The FTSE 100 was trading slightly lower on Friday morning, pulling back from yesterday's close of 6,586.08 - its highest closing level since August 13th - as investors await the Federal Reserve policy meeting next week and continue to digest developments in Syria. The heavyweight mining sector was providing the main drag.
Meantime, and closer to home, the BoE´s Chief economist - Spencer Dale - has reportedly said that forward guidance is not an attempt to add stimulus by pre-comitting to lower for longer rates policy, which would push inflation above target. As an aside, the pound's trade-weighted index rose to 82.7 earlier on Friday, its highest since mid-January, with the UK currency staying near its best levels of the year. Analysts at Goldman Sachs have revised up their sterling forecasts. They now expect to see euro/sterling at 82p and sterling/US dollar
at 1.68 dollars in three months' time.
Investors' appetite for risk is being scaled back ahead of the all-important Federal Open Market Committee two-day meeting which concludes next Wednesday with the Fed's next move highly uncertain following recent mixed economic data.
"The decline in both base and precious metals is putting pressure on the mining sector this morning, keeping the FTSE 100 resolutely below the 6600 level as investors take shelter in more defensive stocks," said Brenda Kelly, Senior Market Strategist at IG. "European indices and gold prices
have seen additional losses, as market expectations of a Fed asset-purchase reduction announcement next week were ramped up."
Kelly said that falls this morning were also fuelled by rumours that former Treasury Secretary and well-known hawk Larry Summers will succeed Fed Chairman Ben Bernanke in January.
Last Friday's worse-than-expected jobs report sparked hopes that the Fed could delay scaling back quantitative easing at its September meeting, given that the central bank has explicitly called for a strong recovery in the labour market before it begins to 'taper'. However, last week's decline in US jobless claims to their lowest level since April 2006 revealed yesterday seems to have now dampened these hopes somewhat (though the figures were affected by one-off factors).
US retail sales and the University of Michigan Confidence index are likely to be in focus this afternoon, with stock futures pointing to a flat start on Wall Street.
Syria meanwhile continues to be closely watched as the US and Russia continued their talks in Geneva over a plan to have Bashar al-Assad hand over chemical weapons to international control in exchange for avoiding US military action.
US Secretary of State John Kerry described his talks with Russian counterpart Sergei Lavrov as "constructive" as they began the second day of their discussions with United nations-Arab League envoy Lakhdar Brahimi. Syria has agreed to the Russian proposal to give up its chemical weapons though President Barack Obama has insisted that the US should go ahead with the strikes if diplomacy fails.
FTSE 100: Miners slump as metals weaken
Falling gold, silver and copper prices hit mining stocks this morning. Gold in particular was at a five-week low and looks set to record its worst weekly loss since June as speculation ramps up about the Fed meeting. Gloomy comments on the precious metal from Goldman Sachs also weighed on prices today, with the bank saying that gold will slip to $1,050 an ounce next year from the current $1,316 level (as of this morning).
Anglo American, Fresnillo, Vedanta, Antofagasta, Rio Tinto and BHP Billiton were all suffering losses by midday.
Glencore Xstrata was also lower after announcing a revised scope for its Zanaga iron ore project with a changed budget and efforts to finance work. The company said the project feasibility study is now being advanced on the basis of a staged development, substantially reducing the initial capital requirement and including the potential for initial production using existing infrastructure.
Vodafone edged higher after winning enough shareholder support for its €7.7bn takeover of German cable company Kabel Deutschland (KDH) to go ahead. The British mobile network giant has received the backing of more than 75% of Kabel shareholders.
FTSE 250: Imagination rises on licence deal
Imagination Technologies has signed a new licence agreement with MediaTek, a semiconductor company for wireless communications and digital multimedia, causing shares
to jump on friday. Under the multi-year agreement, MediaTek will continue to deliver products to the group's PowerVR Series6 division including graphical features such as OpenGL ES 3.0 support, while maintaining the low-power profile essential to mobile devices. MediaTek will be given access to graphics technology.
Utilities group Pennon was out of favour after Credit Suisse downgraded the stock to 'underperform', saying it is increasingly concerned that pricing pressure could materialise on energy-from-waste (EfW) facilities at its waste-management business Viridor.
Kentz was weaker this morning after German firm M&W Group pulled out of a potential bid for the engineering and project management company. M+W is the second company in two days to decide against bidding for Kentz after Amec withdrew its intention on Thursday.
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Tate & Lyle (TATE) 798.00p +1.98%
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Persimmon (PSN) 1,160.00p +0.87%
RSA Insurance Group (RSA) 122.70p +0.82%
Smiths Group (SMIN) 1,371.00p +0.81%
FTSE 100 - Fallers
Anglo American (AAL) 1,561.00p -3.67%
Vedanta Resources (VED) 1,147.00p -2.96%
Fresnillo (FRES) 1,159.00p -2.93%
Antofagasta (ANTO) 844.00p -2.31%
easyJet (EZJ) 1,291.00p -2.27%
Morrison (Wm) Supermarkets (MRW) 295.90p -2.18%
Rio Tinto (RIO) 3,123.50p -1.98%
BHP Billiton (BLT) 1,890.00p -1.72%
International Consolidated Airlines Group SA (CDI) (IAG) 309.50p -1.56%
Barclays (BARC) 301.55p -1.42%
FTSE 250 - Risers
Imagination Technologies Group (IMG) 330.20p +7.42%
Bumi (BUMI) 209.90p +4.90%
Barratt Developments (BDEV) 329.00p +4.44%
Fenner (FENR) 403.80p +4.26%
TalkTalk Telecom Group (TALK) 258.50p +3.82%
Bwin.party Digital Entertainment (BPTY) 113.10p +2.91%
Crest Nicholson Holdings (CRST) 332.70p +2.37%
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Ashtead Group (AHT) 648.00p +2.05%
BH Global Ltd. USD Shares (BHGU) 11.84 +1.89%
FTSE 250 - Fallers
Polymetal International (POLY) 701.50p -4.56%
African Barrick Gold (ABG) 160.10p -4.47%
Pennon Group (PNN) 696.50p -4.13%
Lonmin (LMI) 331.30p -3.55%
Kenmare Resources (KMR) 27.31p -3.22%
Kentz Corporation Ltd. (KENZ) 486.10p -2.59%
Centamin (DI) (CEY) 43.37p -2.54%
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Optos (OPTS) 150.75p +3.25%
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NCC Group (NCC) 153.00p +1.49%
E2V Technologies (E2V) 138.00p +1.10%
SDL (SDL) 348.50p +0.65%
Ricardo (RCDO) 531.00p +0.57%
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Oxford Biomedica (OXB) 2.70p -3.57%
Ark Therapeutics Group (AKT) 0.41p -3.53%
Triad Group (TRD) 12.50p -1.96%
Filtronic (FTC) 63.75p -0.78%
Vislink (VLK) 48.25p -0.52%
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