Level 2

Weekly Review

Date: Friday 21 Sep 2012

The FTSE 100 index ended the week down 63 points at 5,966.

Equity view

What was set up to be the big end to the week, the decision from the independent directors of mining group Xstata on whether to accept the merger proposals from commodities broker Glencore turned out to be a damp squib, with the company pleading for more time to canvas key shareholders. The Takeover Panel duly granted a one week extension.

Food and drink wholesale group Booker Group reported a 4.3% year-on-year rise in total sales in the 12 weeks to September 14th, with non-tobacco sales 3.9% higher, while tobacco sales rose by 5.1%.

Imperial Tobacco's operational performance in the year ended September 30th has been in line with its expectations. Tobacco net revenues are expected to be up by around four per cent with particularly good performances in its Eastern Europe, Africa & Middle East and Asia-Pacific regions. However, stick equivalent volumes are expected to decline by up to three per cent, the majority of which is due to ongoing market weakness in Ukraine and Poland and compliance with international trade sanctions against Syria.

BSkyB welcomed an announcement by Ofcom that Sky "remains a fit and proper holder of its broadcasting licences".

In South Africa, mining giant Anglo American Platinum (Amplats) reported poor attendance at its Rustenburg process operations since it re-opened on Tuesday following a temporary halt to operations amid a wave of labour unrest that has hit the mining industry in South Africa in recent weeks.

There was better news at Lonmin as strikers returned to work after a pay settlement was agreed earlier this week, but the market appears not to like the terms of the agreement, as Lonmin's shares were among the hardest hit in the sector. More than 80% of workers reported for work on Thursday at Lonmin's Marikana project.

Economic news

Inflation continued its downward trend in August after an unexpected blip saw it rise in July. The Consumer Prices Index (CPI) measure of inflation dropped to 2.5%, down from 2.6% in July, helped by falls in the price of clothing and footwear, furniture and household equipment, and domestic gas. The consensus estimate had been for a rise of 2.5%.

UK retail sales fell by 0.2% month-on-month in August (Consensus: -0.3%). However, in year-on-year terms total retail sales grew by 2.7% (Consensus: 2.9%).

Bank of England policy makers voted unanimously in September to keep the bank's asset purchase scheme steady but there were signs the printing presses could be turned on again soon.

The latest details of their meeting showed most members found the decision to keep quantitative easing (QE) at its current level "relatively straightforward".

International events

Spain has categorically denied it is contemplating a pensions freeze, as rumours swirled round the markets that the government is laying the groundwork for a new Spanish rescue programme.

In Greece, however, the government has bitten the bullet and raised the retirement age to 67, as part of a new austerity package being developed for the country to continue its bailout programme. Officials from the 'Troika' and the Greek government had been working on the measure until the early hours of Friday morning. The measure is expected to save €1.1bn.

However, both sides must still come up with measures in addition to those that have already been approved in order to cover the €11.5bn in savings demanded by 'Troika'.

The preliminary HSBC China manufacturing sector purchasing managers´ index for the month of September has come in at 47.8, slightly above the previous month´s reading, according to survey compiler Markit.

However, it continues to indicate a contraction in the sector – for an eleventh month - and marks the longest such streak in the eight year history of the series, something which has apparently not been lost on market watchers.

The Bank of Japan took markets by surprise with the announcement that it will increase the size of its asset purchase fund to 55trn Yen (77.46bn pounds), from 45trn before.

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