Date: Wednesday 04 Jul 2012
- PMI data from China and Europe disappoints
- US markets closed for July 4th
- Investors await policy decisions tomorrow
The Footsie was trading within a narrow range of just 17 points on Wednesday as volumes were seen to be light given that Wall Street is closed for Independence Day. Disappointing economic data from China and Europe prompted moderate falls for European equity markets this morning.
HSBC's China services purchasing managers' index (PMI) fell from 54.7 to 52.3 in June, its slowest rate of expansion in 10 months. HSBC chief China economist Hongbin Qu said: "This, plus the ongoing slowdown of manufacturing sectors, points to growing pressures on the jobs market - the last thing Beijing policy makers want to see".
Meanwhile, Eurozone services PMI rose from 46.7 to 47.1 in June but still remains firmly under the crucial 50-point benchmark that separates contraction and expansion.
Both the European Central Bank (ECB) and the Bank of England (BoE) will give their policy decisions on Thursday. The ECB is widely expected to cut interest rates to a new record-low, although International Monetary Fund Managing Director Christine Lagarde has said that an increase in quantitative easing my be a better option.
"While nobody really expects that a 25 basis-point cut will jump start growth in Europe, it would give a boost more of a psychological and a symbolic nature showing that the ECB is not leaving Europe to their own devices instead is willing to break new ground by for the first time in its history lowering rates to below 1%," according to Markus Huber, head of German HNW Trading at ETX Capital.
Meanwhile, the BoE is predicted to ramp up its own asset purchase programme tomorrow. Matthew Nelson, a sales trader at Spreadex, said this morning: "Following a closer than expected vote on QE in June the question is no longer if but by how much the Bank of England and Monetary Policy Committee will decide to inject in to the economy this time round after the UK’s latest bout of poor figures, with many looking for an increase of £50bn on the current £325bn pot."
Under-pressure banking group Barclays was in the red after Nomura downgraded its rating on the stock from 'hold' to 'reduce'. The broker said it sees "material uncertainties from the vacuum of top management as well as the shape and direction of the group under new leadership, potential for losses linked to LIBOR, weak capital market revenue, concern about the dividend at Barclays, driven by current uncertainties, and the ongoing problem of weak BarCap profitability." Former CEO Bob Diamond who resigned yesterday is to give evidence to the Treasury Select Committee this afternoon.
Potential merger partners Glencore and Xstrata were high risers despite reports the Xstrata shareholder Knight Vinke said it was against the deal on its original terms.
REIT group British Land and engineering support services firm Babcock were falling heavily after going ex-dividend - from today, investors will not have the chance to benefit from their latest dividend payouts. Burberry was another ex-div stock today but was putting in a robust performance - shares were broadly flat - after Credit Suisse named the stock as its top pick in the European luxury goods sector.
Oil giant Tullow fell despite revealing that it revenues in the first half of 2012 would be a record $1.15bn, up from $1.06bn the year before. Analysts at Investec said the trading update was in line with forecasts but has reduced its EPS predictions by around 10% for 2013 and 2014 on the back of lowered Brent crude estimates.
Tobacco giants Imperial Tobacco and British American Tobacco were in demand after Moody's Investors Service said that European tobacco companies will "continue to generate good cash flow thanks to the pricing inelasticity of tobacco products and growth in cigarette consumption in emerging markets." The ratings agency's outlook for the sector over the next 12-18 months is "positive".
Second-tier constituents Halfords, TalkTalk and Cranswick were lower after going ex-dividend. Meanwhile, financial group Phoenix was among the best performers after Berenberg upgraded its rating on the stock to 'buy'.
Fund manager Henderson was a heavy faller after Morgan Stanley downgraded its rating on the stock to 'equal weight'. Meanwhile, price comparison website firm Moneysupermarket.com was being lifted by an upgrade by UBS to 'buy'.
Support services firm Carillion dropped after confirming predictions that its profits will be lower in the first half of the year.
FTSE 100 - Risers
Glencore International (GLEN) 311.00p +2.39%
Xstrata (XTA) 823.00p +2.06%
Aberdeen Asset Management (ADN) 259.80p +1.88%
Croda International (CRDA) 2,372.00p +1.67%
Vodafone Group (VOD) 181.50p +1.09%
Carnival (CCL) 2,220.00p +1.05%
Tate & Lyle (TATE) 656.50p +0.92%
Capita (CPI) 672.00p +0.90%
Serco Group (SRP) 554.00p +0.82%
Pearson (PSON) 1,264.00p +0.80%
FTSE 100 - Fallers
ICAP (IAP) 327.50p -2.18%
Tullow Oil (TLW) 1,498.00p -2.16%
Aviva (AV.) 281.10p -2.02%
Vedanta Resources (VED) 942.00p -1.98%
Babcock International Group (BAB) 867.00p -1.92%
British Land Co (BLND) 512.00p -1.82%
Lloyds Banking Group (LLOY) 31.27p -1.68%
Legal & General Group (LGEN) 127.50p -1.54%
Prudential (PRU) 740.00p -1.53%
Royal Bank of Scotland Group (RBS) 213.40p -1.43%
FTSE 250 - Risers
Phoenix Group Holdings (DI) (PHNX) 493.90p +3.78%
Close Brothers Group (CBG) 780.50p +2.43%
Talvivaara Mining Company (TALV) 151.90p +2.22%
Petra Diamonds Ltd.(DI) (PDL) 124.30p +1.89%
Inchcape (INCH) 355.50p +1.72%
NMC Health (NMC) 199.80p +1.22%
Ferrexpo (FXPO) 223.50p +1.04%
Dixons Retail (DXNS) 18.02p +0.95%
PZ Cussons (PZC) 319.60p +0.85%
Bumi (BUMI) 320.70p +0.85%
FTSE 250 - Fallers
Halfords Group (HFD) 207.50p -9.15%
Man Group (EMG) 67.35p -4.94%
Aquarius Platinum Ltd. (AQP) 48.67p -4.57%
Domino Printing Sciences (DNO) 545.00p -4.39%
Avocet Mining (AVM) 68.55p -3.79%
Carillion (CLLN) 272.70p -3.33%
Cranswick (CWK) 814.00p -3.10%
De La Rue (DLAR) 995.00p -2.74%
Taylor Wimpey (TW.) 47.97p -2.62%
Spirit Pub Company (SPRT) 46.75p -2.60%
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