Broadgate: Market News 11/10
11 October 2012
Britain’s FTSE 100 index is seen opening down 6 to 18 points, or as much as 0.3 percent on Thursday, according to financial bookmakers. Futures on the benchmark index traded 0.3 percent lower at 0618 GMT. For more on the factors affecting European stocks, please click on
The expected fourth day of weakness on the UK index – which would be its longest down run since May – follows on overnight from selloffs on Wall Street, where the S&P 500 closed down 0.6 percent, and in Asia.
London’s blue chip index closed down 33.54 points, or 0.6 percent, at 5,776.71, weighed down by global growth worries and a retreat in BAE Systems after the failure of a planned merger with France’s EADS.
Standard & Poor’s on Wednesday cut Spain’s sovereign credit rating to BBB-minus, just above junk territory, citing a deepening economic recession that is limiting the government’s policy options to arrest the slide. The news is likely to reignite concerns about the euro zone debt crisis, but could also prompt Spain to formally ask for help and thus kick start the European Central Bank’s sovereign bond purchase, which investors have been waiting for.
U.S. trade data for September and the weekly jobless figures, both due at 1230 GMT, will be scanned for fresh clues on global economic health.
Britain’s heavyweight energy stocks may take some heart from a rise in oil prices on escalating tensions in the Middle East. Copper prices, meanwhile, steadied near two-week lows.
BURBERRY: The British luxury brand says second quarter comparable store sales growth slows to 1 percent, hit by slowdown in China and Britain. Burberry says it expects broadly unchanged underlying wholesale revenue year-on-year.
RBS: Royal Bank of Scotland fixes a price of 175 pence per share for the stock market listing of insurer Direct Line, with trading due to start on Friday. RBS will continue to hold 65.3 percent of Direct Line.
BAE: BAE says trading has been consistent with management expectations and restates that it sits modest growth in underlying earnings per share this year. However, it adds that the uncertainty over how the U.S. deficit reduction will be implemented – the so-called fiscal cliff – continues to cloud the outlook and may lead to some trading disruption in the fourth quarter.
UNITED UTILITIES: The Warrington-based multi-utility rose on Wednesday amid revived rumours that the Goldman Sachs Infrastructure Fund and China Investment Corporation were both running the rule over the firm, eyeing up a potential 1,000 pence per share, or 7 billion pounds, bid, according to various newspaper market reports.
The S&P 500 fell for a fourth day on Wednesday, weighed down by disappointing news from Chevron and Alcoa as earnings season got under way.
Chevron shares dropped 4.2 percent to $112.45 after it said third-quarter profits would be “substantially lower” than the previous quarter, while Alcoa fell 4.6 percent to $8.71 after it posted a quarterly loss. The company cut its outlook for global aluminum demand, citing a slowdown in China.
Both stocks are Dow components, and the blue-chip average posted its biggest daily percentage drop since early July.
“The market is worried about what is going to happen with earnings,” said Randy Warren, chief investment officer of investment advisory firm Warren Financial Service in Exton, Pennsylvania.
“All expectations are for a softening.”
The market continues to focus on weak global demand as S&P 500 companies’ third-quarter earnings are expected to fall 2.9 percent from a year ago, according to Thomson Reuters data. It would be the first decline in three years.
Stocks briefly trimmed losses after the Federal Reserve’s Beige Book showed the overall economy had expanded modestly, with most districts seeing strengthened home sales in the last month.
The Dow Jones industrial average fell 128.56 points, or 0.95 percent, to end at 13,344.97. The S&P 500 dropped 8.92 points, or 0.62 percent, to 1,432.56. The Nasdaq Composite lost 13.24 points, or 0.43 percent, to end at 3,051.78.
The declines in the Dow and the S&P 500 were partially offset by gains in Wal-Mart Stores Inc, which hit an all-time high, and FedEx Corp, which posted its largest daily advance this year.
Wal-Mart shares climbed 1.7 percent to $75.42 after hitting an all-time high of $76.81 as it cited strong sales at its U.S. grocery stores and a big start to holiday layaway sales in its annual meeting with analysts and investors.
FedEx rose 5.2 percent to $89.99, its largest daily percentage jump this year, as the package delivery company laid out plans to sharply cut costs at two divisions, seeking to improve profits there by $1.7 billion over the next four years.
Yum Brands shares climbed 8 percent to $70.99 as the parent company of KFC, Taco Bell and other fast-food restaurant chains raised its full-year profit forecast.
Warehouse chain Costco Wholesale also hit a record high at $104.43 after it reported a jump in quarterly profit. Shares closed at $101.56, up 1.9 percent.
Engine maker Cummins Inc lowered its 2012 forecast for a second time this year and its shares dropped 3.4 percent to $87.79.
About 5.9 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the daily average so far this year of about 6.53 billion shares.
On the NYSE, roughly eight issues fell for every five that rose. On the Nasdaq, six shares declined for every five that advanced.
Gold traded steady on Thursday after dropping more than 1 percent over the last four sessions, although a gloom over the euro zone debt crisis that is supporting the dollar is expected to take some shine off bullion.
Spot gold inched up $1.56 to $1,763.50 an ounce by 0601 GMT. It fell to a two-week low of $1,756.86 an ounce in the previous session.
U.S. gold was little changed at $1,765.30.
Spot platinum dropped to a 1-1/2-week low of $1,655, and spot palladium fell to a one-week low of $643.20.
The euro fell on Thursday as uncertainty over Spain’s bailout prospects continued to spook sentiment, which was also dented by a drop in share markets due to worries about slowing global growth.
The euro fell to its lowest since Oct. 1 of $1.2825 before recovering to trade down 0.1 percent at $1.2864. Traders said some market players may want to test the single currency’s key technical support at its 200-day average of 1.2823, and the Oct. 1 low of $1.28035.
The Aussie also regained against the yen to add 0.3 percent to 80.12 yen from below 80 yen before the data.
The euro fell about 0.5 percent against the Aussie at A$1.2514, its lowest since Oct. 2, and was down 0.2 percent against the Japanese yen at 100.37 yen.
The Japanese currency’s strength against an overall weak euro capped dollar/yen, which eased 0.2 percent to 78.04 yen , after touching 77.99 yen.
The yuan hit an intraday high of 6.2781 versus the dollar , its highest level since China set up the domestic foreign exchange market in 1994, but there was little impact in the broader currency market.
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