- Bernanke hoped to reveal hints of extra stimulus
- G4S, Wolseley provide a drag in London
After a subdued start, the Footsie was trading firmly lower by Tuesday lunchtime after German investor confidence fell for a third month in a row. Despite earlier optimism, markets have turned cautious as they wait to see whether the Federal Reserve (Fed) will hint at further stimulus measures to boost the US economy.
According to the ZEW Center for European Economic Research in Germany, its indicator for economic sentiment fell by 2.7 points to -19.6 in July. "Besides the weak demand from the Eurozone for German exports, the German economy is also burdened by weakening growth dynamics in other important partner countries," said ZEW President Wolfgang Franz.
The semi-annual monetary policy report from the Fed later today will be closely watched with all eyes on Chairman Ben Bernanke. "The Fed Chairman has repeatedly stated that while they are reluctant to inject further liquidity into the economy at this time, they are ready to step in if the situation worsens," said analyst Craig Erlam from Alpari this morning..
"Each time we've heard this over recent month's however, data has shown the economy has worsened and no further QE has been adopted. This shows the Fed's reluctance to carry out further monetary easing despite what they have said repeatedly. However once again, we have seen sentiment improving as we near the testimony and I don't believe people are going to get the response they're hoping for."
In domestic news, UK inflation fell in June to its lowest level since November 2008. The annual rise in the Consumer Prices Index (CPI) eased to 2.4% in June from 2.8% in May, surprising the economist community, where the consensus forecast was for no change. The Bank of England's target level is 2.0%.
FTSE 100: G4S extends recent losses; Wolseley disappoints with European update
Security solutions firm G4S continued to fall as it is hampered by the Olympics contract debacle. The company said yesterday that it expects to incur a £35-50m loss on the contract after failing to deliver as many workers as it had promised to. This morning, the stock was being weighed down by ratings cuts from Bank of America Merrill Lynch and Deutsche Bank.
Plumbing and heating products distributor Wolseley was a heavy faller after saying that the difficult market conditions in Continental Europe in the third quarter have continued and it is now exploring strategic options for the future of its businesses in France.
Mining giant Rio Tinto was firmly in the red after saying that iron ore production exceeded sales in the second quarter, fuelling concerns about demand.
Utilities firm National Grid was among the worst performers after both Societe Generale and Morgan Stanley cut their target prices for the stock, while chip designer ARM Holdings was lower after Citi reduced its target price.
FTSE 250: CSR rockets on cash-return news
Wireless technology and computer chip company CSR powered to a 52-week high as it announced the sale of its handset connectivity technology business to Korean technology giant Samsung, paving the way for the return of a pile of cash to shareholders. CSR plans to return up to $285m to shareholders after sealing a deal with Samsung which will see the transfer to the Korean firm of CSR's phone handset operations for a consideration of $310m in cash. ??
BTG, the specialist healthcare company, rose after increasing its revenue estimate for the year ended March 31st 2013 after receiving a final royalty payment from Pfizer in relation to the BeneFIX product. ??European IT services provider
Computacenter was in demand after saying it continues to trade in line with company expectations and the outlook for the full year to December 31st remains intact.
FTSE 100 - Risers
Barclays (BARC) 160.50p +1.78%
Amec (AMEC) 1,078.00p +1.22%
Vedanta Resources (VED) 905.00p +0.84%
Diageo (DGE) 1,681.00p +0.54%
BP (BP.) 443.85p +0.53%
British Sky Broadcasting Group (BSY) 692.00p +0.51%
Resolution Ltd. (RSL) 219.30p +0.46%
Carnival (CCL) 2,122.00p +0.43%
Anglo American (AAL) 2,029.50p +0.37%
Royal Dutch Shell 'A' (RDSA) 2,221.00p +0.34%
FTSE 100 - Fallers
G4S (GFS) 244.90p -3.81%
Wolseley (WOS) 2,250.00p -3.35%
National Grid (NG.) 662.00p -3.00%
International Consolidated Airlines Group SA (CDI) (IAG) 155.60p -2.75%
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