Date: Monday 24 Sep 2012
After reaching a nadir at midday, equities pared losses in the afternoon session, with defensive stocks enjoying a bit of support.
The morning had been characterised by gloom over China's economy and differences of opinion among the heavy hitters in the Eurozone.
Chinese central-bank advisor Song Guoqing conceded over the week-end that there are precious few signs of the Chinese economy recovering its mojo in the third quarter.
Sur le continent, investor sentiment was knocked by renewed concerns over the single currency region following France and Germany's failure to agree a schedule for initiating shared oversight of the region's banking sector.
Economic data from Germany further soured sentiment. Germany's IFO business climate indicator fell to 101.4 points in September, down from 102.3 in the previous month and the 102.5 expected by the market consensus. The business climate gauge has declined for a fifth consecutive month according to data from the IFO Institute in Munich. For the most, at least until now, Germany´s economy has remained relatively unscathed by the economic crisis.
From a technical perspective, this is what analysts at Charles Stanley had to tell clients this morning regarding the top share index´s aspect: "The chart shows that this reversal (last weeek´s fall in the benchmark) still leaves FTSE within striking distance of its recent highs, at 5915, although I would draw readers’ attention to the manner in which it has retreated from a downtrend line that has been in place since 2007 (and which still appears to be exerting an influence). This price action need not necessarily be fatal to the bull case but to maintain its current trend it is essential that it holds above 5760 or so (a level whose importance is reinforced by the fact that it is also where the index’s 50-day moving average now stands)." As an aside, they also note that there is a risk of profit-taking ensuing in the S&P 500, although "the trend to the upside remains intact (so long as support in the 1,430 point area holds)."
Miners led the fallers in the wake of the comments about the Chinese economy. Analysts at JP Morgan advised its clients to take profits in the sector because stalling economic growth in the US and more significantly in China, are expected to offset the US Fed´s third round of asset purchases. Furthermore, JP Morgan analysts have specifically recommended avoiding shares of Khazakmys and Anglo American. Analysts at Bank of America Merrill Lynch seemed to be coming round to JP Morgan's view, at least so far as shares of Anglo American are concerned, as they downgraded the stock to "neutral" from "buy".
Mining giant Bumi was also weighing on the sector after it said it was investigating allegations of financial and other irregularities at its Indonesian operations. The investigation centres on PT Bumi Resources, in which the company has a 29% interest, with particular focus on that firm's development funds.
"The extensive development funds in PT Bumi Resources Tbk and the one development asset in PT Berau Coal Energy Tbk were marked down to zero in the accounts of Bumi plc as at December 31st 2011, except for one investment with a carrying value of $39m in the consolidated financial statements," the statement said.
While Bumi was gloomy, Petra Diamonds shone brightly after a trading update. The company offered reassurance on the recent unrest in the South African mining sector, which has seen workers killed and a number of mines closed.
"With regards to Petra, it is important to note that the majority of the group's employees are skilled and semi-skilled workers, as block cave mining is a highly mechanised process," it said.
"Petra has a strong track record of stable labour relations and has not over recent months experienced any disturbances related to employee unrest or external intimidation of employees."
Fund manager Aberdeen Asset Management saw its assets under management (AuM) edge up in the first two months of the second half of the year. AuM at the end of August stood at £184.3bn, up from £182.7bn at the end of June. Gross new business during July and August totalled £6.1bn, but overall the group saw a net outflow of £0.1bn.
Aberdeen's much smaller sector peer MAM Funds saw assets under management grow for the third quarter in a row and said the second half of the year had started well. AuM reached £1.72bn at the end of June, up 3.5% from £1.67bn at the end of December.
Elsewhere in the financial sector, taxpayer-owned Royal Bank of Scotland (RBS) unveiled plans to cut an extra 300 jobs at its investment bank. RBS now aims to cut 3,800 roles at its investment banking arm by the end of 2013, 300 more than previously anticipated. The lion's share of those jobs, 3,000, will be gone by the end of this year.
Defence firm QinetiQ started the day with a bang as it aid its first half performance had been better than expected on the back of the majority of two key orders for the Q-Net vehicle survivability product beingdelivered earlier than originally planned.
Dairy products firm Dairy Crest warned of lower first half profits, as challenging conditions continue, but said profit expectations for the full year ending March 31st 2013 remain unchanged.
Profit before tax and exceptional items slipped to £14.9m in the six months ended July 28th, from £16.2m in the corresponding period of last year at Irn-Bru maker AG Barr. The company took a £1m hit from adverse currency movements, although around £0.6m of this is expected to unwind in the second half of the year. On a constant currency basis, first half profit before tax was £0.3m behind the similar period in the prior year. Sales in the first seven weeks of the second half have shown double digit percentage growth.
The price of oil has south at a rate of knots, with the most actively trade futures contract for Brent crude off $2.42 at $109.00 a barrel.
The yield on the benchmark 10-year gilt is 1.81%, down from 1.84% earlier this morning.
FTSE 100 - Risers
Shire Plc (SHP) 1,845.00p +1.71%
Reckitt Benckiser Group (RB.) 3,638.00p +1.08%
Smith & Nephew (SN.) 693.00p +1.02%
Compass Group (CPG) 711.50p +0.99%
Sainsbury (J) (SBRY) 347.80p +0.84%
British Sky Broadcasting Group (BSY) 738.50p +0.75%
AstraZeneca (AZN) 2,962.50p +0.70%
United Utilities Group (UU.) 727.00p +0.69%
BT Group (BT.A) 233.50p +0.65%
BG Group (BG.) 1,253.50p +0.60%
FTSE 100 - Fallers
Eurasian Natural Resources Corp. (ENRC) 330.60p -4.03%
Evraz (EVR) 261.50p -3.82%
GKN (GKN) 218.90p -3.14%
Vedanta Resources (VED) 1,056.00p -2.76%
Anglo American (AAL) 1,887.50p -2.61%
Sage Group (SGE) 317.10p -2.37%
Glencore International (GLEN) 354.15p -2.17%
Kazakhmys (KAZ) 714.00p -2.06%
ITV (ITV) 88.10p -2.06%
Rio Tinto (RIO) 2,980.00p -2.01%
FTSE 250 - Risers
Petra Diamonds Ltd.(DI) (PDL) 118.00p +7.57%
QinetiQ Group (QQ.) 182.90p +6.46%
Computacenter (CCC) 377.40p +2.78%
Brown (N.) Group (BWNG) 274.30p +2.58%
Diploma (DPLM) 467.90p +2.23%
SIG (SHI) 104.70p +2.05%
Barr (A.G.) (BAG) 459.90p +1.97%
Pace (PIC) 168.30p +1.85%
Shanks Group (SKS) 90.15p +1.75%
Stobart Group Ltd. (STOB) 116.50p +1.75%
FTSE 250 - Fallers
Bumi (BUMI) 147.60p -24.66%
Talvivaara Mining Company (TALV) 157.60p -4.25%
Centamin (DI) (CEY) 91.80p -4.08%
Imagination Technologies Group (IMG) 512.50p -3.57%
Petropavlovsk (POG) 424.30p -3.48%
Dunelm Group (DNLM) 662.00p -3.36%
Bodycote (BOY) 388.60p -2.85%
Travis Perkins (TPK) 1,055.00p -2.77%
Oxford Instruments (OXIG) 1,316.00p -2.73%
New World Resources A Shares (NWR) 283.50p -2.64%
FTSE TechMARK - Risers
BATM Advanced Communications Ltd. (BVC) 17.50p +6.06%
Antisoma (ASM) 1.69p +4.64%
Oxford Biomedica (OXB) 2.46p +2.07%
FTSE TechMARK - Fallers
E2V Technologies (E2V) 130.25p -4.05%
Filtronic (FTC) 41.50p -4.05%
Ricardo (RCDO) 378.25p -3.26%
Vislink (VLK) 30.50p -3.17%
Promethean World (PRW) 23.25p -3.12%
Skyepharma (SKP) 97.75p -2.74%
Xaar (XAR) 242.50p -2.22%
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