By This Is Money Reporters
17.10 (close): Markets were back on the front foot as the FTSE 100 Index edged into positive territory following big losses in its previous two sessions.
London’s top-flight closed 21.7 points higher, at 6572.3, having fallen to a five-week low on the back of triple-digit declines on Friday and Monday.
The slump has been driven by fears of a new emerging markets rout as US policymakers start to withdraw monetary support, with the Federal Reserve about to announce whether it will continue tapering America’s massive monetary stimulus.
Emerging market turmoil: A run on the Turkish lira is among developments concerning investors
The availability of ‘easy money’ in the US has seen investors ploughing cash into fast-growing emerging markets to seek better returns.
Prospects for the UK economy also occupied investors after the Office for National Statistics said output grew by 0.7 per cent in the final quarter of the year and by 1.9 per cent across the year as a whole – the best performance since 2007.
But the figures failed to provide much support for the pound, particularly as the latest growth estimate was slightly lower than the rate of 0.8 per cent seen in the previous two periods.
That may provide the Bank of England with room to keep interest rates at their record low of 0.5 per cent for a little longer.
Sterling was flat at 1.66 US dollars and 1.21 euros.
Meanwhile, bourses in France and Germany rallied strongly while New York’s Dow Jones Industrial Average was ahead after a rise in consumer confidence data and good corporate earnings figures.
In London, Royal Bank of Scotland shares rallied 11.7p to 343.9p after falling in the previous session on its announcement that it will have to set aside more than 3billion to cover litigation and customer compensation claims.
The update had prompted a number of City houses, including Deutsche Bank and Citi, to retain their sell recommendations on the NatWest owner, but it recovered amid a good performance from wider banking stocks.
Barclays improved 4p to 273.3p and Lloyds Banking Group was ahead 2.4p to 82.8p.
It came as Lloyds announced it was to shed a further 1,080 jobs across its retail, risk, operations and commercial banking divisions with another 300 posts being moved to other employers.
Meanwhile it was reported that Barclays was planning more job losses in its investment banking arm to cut costs.
Carpetright shares were two per cent lower after it warned over profits for the second time in less than four months.
The floorings retailer saw UK like-for-like sales bounce back with a 1.9 per cent rise in its third quarter to January 25, but ‘extremely difficult economic conditions’ in the Netherlands has left it nursing losses in its overseas division. Shares were off 13p to 555p.
F&C Asset Management rose for a second session in a row after it agreed to a 708million takeover by Canada’s Bank of Montreal.
The FTSE 250 company confirmed on Monday it was in advanced talks with the bank and was likely to recommend the all-cash offer, which sent shares surging by 25 per cent. The stock was 7.1p higher at 123.5p, slightly higher than the offer price.
The biggest FTSE 100 risers were Severn Trent up 78p to 1778p, Hargreaves Lansdown up 56p to 1485p, Royal Bank of Scotland up 11.7p to 343.9p and Royal Mail up 19.5p to 578.5p.
The biggest fallers were Fresnillo, down 24p to 751p, BG Group down 28.5p to 1053.5p, Tullow Oil down 14p to 829.5p and Imperial Tobacco down 35p to 2217p.
15.50: The Dow Jones has opened 90 points higher at 15,927.9 after January consumer confidence data beat expectations, but other US economic news was mixed.
The FTSE 100 was up 30.3 points at 6,580.9 as today’s session draws to a close.
The Dow Jones is forecast to open higher despite weaker than expected US durable goods orders and house price data.
In London, the FTSE 100 is 22.7 points up at 6,573.4.
Toby Morris, senior sales trader at CMC Markets, said all major European benchmark indices had made gains as buyers step in to find value after three sessions of pretty heavy losses.
‘Emerging markets continue to look like the emerging theme for this quarter, with today’s bounce coinciding with the strengthening of developing nation currencies overnight, with the [Indian] rupee, [South African] rand, [South Korean] won and [Turkish] lira all reversing recent routs.
‘This is unlikely to be any expectation that the Fed might be willing to lend a hand by slowing the pace of stimulus cuts, but we will get confirmation of that tomorrow.
‘Probably more important will be any indication from the minutes as to whether they could be sensitive to further developments from the emerging nations.’
The FTSE 100 is holding onto gains in lunchtime trading – it’s still ahead 26.4 points at 6,577.1.
Stocks had slumped in recent days due to concern about a new emerging markets rout as the US Fed winds down its stimulus programme. The central bank is due to decide tomorrow whether it is ready to make more cuts to the scheme.
The availability of ‘easy money’ in the US has seen investors plough cash into fast-growing emerging markets to seek better returns.
The prospects for the UK economy also occupied investors after the Office for National Statistics said output grew by 0.7 per cent in the final quarter of the year and by 1.9 per cent across the year as a whole – the best performance since 2007.
The impact of the release on the pound was mixed, particularly as the latest growth estimate was slightly lower than the rate of 0.8 per cent seen in the previous two quarters.
That may provide the Bank of England with room to keep interest rates at their record low of 0.5 per cent for a little longer.
F&C Asset Management shares rose for a second session in a row after it agreed to a 708million takeover by Canada’s Bank of Montreal.
F&C confirmed yesterday it was in advanced talks with the bank and was likely to recommend the all-cash offer, which sent shares surging by 25 per cent. The stock was 5.8p higher at 122.2p today, slightly higher than the offer price.
The market has shrugged off news that UK economic growth slowed slightly to 0.7 per cent in the final quarter of 2013.
However, the economy grew by 1.9 per cent overall last year, the fastest pace since 2007, official figures showed today. Read more here.
The FTSE 100 was little changed, but remained 22.5 points in the black at 6,573.2 as the focus remained on the future of the US stimulus programme.
London’s top index had fallen to a five-week low on the back of triple-digit declines on Friday and Monday, with the slump caused by fears of more emerging market turmoil as US policymakers start to withdraw monetary support.
The Fed is due to decide tomorrow whether to continue ‘tapering’ the country’s massive economic stimulus programme.
In London, Royal Bank of Scotland shares recovered 3.1p to 335.35p after falling 2 per cent yesterday on its revelation that it will have to set aside more than 3billion to cover litigation and customer compensation claims.
Other banking stocks were on the front foot, with Barclays up 3.5p to 272.9p and Lloyds Banking Group ahead 1.7p to 82.2p.
Carpetright shares were nearly 4 per cent lower after it warned over profits for the second time in less than four months.
The floorings retailer saw UK like-for-like sales bounce back with a 1.9 per cent rise in its third quarter to January 25, but ‘extremely difficult economic conditions’ in the Netherlands has left it nursing losses in its overseas division. Shares were off 20.5p to 547.5p. Read more here.
Meanwhile, lower than expected sales of the iPhone saw Apple shares drop in New York last night, although new products helped the technology giant post record revenue figures for the last quarter.
Apple shares fell by as much as 7.5 per cent in the 30 minutes after trading closed in the US, as lofty sales predictions for the smartphone fell slightly short of forecasts. Read more here.
Joao Monteiro, analyst at Monex Capital Markets, said: ‘The rout that has rocked global equity markets in recent days appears to be drawing to a close as the major Asian indices finished the day broadly unchanged.
‘The fact Wall Street rallied back later in yesterday’s session doubtless helped here and many will be hoping that this bout of selling will have knocked some of the froth out of the market, paving the way for the start of another run higher.’
He added: ‘Disappointing numbers from Apple last night may well be weighing on the stock, but looking at futures markets it appears that Wall Street is in for a solid start to Tuesday’s session.
‘The Dow is close to posting a triple-digit gain at the open, although December’s durable goods orders print is due for release ahead of the opening bell and any big miss here could well serve to knock confidence. We may be seeing a leveling off from the recent selling, but traders will inevitably remain nervous.’
Ishaq Siddiqi, market strategist at ETX Capital, said: ‘The global deterioration of equity markets paused overnight in Asian markets, a day after stocks in the region fell to six-month lows.
‘Slowing growth in China together with Fed’s tapering of quantitative easing prompted fresh fears about the outlook for emerging markets.’
He offered a rundown of recent developments in emerging markets, saying: ‘Last week’s slide in the Argentinean peso after the central bank there halted policies to support the currency together with a run on the Turkish lira – a rate hike is expected in coming days from the central bank there – and [the political instability of] nations like Ukraine and Thailand, all added to rattle investor sentiment around the emerging markets space.
‘Structural imbalances remain a huge threat to emerging markets, with Latin American nations under more scrutiny as countries like Brazil operate huge current account deficits which leave them vulnerable to the outflow of capital.
‘In Asian markets overnight, India’s central bank surprised the market by raising interest rates for the third time in six months to respond to the vulnerability of the rupee currency together with rising inflation.
‘With this all in the background and ahead of tomorrow’s Fed policy meeting [from] which most in the market now expect a further reduction of the bond buying programme by $ 10billion, it’s a no brainer that asset allocators around the world are shedding off their emerging markets holdings.’
8.40: The FTSE 100 has opened 20.6 points higher at 6,570.7, rebounding modestly from losses caused by anxiety that a cut in US stimulus will hurt emerging economies.
There is speculation that the US Federal Reserve will reduce its monthly bond purchases by a further $ 10billion to $ 65billion a month after a meeting starting today.
The powerful central bank announced a first $ 10billion-a-month cut to its vast stimulus programme last December, but some believe tumult in emerging markets could prompt it to delay the next move in this direction. Its decision is due tomorrow after the London market closes.
Market watch: Traders are worried about the impact of US stimulus withdrawal on emerging economies
The Fed’s stimulus drive was intended to support the US recovery, but it has also provided a plentiful supply of cheap money that has gone into stocks, currencies and government bonds all over the world in the past few years.
The prospect of its withdrawal following signs of US economic revival has led to bouts of significant market volatility, particularly in emerging economies.
The focus today will be on whether the Turkish lira will recover further after an emergency meeting of the country’s central bank later.
The lira rebounded on Monday after the news of the meeting, but Brazil’s real currency slumped to a five-month low.
The Footsie closed 113.08 points or 1.7 per cent lower at 6,550.66 yesterday, extending last week’s falls due to the troubles in emerging markets and slumps in oil and gas firm BG Group and telecoms company Vodafone.
Mike van Dulken, head of research at Accendo Markets, said: ‘Uncertainty remained within global markets after mixed US data, although US markets did improve into the close – even testing positive – and Asia-Pacific is showing signs of resilience after several days of turmoil.
‘Asian stocks are still slightly bloodied amid concerns over the impact of continued tapering ahead of the Fed’s latest update tomorrow and slowing China industrial profits adding to the recent uncertainty surrounding the geography.’
Stocks to watch today include
ROYAL BANK OF SCOTLAND: RBS is taking billions of pounds in extra charges to cover the cost of past misdeeds, sending it deep into the red and resulting in its top executives not receiving any bonuses for the past year.
TECH FIRMS: Lower-than-expected holiday iPhone sales and a weak revenue forecast by Apple Inc renewed fears about Chinese demand for iPhones and a tepid global market, wiping 8 per cent off the company’s stock. London-listed ARM provides chip licenses for Apple.
FRESNILLO: The Mexican precious metals miner said on Tuesday it hit a 2013 production target for silver, while just missing a revised target for gold, as the company continues to push for a ban on the use of explosives at one of its mines to be lifted.
BRITISH LAND: The real estate investment trust reports a rise in like-for-like occupancy of 30 basis points to 97.1 per cent, with 525,000 square feet of lettings and renewals in the last quarter.
CARPETRIGHT: The floor coverings retailer warned on year profit for the second time in under four months after deteriorating trade in the Netherlands dampened an improving performance in the UK.
CREST NICHOLSON: The housebuilder reports a profit rise of 40 per cent, with forward sales rising by 51 per cent.
GALLIFORD TRY: The construction company wins contracts for care and affordable housing worth a combined 55million.
AFREN: The oil and gas firm said it saw double-digit production growth over the next five years after 2013 production came in at the upper end of guidance. One of the year’s discoveries in Nigeria was among ‘the largest global discoveries of 2013’.