’s blue-chip index closed near its intraday low on Wednesday as ongoing concerns over the Eurozone, and particularly Spain, sank global equity markets.
“Spain has taken centre stage again today. Ongoing concerns over the country’s banking system are forcing investors to re-adopt a risk-off approach,” said analyst Craig Erlam from Alpari. In fact, some analysts, like Matthew Lynn from Strategy Economics, are saying that Spain is more likely to leave the euro before Greece.
The European Central Bank (ECB) has today denied press claims that it has been sticking its nose into Spain's affairs and advising on the southern European country's plans to inject €19bn into the stricken lender Bankia. Nonetheless, the central bank may have unwittingly muddied the waters a bit further when it later ammended a rectification to a subsequent clarification.
Also dampening sentiment today was the news that the governor of the Bank of Spain, Miguel Angel Fernández Ordóñez, has announced that he will resign on Sunday, June 10th, instead of waiting for his term to expire on July 12th.
Further complicating matters, ECB data today revealed that the retail and corporate deposits in Spanish banks declined from €1.656tn to €1.624tn in April, a fall of 1.9% month-on-month compared with a slight rise the month before.
Before the close in London, Spain's 10-year bond yield was 21.2 basis points (bp) higher at 6.658%, while Italy's was up 17.2bp at 5.938%. Italy sold €5.73bn in five- and 10-year debt this morning, short of its maximum €6.25bn target and at higher borrowing costs than at the last auction.
In other news, the European Commission's economic sentiment index fell from 92.9 to 90.6 in May, well below the 92.0 figure expected by analysts. Sentiment now stands at its lowest level since October 2009.
Commodity futures dropped sharply today after the Chinese government said that it does not intend to introduce additional economic stimulus measures, in direct contrast to recent market chatter. Oil prices were also pressured lower on speculation that US stockpile data (to be released tomorrow) will show that inventories rose to their highest levels since 1990 last week. Mining peers ENRC, Vedanta, Kazakhmys, Rio Tino and Antofagasta were suffering heavy losses by the close.
Risk aversion was also dampening the financial sector with banking peers Lloyds, RBS, Barclays and HSBC firmly in the red, joined by insurance groups Aviva, RSA and Standard Life.
Several stocks on the Footsie were also falling after going ex-dividend - trading without the right for their latest dividend payouts - including National Grid, Capital Shopping Centres Group, Marks & Spencer and AMEC. AMEC, the engineering and project management group, also announced this morning that it has acquired a Brisbane-based consulting, engineering and technical services business to expand its Environment and Infrastructure service offering in Australia.
Natural gas giant BG Group dropped after saying that it is to sell its stake in to gas-fired power generation plants in the Philippines as part of its planned release of $5bn of capital over the next two years.
Leading the upside were the utilities stocks, benefitting from their defensive characteristics during a ‘risk-off’ session. Severn Trent was the best performer despite pre-tax profits falling 38% in the year to the end of March; the group announced a special dividend and said it forecast no water restrictions for customers this year.
India-focused energy group Essar Energy soared in the last ten minutes of trade after it noted media reports regarding an Indian ministerial coal block meeting. The company’s coal block at Mahan in Madhya Pradesh state rumoured to be among those to have been provisionally approved by the Group of Ministers for Stage 1 Forest Clearance. While the company assured that not final decision has been made by the Indian Cabinet, it said that the approval would allow it to enter and clear the coal block areas.
Energy support services firm Cape jumped after announcing that a new Chief Executive will join the firm at the end of June. Joe Oatley will become Group Chief Executive and comes from Hamworthy, a global engineering business serving the oil and gas industry.
Food wholesaler Booker Group rose after saying it is to buy Makro UK, a subsidiary of the huge German retailer Metro, in a combined share and cash deal. Booker says the transaction will enable it to become the “UK's leading wholesaler to caterers, retailers and small and medium sized enterprises.”
Ex-dividend stocks on the second-tier were trading lower; these included Britvic, Daily Mail & General Trust, Marston's, Cable & Wireless Communications and Intermediate Capital.
FTSE 100 - Risers
Severn Trent (SVT) 1,706.00p +2.52%
Morrison (Wm) Supermarkets (MRW) 275.00p +0.62%
Next (NXT) 3,013.00p +0.37%
ARM Holdings (ARM) 508.50p +0.20%
International Power (IPR) 414.30p +0.07%
Tate & Lyle (TATE) 677.00p +0.07%
United Utilities Group (UU.) 642.00p 0.00%
FTSE 100 - Fallers
Eurasian Natural Resources Corp. (ENRC) 434.60p -6.58%
Vedanta Resources (VED) 940.50p -5.38%
Capital Shopping Centres Group (CSCG) 307.70p -4.94%
BG Group (BG.) 1,224.00p -4.64%
National Grid (NG.) 650.00p -4.48%
Kazakhmys (KAZ) 680.00p -4.29%
Petrofac Ltd. (PFC) 1,542.00p -4.16%
Rio Tinto (RIO) 2,801.00p -4.14%
CRH (CRH) 1,121.00p -4.11%
Amec (AMEC) 975.00p -3.94%
FTSE 250 - Risers
Essar Energy (ESSR) 141.80p +21.93%
Booker Group (BOK) 87.00p +9.99%
Centamin (DI) (CEY) 64.25p +4.05%
Euromoney Institutional Investor (ERM) 763.00p +3.39%
Telecom Plus (TEP) 733.00p +3.31%
Cape (CIU) 238.00p +3.25%
Dignity (DTY) 836.50p +1.83%
Synergy Health (SYR) 813.00p +1.82%
London & Stamford Property (LSP) 107.80p +1.41%
Aquarius Platinum Ltd. (AQP) 76.95p +1.18%
FTSE 250 - Fallers
Cable & Wireless Communications (CWC) 27.29p -15.25%
New World Resources A Shares (NWR) 289.90p -9.24%
Intermediate Capital Group (ICP) 244.60p -7.45%
Ocado Group (OCDO) 98.00p -6.67%
Petropavlovsk (POG) 361.70p -6.46%
Lonmin (LMI) 706.00p -5.93%
Ferrexpo (FXPO) 205.60p -5.90%
Northgate (NTG) 168.00p -5.83%
Talvivaara Mining Company (TALV) 138.60p -5.71%
Heritage Oil (HOIL) 121.00p -5.62%
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