- Olli Rehn says Spain has taken 'effective action'
- UK data mixed; BoE cuts growth forecast
- Mining and oil stocks sold off
The Footsie lost nearly one per cent on Wednesday as risk appetite waned after comments from Olli Rehn on Spain and concerns about the global economy brought out the bears.
Rehn, the European Commissioner for Economic and Monetary Affairs, quashed speculation this afternoon that Spain was near to a bailout request, saying that the country has taken "effective action" to cut its budget deficit for this year and the next, though 2014's targets could be a stretch.
Financial trader Shavaz Dhalla said: "Global headline shares
continued to tread with caution today as investors remained confused as to what is actually being done to solve the Eurozone debt crisis as well as the US's impending fiscal cliff. Furthermore, worse-than-expected monthly retail sales from the US also added to the concern that the global economic recovery has probably stalled."
Market chatter still abounds on the danger of the US 'fiscal cliff' as the country's politicians prepare for talks scheduled for Friday to come to an agreement on how to deal with the budget deficit. President Barack Obama's administration and Republican lawmakers must come to an agreement in order to avoid $607bn in spending cuts and tax increases that, if not changed, will take effect on January 1st.
Investors were also fretting about US dividend taxes: these have been at 15% for nearly a decade but could automatically increase when the 2003 deal expires in 2013.
Meanwhile, some mixed economic data closer to home and remarks from the Bank of England (BoE) did their bit to add to the selling pressure.
Claims for unemployment benefits in the UK increased by 10,100 in October, disappointing the consensus of analysts who were expected no change. This was the largest increase in over a year. Nevertheless, it was revealed today that the UK jobless rate declined to 7.8% in the third quarter, below the consensus estimate of a flat 7.9% reading.
The BoE has reduced its 2013 UK growth forecast to about 1% in its quarterly inflation report. The report said there was "a greater risk that the UK economy may be in a period of persistent low growth", with problems in the Eurozone and the rest of world continuing to have an impact at home. The Bank also said inflation should fall towards the government's 2% target in the second half of 2013, later than previously thought.
FTSE 100: EVRAZ leads resource stocks lower
Evraz, the steel, mining and vanadium group, was the top faller of the day after proposing that a covenant be removed relating to $577m of outstanding guaranteed notes due 2015. Evraz is seeking to remove a covenant requiring the company to maintain the net leverage ratio at or below a specified level. The statement from the company stressed that it is not actually in breach of this covenant or any of the others, but the market still took fright at the news.
Mining peers Randgold, ENRC, Vedanta and Kazakhmys were also registering heavy losses, as were oil stocks Shell, Tullow and BG Group. Shell announced this morning that it has raised its stake in the North Sea Schiehallion field, at the same time as selling its interest in the Seal are in Canada. Even Tullow Oil, which said this morning it is on track to hit its full-year production targets, was subdued, trading broadly flat by midday.
Engineering consultancy AMEC gained after saying it was trading in line with expectations despite ongoing economic uncertainty. The firm said mining activity was slowing, but conventional oil and gas activity remained strong, particularly in the North Sea and Gulf of Mexico.
Shares in British Gas owner Centrica rose as the shares recovered from serious declines the previous day when it was forced to deny claims it had a hand in the manipulation of wholesale gas prices.
Energy supplier SSE was in demand after posting a 38% jump in profits in the first half as it immediately moved to offset a media storm over its hike in household bills last month. The firm pushed up its dividend 5% to 25.2p as earnings per share leapt 40.6% to 35.3p.
Supermarket group Sainsbury was falling despite reporting a better-than-expected underlying half-year profit before tax in the first half. Jefferies highlighted that like-for-like momentum is likely to moderate in the second half. The broker, keeping its 'hold' rating for the stock, said that the shares are likely to de-rate from here given that the valuation (11.5 times 2013 earnings) 'looks stretched'. Retail peer Marks & Spencer was also lower after going ex-dividend.
FTSE 250: Talvivaara rebounds after leak stopped
Nickel miner Talvivaara surged, recovering after recent falls, after saying that the leakage of the gypsum pond at the Sotkamo mine, which started two week ago, has now been stopped. However, the company said that it was re-assessing its fourth-quarter production target after a temporary plant shutdown.
Inter-dealer broker ICAP dropped after headline pre-tax profit dropped 26% in the first half and revenue fell 14%. Bank recapitalisation and deleveraging, uncertainty over regulatory reform and even the London Olympics were cited by boss Michael Spencer as reasons for the decreases.
Soft drink peers Britvic and AG Barr were higher after agreeing on a merger. Assuming the tie-up goes through, Britvic shareholders will end up controlling 63% of the combined company and AG Barr shareholders 37%. The new entity will be called Barr Britvic Soft Drinks.
FTSE 100 - Risers
Centrica (CNA) 318.30p +2.41%
Amec (AMEC) 1,056.00p +2.23%
Bunzl (BNZL) 1,043.00p +1.26%
SSE (SSE) 1,400.00p +1.23%
Serco Group (SRP) 551.00p +1.10%
Severn Trent (SVT) 1,545.00p +1.05%
United Utilities Group (UU.) 653.00p +0.85%
Pennon Group (PNN) 670.00p +0.68%
Prudential (PRU) 871.00p +0.64%
Capita (CPI) 726.50p +0.62%
FTSE 100 - Fallers
Evraz (EVR) 217.40p -7.01%
Randgold Resources Ltd. (RRS) 6,575.00p -5.12%
Eurasian Natural Resources Corp. (ENRC) 276.20p -4.63%
Burberry Group (BRBY) 1,180.00p -4.14%
Kazakhmys (KAZ) 661.00p -3.22%
Royal Dutch Shell 'B' (RDSB) 2,164.00p -2.81%
Royal Dutch Shell 'A' (RDSA) 2,100.00p -2.78%
BG Group (BG.) 1,014.50p -2.73%
Vedanta Resources (VED) 1,062.00p -2.57%
Anglo American (AAL) 1,725.00p -2.54%
FTSE 250 - Risers
Talvivaara Mining Company (TALV) 105.00p +25.90%
Britvic (BVIC) 387.00p +5.08%
Barr (A.G.) (BAG) 450.80p +4.30%
Fidessa Group (FDSA) 1,318.00p +3.37%
Telecity Group (TCY) 850.00p +3.03%
SIG (SHI) 105.30p +2.63%
Computacenter (CCC) 350.00p +2.49%
Dairy Crest Group (DCG) 350.80p +2.30%
De La Rue (DLAR) 1,024.00p +1.79%
Cobham (COB) 193.50p +1.79%
FTSE 250 - Fallers
ICAP (IAP) 281.40p -9.20%
Pace (PIC) 184.70p -5.28%
TalkTalk Telecom Group (TALK) 210.00p -4.98%
Dechra Pharmaceuticals (DPH) 571.00p -3.71%
International Personal Finance (IPF) 346.00p -3.62%
Kenmare Resources (KMR) 35.05p -3.55%
Dialight (DIA) 1,051.00p -3.49%
Ferrexpo (FXPO) 200.20p -3.42%
IG Group Holdings (IGG) 426.90p -3.33%
Home Retail Group (HOME) 110.00p -3.25%