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LONDON (Alliance News) - Investors flocked to safe haven assets on another dire day for global equities Thursday, with banking and financial stocks resuming their downturn after a days respite on Wednesday.
The price of gold attained its highest level since last May, while media reports suggested UK 10-year gilt yields fell to record lows. Investors scrambled for the traditional safe haven assets as fear tightened its grip on the market.
The price of gold spiked to a high of USD1,229.70 an ounce, supporting the share price of gold miners which led the few gainers in both the FTSE 100 and FTSE 250 indices. Fresnillo, up 6.5% and Randgold Resources, up 6.2%, were the best blue-chip performers, while Centamin, up 5.8% and Acacia Mining, up 4.5%, were both the top mid-cap gainers.
Meanwhile, the Japanese yen, which is seen as another risk-off play, continued to appreciate against other currencies sending stocks on the Tokyo market lower.
"The strength in the yen is driven to a large extent by the unwinding of carry trades which play upon the reliably low interest environment in Japan. As the yen appreciates to reflect this flight back to safety, the Japanese stock market is hurt by the perception that its export market will deteriorate," said IG's market analyst Joshua Mahony.
Tokyo was closed for a holiday on Thursday, but the Nikkei 225 index lost 2.3% on Wednesday after shedding 5.4% on Tuesday. The Hang Seng index ended down 3.8%, after Hong Kong's first trading session following a three-day holiday, while the Shanghai market remained closed for the Chinese New Year holidays.
In London at midday, the FTSE 100 was down 2.4% at 5,537.78, having earlier touched its lowest level since July 2012 at 5,499.51. The FTSE 250 was down 2.0% at 15,205.16 and the AIM All-Share down 1.1% at 666.41.
European equities were equally feeling the effects of the global sell-off. The DAX 30 index in Frankfurt traded down 2.2%, the CAC 40 in Paris was down 3.4%, and the Euro STOXX 50 index traded down 2.9%.
"The main pain is being felt on the continent, with Credit Suisse hitting a 25-year low and Societe Generale (which warned it may miss its profit targets for 2016 due to the dual pressures of tighter regulation and the current market conditions)," said Connor Campbell, financial analyst at Spreadex.
UK banking stocks were not faring much better, as they resumed their decline, having closed higher on Wednesday. At midday, Barclays traded down 6.2%, Standard Chartered down 5.0% and HSBC Holdings down 4.4%. The broader financial sector was hit as shares in emerging markets-focused fund manager Aberdeen Asset Management were down 7.1%, while life insurer Prudential was down 5.4% and fund supermarket Hargreaves Lansdown down 5.2%.
Futures pointed Wall Street for a considerably lower open following on from the Asian and European sessions. The Dow 30 and S&P 500 were both indicated down 1.8%, while the Nasdaq 100 was pointed down 2.0%.
Adding to the gloom in markets was another slide in oil prices. Brent crude held relatively firm, trading at USD30.40 a barrel, not too far off what it was at the London equities close on Wednesday at USD30.76. However, US benchmark West Texas Intermediate was in focus as it fell to its lowest price since 2003 Thursday at USD26.31 a barrel.
Oil major BP traded down 5.2%, as the stock went ex-dividend, meaning new buyers no longer qualify for dividend payments.
Elsewhere in the London, DCC was bucking the trend, trading up 1.7%.
The FTSE 100-listed distribution and logistics company reiterated expectations that it will see operating profit and adjusted earnings per share "very significantly ahead" of the previous year and in line with market expectations for its current year to end-March. In the year to end-March 2015, DCC reported an operating profit of GBP221.7 million, and adjusted earnings per share of 202.2 pence.
Investors also welcomed 2015 results from events and business information firm Informa, which reported a swing to a pretax profit as it heads into the third year of a restructuring and investment programme.
Informa reported a pretax profit of GBP219.7 million in 2015, swung from a pretax loss of GBP31.2 million in 2014, mostly as a result of revenue rising to GBP1.21 billion from GBP1.14 billion a year before and the impairment in 2014.
Revenue growth was driven by a particularly strong performance from the company's Global Exhibitions division, where revenue was up 31%, and its Academic publishing division, where revenue was up 9.4%.
The stock was one of the best performers in the FTSE 250, up 3.6%.
Also one of the biggest gainers in the mid-cap index was Enterprise Inns, up 2.9%. The pub company said it made a strong start to its financial year with growth in like-for-like net income, ahead of its annual general meeting on Thursday.
Enterprise Inns added that its strategic plan is on track, as the trading performance and expansion of its managed house operations is progressing in line with its plans. It expects to have in excess of 100 managed houses in operation by end September.
Ingredients maker Tate & Lyle was down 7.7% even though it said that it remains on track to deliver full-year results in line with expectations and that its longer term outlook remains positive despite some of its divisions continuing to face headwinds.
Tate & Lyle said its results for the full year should meet expectations, aiming for an adjusted profit before tax from continuing operations at a constant currency rate of around GBP193.0 million, flat on last year. However, it said the reported adjusted before tax will be "modestly below" that GBP193.0 million.
Still ahead in the economic calendar, US initial and continuing jobless claims are due at 1330 GMT, while EIA Natural Gas storage change data are due at 1530 GMT.
US Federal Reserve Chair Janet Yellen will deliver her semi-annual monetary policy testimony before the US Senate Banking Committee, her second day facing questions on Capitol Hill, starting at 1500 GMT.
This comes after Yellen warned Wednesday that financial conditions "have become less supportive to growth", adding that this could weigh on the outlook for economic activity if it persists.
Yellen also reiterated that the actual path of interest rates "will depend on what incoming data tell us about the economic outlook". However, she warned that "if the economy were to disappoint, a lower path of the federal funds rate would be appropriate".
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
Copyright 2016 Alliance News Limited. All Rights Reserved.
4 May 2024 23:51
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