The volatile trade seen over the past week continued on Friday with investors turning nervous ahead of another raft of economic indicators from the US later on.
“European markets have taken a leg lower this morning as traders look to scale back risk heading into the month’s end, with the central bank policy picture still unclear,” said Matt Basi, the Head of UK Sales Trading at CMC Markets.
The FTSE 100 was trading around one per cent lower by lunchtime, slipping well below the 6,600 mark, a level not seen in three weeks, as it was announced that the Eurozone unemployment rate rose from 12.1% to a record 12.2% in April. This follows downwards revisions to Eurozone growth forecasts by the OECD earlier this week.
UK stocks gained slightly yesterday as a worse-than-expected second reading of US gross domestic product growth and a rise in jobless claims lifted hopes that the Federal Reserve could delay its ‘exit strategy’ from stimulus measures.
The US economy grew by 2.4% in the first quarter, under the initial 2.5% estimate, while jobless claims rose 10,000 last week, disappointing those who were expecting no change.
Increased speculation that the Fed could soon scale back its quantitative easing programme has weighed heavily on global markets over the past week, so these figures reassured investors that the recovery isn’t strong enough for the Fed to pull the plug.
However, traders are unlikely to turn too optimistic just yet ahead of the Chicago purchasing managers’ index and the University of Michigan confidence data due out this afternoon, for further indications at how the Fed may act in the next few meetings.
FTSE 100: Banks mixed; consumer staples fall
UK banking group Lloyds slipped into the red after selling a portfolio of US residential mortgage backed securities for £3.3bn as it continues to dispose of non-core assets to boost capital. The portfolio has a book value of £2.7bn so the bank will pocket a gain of £540m before tax on the sale which will be used for “general corporate purposes”.
Sector peers HSBC, Barclays and Standard Chartered were also weighing on the index, but RBS bucked the trend to register moderate gains.
Also providing a drag in London this morning were consumer staples stocks, with beverage firms Diageo and SABMiller out of favour, along with household products group Reckitt Benckiser.
Utilities stocks were on the up, rebounding after their recent falls. Severn Trent, National Grid and Centrica were in demand.
Engineering firm Smiths Group dropped despite an earlier stint in the blue, after confirming rumours that it has received a preliminary approach for its medical division. Market reports suggested that the unit could fetch at least £2.0bn.
Tour operator TUI Travel fell after committing to spend $6.1bn on 60 new aircraft with the option to acquire the same amount again at the same price.
B&Q owner Kingfisher was also in the red, pulling back after its strong rise yesterday following its first-quarter trading update. The recent wet weather in the UK led to profits coming in below estimates but Credit Suisse said yesterday that it doesn’t see material risk to full-year forecasts.
FTSE 250: Lonmin and Halfords on the rise
Platinum miner Lonmin surged as negotiations continue with labour unions in South Africa. The stock was given a boost this morning by Morgan Stanley which upgraded its rating from ‘equal weight’ to ‘overweight’, saying that the stock appears attractively valued versus peers.
Car and bike parts retailer Halfords was also a strong riser on the FTSE 250 after UBS raised its recommendation for the stock by two notches from ‘sell’ to ‘buy’ and hiked its target price from 280p to 375p. “Halfords is a brand with high market share in its core markets, good resonance with consumers, and finally is undertaking some of the investment required to succeed as a specialist retailer,” the broker said.
FTSE 100 – Risers
Randgold Resources Ltd. (RRS) 5,295.00p +1.34%
Centrica (CNA) 380.70p +1.25%
Tullow Oil (TLW) 1,051.00p +0.77%
Eurasian Natural Resources Corp. (ENRC) 253.50p +0.64%
Fresnillo (FRES) 1,162.00p +0.52%
Wood Group (John) (WG.) 852.50p +0.41%
Rexam (REX) 533.00p +0.38%
International Consolidated Airlines Group SA (CDI) (IAG) 281.40p +0.29%
BG Group (BG.) 1,218.00p +0.25%
National Grid (NG.) 790.00p +0.19%
FTSE 100 – Fallers
Experian (EXPN) 1,214.00p -3.88%
Old Mutual (OML) 203.00p -3.47%
WPP (WPP) 1,128.00p -3.18%
IMI (IMI) 1,288.00p -2.94%
Rolls-Royce Holdings (RR.) 1,184.00p -2.87%
Melrose Industries (MRO) 257.20p -2.43%
Evraz (EVR) 139.00p -2.32%
CRH (CRH) 1,402.00p -2.30%
BAE Systems (BA.) 403.10p -2.16%
SABMiller (SAB) 3,305.00p -2.13%
FTSE 250 – Risers
Halfords Group (HFD) 329.00p +6.13%
Lonmin (LMI) 301.10p +4.91%
Petropavlovsk (POG) 139.80p +3.25%
New World Resources A Shares (NWR) 102.00p +2.72%
FirstGroup (FGP) 129.40p +2.62%
Keller Group (KLR) 947.00p +1.88%
Direct Line Insurance Group (DLG) 211.20p +1.83%
Synthomer (SYNT) 202.00p +1.81%
Computacenter (CCC) 463.00p +1.36%
Anite (AIE) 128.70p +1.26%
FTSE 250 – Fallers
Man Group (EMG) 116.30p -4.75%
Perform Group (PER) 557.50p -4.21%
Persimmon (PSN) 1,183.00p -3.43%
Imagination Technologies Group (IMG) 355.40p -3.42%
Investec (INVP) 454.90p -3.36%
Mondi (MNDI) 876.00p -2.88%
Taylor Wimpey (TW.) 98.05p -2.73%
Balfour Beatty (BBY) 234.20p -2.70%
JPMorgan Indian Inv Trust (JII) 383.60p -2.57%
Howden Joinery Group (HWDN) 235.50p -2.52%