Banking and mining stocks were firmly out of favour on Wednesday morning as risk appetite was scaled back due to concerns over the outlook for global economic growth.
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%.
The World Bank forecast cut follows some growth downgrades from Germany yesterday, resulting in a "risk-off tone across Europe amid resurging worries about the global economy", according to market strategist Ishaq Siddiqi from ETX Capital.
Further dampening sentiment this morning were comments by Eurogroup chief Jean-Claude Juncker who warned on Tuesday that the euro's recent rally to a 10-month high poses a new threat to the Eurozone even as the region begins to exit the sovereign debt crisis. "The euro foreign-exchange rate is dangerously high," Juncker said.
ETX Capital's Siddqi said: "These warnings combined have all pushed investors to seek out safe-havens such as core government bonds and the US dollar
and shun risky assets such commodities, the euro and cyclical stocks."
Meanwhile, fourth-quarter earnings figures due out later from Wall Street banking heavyweights Goldman Sachs (scheduled for 12:30)and JPMorgan Chase (scheduled for noon) further ensured that there was an element of caution in stock markets today.
FTSE 100: Banks, miners bear the brunt of reduced risk appetite
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.
Anglo American was extending losses from yesterday after the restructuring of its platinum operations prompted backlash from South African politicians and unions. The business was hit by fresh strikes at one of its mines today. UBS kept its 'neutral' rating on the stock today, saying that Anglo's "value, EPS momentum/growth, heightened South Africa risk and Minas Rio challenges make the risk/reward less compelling than for other diversified UK miners".
Mining peers Xstrata, Kazakhmys and Glencore were also unwanted this morning. However, EVRAZ bucked the trend after completing the acquisition of a 50% stake in Corber Enterprises, meaning that it has secured an indirect controlling interest in OJSC Raspadskaya. The purchase makes the enlarged group the largest producer of coking coal in Russia.
Telecoms giant Vodafone was being weighed down by a ratings cut by Deutsche Bank from 'buy' to 'hold'. The broker said that there's "little to cheer" about at Vodafone: "We forecast growth deterioration through calendar 2013 with the outlook for financial FY14 set to confirm declining free cash flow (FCF), no further dividend-per-share (DPS) growth and a scaled down buyback to avoid increased leverage."
Also providing a drag on London's blue-chip index was tobacco giant Imperial after going ex-dividend this morning. From today, investors won't be able to tap into the group's latest final dividend payment.
Information services company Experian was doing its best to support the Footise, gaining after posting a 5.0% increase in revenue for the three months to December 31st.
FTSE 100 - Risers
Carnival (CCL) 2,526.00p +2.68%
Eurasian Natural Resources Corp. (ENRC) 348.50p +2.62%
Associated British Foods (ABF) 1,556.00p +1.57%
Shire Plc (SHP) 2,064.00p +1.52%
Experian (EXPN) 1,053.00p +1.45%
United Utilities Group (UU.) 707.00p +1.36%
Wood Group (John) (WG.) 798.00p +1.27%
Rexam (REX) 464.20p +0.98%
Unilever (ULVR) 2,428.00p +0.96%
Burberry Group (BRBY) 1,399.00p +0.94%
FTSE 100 - Fallers
Imperial Tobacco Group (IMT) 2,382.00p -4.11%
Lloyds Banking Group (LLOY) 52.38p -3.66%
Xstrata (XTA) 1,149.50p -2.83%
Royal Bank of Scotland Group (RBS) 344.40p -2.74%
Anglo American (AAL) 1,910.00p -2.60%
Glencore International (GLEN) 383.00p -2.47%
Kazakhmys (KAZ) 765.50p -2.36%
Resolution Ltd. (RSL) 260.50p -2.25%
Vodafone Group (VOD) 159.95p -1.87%
Barclays (BARC) 289.95p -1.84%
FTSE 250 - Risers
Informa (INF) 481.20p +1.88%
Regus (RGU) 111.60p +1.73%
Filtrona PLC (FLTR) 554.50p +1.65%
Betfair Group (BET) 679.00p +1.65%
Genus (GNS) 1,464.00p +1.60%
Berkeley Group Holdings (The) (BKG) 1,846.00p +1.43%
Redrow (RDW) 183.40p +1.21%
Spectris (SXS) 2,011.00p +1.16%
William Hill (WMH) 347.10p +1.11%
Raven Russia Ltd (RUS) 66.20p +0.99%
FTSE 250 - Fallers
Lonmin (LMI) 326.60p -5.61%
New World Resources A Shares (NWR) 288.60p -4.12%
ITE Group (ITE) 240.50p -4.03%
Dixons Retail (DXNS) 26.18p -3.71%
EnQuest (ENQ) 119.30p -3.71%
Jupiter Fund Management (JUP) 313.10p -3.66%
Senior (SNR) 198.60p -3.55%
Diploma (DPLM) 519.00p -3.53%
Centamin (DI) (CEY) 55.20p -3.50%
Taylor Wimpey (TW.) 72.60p -3.26%