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Markets: Eurozone unrest hits FTSE 100 on Wednesday

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Interactive Investor's Market Report brings you bite-sized news covering all the day's FTSE and AIM announcements, the latest on commodities, global and domestic economics, gold, oil and currencies as well as US markets. Updated throughout the day, it's the digest you can't afford to miss.

Last updated: 17:00

UK markets: Wednesday's close

A fall in the rate of unemployment was not enough to outweigh the overriding negative sentiment that persisted in the marketplace, causing the FTSE 100 (UKX) to close decidedly in the red. The Bank of England helped to fuel that negative sentiment by downgrading its growth forecasts, cementing the bearish streak to Wednesday's trading session. 

The blue-chip index declined 64.24 points to close at 5722.01.

Evraz (EVR) was left holding the wooden spoon, down 7%. Centrica (CNA) added almost 2.5%.

On the AIM front, shares in Triple Plate Junction () plunged 15%. 600 Group (SIXH) soared 23%.

Vodafone (VOD) was the most actively-traded stock by the users of Interactive Investor.

"At this point in time, investors really need something significant to be able to get excited about stocks again as in the current environment there's simply very little going the bulls' way," stated Angus Campbell, head of market analysis at Capital Spreads. "A weak session has turned into an even weaker one and we are dangerously close to breaking through the support area of 5715 to the downside.

"With no clear guidance on Greece or the US fiscal cliff, things could keep their bearish bias only until there's clarity over them."

At a glance...

Currencies Commodities
GBP/USD: 1.5849 Gold: $1,731.91 
GBP/EUR: 1.2436 WTI crude oil:$85.90
EUR/USD: 1.2742 All changes from 09:00 GMT.






US markets: 16:40 update

US stocks turned lower on Wednesday as Wall Street's cheer over an upbeat quarterly report from Cisco Systems (CSCO) did little to mitigate concerns about efforts to reach a deficit-cutting deal.

US retail sales declined in October for the first time in four months, impacted by the deadly storm that flooded and shut off power in parts of the north-east. Wholesale prices also fell in October, down 0.2%, as the cost of energy fell.

The Dow Jones declined 56 points to 12700. The Nasdaq slipped three points to 2881, while the S&P 500 lost four points to 1370.

WH Smith sales drop

WH Smith (SMWH) has produced an interim management statement for the first 10 weeks of the 2013 financial year, with like-for-like sales in the high street and travel falling by 5% and 4% respectively.

"All main trends remain in place, with profits driven by gross margin gains and cost control, rather than sales growth," said Philip Dorgan, analyst at Panmure Gordon. He rated the stock a ‘hold', justifying: "The valuation is low and we expect the major trends to remain in place; we just don't see a short-term catalyst."

Italy succeeds in €5 billion auction

The Italian Treasury has sold €5 billion (£4 billion) worth of government bonds, with the average yields offered and bid-to-cover ratios tolerable rather than reassuring.

€3.5 billion worth of three-year bonds were sold at an average yield of 2.64%, in comparison with 2.86% seen at the previous auction. €1.5 billion of bonds maturing in August 2023 and November 2029 were auctioned at average yields of 4.81% and 5.33%, respectively. The Treasury needs to cover €27.6 billion of debt redemptions in November and €60.54 billion in December.

Raj Badiani, Italian economist at IHS Global Insight, predicted that the immediate loss of political will to break the cycle of low potential growth and an unsustainable level of public debt in Italy could elevate Italian 10-year bond yields to worryingly high levels, probably rising quickly beyond 7%.

He added: "Then, with Italy facing a lengthy period of economic woes, crippling its ability to reduce significantly its public debt ratio, estimated at 126% of GDP in 2012, [this] could deconstruct demand for Italian sovereign demand and elevate borrowing costs as it faces another challenging sovereign financing cycle in 2013."

Sainsbury's delivers "exceptional" growth

Sainsbury's (SBRY) confirmed it had made a "strong" start to the year in a "challenging market" as it unveiled its interim results for the 28 weeks to 29 September.

Total sales including VAT and fuel jumped 4%. Like-for-like sales climbed 1.7%, with the supermarket now having delivered 31 consecutive quarters of like-for-like sales growth. Pre-tax profits increased 2.5% to £405 million. Sainsbury's share of the grocery market came in at a decade-high peak of 16.7%.

"31 consecutive quarters of like-for-like sales growth says it all. In an economic climate as underwhelming as this, that's exceptional," commented Phil Dorrell of retail consultants, Retail Remedy.

However, he pointed out some weaknesses: "Brand Match may have been relaunched but it is fundamentally passive, there is scope to improve its clothing and make it more relevant and profitable, and the retailer could penetrate a wider geographic diversity with big stores not just corner shops. All this takes money and skill, but these are two things that it should have enough of.

"If [Sainsbury's] can make hay in this economic climate, it will steal ahead when things finally pick up."

UK markets: 15:00 update

The FTSE 100 (UKX) continued to linger in the doldrums, losing 37 points to 5748.

Evraz (EVR) lost 7%, while AMEC () retained its top spot, adding almost 2.5%.

On AIM, Petrel Resources (PET) jumped 23%. The Weather Lottery () plunged 27%

At a glance...

Currencies Commodities
GBP/USD: 1.5864 Gold: $1,726.28
GBP/EUR: 1.2454 WTI crude oil:$85.53
EUR/USD: 1.2738 All changes from 09:00 GMT.






US markets: Wednesday's open

US stocks climbed at the open on Wednesday, albeit very slightly, after computer-networking equipment maker Cisco Systems (CSCO) reported quarterly profits that beat expectations.

On the economic front, the government reported retail sales fell 0.3% and producer prices declined 0.2%, both in October.

The Dow Jones added three points to 12758. The Nasdaq added 12 points to 2896, while the S&P 500 followed suit with a two-point increase to 1376.

Prudential "fully valued" - analyst

Insurer Prudential (PRU) has announced sound new business numbers for the first nine months of 2012, modestly beating consensus estimates.

New business on an annual premium equivalent basis was up 14% at c. £3.1 billion, driven by a 16% rise in Asia, a 15% increase in the USA and an 8% advance in the UK. The margin on this new business slipped 1% to 56%. Elsewhere, funds under management rose 12% at M&G and Asian funds were 13% ahead.

"All this means that Prudential remains on track to meet its end-2013 cash-generation targets which are a prerequisite, in our view, to grow the dividend at 5% per annum as we forecast," stated Kevin Ryan, analyst at Investec. He rated the stock a 'hold', saying that the stock was "fully valued".

Barratt Developments issues in-line interim statement

Housebuilder Barratt Developments (BDEV) has issued an interim management statement in line with expectations.

Private sales rates during the first 18 weeks of the year were marginally ahead at 0.54 homes per site per week compared to 0.53 a year earlier. Net margins continued to be the key driver of profitability at the group as new land worked its way through. Around 50% of completions in 2013 will come from new land, up from around 30% in 2012. The group's private order book looked strong, and was around 21% ahead year-on-year.

Barratt has reduced its debt guidance for the half year from £475 million to £400 million due to the timing of land payments.

"With no positive surprises within the statement and no upgrade to numbers, we remain comfortable with [our 'hold'] rating for now," stated Rachael Applegate, analyst at Panmure Gordon.

EMED Mining jumps on funding news

Shares in EMED Mining (EMED) added more than 8% as it announced that it had entered into conditional agreements with a cornerstone customer, RK Mine Finance Fund II (Red Kite), for an aggregate funding package of $50 million (£31.5 million).

There was also good news for Centamin (CEY), which announced record quarterly earnings, with basic earnings per share up 43% quarter-on-quarter and 22% on the prior-year period.

For our round-up, read: Wednesday's mining news.

Bank of England lowers UK growth forecasts

The Bank of England has lowered its GDP growth forecasts and raised its consumer price inflation projections, stating that it continued to see events in the eurozone as posing a serious risk to sustained UK recovery. It added that much also depended on whether productivity growth would pick up from its recent poor performance. Under the central forecast, year-on-year GDP growth was expected to be around 2.0% at both the end of 2013 and the end of 2014.

The November quarterly inflation report and Sir Mervyn King's accompanying comments suggested the door was very much open to more quantitative easing as well as reinforcing belief that the Bank was likely to keep interest rates at 0.5% for a very long time to come.

Sir Mervyn warned the UK faced an "unappealing mix of a weak recovery and high inflation". He also observed that the overall appreciation of sterling since the middle of 2013 had not been helpful for the UK economy.

"In other words, the outlook is pretty DIRE - Disappointing Inflation and Rotten Expansion," said Howard Archer, chief UK and European economist at IHS Global Insight. "This is in marked contrast to the NICE decade that Sir Mervyn often used to refer to before the 2008/9 recession - Non-Inflationary Consistent Expansion."

Interserve preferred bidder for £100m contract

Support services and construction group Interserve (IRV) has been announced as the preferred bidder on a seven-year residential and corporate property contract with East Thames Group.

The contract has a potential value of around £100 million over the initial seven-year term, and includes a provision to extend to 15 years in total.

UK markets: Midday update

The FTSE 100 (UKX) struggled to find reasons to be positive as Wednesday wore on, losing 34 points to 5751.

Evraz (EVR) declined more than 4.5%, while AMEC () added 3%.

On AIM, African Medical Investments () added a quarter to its market cap. Shares in The Weather Lottery () plunged 27%.

Vodafone (VOD) was the most actively-traded stock by the users of Interactive Investor.

"[Tuesday's] weak finish in the US has cast something of a dampener on the session in London, while Greece continues to hang over markets like the sword of Damocles," commented Chris Beauchamp, market analyst at IG. "Of course, Greece is something of a sideshow when we consider the US fiscal cliff.

"Some brave voices may now be saying that the combination of spending cuts and tax rises may not quite be the apocalyptic event that has been painted, but the prospect of weeks of political wrangling must fill us all with a sense of foreboding."

Looking ahead, Beauchamp was expecting a turnaround for US markets, with the Dow Jones opening around 80 points higher.

At a glance...

Currencies Commodities
GBP/USD: 1.5863 Gold: $1,723.73
GBP/EUR: 1.2455 WTI crude oil: $85.76
EUR/USD: 1.2735 All changes from 09:00 GMT.






BT takes over Tikit

Shares in Tikit Group (TIK) soared 16% on news that it would be acquired by BT Group (BT.A) for £64.2 million, or 416p per share.

"Tikit represents a highly complementary fit with BT Retail's existing IT strategy and strengthens our position in the provision of information and communications technology (ICT) services to legal firms in the UK," said BT chief eceutive Gavin Patterson.

"The offer will enable us to combine Tikit's expertise, portfolio, relationships and deep understanding of the legal sector with BT Retail's scale and breadth of products. Together, we expect to deliver a truly differentiated offering with the capacity to supply, install and support mission-critical IT applications and ICT infrastructure through a single point of contact."

Mike McGoun, non-executive chairman of Tikit, stressed that the transaction was in the best interests of shareholders and employees: "BT will enable Tikit to continue to grow and better service the needs of its clients."

Sound Oil gets Italian boost

Shares in Sound Oil (SOU) jumped 11% on news that the Italian Ministry of Economic Development had re-opened the company's applications for two of its offshore permits.

The permits, d150DR-CS, containing the Laura gas discovery, and d148DR-CS, are located in the Gulf of Taranto, southern Italy.

For more, read:
Sound soars ahead of permit awards.

UK employment growth continues, but pace of improvement slows

Employment grew by a solid 100,000 in the three months to September, and at 29.58 million, the number of people in work remained slightly above its pre-crisis peak in May 2008.

"On the surface, this is a mixed set of labour market data, but scratch beneath the surface and there are signs of some softening in the labour market's recent impressive resilience," stated Howard Archer, chief UK and European economist at IHS Global Insight.

The most obvious sign of softening in the labour market came in a 10,100 rise in the number of claimant count unemployed, the largest increase for 13 months following a small rise of 800 in September. And while employment rose by 100,000 in the three months to September, this masked a drop of 14,000 in September itself and the three-month gain of 100,000 was down from an increase of 212,000 in the three months to August. Meanwhile, earnings growth slowed in September - headline annual earnings growth dipped to 1.7% in September after rising to 2.3% in August.

"The tentative signs that the labour market is losing some of its recent resilience reinforces our belief that unemployment will rise modestly over the coming months," added Archer. He suspected the number of unemployed on the International Labour Organisation (ILO) measure would rise gradually to reach a peak around 2.7 million in late 2013/early 2014, which would see the unemployment rate reach 8.4%.

AG Barr and Britvic confirm merger

Britvic (BVIC) and AG Barr (BAG) have confirmed an all-share merger to create Barr Britvic Soft Drinks.

Britvic shareholders will own 63% of the enlarged group, with Barr shareholders owning the remaining 37%. AG Barr's chief executive Roger White will assume the same role in the enlarged group, with Britvic's chief financial officer John Gibney's becoming the chief financial officer.

Barr Britvic Soft Drinks is targeting total annual synergies of £40 million by 2016, with £35 million to be achieved from cost synergies and the remaining £5 million from revenue synergies.

"Given the competitive dynamics of the UK market, and the risks associated with delivering synergies, we maintain our 'hold' recommendation on both stocks," said Damien McNeela, analyst at Panmure Gordon.

BAE Systems reaches settlement with Trinidad

BAE Systems (BA.) has reached a settlement with the government of the Republic of Trinidad and Tobago regarding a disputed offshore patrol vessel contract, as announced on 21 September 2010.

Three offshore patrol vessels that were the subject of the Trinidadian contract were subsequently sold to the Brazilian Navy under a contract signed in December 2011 and the first ship was handed over to the Brazilian Navy in June this year.
The settlement with the Trinidadian government was at an amount consistent with provisions held.

UK markets: 09:00 update

The FTSE 100 (UKX) resumed its trip south on Wednesday, as mass strikes and protests across the eurozone served as a stark reminder that all was far from well in the region.

The blue-chip index declined 27 points to 5758.

Eurasian Natural Resources () slipped 2%, while Weir Group (WEIR) climbed by the same percentage.

On the AIM front, Tikit Group (TIK) soared 16%. Shares in Surface Transforms (SCE) plunged 22%.

Xcite Energy (XEL) was the most actively-traded stock by the users of Interactive Investor.

"Certainly not a market for the faint hearted, but with stocks starting to look a tad oversold we expect to see some short-term investors coming out to play," stated Mike McCudden, head of derivatives at Interactive Investor.

US markets: Tuesday's close

Fiscal cliff concerns outweighed strength in the consumer discretionary sector late on Tuesday to drive Wall Street lower by the close.

For every stocks that rose more than two fell on the New York Stock Exchange.

The Dow Jones slipped 58 points to 12756. The Nasdaq declined 20 points to 2883, while the S&P 500 followed suit with a five-point fall to 1374.

At a glance...

Asian marketsCurrenciesCommodities
Nikkei 225: 8664 ( three)GBP/USD: 1.5872Gold: $1,724.30
Hang Seng: 21441 ( 253)GBP/EUR: 1.2520WTI crude oil: $85.11
Shanghai Composite: 2055 ( seven)EUR/USD: 1.2686 






08:00 - The FTSE 100 (UKX) opens at 5786.25.