Date: Thursday 12 Jul 2012
- All eyes on Chinese GDP data tomorrow
- FOMC minutes disappoint as they fail to hint at QE3
- Aegis rockets after Dentsu offer; miners tank
The FTSE 100 finished around 1% lower on Thursday afternoon with the mining sector bearing the brunt of concerns over the global economy ahead of some highly-anticipated growth data from China due out tomorrow.
China will reveal its second-quarter gross domestic product (GDP) growth rate on Friday, with government think-tank Development Research Centre (DRC) expecting the growth rate to have slowed to 7.5% from 8.1% in the first quarter. However, while the government is targeting 7.5% GDP growth for 2012 as a whole, the DRC thinks that the economy could actually expand by 8% this year.
The minutes of the latest Federal Open Market Committee (FOMC) meeting - at which is decided to expand its 'Operation Twist' programme – released last night deflated hopes over hints of possible further stimulus. Analysts at Morgan Stanley said: "The FOMC minutes reveal that there appears to be little appetite by the Fed to enter another round of full balance sheet-expanding QE at this point, despite the recent loss of momentum in the pace of the US recovery."
US benchmarks reacted to the report by opening firmly in negative territory despite weekly initial jobless claims falling to a four-year low last week. According to the Labor Department, applications for unemployment benefits fell 26,000 to 350,000 from an upwardly revised 376,000 the week before. Consensus forecasts were for a more modest decline to 372,000. Analyst Cooper Howes at Barclays Capital said that the near-10,000 drop in the four-week moving average is “certainly an encouraging sign, given that jobless claims stood higher during most of Q2 than they did at the end of Q1.”
In other news, the European Central Bank's (ECB's) overnight deposits dropped to a seven-month low of €324.9bn down from €808.5bn previously after policy makers slashed the deposit rate to zero. Klaas Knot, the head of the Dutch central bank and ECB policymaker, told Financial Times Deutscheland that “there is no article of faith preventing us from going below 0.75%," referring to the main refinancing rate.
Mining heavyweights Rio Tinto, BHP Billiton, Anglo American, Antofagasta and ENRC were registering steep losses after Credit Suisse slashed target prices across the sector after lowering commodity price estimates. Rio Tinto announced this morning that its Chief Financial Officer is to retire at the end of next year.
While the miners were being weighed down by broker comments and worries over Chinese growth, fund manager Ashmore was by far the worst performer on the Footsie, dropping nearly 7% after saying assets under management fell 3.3%to $63.7bn in the quarter ended June 30th as worries about the Eurozone crisis and global growth rattled investor confidence.
Security giant G4S was out of favour on reports that it had encountered delays in training security staff for the Olympics. The army is being asked to provide an additional 3,500 troops to help out. According to Home Secretary Theresa May, G4S faces penalties for breaching its contract.
Primark-owner Associated British Foods was one of the few stocks in positive territory after reporting that revenues rose 11% in the 40 weeks to June 23rd, in line with the rate reported in the interim results.
InterContinental Hotels dropped after US rival Marriott scaled back its expected full-year international revPAR (revenue per available room) growth rate due to poor demand in Asia and the Middle East.
The relatively brief stock market history of Aegis is set to come to an end with the the media and digital communications group agreeing to a takeover by Japanese advertising agency Dentsu. Dentsu is offering 240p in cash for each Aegis share, almost half as much again as the shares were trading at in London on the day before the agreed bid announced. The offer terms value the whole of Aegis at around £3.16bn.
Oil and gas development and production company RusPetro edged higher after saying it was confident of hitting an exit rate of 10,400 barrels of oil per day for 2012.
Shares of oil and gas firm Premier Oil rose after it announced that it will pay $231m for a 60% stake in Rockhopper Exploration’s licence in the Falkland Islands.
FTSE 100 - Risers
Admiral Group (ADM) 1,181.00p +1.11%
Johnson Matthey (JMAT) 2,120.00p +0.81%
Associated British Foods (ABF) 1,276.00p +0.71%
Resolution Ltd. (RSL) 210.30p +0.67%
BP (BP.) 435.10p +0.59%
British Sky Broadcasting Group (BSY) 688.00p +0.58%
ITV (ITV) 72.25p +0.56%
Shire Plc (SHP) 1,864.00p +0.49%
Land Securities Group (LAND) 769.00p +0.46%
Pearson (PSON) 1,249.00p +0.24%
FTSE 100 - Fallers
Ashmore Group (ASHM) 307.80p -6.73%
Eurasian Natural Resources Corp. (ENRC) 393.60p -4.21%
Antofagasta (ANTO) 1,040.00p -3.97%
Aggreko (AGK) 1,919.00p -3.71%
Rio Tinto (RIO) 2,926.00p -3.53%
BHP Billiton (BLT) 1,751.00p -3.31%
IMI (IMI) 783.50p -3.09%
InterContinental Hotels Group (IHG) 1,503.00p -3.03%
Fresnillo (FRES) 1,405.00p -2.97%
Burberry Group (BRBY) 1,158.00p -2.61%
FTSE 250 - Risers
Aegis Group (AGS) 235.30p +45.07%
Melrose (MRO) 379.00p +6.85%
Cable & Wireless Communications (CWC) 31.58p +3.98%
Daejan Holdings (DJAN) 2,895.00p +2.99%
Barratt Developments (BDEV) 136.90p +2.93%
Go-Ahead Group (GOG) 1,260.00p +2.69%
Informa (INF) 379.30p +2.15%
Premier Oil (PMO) 366.30p +2.09%
AZ Electronic Materials SA (DI) (AZEM) 282.50p +1.73%
New World Resources A Shares (NWR) 321.80p +1.61%
FTSE 250 - Fallers
Fenner (FENR) 344.80p -7.88%
Ferrexpo (FXPO) 199.70p -5.18%
Hays (HAS) 67.05p -4.96%
Bodycote (BOY) 310.30p -4.64%
Dixons Retail (DXNS) 16.80p -4.55%
Aquarius Platinum Ltd. (AQP) 40.22p -4.33%
Centamin (DI) (CEY) 66.15p -4.27%
Kenmare Resources (KMR) 33.15p -4.19%
Gem Diamonds Ltd. (DI) (GEMD) 214.70p -4.15%
Victrex (VCT) 1,185.00p -4.05%
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