- G4S tumbles on Olympics contract; CSR rockets after disposal, cash return
With Ben Bernanke failing to give any clear indications quickly enough this afternoon [before London markets closed], as regards the possibility of further near-term stimulus in the US, global stock markets took a hit on Tuesday afternoon, sending the Footsie lower for the third straight business day.
Thus, as part of the Federal Reserve's semi-annual monetary policy report to Congress Chairman Bernanke said that the central bank is "prepared to take further action as appropriate" - more or less in line with his comments in the past. Alpari analyst Craig Erlam said: "These words are becoming as empty as promises from the Eurozone leaders."
"Ben Bernanke showed today that he can still surprise the markets by doing nothing. The markets appeared to have priced in further QE leading up to the testimony," Erlam said.
Ironically enough however, Wall Street has since turned higher as Bernanke continues to speak. It must also be pointed out that some analyst surveys see the Fed going ahead with another round of QE in quarter four of this year.
Also dampening the mood today was the German Zew economic sentiment index which fell by 2.7 points to -19.6 in July, the third monthly decline in a row. "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.
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 continues to take a beating
The share price of security solutions group G4S continues to battered by the Olympics contract debacle, with the company admitting yesterday that it expects to take a £35-50m hit after failing to deliver as many workers as it had promised to. Today, the stock, down nearly 6%, was being weighed down by ratings cuts from both Bank of America Merrill Lynch and Deutsche Bank.
The miners were also heavy fallers today as Bernanke's comments fuelled a rise in the dollar, meaning that greenback-denominated commodities (such as gold, silver and copper) became more expensive. ENRC, Kazakhmys, Randgold and Antofagasta were among the worst performers. Sector peer 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.
Barclays was one of the few stocks to finish in positive territory after Investec labelled the group as its "top pick in the UK banking sector". The broker believes that Barclays should benefit in the coming months (and years) as evidence of other banks' involvement in attempted LIBOR manipulation is disclosed.
FTSE 250: CSR rockets on cash-return news
Wireless technology and computer chip company CSR gained over a third of its market value after the $310m sale of its handset connectivity technology business to Korean technology giant Samsung, paving the way for the return of $285m to shareholders.
BTG, the specialist healthcare company, rose after increasing its revenue estimate for the current year after receiving a final royalty payment from Pfizer in relation to the BeneFIX product.
Computacenter was in demand after saying it continues to trade in line with company expectations and the outlook for 2012 remains intact.
FTSE 100 - Risers
British Sky Broadcasting Group (BSY) 695.00p +0.94%
Amec (AMEC) 1,075.00p +0.94%
WPP (WPP) 793.00p +0.89%
British Land Co (BLND) 538.00p +0.84%
Barclays (BARC) 159.00p +0.82%
Resolution Ltd. (RSL) 219.90p +0.73%
Diageo (DGE) 1,684.00p +0.72%
BP (BP.) 444.00p +0.57%
Hammerson (HMSO) 467.00p +0.56%
InterContinental Hotels Group (IHG) 1,515.00p +0.53%
Datafeed and UK data supplied by NETbuilder and Interactive Data.
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