LONDON MARKET CLOSE: FTSE 100 Hits 2012 Levels As Miners Join Sell-Off

LONDON (Alliance News) - The FTSE 100 extended its run of losses to three consecutive sessions Tuesday, touching its lowest level since the middle of 2012 with London-listed miners falling after a brief period of resurgence.

The FTSE 100 closed down 1.0% at 5,632.19 points, having reached a low of 5,596.26 earlier in the session, a level not seen since July 2012. The FTSE 250 ended down 1.2% at 15,316.93, having hit its lowest level since December 2014 at 15,203.90. The AIM All-Share fell 1.4% to 671.22, and reached its worst level since October 2014.

European stocks also fell into declines, with the French CAC 40 ending down 1.7% and the German DAX 30 ending down 1.1%.

In New York at the London close, The Dow 30 traded slightly lower, having opened higher. The S&P 500 was up 0.1% and the Nasdaq Composite traded up 0.2%.

The dollar lost ground against other major currencies. At the London equity close, the euro traded the greenback at USD1.1312 versus USD1.1192 on Monday. The pound traded at USD1.4489, just slightly higher compared to USD1.4429 Monday.

UK stocks started the day modestly higher, although on unstable ground after the Tokyo market provided a negative lead from Asia in the absence of Chinese markets, which remained closed for Chinese New Year. The Nikkei 225 index dropped 5.4% after the yen briefly strengthened past the JPY115 per dollar level for the first time since 2014. Japan relies on a weak yen to support exports and maintain the country's trade surplus.

Whilst the higher US open helped London briefly narrow its losses, a late decline in oil prices drove the London market firmly into the red. At the London stock market close Brent oil was quoted at USD32.03 a barrel, compared to the close on Monday when it was USD33.73.

However, it was miners that took the brunt of the selling action, with Glencore down 8.1%, Antofagasta down 7.8%, and Anglo American closing down 5.6%. Anglo and Glencore were also subject to price target cuts by Goldman Sachs while Antofagasta was downgraded to Sell from Neutral.

"Perhaps the most worrying aspect of today's move has been the weakness in the mining sector. Yesterday a number of these firms were, if not rallying, at least holding their ground," said Chris Beauchamp, senior market analyst at IG.

"Today sees them resume their declines, as the positive narrative and short-covering of last week both unwind. If this continues, we can expect the lows of January to be just another milestone in this ongoing sell-off," he added.

Whilst the miners sold off, the price of gold remained stable from Monday. The metal was quoted at USD1,193.31 an ounce at the London close Tuesday versus USD1,194.07.

Banks were again amongst the worst performers as negative sentiment from Europe overflowed to London, with Standard Chartered and Barclays both down 3.8%, and Royal Bank of Scotland down 2.4%.

Jasper Lawler, market analyst at CMC Markets, said the distortions created by the European Central Bank's bond-buying scheme are coming to the surface.

"With yields on safe-assets pushed lower by central-banking buying, yield-hungry investors were forced into some of the murkier areas on the corporate debt world," Lawler said. "Deutsche Bank's contingent convertible (coco) bonds are one such asset. Because dried up liquidity means all investors can't head for the door when there's some stress, other assets like credit default swaps and equities are distorted by the need for hedging."

Deutsche's co-chief executive John Cryan tried to reassure staff and investors about the stability and liquidity of the lender.

"You can tell [clients] that Deutsche Bank remains absolutely rock solid, given our strong capital and risk position," Cyran wrote in a letter to staff.

The Frankfurt-based bank has emerged at the centre of investors' concerns about the state of the European financial sector, posting a loss in the final quarter of 2015 of EUR2.1 billion and a full-year loss of EUR6.8 billion as its key investment banking business slumped. Deutsche closed down 4.3% in Europe.

Sophos Group closed as one of the worst performers in the FTSE 250, down 7.8%, even though the security software and hardware developer saw higher billings and revenue in the third quarter of its financial year.

Like-for-like billings in the three months to December 31 grew 17% year-on-year to USD141.3 million from USD127.7 million. On a reported basis, the increase was 11%.

Sophos said it achieved growth across all major regions and product categories, but that reported billings were hit by significant currency headwinds including the weakening of the euro and pound against the dollar.

Cambian Group ended as the biggest faller in the FTSE All-Share, falling 53%. The health, education and care services provider warned on its earnings for 2015, saying it now expects earnings before interest, tax, depreciation and amortisation to be lower than previously guided.

The company said adjusted Ebitda for 2015 will be approximately GBP46 million, having indicated in October that it would be no less than GBP49 million.

Cambian said that, since issuing its guidance in October, revenue and wages have been broadly in line with expectations, but that due to weaknesses in its cost management processes, it took longer to identify and manage down other costs.

In the economic calendar for Wednesday, UK industrial and manufacturing data are at 0930 GMT, just before the European Commission's economic growth forecasts at 1000 GMT. At 1200 GMT are US mortgage applications. The National Institute of Economic and Social Research UK GDP forecast is at 1500 GMT and the US Energy Information Administration's crude oil stock at 1530 GMT.

Markets will particularly be looking ahead to Federal Reserve Chair Janet Yellen's testimony to the Committee on Financial Services in the US House of Representatives at 1500 GMT.

In the UK corporate calendar, chipmaker ARM Holdings reports fourth quarter results, while engineering, design and project management consultancy WS Atkins reports third quarter results and homewares retailer Dunelm Group releases half-year results.

There are also trading statements from oil producer Tullow Oil, pub company Greene King, defence services company QinetiQ, property investment and development company Great Portland Estates, housebuilder Bellway, specialty chemicals company Victrex and Electrocomponents.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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