LONDON MARKET COMMENT: Stocks Lower As Greece Submits New Proposals

LONDON (Alliance News) - UK stocks are lower Tuesday mid-morning, with Greek debt negotiations taking stage centre, after the Mediterranean country submitted new reform proposals to its international creditors, while Reed Elsevier and Anglo American are the best and worst performers in the FTSE 100, respectively, moving on broker rating changes.

The blue-chip index is down 0.3% at 6,767.93, a level it hasn't seen since mid-March, while the FTSE 250 is down 0.2% at 17,841.45. The AIM All-Share is down 0.1% at 773.56.

In Europe, the CAC 40 in Paris is down 0.7% and the DAX 30 down 1.1%.

The blue-chip index is moving again in a short range as European investors await for a significant advance in the Greek debt negotiations with its creditors, following recent days in which talks between the two parts have intensified.

Greece has submitted Tuesday new reform proposals to its creditors, according to dpa sources in Brussels, a day before Greek Prime Minister Alexis Tsipras is due to hold key talks with German Chancellor Angela Merkel and French President Francois Hollande.

"We have received proposals which we are now assessing," an European Union source said.

Meanwhile, speaking after the Group of Seven industrialised nations summit in Germany on Monday, Merkel said that there was not much time left for a for a reform-for-aid deal to keep Greece in the eurozone.

"We want Greece to remain part of the euro zone but we take the clear position that solidarity with Greece requires that Greece makes proposals and implements reforms," Merkel said. "There isn't much time left. Everyone is working intensively. The day after tomorrow there will be opportunity to discuss it with the Greek prime minister. Every day counts now,' she added.

Spreadex analyst Connor Campbell comments: "It appears that both sides have reached some kind of negotiation overload, and are now simply waiting for the other side to blink first instead of engaging in any real kind of discussion with each other."

The euro retains the gains made Monday and currently trades at USD1.1278.

The UK trade deficit narrowed more than expected to a 13-month low in April, figures from the Office for National Statistics showed. The visible trade deficit narrowed by GBP2.1 billion to GBP8.6 billion in April, the smallest shortfall since March 2014. This was also the largest monthly fall since June 2013. The deficit was forecast to narrow to GBP9.9 billion.

"With UK growth so dependent on domestic demand, attention will soon turn to the July 9 budget," says Conall Mac Coille, analyst at Davy Research. "The key question is whether Chancellor George Osborne will actually proceed with the GBP30 billion (1.7% of GDP) of planned spending cuts, intended to reduce the deficit from 5% of GDP in 2014 to 2% in 2016."

On the London Stock Exchange, HSBC Holdings shares are down 0.4% after the London-based banking group said it will take action to save billions of dollars in costs by 2017, building on the costs Chief Executive Stuart Gulliver has already slashed from the group's annual bill.

The bank said it wants to save a further USD4.5 billion to USD5.0 billion by 2017, with a one-off cost of between USD4.0 billion and USD4.5 billion to achieve those cuts. HSBC confirmed it intends to sell operations in Turkey and Brazil, though it will keep a presence in the South American country to help serve large corporate clients.

It will axe between 22,000 and 25,000 full-time employees between 2014 and 2017, not including Brazil and Turkey, from the 258,000 employed in the whole group at the end of 2014, although reductions will be partly re-invested in growth and compliance.

Meanwhile, Reed Elsevier, soon to be renamed RELX Group, is the best performer in the blue-chip index, up 2.1%. The Anglo-Dutch publisher shares are higher after being upgraded to Overweight from Equal Weight by Barclays.

On the flip side, Anglo American is the biggest faller, down 2.4%. Societe Generale cut the miner's recommendation to Hold from Buy. Fellow Rio Tinto also was downgraded to Hold from Buy by SocGen, with its shares down 1.6%.

Separately, South32, a recently created spin-off company from BHP Billiton, said Tuesday it has decided to delay restarting three of the four high-carbon ferromaganese furnaces at its joint venture operation in South Africa with Anglo American, due to the decline in high-carbon ferromanganese prices, which have continued to decline in 2015. Shares in South32 are down 1.0% and those of BHP Billiton are up 0.2%.

In the FTSE 250, Vedanta Resources is the biggest gainer, up 6.6%, after it noted press speculation about potentially merging its subsidiary Cairn India into itself. Vedanta Resources did not comment on the speculation, but said it "will make appropriate disclosures as and when required" about the potential merger of its wholly-owned subsidiary Vedanta and Cairn India.

Plastic products designer and maker RPC Group shares are up 3.6% after it reported higher profits and earnings for its financial year helped by acquisitions. It said the current year has got off to a satisfactory start despite adverse exchange rate movements and a time lag in passing through higher polymer prices. RPC raised its full-year dividend to 15.4 pence from 13.8p.

Meanwhile, Pets At Home is down 3.8%, after KKR sold a further 108.0 million shares in Pets at Home Group, a 21.6% stake in the pet product retailer it listed last year.

Still in the economic calendar Tuesday, in the US, the Redbook index is due at 1355 BST while JOLTS job openings are at 1500 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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