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London Market Report
Stocks fall as Greek talks drag on
Market Movers
techMARK 1,961.27 -0.51%
FTSE 100 5,771.85 -0.40%
FTSE 250 10,873.75 -0.32%
UK stocks slipped in early trading on Friday, giving up some gains made yesterday on the back of the post-Fed rally, as focus again returns to Greece with talks over the debt swap continuing to weigh on investors' minds.
Both sides taking part in the negotiations over the degree of private sector involvement (PSI) in Greece see progress in the talks, according to Reuters. The main bone of contention is whether and to what degree European Union (EU) public sector entities, such as national governments and the European Central Bank (ECB), participate in any agreement. The ‘hair cut’ which will be applied to private sector debt holders is seen depending on the answer to that question.
The EU’s economic affairs commissioner, Olli Rehn, is being cited by Reuters as having said that, "there is likely to be some increased need of official sector funding, but not anything dramatic." However, Sources at the ECB are reported to have said that the central bank is no closer to reaching such a conclusion following a meeting late last night.
BP FALLS AS MACONDO ISSUES DRAG ON
Integrated oil giant BP has again called on US oil services company Transocean to put its hand in its pocket to pay its share of the clean-up costs for the Macondo oil spill after a US court ruling on Thursday relating to the Deepwater Horizon tragedy.
The ruling makes clear that contractors will be held accountable for their actions under the law, a BP statement said. BP was among the worst performers on the FTSE 100 in the opening minutes.
Public sector services group Serco also fell despite having signed a contract with the UK Ministry of Defence (MoD) to provide training and support to the British Army prior to deployment on operations around the world. The contract has a total value to Serco of £55m through to December 2014.
On the FTSE 250, gold miner African Barrick Gold led the riser after hiking its previous resource estimate fourfold for the Tusker deposit at the Nyanzaga Project in Tanzania.
London Stock Exchange rose after reporting that total income in the third quarter was up 17% year-on-year. However, the bourses operator added that the fourth quarter has started with subdued secondary market trading.
Healthcare outsourcing group Synergy fell after saying that while trading has been in line with expectations, it will incur a £2.3m one-off charge after a "re-organisation" in response to macroeconomic risks.
Aveva, the Cambridge based engineering technology company, fell despite releasing a bullish management statement. The company attempted to put to rest any qualms that it might be suffering similar problems in China to its rival, Invensys.
Also underwhelming investors was plastic packaging firm RPS after saying that revenues in the quarter ended December 31st were significantly ahead of last year.
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FTSE 100 - Risers
Man Group (EMG) 119.60p +1.10%
BAE Systems (BA.) 316.70p +0.60%
Essar Energy (ESSR) 136.50p +0.59%
Imperial Tobacco Group (IMT) 2,266.00p +0.58%
Rolls-Royce Holdings (RR.) 755.00p +0.47%
Polymetal International (POLY) 1,157.00p +0.43%
Tesco (TSCO) 324.20p +0.37%
Tullow Oil (TLW) 1,395.00p +0.36%
Pearson (PSON) 1,181.00p +0.34%
Severn Trent (SVT) 1,552.00p +0.32%
FTSE 100 - Fallers
InterContinental Hotels Group (IHG) 1,328.00p -2.14%
Sage Group (SGE) 296.00p -1.73%
Evraz (EVR) 450.30p -1.55%
BP (BP.) 471.10p -1.19%
BT Group (BT.A) 205.50p -1.11%
ARM Holdings (ARM) 591.50p -1.09%
Wolseley (WOS) 2,250.00p -1.06%
Rio Tinto (RIO) 3,852.50p -1.04%
Barclays (BARC) 220.55p -1.03%
Anglo American (AAL) 2,709.50p -1.00%
FTSE 250 - Risers
African Barrick Gold (ABG) 508.00p +3.78%
Brown (N.) Group (BWNG) 238.00p +2.85%
Regus (RGU) 100.60p +1.62%
JD Wetherspoon (JDW) 419.20p +1.62%
London Stock Exchange Group (LSE) 893.00p +1.30%
PayPoint (PAY) 565.50p +1.25%
Kier Group (KIE) 1,376.00p +1.18%
Gem Diamonds Ltd. (DI) (GEMD) 218.00p +1.07%
easyJet (EZJ) 449.90p +0.99%
Halfords Group (HFD) 318.50p +0.95%
FTSE 250 - Fallers
Phoenix Group Holdings (DI) (PHNX) 550.50p -4.26%
Morgan Crucible Co (MGCR) 297.90p -4.12%
F&C Asset Management (FCAM) 65.20p -2.47%
PZ Cussons (PZC) 296.40p -2.21%
Carpetright (CPR) 594.00p -2.14%
Cobham (COB) 185.10p -2.12%
Rightmove (RMV) 1,279.00p -1.99%
Greggs (GRG) 501.50p -1.67%
Afren (AFR) 126.50p -1.63%
Domino's Pizza UK & IRL (DOM) 464.20p -1.63%
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European Market Report
FTSE 100 Euronext Dax perf CAC 40
Some investors are now worrying over Portugal
FTSE 100: -0.65%
Dax 30: -0.46%
Cac 40: -0.50%
Ibex 35: -0.61%
The main European equity benchmarks have begun the day moderately lower, tracking the losses seen on Wall Street and in the Asian trading session. Most market commentary seems to be ascribing the selling pressure to growing doubts regarding the sustainability of Portugal’s public finances.
For some traders another factor behind the selling pressure is the likelihood that the recent trend of positive economic surprises, in the US for example, may be close to peaking.
The latest quarterly Spanish unemployment rate figures have also drawn some interest, coming in as they have at a worse than expected 22.9%.
On a brighter note perhaps, Italian 10 year debt yields are moving down. The country will auction €11bn in bills later today, towards midday.
EQUITIES
French banks are on the back foot today following the release of a research note from JP Morgan Cazenove on Credit Agricole and BNP.
Nokia is down after negative comments from Morgan Stanley.
MACROECONOMY
Spanish unemployment rose to 22.9% in quarter four, above expectations.
Spanish retail sales fell 5.4% on the year in December (Consensus: -5.9%).
German import prices rose by 0.3% on the month in December (Consensus: 0.3%).
Eurozone money supply (M3) data scheduled for 9am.
OTHER MARKETS
Front month Brent crude futures are down by 0.163% to $110.61 per barrel.
The euro is now retreating by 0.09% against the dollar to reach $1.3093.
UK Event Calendar
INTERIM DIVIDEND PAYMENT DATE
Atkins (WS), Betfair Group, Burberry Group, Dart Group, Ensor Holdings, Falkland Islands Holdings, Greene King, Halfords Group, Hornby, Micro Focus International, RPC Group, Solid State, Speedy Hire, Vertu Motors
QUARTERLY PAYMENT DATE
F&C Commercial Property Trust Ltd.
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
GDP (Advance) (US) (13:30)
M3 Money Supply (EU) (09:00)
U. of Michigan Confidence (Final) (US) (15:00)
Q4
Samsung Electronics Co Ltd (ATT) GDR (Reg S)
IMSS
Aveva Group
SPECIAL DIVIDEND PAYMENT DATE
F&C Private Equity trust Restricted Shares, Income & Growth VCT
AGMS
Brainspark, Henderson European Focus Trust, Hot Tuna International, JPMorgan Russian Securities, Marston's, Petra Diamonds Ltd., Scottish Inv Trust, Smiths News
TRADING ANNOUNCEMENTS
Hornby
FINAL DIVIDEND PAYMENT DATE
Character Group, Proactis Holdings
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US Market Report
Stocks reverse on poor economic data
Dow -22 at 12,735
NASDAQ -13 at 2,805
S&P 500 -8 at 1,318
The major US equity benchmarks ended the day lower after the release of worse than expected readings on leading economic indicators and new home sales this afternoon. The Federal Reserve's well-received statement released last night was not enough to offset the trend.
The Fed, which had previously said it would maintain the federal funds rate between 0% and 0.25% until mid-2013, announced on Wednesday that it intends to leave them as they are until late 2014. According to the Federal Open MarketCommittee (FOMC), "economic conditions - including low rates of resource utilization and a subdued outlook for inflation over the medium run - are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014."
The commitment to keep interest rates low for even longer had some pundits wondering how banks are going to make fat profits in such an environment. Meanwhile, the disappointing housing figures (see below) hit demand for house builders such as Lennar and Pulte.
Biotechnology firm Amgen finished down after it announced that it plans to acquire rival Micromet for $11 per share, equivalent to around $1.16bn. The world's largest biotech company explained that the deal will strengthen its cancer-drug research pipeline.
Corporate results from the likes of earth-moving equipment maker Caterpillar, pay TV provider Time Warner and aeronautics company Lockheed Martin came in better than expected, but those from phone company AT&T were a bit more mixed. AT&T posted a fourth quarter net loss of $6.7bn compared to a profit of $2.1bn a year earlier, despite record smartphone sales in the period. The company took a $4bn pre-tax charge related in part to the failed takeover of T-Mobile USA
Shares of LSI Logic, the computer network storage technology company, finished the day still very much up, having published results yesterday.
Netflix retained its positive position after an upgrade from Citigroup to "buy" from "neutral".
Manufacturing giant 3M also rounded off the day in a top spot after reporting forecast-beating profits as strong sales growth in its industrial and transportation divisions helped offset weakness elsewhere.
Fourth quarter earnings per share came in at $1.35, topping the consensus estimate of $1.31. Net income rose to $954m from $928m in the year-ago period. Revenue rose 6% to $7.09bn, in line with the consensus estimate.
Retailer JC Penney was deemed a January bargain after it raised expectations on how much money its turnaround plan may save in 2012.
MACROECONOMY
Initial weekly unemployment claims fell by 22,000 to 377,000 last week (Consensus: 374,000). Continuing claims reached 3.554m (Consensus: 3.5m).
The index of leading economic indicators for the month of December showed a rise of 0.4% on the month (Consensus: 0.7%).
Durable goods orders for the month of December grew by 3.0% on the month (Consensus: 2.0%). Core durable goods orders have increased by 2.9% on the month.
New home sales came in at 307,000 for December (Consensus: 320,000).
OTHER MARKETS
West Texas Intermediate sweet light crude for March delivery ended the day 30 cents higher at $99.70 a barrel in trading on the New York Mercantile Exchange.
On the bonds market, 10-year Treasuries rose 18/32 of a dollar, pushing the yield down 6/100 of a point to 1.93%.
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Friday newspaper round-up
The Treasury will on Friday publish plans for a radical overhaul of financial regulation that will hand the Chancellor new powers to take charge in a crisis, rein in the might of the Bank of England, and provide extra protection for consumers. The new Financial Services Bill will be put to Parliament on Friday morning alongside a memorandum of understanding between the Treasury and the Bank that will set down how the authorities should respond to another financial crisis. It will make clear that responsibility lies with the Chancellor whenever taxpayers' money is put at risk to avoid a repeat of the Northern Rock fiasco when Alistair Darling found he could not order the Bank to act, The Telegraph says.
David Cameron and Boris Johnson were caught up in a new round of cross-Channel tensions yesterday after the favourite to replace Nicolas Sarkozy as President of France threatened to scupper the EU’s economic rescue plan and undermine the City. François Hollande, the socialist tipped to win power in May, set out a manifesto that declared war on financial services and promised to rip up the EU’s fiscal treaty, due to be approved on Monday. The Prime Minister, the Mayor of London and British business chiefs were taken aback by Mr Hollande’s plans, claiming that they would damage financial centres. Mr Johnson accused him of “political vindictiveness”, The Times explains.
Faltering efforts to resolve the Eurozone debt crisis may lead to growth forecasts for this year being cut again. Angel Gurría, secretary-general of the Organisation for Economic Co-operation and Development, said that Europe’s approach to the crisis was “like going to a prize fight with one hand tied behind your back”. Leaders needed to use the firepower of the European Central Bank “to the hilt”, he said. The OECD cut its forecast for this year’s growth in the Eurozone to 0.2% in November. “Even those recent numbers may prove too optimistic because of the trend for slower or sometimes negative growth in [the] Eurozone in particular,” Mr Gurría said. He urged the coalition in Britain not to relent in cutting the deficit despite the fall in GDP in the fourth quarter, warning that countries could lose credibility in the financial markets “very fast”, The Times reports.
Capital Shopping Centre's agreement to buy land from its biggest shareholder Peel Group is "confusing", according to City analysts. The FTSE 100 retail property group will pay an initial £13.3m to acquire land next to its Braehead shopping centre in Glasgow and a development plot in Malaga, Spain. However, it could eventually pay about £100m because of clauses in the agreement, and the proposals have met a backlash from analysts and investors. "Two deals totalling £13m at first seem immaterial, but they are not," said Robert Duncan at Jefferies. "The Spanish land option is confusing and we are concerned that CSC risks diluting its core UK franchise investing in a market in which it has no track record through a transaction with its major shareholder." The land in Spain has planning consent for an 860,000 sq ft shopping centre, The Telegraph writes.
Stephen King, group economist at HSBC, has predicted a return to the world economy of 1,000 years ago - with the centre of world trade centred on China, India, Indonesia, and the east coast of Africa. Trade between emerging markets will rise sharply in the coming years, said Mr King as the European and the US economy slowed. "Where will global growth come from? Much will come from the growing connections between these countries over the next 20 to 30 years. We will see a ten-fold expansion of trade, an extraordinary change." Citing the car industry as an example, he said emerging market companies would create products for other emerging markets, with smaller, cheaper cars produced by Indian and Chinese companies for Indian and Chinese consumers. Emerging markets had invested heavily in trading infrastructure, he added, citing the fact that five of the world's top container shipping ports were now in China, according to The Telegraph.
Fuel prices have risen again just 24 hours after one of Britain’s biggest refineries went bust, stopping supplies to filling stations. Administrators for the Coryton oil refinery in Essex have rushed to strike a deal with suppliers and customers to get fuel delivery trucks rolling again today but the action came too late to prevent long queues forming outside several filling stations in the South East yesterday as diesel pumps ran dry. Supermarkets – which usually set the trend – have put up to 1p a litre on the price of diesel and unleaded. On average across the UK, diesel rose to 142.32p (from 142.21p) per litre and is now within a fraction of a new record. Petrol rose to 134.03p per litre (from 133.89p), the AA reported.