Date: Tuesday 02 Oct 2012
- Moody's to reveal Spanish review this month
- Banks provide a drag on the Footsie
- Bumi and Bank of Georgia are big movers on FTSE 250
After a morning rally into the blue, the Footsie had dropped back into negative territory by the close of trade on Tuesday with uncertainty surrounding Spain continuing to weigh on investors’ minds.
Markets were reacting this afternoon to news that Moody’s expects to announce the decision of its review of Spain’s sovereign debt rating at some point this month. The ratings agency downgraded its rating on Spain from ‘A3’ to ‘Baa3’ in June.
"Moody's review of Spain's rating is continuing to assess a number of factors, including Spanish banks' capital needs, the nature and size of support mechanisms, the recently released 2013 budget plan and the consequences for the euro area's crisis management framework of the further advancement of a banking union," a Moody’s spokeswoman said today.
Spain is reportedly ready to move ahead with its bailout request to the Eurozone though Germany is now asking the government to hold off due to internal political pressure. On Friday, the southern European country received a long-awaited report noting that its financial sector needs €59.3bn in additional capital.
Australian stocks surged overnight after the Royal Bank of Australia surprised many with a rate cut, slashing its key interest rate by 25 basis points to 3.25%. Whilst highlighting concerns over the outlook for the global economy, Governor Glenn Stevens also said that investment in the mining sector next year "may be at a lower level than earlier expected".
In domestic news, the UK economy came out of recession in the third quarter, according to the British Chambers of Commerce (BCC). Its survey of 7,593 UK firms showed the economy grew by 0.5% between July and September, following three consecutive quarters of contraction.
Meanwhile, the UK construction sector purchasing managers’ index for the month of September has come in at 49.5 points, up from the previous month’s reading of 49 but below the consensus estimate of 49.8.
Meanwhile, banking stocks were weighing on the blue-chip index today following the decision by UBS to slash their rating on shares of Lloyds, RBS and Barclays from ‘buy’ to ‘neutral’, attributing the cut to worries over the potential need of the sector to raise new capital at some point.
British Airways owner IAG was a high riser on earlier speculation that Qatar Airways was joining the Oneworld alliance, though this was later denied by the airline.
Engineering support firm Babcock was performing well after saying it was enjoying buoyant markets as customers turned to it to make cost savings. Jefferies, Seymour Pierce and Investec all hailed the first-half trading update as "in line", maintaining their 'buy' ratings for the stock saying that the business is "well positioned".
Rumours of a special dividend from Wolseley have proved to be on the money, with the plumbers' merchant paying 40p on top of the full-year divi of 60p. Nevertheless, shares fell after reported pre-tax profits fell from £391m to £198m. Irish broker Davy has downgraded its recommendation for Wolseley from ‘outperform’ to ‘neutral’, saying that “the stock is fully valued.”
Pharma giant AstraZeneca was extending losses after announcing yesterday that it had suspended its share repurchase programme with immediate effect. Credit Suisse cut its forecasts for the group this morning, saying that this "will likely mark the start of further EPS downgrades at AZN".
Investec has upgraded its recommendation for retail-focused real estate investment trust Hammerson from 'sell' to 'hold', providing a lift for the shares.
Bumi rose on reports that the Jakarta-based miner, PT Bumi Resources, in which it owns 29%, is to raise cash by selling non-core assets, to quickly pay down debt. Bumi, founded by Nathaniel Rothschild, revealed on September 24th that it had begun investigating “potential financial and other irregularities” in the Indonesian miner.
Bank of Georgia Holdings suffered steep falls on concerns over political uncertainty in its domestic market after a surprise upset in the parliamentary elections. “The impact on Georgia in the short term will be a higher degree of risk and uncertainty until the new government is formed and makes its policies clear,” said analyst Sue Munden from Seymour Pierce.
FTSE 100 - Risers
International Consolidated Airlines Group SA (CDI) (IAG) 159.00p +3.05%
Babcock International Group (BAB) 945.00p +2.44%
BAE Systems (BA.) 334.00p +2.08%
Fresnillo (FRES) 1,920.00p +2.07%
IMI (IMI) 949.50p +1.82%
Tesco (TSCO) 336.70p +1.72%
BG Group (BG.) 1,300.00p +1.64%
Randgold Resources Ltd. (RRS) 7,770.00p +1.37%
WPP (WPP) 858.00p +1.36%
Next (NXT) 3,496.00p +1.10%
FTSE 100 - Fallers
Royal Bank of Scotland Group (RBS) 257.50p -3.34%
Evraz (EVR) 246.30p -2.92%
Lloyds Banking Group (LLOY) 39.02p -2.38%
Croda International (CRDA) 2,447.00p -2.16%
Schroders (SDR) 1,543.00p -1.84%
Standard Chartered (STAN) 1,410.50p -1.74%
ARM Holdings (ARM) 577.00p -1.54%
BHP Billiton (BLT) 1,944.50p -1.52%
Severn Trent (SVT) 1,681.00p -1.41%
Xstrata (XTA) 966.60p -1.37%
FTSE 250 - Risers
Bumi (BUMI) 159.50p +6.48%
Bwin.party Digital Entertainment (BPTY) 110.80p +5.62%
PayPoint (PAY) 770.00p +5.19%
CSR (CSR) 337.00p +3.85%
Devro (DVO) 341.20p +3.77%
Telecom Plus (TEP) 850.00p +3.53%
JD Sports Fashion (JD.) 720.00p +3.37%
Berendsen (BRSN) 568.00p +3.27%
Talvivaara Mining Company (TALV) 153.70p +3.22%
Savills (SVS) 413.50p +3.12%
FTSE 250 - Fallers
Bank of Georgia Holdings (BGEO) 1,194.00p -6.57%
NMC Health (NMC) 188.10p -3.88%
IP Group (IPO) 118.40p -3.43%
Petra Diamonds Ltd.(DI) (PDL) 116.70p -2.75%
Hunting (HTG) 828.00p -2.65%
Kentz Corporation Ltd. (KENZ) 426.90p -2.27%
St. Modwen Properties (SMP) 195.50p -2.20%
Jupiter Fund Management (JUP) 249.00p -2.05%
Daejan Holdings (DJAN) 2,874.00p -2.04%
Mitchells & Butlers (MAB) 289.50p -1.93%
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