Kamis, 05 Juli 2012

FTSE CLOSE: Traders digest gloomy ECB economic outlook

FTSE CLOSE: Traders digest gloomy ECB economic outlook

By This Is Money Reporters

PUBLISHED: 02:21 EST, 5 July 2012 | UPDATED: 11:24 EST, 5 July 2012

17.15 (close): Stimulus measures from central banks across the world failed to trigger a meaningful rally for London's leading shares index today.

The Bank of England pumped another £50billion into the UK economy, while interest rates in the eurozone and China were cut, but the measures only served to fuel fears about the strength of the global economy.

The FTSE 100 Index was up 8.2 points at 5692.6, as it surrendered most of its earlier gains and banks fell as much as three per cent.

Market watch: Hopes are riding high that central banks will inject more stimulus into struggling economies

Germany's Dax, France's Cac40 and the Dow Jones Industrial Average were all lower as the London market closed.

European Central Bank boss Mario Draghi spooked markets by making gloomy comments about the prospects for the eurozone.

And the Chinese rate cut, which took markets by surprise and was the second in a month, fuelled fears of a 'hard landing' for the world's second biggest economy.

The pound was down against the dollar at 1.55 after sterling was weakened by the Bank's stimulus measures. But the pound was up against the euro at 1.25 after the single currency was hit even harder by Mr Draghi's warnings.

The banking sector was under pressure amid continued fears that other lenders besides Barclays would be implicated in the rate rigging scandal.
Royal Bank of Scotland was the biggest faller, down 7.3p at 207.2p, or three per cent, while Lloyds Banking Group fell 0.8p to 30.8p.

Barclays saw its credit rating outlook downgraded by agency Moody's to reflect concerns over Bob Diamond's resignation as chief executive.

But shares in the embattled bank rose 2.2p to 168.2p as it regained some of its recent hefty falls.

Heavily weighted miners had a mixed session as they surrendered much of their earlier gains in the wake of the Chinese rate cut. Evraz was among the biggest fallers, down 8.7p at 257.8p, but Xstrata rose 25p to 845.8p.

In corporate news, Aviva's shares pushed higher after the embattled insurance giant unveiled a major sell-off plan as part of a broader turnaround.

Executive chairman John McFarlane said a review of 58 divisions had identified 16 weak performers that would be exited. Shares rose 3.2p at 284.6p.

Engineering group GKN was the biggest riser, up 13 per cent, after it bought the aero engine division of Sweden's Volvo for £633million.

Investors backed the deal which will help GKN benefit from global growth in airlines' aircraft orders. GKN shares were ahead 24.4p at 211p.

Outside the top flight, Cineworld shares fell nearly one per cent after the UK's largest cinema operator revealed a decline in admissions in the first half of its financial year.

The group saw admissions fall 0.8 per cent but box office revenues rose 4.1 per cent in the 26 weeks to June 28 as it bumped up prices. Shares dipped 1.5p to 208p.

The biggest Footsie risers were GKN up 24.4p at 211p, Xstrata ahead 25p at 845.8p, Experian up 28p at 954p, and Arm Holdings ahead 9p at 521p.

The biggest Footsie fallers were Royal Bank of Scotland down 7.3p at 207.2p, Evraz off 8.7p 257.8p, Polymetal International down 28p at 894p, and Lloyds off 0.8p at 20.8p.

14.45: The Dow Jones has opened down 69 points at 12,874.9 as gloomy ECB comments about the eurozone economic outlook offset positive U.S. jobs figures.

Gains on the FTSE 100 have dwindled and the index stands just 4 points higher at 5,688.5 in mid-afternoon trading.

13.40:

The FTSE 100 initially surged on news that the Bank of England plans to pump a further £50 billion into the economy, but has since fallen back to trade just 14.3 points higher at 5,698.7.

The European Central Bank also cut its interest rate by a quarter of a percentage point to 0.75 per cent to support the troubled eurozone.

The persistence of the debt crisis was underlined by another spike in Spain's borrowing rate at a bond auction today.

The BoE move comes amid signs the economy deteriorated in June as industry surveys showed that the construction sector went into reverse and the powerhouse services sector suffered its worst performance for eight months.

The decision boosted the heavily-weighted resources sector with Xstrata adding 42.5p to 863.3p, Rio Tinto jumping 70.5p to 3212.5p and Vedanta Resources rising 25p to 965p.

The BoE's action also hit the value of the pound against the U.S. dollar and Japanese yen as the market will be effectively be flooded with extra sterling.

In corporate news, Aviva saw its shares increase 2 per cent after the embattled insurance giant unveiled a major sell-off plan as part of a broader turnaround.

Executive chairman John McFarlane said a review of 58 divisions had identified 16 weak performers that would be exited. Shares were up 6.6p at 288p. Read more here.

Shares in engineering group GKN jumped 12 per cent after it bought the aero engine division of Sweden's Volvo for £633million.

Investors backed the deal which will help GKN benefit from global growth in airlines' aircraft orders. GKN shares were ahead 23.6p at 210.2p.

Outside the top flight, Cineworld shares fell by nearly 1 per cent after the UK's largest cinema operator revealed a decline in admissions in the first half of its financial year.

The group saw admissions fall 0.8 per cent but box office revenues rose 4.1 per cent in the 26 weeks to June 28 as it bumped up prices. Shares dipped 1.4p to 208.2p.

12.10:

The Bank of England is to inject a further £50billion into the economy today as the UK struggles to pull out of its double-dip recession and the eurozone debt crisis worsens.

The Bank's monetary policy committee voted to increase the quantitative easing programme - effectively printing more cash - from £325billion to £375billion. It held interest rates at a record low of 0.5 per cent.

The FTSE 100 added to gains and is ahead 42.2 points at 5,726.6 after the news.

Economist Howard Archer of IHS Global Insight said: 'The MPC were on the brink of approving more QE at their June meeting with four of the nine committee members (notably including Sir Mervyn King) favouring immediate action then.

'With latest economic data and surveys largely grim, the outlook worrying and recent inflation developments largely benign, it was always likely that most, if not all, MPC members would take the view that more QE is now warranted and justifiable.'

10.40:

The banking sector remains under pressure as Barclays saw its credit rating outlook downgraded by Moody's to reflect concerns over boss Bob Diamond's resignation after the rate-rigging scandal.

Shares in the embattled bank were down 0.95p at 165.05p. Read more here about the downgrade.

Taxpayer-backed lenders Lloyds Banking Group and Royal Bank of Scotland were also lower as investors remained concerned that the Libor-fixing affair was set to become an industry-wide issue.

Lloyds fell 0.3p to 31.4p while RBS dropped 1.7p to 212.8p.

In the resources sector, miner Evraz fell 4 per cent or 9.9p to 256.6p, Meanwhile, Xstrata advanced 7.1p at 827.9p, although the latter's merger with Glencore still hangs in the balance.

The FTSE 100 is ahead 16.9 points at 5,701.3 but is struggling to find direction as investors nervously wait to see if central banks in Europe will act to boost the economic recovery.

'Independence Day has come and gone, to be replaced by the no less exciting Central Bank Day,' said Chris Beauchamp, market analyst at IG Index.

'The Bank of England will take the stage first, with most economists expecting an increase in QE, with amounts in the region of £50-75billion expected, as policymakers respond to weakening UK economic data.

'ECB head Mario Draghi will follow, with rates for the eurozone forecast to be cut below 1 per cent for the first time. No other surprises are expected, but Mr Draghi has caught us on the hop before.'

Futures trading points to a lacklustre open on the Dow Jones, but sentiment could change rapidly as a batch of key employment and services data is due out later.

U.S. investors are also gearing up for tomorrow's non-farm payrolls data - the benchmark measure of the jobs market across the Atlantic.

Brent crude is trading at $101.19 a barrel today, while gold is at $1,616.70 an ounce.

8.20:

The FTSE 100 has opened up just 1.2 points at 5,685.6 as investors consolidate recent gains ahead of widely-anticipated moves from the European Central Bank and the Bank of England to stimulate the economy.

Lacking any lead from Wall Street, which was closed for U.S. Independence Day on Wednesday, investors will closely watch the outcomes of today's policy meetings at the two central banks.

The BoE is expected to launch a third round of monetary stimulus, moving to counter a recession and the effects of a worsening debt crisis in the eurozone just two months after calling a halt to the programme.

Most commentators believe it will increase its quantitative easing total by £50billion to £375billion in a bid to revive the flagging economy.

Bold measures to shore up the euro agreed at last week's EU summit are seen as paving the way for an ECB interest rate cut to a new record low of 0.75 per cent.

But some economists argue the ECB may have to take even more emergency measures soon to placate financial markets.

Debt-stricken Spain is still expected to pay high premiums to borrow at a bond auction later today.

Stocks to watch today include:

Glencore, Xstrata: Australia's competition watchdog has said it would not oppose  commodities trader Glencore's $26billion takeover of miner Xstrata.

Barclays: Crispin Odey, one of Europe's best-known hedge fund managers, has spotted an opportunity in shares in Barclays amidst the growing scandal over interest rate rigging.

CALEDONIA INVESTMENTS issues a first-quarter trading update.
DUNELM GROUP issues a trading update.
EASYJET issues June traffic figures.
NCC GROUP reports full-year results.
ROBERT WALTERS issues a trading update.

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More billions for these parasitic gamblers to punt in the hope of making huge profits that will remain in the City so that they can punt some more, while the real economy goes down the tubes.

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Will you please stop following the fictitious BoE and government line of smoke and mirrors DM? QE does not and never can stimulate any economy. Just look at everywhere it has been used previously, such as 20 years or so in Japan and in Zimbabwe. It is debasement pure and simple. Debasement destroys the real wealth creating processes, and does not stimulate them. QE is being used to enable the continuance of the present increasing level of government spending without increasing taxation, and to prop up the banks. The government and BoE are not being honest with the public about the real reasons for debasing. (This is not Keynesianism since there is not and never was any intent to withdraw this additional money at the end of any recession.) So please report the truth instead of the government lies.

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