Last checked at LONDON (Alliance News) - London stock prices closed lower Friday on a day of low trading volumes due to the US Independence Day holiday, with investors repositioning cautiously ahead of Greece's referendum on Sunday on its debt bailout terms.
Opinion polls ahead of the referendum suggest that Greece is divided right down the middle. A poll commissioned by Bloomberg News by the University of Macedonia Research Institute of Applied Social and Economic Studies showed that of the 1,042 people surveyed, 43% intend to vote 'no' to reject the austerity demanded by creditors in exchange for financial aid; and 42.5% back a 'yes' to accept the conditions.
Other polls also suggest a close race. According to a survey by ALCO published Friday in the Ethnos newspaper, the 'yes' camp is slightly ahead with 44.8%, compared with 43.4% for the 'no' camp. A further 11.8% are undecided.
Greek Prime Minister Alexis Tsipras again asked his country to say no to austerity in the referendum and said that an assessment by the International Monetary Fund justified the government's position.
Citing the IMF report released earlier in Friday, which suggested that Greece required debt relief, Tsipras said it vindicated the government's call to reject austerity. The IMF warned in its debt assessment that Greece's problems are far from over, arguing that Athens will need a further EUR50 billion in funding to get it through the end of 2018.
However, European Commission President Jean-Claude Juncker said Greece's negotiating position will be "dramatically weakened" if a majority of citizens vote 'no' in Sunday's referendum.
"If the Greeks vote 'no' they [will] have done everything but strengthen the Greek negotiating position," Juncker said at an event in Luxembourg. "Even in case of a 'yes' vote we will have to face difficult negotiations," he added.
European Central Bank Vice President Vitor Constancio signalled on Friday that the ECB could loosen emergency funding to Greek banks if Greeks vote 'yes' in the referendum, Reuters reported.
Constancio said the significance of the referendum was in making it more or less likely that an agreement could be reached on providing financial assistance to Greece.
"If there is a 'no' result, then it will be more difficult for such an agreement to be reached," Constancio said, adding that this would have consequences for ECB's analysis and decisions. "If the result will be a 'yes', then it's the opposite: it seems it will be easier to reach an agreement," he said.
Jasper Lawler, market analyst at CMC Markets, said Constancio's comments suggest that Greece does not actually need to be in a bailout program to get the emergency liquidity assistance limit raised, the ECB just needs to think it is about to be.
"Constancio's comment puts clear blue water between a 'yes' and 'no' result because a 'yes' could mean an almost instant end to capital controls and a possibly imminent banking crisis. Without the European Central Bank's emergency funding, estimates are that Greece's banks are days from insolvency, so a 'no' vote carries a very strong likelihood of a 'Grexident'," Lawler said.
The FTSE 100 closed down 0.7% at 6,585.78, but down 2.5% for the week as a whole. Since hitting an all-time high at the end of April, the FTSE 100 has declined seven out of the following ten weeks. The FTSE 250 closed down 0.4% at 17,613.46, and the AIM All-Share index closed up 0.4% at 764.48.
In Europe the CAC 40 in Paris closed down 0.6%, and ended down 5.0% for the week, while the DAX 30 in Frankfurt closed down 0.4% on the day and 3.8% for the week.
On the London Stock Exchange, banks were amongst the biggest fallers in the FTSE 100 after several media outlets reported on Thursday that competition authorities in Brazil are investigating 15 of the biggest banks in the world over allegations that they colluded to influence benchmark currency rates in the South American country. Cade, the Brazilian competition authority, alleged that banks' activity deterred competitors from the market for several years from 2007, the reports said.
Standard Chartered closed down 2.1%, Royal Bank of Scotland Group down 1.9%, and Barclays down 1.3%. HSBC Holdings recovered somewhat but still ended down 0.9%.
In addition, RBS could face a penalty of as much as USD13 billion depending on the outcome of a US mortgage securities lawsuit, Bloomberg News reported on Thursday. According to the report, the US Federal Housing Finance Agency, which is suing on behalf of Fannie Mae and Freddie Mac, estimated that amount in a court filing in a related case.
Rolls-Royce Holdings was one of the worst performers in the FTSE 100, down 2.1% to 857.953 pence after Deutsche Bank cut its price target on the aerospace and engineering company to 610.00p from 645.00p reiterating its Sell rating. The bank has concerns about the Roll-Royce's ability to deliver earnings growth in 2016. The company closed trade at 857.50p.
British Land Co closed amongst a handful of blue-chip gainers, up 0.8%, following its analyst and investor day on Thursday. Panmure Gordon says it believes the property developer's strategy is revealing opportunities in the rapidly changing consumer shopping environment.
Auto Trader Group was the biggest gainer in the FTSE 250, up 4.4%, after Exane BNP initiated the digital car retailer at Outperform.
In the AIM All-Share index, Phorm Corp closed up 14% after the online advertising platform operator reported higher quarterly revenue and other key performance indicators in Russia, while it also reported on the start of commercial operations in the US. Revenue attributed to Russia was RUB29.0 million in the second quarter of 2015, Phorm reported, almost double the RUB15.7 million in the first quarter.
In the economic calendar Monday, Japanese leading economic and coincident indices are at 0600 BST. German factory orders are at 0700 BST, before eurozone Sentix investor confidence at 0930 BST. In the afternoon there is the US Markit service and composite purchasing managers' index at 1445 BST, and the ISM non-manufacturing PMI at 1500 BST, alongside the labour market conditions index.
In the UK corporate calendar, there is a trading update from housebuilder Bovis Homes Group, half-year results from education and IT services company RM, and June traffic statistics from easyJet.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
Copyright 2015 Alliance News Limited. All Rights Reserved.
22 Dec 2023 06:32
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