LONDON (Alliance News) - Wall Street is called for a negative open Monday after the long US holiday weekend, as London and European share prices are lower, but not dramatically so, following the 'no' vote in Greece's referendum on Sunday.
Some of the expected market losses were trimmed after Greek Finance Minister Yanis Varoufakis unexpectedly resigned, citing the "loathing" for him by his eurozone negotiating partners.
"Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted 'partners', for my... 'absence' from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today," Varoufakis said in a post on its blog.
"And I shall wear the creditors’ loathing with pride," he added.
In the referendum Sunday, the 'no' vote received 61.3% of the vote, according to the Interior Ministry in Athens, with 'yes' finishing at 38.7%.
German Chancellor Angela Merkel and French President Francois Hollande are set to meet in Paris to take stock of the 'no' vote, while European Commission President Jean-Claude Juncker is scheduled to hold a teleconference with the European Central Bank President Mario Draghi and Eurogroup President Jeroen Dijsselbloem later in the day.
Meanwhile, Donald Tusk, president of the European Council, confirmed that eurozone nations will hold a summit on the results of the referendum on Tuesday.
CMC Markets analyst Jasper Lawler says the negotiations could be more amiable after the departure of Varoufakis, but the analyst believes this does not necessarily mean a deal is closer.
"Really, all the players in negotiations remain the same bar one and the ‘red line’ issues that have prevented a deal all along remain the same," Lawler writes. "The post-negotiation dinners enjoyed by Europe’s leaders in Brussels may be a little less awkward without Varoufakis, but a deal is no more likely."
Holger Schmieding, chief economist at Berenberg, says that while Varoufakis' resignation is a positive step, it could be purely symbolic.
"That is a positive signal. Eurogroup finance ministers may finally have serious discussions about the actual issues again instead of having to deal with Varoufakis," Schmieding says. "But as Varoufakis was no longer leading the negotiations since April, this may be more symbolic than a change of substance."
The FTSE 100 is down 0.6% at 6,546.68, the FTSE 250 is down 0.7% at 17,486.27 and the AIM All-Share is down 0.6% at 759.44.
In Europe, the French CAC 40 is down 1.5% and the German DAX 30 is down 1.3%.
Looking to the US, CMC Markets' Lawler says nerves are rattled ahead of that second quarter earnings season, "which could see a repeat or even acceleration of the year-over-year losses seen in the first quarter amongst S&P 500 firms."
US earnings season starts with Alcoa reporting on Wednesday, with earnings also expected from PepsiCo and Walgreens Boots Alliance on Thursday.
Wall Street is expected to open lower, with the DJIA pointed down 0.7%, the S&P down 0.6% and the Nasdaq 100 down 0.8%.
Still ahead in the economic calendar is US Markit service and composite purchasing managers' index at 1445 BST, ISM non-manufacturing PMI at 1500 BST alongside labour market conditions index.
Among individual London stocks, Roll-Royce Holdings is the biggest decliner in the FTSE 100, trading down 8.9% after it slashed its guidance for 2016 due to problems afflicting its Civil Aerospace and Marine divisions. The aerospace and engineering group said its guidance for its Civil Aerospace business in 2015 remains unchanged, with challenges facing its Trent 700 engine programme, business jet and regional aftermarket divisions offset by better-than-expected benefits from contract provision releases and widebody aftermarket growth.
But while its revenue guidance for this year remains unchanged, the group said that is now expects free cash flow to be between a GBP150 million negative and GBP150 million, compared to its previous guidance of GBP50 million to GBP350 million. Given this weaker cash flow outlook, the company said it will discontinue its current GBP1 billion share buyback programme, having completed half of it in the first half.
Miners are also amongst the worst performers in the FTSE 100 and FTSE 250 following a decline in metal prices. Carsten Menke, commodities research analyst at Julius Baer, says concerns over Chinese demand are pushing commodity prices lower, with aluminium, copper, iron ore and steel prices are all moving towards multi-year lows. China announced a string of measures over the weekend to reverse the recent free-fall of Chinese stock markets.
In the FTSE 100, Antofagasta is down 1.9%, Glencore is down 1.7% and Anglo American is down 1.6%. In the FTSE 250, Vedanta Resources is down 5.0%, KAZ Minerals is down 3.7% and Acacia Mining is down 2.8%. The FTSE 350 mining sector index is off 1.5%.
Traditional defensive stocks, such as tobacco and utility companies, are amongst the biggest blue-chip gainers Monday, with SSE up 1.0%, Severn Trent up 0.6%, Centrica up 0.5%, and United Utilities Group up 0.5%. Meanwhile, Imperial Tobacco Group is 0.5% higher, and British American Tobacco shares are up 0.1%.
In the AIM All-Share, Seeing Machines is up 15%. The company said Caterpillar Safety Services has ordered decision support system units to provide Fatigue Risk Assessments for Caterpillar customers. No financial details were disclosed on the order.
"Theses assessments will gradually replace Seeing Machines' very successful DSS trial program while broadening the technology's geographical footprint and expanding the offering from only the mining sector into the other Caterpillar fields of operation," said Ken Kroeger, Seeing Machines' chief executive.
Intercede Group shares are up 10% after the cybersecurity company said its revenue in the first quarter doubled year-on-year and said its trading has given it a solid base to meet market expectations for the full year. Intercede said its revenue in the first quarter of its financial year to the end of June was GBP2.7 million, double the amount it made a year earlier and up by 34% on the fourth quarter of its 2015 financial year.
Meanwhile, Litebulb Group is down 26%. The branded product developer called time on its acquisition-led growth strategy, with Chief Executive Simon McGivern and Sales Director James Phillips resigning and the company turning its focus to integrating its operating divisions and driving organic growth. Litebulb said: "There is no intention of making further acquisitions in the short-term."
By Daniel Ruiz; danielruiz@alliancenews.com
Copyright 2015 Alliance News Limited. All Rights Reserved.
20 Apr 2016 15:31
