Date: Thursday 13 Sep 2012
- Markets close higher ahead of Fed decision
- Greece could need third bailout, says IMF official
- BAE's merger with EADS called into question
Following a subdued start, UK stocks ended at their highest levels of the day with just an hour or so to go before the announcement of the Federal Reserve’s policy decision.
The Federal Open Market Committee (FOMC) brings its two-day policy meeting to a close this afternoon. Chairman Ben Bernanke’s comments leading up to this event – he has highlighted serious concerns about poor jobs growth and the unemployment rate – mean that markets are widely expecting him to announce a new round of quantitative easing (QE) or some sort of stimulus measures in the subsequent press conference.
Market analyst Craig Erlam from Alpari said today: “The Chairman appears to have been justifying the Fed’s decision before taking it, potentially in a bid to gauge the reaction to such a move. However there are a lot of people who are less than convinced by Bernanke’s calculations. He claimed that further QE could raise gross domestic product by almost 3%, way beyond some economists’ expectations. Despite this, the market appears convinced that it will happen.”
Some think more QE would be a game-changer, while critics say it will not actually provide any real benefits. Simon Furlong, a trader at Spreadex, said the fact that US unemployment figures were slightly worse than expected today added to speculation that QE3 will be announced this evening.
In other news, Thanos Catsambas, who is Greece’s representative on the IMF board, said today that the country may need a third bailout: “Greece will require additional financing, which may take the form either of Official Sector Involvement or of additional loans, hopefully on more favourable terms.”
BAE Systems was pulling back after announcing yesterday that it is in discussions with EADS about a possible merger to create the world’s largest defence and aerospace company estimated to be worth nearly $50bn.
While the groups have until mid-October to seal the deal (under UK takeover rules), the combination will be complex with approvals needed from many governments, said analysts at Investec who downgraded their rating on the shares from ‘hold’ to ‘sell’ this morning. The broker recommended investors who are not prepared to wait for the long-term synergies of the tie-up to “cash in”. Engineering group Rolls-Royce was a high riser on the Footsie this afternoon.
High Street retailer Next lost over 7% of its value after investors shrugged off some ‘in-line’ figures to focus on the group’s gloomy outlook. Next said it had seen disappointing sales in August and early September and remained cautious on the outlook.
Telecoms peers Vodafone and BT Group were among the best performing stocks this afternoon. Vodafone tanked yesterday on concerns about a special dividend from its US joint venture Verizon Wireless, however the Tempus column in The Times said this morning not to believe all the rumours and said that Vodafone’s yield is a good enough reason to hold the shares.
Meanwhile, phone and broadband firm BT was extending gains yesterday after announcing yesterday a “ground-breaking” £152m deal for a range of exclusive live rights for Premiership Rugby from next season onwards.
Electronics components supplier Premier Farnell surged after saying that it returned to year-on-year sales growth of 0.4% in August, following a 1.6% decline in the second quarter.
Mobile devices chip specialist Imagination Technologies saw its share price clobbered after a trading update which raised doubts about the group's confidence in hitting full-year targets.
Homewares retailer Dunelm rose after saying pre-tax profit climbed a better than expected 15.1% in the first half, while sector peer Home Retail was out of favour after saying that its DIY chain Homebase had continued to be hit hard by bad weather and a reluctance on the part of consumers to buy big ticket items.
FTSE 100 - Risers
Rolls-Royce Holdings (RR.) 854.00p +3.08%
Vodafone Group (VOD) 177.35p +1.93%
BG Group (BG.) 1,263.00p +1.90%
Resolution Ltd. (RSL) 221.40p +1.89%
British American Tobacco (BATS) 3,182.00p +1.74%
Whitbread (WTB) 2,275.00p +1.74%
Sainsbury (J) (SBRY) 337.50p +1.63%
Associated British Foods (ABF) 1,287.00p +1.58%
SSE (SSE) 1,390.00p +1.53%
Standard Chartered (STAN) 1,451.50p +1.50%
FTSE 100 - Fallers
BAE Systems (BA.) 337.10p -7.29%
Next (NXT) 3,320.00p -7.24%
Evraz (EVR) 259.40p -3.57%
Vedanta Resources (VED) 961.50p -2.44%
Johnson Matthey (JMAT) 2,428.00p -2.29%
Eurasian Natural Resources Corp. (ENRC) 327.50p -2.09%
Ashmore Group (ASHM) 321.30p -2.07%
Burberry Group (BRBY) 1,050.00p -2.05%
Glencore International (GLEN) 353.30p -1.75%
Petrofac Ltd. (PFC) 1,614.00p -1.47%
FTSE 250 - Risers
Premier Farnell (PFL) 190.00p +10.59%
Ruspetro (RPO) 114.40p +10.00%
Essar Energy (ESSR) 114.70p +6.11%
Barratt Developments (BDEV) 168.00p +5.79%
Dunelm Group (DNLM) 659.00p +5.44%
Persimmon (PSN) 774.50p +4.80%
Jupiter Fund Management (JUP) 260.00p +4.38%
SDL (SDL) 670.00p +4.36%
Kier Group (KIE) 1,401.00p +4.16%
Gem Diamonds Ltd. (DI) (GEMD) 185.10p +3.64%
FTSE 250 - Fallers
Imagination Technologies Group (IMG) 566.00p -7.21%
Home Retail Group (HOME) 94.85p -4.58%
Regus (RGU) 98.20p -3.73%
Salamander Energy (SMDR) 187.80p -3.49%
EnQuest (ENQ) 120.70p -2.43%
Bumi (BUMI) 286.00p -2.42%
Computacenter (CCC) 399.10p -2.40%
Premier Oil (PMO) 371.50p -2.24%
Carpetright (CPR) 645.00p -1.83%
Hunting (HTG) 862.00p -1.82%
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