- World Bank, Germany cut growth estimates
- Hostage crisis in North Africa
- TUI Travel surges after approach from TUI AG
The FTSE 100 ended moderately lower on Wednesday as markets trimmed losses by the close, though the mood was still cautious after both the World Bank and German government downgraded their growth forecasts.
Concerns about ongoing conflicts in North Africa were also likely to be on investors' minds today. As the French military intervention in Mali intensifies, there was news of an Islamist militant attack at a BP gas field in neighbouring Algeria (near the Libyan border) which has resulted in a number of deaths and a hostage situation.
Markets are becoming increasingly concerned about the wider implications that these conflicts could have, as a number of neighbouring countries are large suppliers of key petrochemicals and minerals.
The World Bank has cut its global growth forecast for 2013 due to the difficult recovery that economies worldwide are currently undergoing despite the improvement in financial markets. It now expects growth of 2.4% this year, down from its prior forecast of 3%.
Meanwhile, Germany expects its economy to grow by a mere 0.4% this year, well below the 1% growth forecast in October and the 0.7% expansion recently estimated for 2012.
"Given the news flow today it's hard to fathom why markets aren't lower than they are, given the continued stream of bad news from the retail sector," said market analyst Michael Hewson from CMC Markets.
Nevertheless, markets picked up from their intraday lows in afternoon trade after US banking heavyweights JPMorgan Chase and Goldman Sachs beat consensus estimates with fourth-quarter profits. The latter reported earnings per share of $5.60 for the last three months of 2012, smashing the $3.64 consensus estimate. This was Goldman's most profitable quarter since the first three months of 2010.
"We're used to seeing Goldman Sachs beating earnings forecasts, but today's results caught everyone off-guard," said market analyst Craig Erlam from Alpari.
FTSE 100: TUI leaps on confirmation of merger approach
TUI Travel raced ahead on Wednesday afternoon after the firm confirmed that it has been approached by its German parent company, TUI AG, about a merger. "The Independent Directors of TUI Travel have recently received an approach from TUI AG which may or may not result in a combination of the two companies," the company announced.
The mining sector was out of favour today as investors reduced their appetite for risk. Anglo American was extending losses from yesterday after the restructuring of its platinum operations prompted backlash from South African politicians and unions. Shares continued to fall after a number of workers protested against plans to close several mines. Sector peers Xstrata and Glencore were also registering losses.
However, EVRAZ bucked the trend after becoming the largest producer of coking coal in Russia through the indirect acquisition of a controlling interest in OJSC Raspadskaya. ENRC also rose after JP Morgan upped its target price on the stock from 275p to 300p and kept its 'neutral' stance on its shares.
BP finished the day flat despite a 'terrorist' attack at one of its gas fields in Algeria. BP released a statement confirming the incident but a spokesman declined further details when reached for comment. "We can confirm that there has been a security incident this morning at the In Amenas gas field in the eastern central region of Algeria," it said.
Part-nationalised lenders RBS and Lloyds were registering losses after Bank of England officials said that they need more capital to shore up their balance sheets. Meanwhile, the Daily Mail has said that RBS may be facing the prospect of a £500m fine over its alleged role in the LIBOR interest-rate rigging scandal.
Nomura also said this morning that it prefers Asia-focused banks (HSBC and StanChart) over UK domestic lenders, though it still prefers French and Swiss banks over the UK banking sector in general.
Information services company Experian rose after it posted a rise in revenue for the three months to December 31st, during which time total revenue from continuing activities increased by seven per cent at constant exchange rates.
FTSE 250: Ashtead boosted by Credit Suisse note
Equipment rental group Ashtead Group rose after Credit Suisse raised its target price on the stock from 400p to 545p, retaining an 'outperform' rating.
Jupiter Fund Management reported 'another good quarter', but it wasn't enough to stop broker Peel Hunt downgrading the stock from 'buy' to 'hold', pushing the stock lower.
Platinum miner Lonmin was also down, largely as a result of nervousness about recent Anglo American events.
In contrast, outsourcing firm MITIE Group declined after Credit Suisse reduced its target price on the stock from 290p to 250p and kept an underperform rating.