- Philly Fed manufacturing and other US data disappoints
- No QE3 boost from the Fed
- Chinese and Eurozone PMIs paint gloomy picture
The Footsie closed near its lowest levels of the day on Thursday afternoon after a raft of economic indicators from the US disappointed, just one day after the Federal Reserve made a downward revision to growth forecasts.
There was a sharp drop seen in the Philadelphia Federal Reserve Bank's regional manufacturing sector survey with weakness evident in all of the forward-looking indicators. Meanwhile, jobless claims fell by a less-than-expected 2,000 last week, while existing home sales decreased by 1.5% in May.
Acting as a backdrop, the keenly-awaited policy decision in the US last night failed to boost markets after the Federal Reserve also downgraded its growth forecasts for the world's largest economy. While the Federal Open Market Committee decided to extend its 'Operation Twist' programme, which involves the sale of short-term debt in exchange for long-term securities with the intention of flattening the interest rate curve, it refrained from announcing any further quantitative easing measures (QE3).
The central bank said it expects US GDP to grow by 1.9-2.4% in 2012, down from earlier predictions of a 2.4-2.9% expansion.
The Chinese manufacturing sector purchasing managers' index (PMI) for the month of June compiled by Markit fell from 48.4 to 48.1 in June, a seven-month low. Many observers, however, believe that the Asian powerhouse will bottom-out in the current quarter. Furthermore, Markit's composite PMI for the Eurozone was 46.0 in June, unchanged from May's 35-month low.
Meanwhile, Spain managed to sell €2.22bn in debt, topping its €2bn top-end target. However, borrowing costs surged again compared with the previous auction. It was revealed today that the recapitalisation of the Spanish banking sector will cost up to €62bn, according to two independent auditors.
FTSE 100: Miners drop on macro concerns; rumours of bank downgrades
Weak PMIs from China and the Eurozone weighed on the mining sector today. Meanwhile, with the Fed holding back from QE3 last night, the dollar strengthened meaning that greenback-denominated metals prices fell. Anglo American, Vedanta Resources, Glencore, Kazkahmys, Xstrata and BHP Billiton were among the worst performers in afternoon trade.
Also under pressure were UK banking groups RBS, Barclays and HSBC, rumoured to be at risk of a ratings downgrade from Moody's, according to Sky.
Real estate investment trusts British Land and Land Securities were suffering after Societe Generale downgraded both stocks to 'sell'.
Insurance stocks were extending gains made yesterday after it was revealed that the EU is thinking about 'phasing in' new capital rules for life insurers over the next seven years, easing the pressure and buying the industry time to meet new regulations. Fitch also said yesterday that insurance firms are loss exposed than banks to contagion risk triggered by a Greek exit from the Eurozone. Sector peers Standard Life, Aviva and RSA Insurance were advancing today.
Unilever was in demand after Investec recommended investors not to look too much into the profit warnings across the consumer goods sector, saying that the UK-listed company is not like its peers P&G and Danone. "For us, ULVR is a company that is gaining momentum rather than losing it, whose input pressures are getting better rather than worse, who is relatively less exposed to slowing geographies and who is less of a hostage to guidance fortune."
FTSE 250: Invensys drops after bid talks fizzle out
Following a massive jump the day before on the back of bid speculation, shares of Invensys plummeted on Thursday after it said that while rumours of an approach from Emerson Electric proved to be correct, these discussions 'are no longer ongoing'. The maker of rail signalling and industrial automation systems said that despite having been in "highly preliminary" discussions with other third parties, no more talks are taking place.
Heading the other way was electrical goods retailer Dixons after seeing a sharp up-tick in like-for-like (LFL) sales in the final quarter of its financial year. Group LFL sales were down 3% year-on-year over the 52-week period ended April 28th but were up 5% in the fourth quarter.
Also on the up was legacy software specialist Micro Focus after it delivered full-year results in line with guidance, with licence fee growth offsetting a foreseen decline in maintenance revenues. Merchant Securities initiated coverage on the stock with a 'buy' rating this morning, saying that it was impressed with its "excellent" cash generation.
FTSE 100 - Risers
Reckitt Benckiser Group (RB.) 3,419.00p +1.54%
Compass Group (CPG) 660.50p +1.23%
International Consolidated Airlines Group SA (CDI) (IAG) 160.10p +1.14%
Sage Group (SGE) 270.20p +1.01%
Unilever (ULVR) 2,080.00p +0.87%
Meggitt (MGGT) 379.00p +0.82%
Standard Life (SL.) 230.70p +0.79%
GlaxoSmithKline (GSK) 1,472.50p +0.58%
Rolls-Royce Holdings (RR.) 860.50p +0.47%
Schroders (SDR) 1,314.00p +0.46%
FTSE 100 - Fallers
Anglo American (AAL) 2,101.00p -5.15%
Vedanta Resources (VED) 930.00p -4.91%
Kazakhmys (KAZ) 724.00p -4.17%
Antofagasta (ANTO) 1,080.00p -3.74%
Xstrata (XTA) 839.00p -3.57%
Fresnillo (FRES) 1,492.00p -3.31%
BP (BP.) 412.10p -3.18%
Glencore International (GLEN) 322.65p -3.18%
Randgold Resources Ltd. (RRS) 5,805.00p -3.17%
Rio Tinto (RIO) 3,000.00p -3.07%
FTSE 250 - Risers
Dixons Retail (DXNS) 17.19p +7.44%
Micro Focus International (MCRO) 477.70p +5.69%
Imagination Technologies Group (IMG) 502.50p +4.19%
Investor sentiment seems to have firmed a little in the first half of the session. That comes after a cautious start higher after the long weekend and as traders continued to debate about how much further the current push higher in equity markets has to go. [7 May '13]
Investors in London have come back from the long weekend with a slightly cautious attitude, as traders continue to debate whether the current push higher in equity markets will be sustained or not. [7 May '13]
Mining stocks were making decent gains as metals prices improved. ENRC was the standout performer on the back of reports Suleiman Kerimov, the Russian billionaire, has increased his stake in the miner. [3 May '13]
The FTSE 100 had pared gains by Monday lunchtime, pausing for breath after a strong surge last week on anticipation of a potential rate cut from the European Central Bank (ECB) in a few days' time. [29 Apr '13]
Nomura has kept its cautious view on the European mining sector but has highlighted BHP Billiton and Rio Tinto as its top picks and upgraded its rating for ENRC and Anglo American from 'reduce' to 'neutral'. [29 Apr '13]
Datafeed and UK data supplied by NETbuilder and Interactive Data.
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