Stock markets all over the world were in retreat on Wednesday, and London was no exception, as investors fretted about Spain's negotiations over bailout terms.
Spain will restrict early retirement programmes as one of the new measures that President Rajoy will announce during the 2013 budget presentation on Thursday.
In an interview with The Wall Street Journal, Mariano Rajoy said that his government will also create an independent agency to oversee that budget targets are reached. According to analysts at UniCredit, this agency is one of the bailout conditions from the European Union. Rajoy also said that measures will include new job-training programmes and legislation that does away with onerous government regulations.
Rajoy was unable to avoid the question of whether a bailout request was pending. "At the moment, I cannot tell you," he said, adding that the government would need to determine whether conditions attached to the bailout are "reasonable." However, he did clarify that he would definitely ask for the bailout if Spanish debt yields were too high for too long.
It was unclear what his definition of "too high" is, but yields on 10-year Spanish Treasury bonds rose more than a quarter of a point to rise above the 6% level today.
Resource stocks friendless
Mining stocks were hammered on concerns over slowing global growth. Anglo American said it plans to cut back on coking coal output over the next few months as costs rise and prices drop.
The company also revealed that its Anglo American Platinum subsidiary continues to experience low attendance levels at its Rustenburg operations in South Africa, which are the subject of unofficial industrial action. Turnout rates are less than 20%, the company revealed.
Copper and gold prices
moved lower on futures markets, while the price of oil was also heading lower, meaning oil companies joined miners in the dog-house.
Nationalised-lender Royal Bank of Scotland (RBS) was the worst performing blue-chip, however, as court filings revealed that transcripts of instant message conversations involving RBS trader Tan Chi Min contained claims that the bank was able to move global interest rates. The transcripts came to light as part of the investigation into the London Interbank Offer Rate (LIBOR) scandal, which brought down the top brass at RBS's rival Barclays earlier this year.
In other company news, first half profits from international home emergency business Homeserve will be higher than in the corresponding period of last year, and therefore higher than some broker estimates. Adjusted pre-tax profit for the six months ending September 30th is expected to be higher than the £23.5m achieved at the interim stage last year, principally due to the benefits of increasing ownership of Domeo from 49% to 100%. The numbers were ahead of the estimates of both Peel Hunt and Jefferies Hoare Govett, but the company stuck by its full-year profits guidance.
Waste management group Shanks was dumped after a profit warning. Market conditions in the UK and Dutch solid waste markets deteriorated significantly in the first half, Shanks said.
Another company running up the red flag was inter-dealer broker ICAP, which said trading at its voice and electronic businesses has remained more muted than anticipated at the time of the firm's annual general meeting in July.
Growth has slowed at pizza delivery firm Domino's Pizza. Like-for-like sales in the UK in the third quarter were up by 3.7%, versus 4.1% the year before and 5.7% in the first six months of the financial year.
Chip designer Imagination Technologies was sharply lower after long term partner Texas Instruments indicated at an investor conference overnight that the smart-phone and tablet market was not as big a priority for the firm as it had been in the past.
Broker Investec reckons that if US chip giant does get out of the market altogether, it could put £10m of revenues at risk at Imagination.
"This will not disappear immediately (and could be won back through other accounts potentially), but we expect a significant proportion of devices could move to Qualcomm, Nvidia and others using their own graphics chips or those who are Arm partners," suggests Investec's James Goodman.
"£10m is around 12% of 2013 estimated Technology royalty revenues (pro-forma) and around 20% of group profits," Goodman calculated.
FTSE 250 engineering firm WS Atkins was a rare bright feature. It said its performance in the second quarter has not changed since its update at the start of August and it remains on track to meet expectations for the year.
Broker Charles Stanley has reiterated its 'reduce' recommendation on WS Atkins, however. "Outlook for the full year remains unchanged implying flat PBT [profit before tax] growth following the downgrades in its US operations," Charles Stanley's Andy Smith said.
"We have recently downgraded our recommendation to Reduce as we believe the outlook for the US will get worse before it gets better as Atkins is heavily reliant upon public sector funding which is under pressure - hence our belief that the US has the potential to disappoint further,' he continued
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