By This Is Money Reporters
17.10 (close): Asia-focused stocks came under pressure today after drinks giant Diageo warned that emerging markets had become more challenging.
Markets were already on edge after the US Federal Reserve announced a further tightening in monetary policy by reducing its monthly bond purchases by 10 billion US dollars (6billion) to 65 billion US dollars (39.3billion).
This has fuelled fears for a sudden reversal of the trend where investors have used ‘easy money’ in the US to plough cash into faster-growing countries.
Footsie fights back: The FTSE 100 index bounced back into positive territory in afternoon trade as US stocks staged an early rally
The FTSE 100 Index, which endured a rollercoaster session on Wednesday, finished just 5.8 points lower at 6538.4, having been helped by a positive start to trading on Wall Street.
The pound had a mixed session, with sterling stronger against the euro at 1.21 but down against the US dollar at 1.65.
Diageo shares provided the biggest fall of the session after the Johnnie Walker and Smirnoff maker said sales growth in emerging markets slowed to 1.3 per cent in the half year, with the figure for the whole group 1.8 per cent higher compared with the growth of 2.2 per cent reported for the first quarter.
China’s anti-corruption crackdown on extravagant gifts and weakness in some other markets, most notably Thailand and Nigeria, have impacted the firm. Diageo fell 90p to 1820p, a drop of five per cent.
Rival drinks firm SABMiller, which is also a big player in emerging markets, was down 48.5p at 2753p. Other stocks with a focus on Asia for sales also fell, with Rolls-Royce down 19p at 1039p, Prudential off 4p at 1240p and Burberry down 41p to 1411p.
In a busy session for corporate results, broadcaster BSkyB jumped four per cent after it reported a surge of more than 40 per cent in the take-up of products over its Christmas quarter. Shares rose 33.5p to 878p, despite an eight per cent drop in half-year operating profits caused by higher sports rights costs.
There was better news for Royal Dutch Shell shareholders as new chief executive Ben van Beurden set out his turnaround plans following the company’s profits warning earlier this month. His strategy to focus on improved returns was welcomed as shares rallied 24p to 2266.5p.
Outside the top flight, shares in Serco slumped 17 per cent after the troubled outsourcing firm issued another profits warning.
The group, which runs a vast range of services from prisons to rail services, has been given the all-clear to resume bidding for public sector contracts but it still anticipates profits will be up to 20 per cent lower this year.
Shares were down 86.3p to 423.2p, while rival firm G4S, which has also been the subject of a criminal probe into overcharging on tagging contracts, was 9.2p lower at 237.7p in the FTSE 100 Index.
The biggest FTSE 100 Index risers were BSkyB up 33.5p at 878p, International Airlines Group ahead 15.5p at 418.7p, Ashtead up 18.5p at 795p and Petrofac ahead 27p at 1184p.
The biggest fallers were Diageo down 90p at 1820p, G4S off 9.2p at 237.7p, Aggreko down 51p at 1560p and Burberry off 41p at 1411p.
14.40: The Footsie recovered its poise in early afternoon trade bouncing higher in tandem with an opening advance in New York as emerging markets troubles were pushed aside by solid US growth data.
However, drinks giant Diageo remained a big blue chip casualty after its first half results showed the scars of a slowdown in demand in emerging markets.
The FTSE 100 index was up 17.4 points at 6,561.6 after data that showed the US economy grew at its highest level since 2011, although weekly initial jobless claims increased more than forecast.
Lee Mumford, financial sales trader at Spreadex said: ‘US GDP data came in slightly less than expected with the economy growing 3.2 per cent versus the 3.3 per cent expected. Although the figure didn’t meet expectations, the figure was the highest in three years, laying the ground for further improvement in 2014.’
‘Data from the US showed that US jobless claims increased more than forecast over the past week, climbing by 19,000 to 348,000,’ Mumford added.
Better than expected earnings from social media firm Facebook provided support for US stocks, with its shares in up over 16 per cent in after results showing that almost half of its advertising revenue came from mobile devices.
In opening deals, the Dow Jones Industrial Average was up 64.8 points at 15,803.9 having notched up hefty triple-digit falls yesterday with worries over turmoil in emerging markets exacerbated by a move by the Federal Reserve to further taper its equity supportive bond-buying programme.
Although Wednesday’s move, which saw the latest FOMC meeting sanction another $ 10billion cut in monthly bond purchases to $ 65billion from next month, was widely expected it put more pressure on the fragile sentiment in emerging markets.
Investors have become concerned about prospects for emerging markets as inflationary pressure builds in some developing economies, growth slows in China and the Fed continues to scale back its quantitative easing programme.
The Fed’s emergency bond-buying has been a key feature in the rise of emerging market asset prices over the past five years.
In London, Diageo was the biggest blue chip faller, down 4 per cent or 77.0p at 1,833p as the Smirnoff vodka to Guinness company reported slower sales growth of 1.8 per cent in the first half, down from 2.2 per cent previously.
However, an earlier an 11 per cent drop in Diageo’s share price was put down to a ‘fat finger’ mistake, when a trader accidentally inputs the wrong price for a buy or sell order into their pricing terminal.
Fat fingers also had an impact for banking giant HSBC earlier as well, with the lenders shares up 10 per cent at one stage to 688p from 630p, prompting an automatic five minute suspension of trading in the shares.
When trading resumed HSBC shares fell back to their previous level and stayed there, up 3.5p to 629.8p.
The London Stock Exchange confirmed the temporary suspension in HSBC shares, and said it was investigating whether the earlier trades would be allowed to stand, or could be cancelled.
The biggest overall stock market faller today was internet media firm Blinkx, which shed over a third of its value with a 59.6p drop to 115.9p.
Traders cited reports that a US academic had questioned the firm’s business practices, although Blinkx was yet to make a statement explaining the precipitous share price fall.
13.00: The FTSE 100 fallers’ board is dominated by firms with exposure to Asia. Diageo warned that emerging markets had become more challenging and its shares were down 5 per cent or 91.25p at 1,819.75p.
The Johnnie Walker and Smirnoff maker said sales growth in emerging markets slowed to 1.3 per cent in the half year, with the figure for the whole group now 1.8 per cent higher against the growth of 2.2 per cent reported for the first quarter.
China’s crackdown on extravagant gifts to officials and weakness in some other markets, most notably Thailand and Nigeria, have impacted the firm.
Not good: Guinness brewer Diageo was the top FTSE 100 faller as it said sales growth in emerging markets slowed to 1.3 per cent in the half year
Markets were on edge after the US Federal Reserve last night announced a further tightening in monetary policy by reducing its monthly bond purchases by $ 10billion (6billion) to $ 65billion (39.3billion).
The FTSE 100 Index, which endured a rollercoaster session yesterday, was 19.5 points lower at 6,525.8,
Rival drinks firm SABMiller, which is also a big player in emerging markets, was down 50.75p at 2750.75p. Other stocks with a focus on Asia for sales also fell, with Prudential off 31.5p at 1212.5p and Burberry down 34p to 1418p.
In a busy session for corporate results, broadcaster BSkyB jumped 3 per cent after it reported a surge of more than 40 per cent in the take-up of products over its Christmas quarter. Shares rose 29p to 873.5p, despite an 8 per cent drop in half-year operating profits caused by higher sports rights costs.
There was better news for Royal Dutch Shell shareholders as new chief executive Ben van Beurden set out his turnaround plans following the company’s profits warning earlier this month. His strategy to focus on improved returns was welcomed as shares rallied 66p to 2308p.
Outside the top flight, shares in Serco slumped another 11 per cent after the troubled outsourcing firm issued another profits warning.
The group, which runs a vast range of services from prisons to rail services, has been given the all-clear to resume bidding for public sector contracts but it still anticipates a mid-single digit decline in revenues this year.
Shares were down 53.9p to 455.9p, while rival firm G4S, which has also been the subject of a criminal probe into overcharging on tagging contracts, was 5.2p lower at 241.7p in the FTSE 100 Index.
09.45: Social unrest and currency problems in emerging markets such as Thailand, Turkey and Argentina have knocked global equities over the past week, along with lingering concerns about an economic slowdown in China, the world’s second-biggest economy and biggest consumer of metals.
The final reading of the Markit/HSBC China manufacturing survey today pointed to fresh signs of a weak start for China in 2014, which further weighed on the FTSE and particularly its heavyweight mining sector.
“Poor data from China is always going to have a knock-on effect on the market,” said IPR Capital director Steven Mayne.
In a busy session for corporate results, satellite broadcaster BSkyB jumped 2 per cent after it reported a surge of more than 40 per cent in the take-up of its products over its Christmas quarter.
BSkyB shares rose 16.5p to 861p, despite an 8 per cent drop in half-year operating profits caused by higher sports rights costs.
There was also better news for Royal Dutch Shell shareholders today as new chief executive Ben van Beurden set out his turnaround plans following the company’s profits warning earlier this month.
His strategy to focus on improved returns offset an, as expected, fourth quarter profit drop and Shell shares rallied 36.5p to 2,162p.
Other oil and gas blue chips were higher in sympathy, with the heavyweight sector’s gain helping limit the FTSE 100’s falls. BP was up 3.0p at 479.8p and BG Group added 1.0p at 1,034.0p, with both firms set to unveil their latest results next week.
Although many investors expect the FTSE to eventually rally to hit a record 7,000 point level in the first quarter of this year, helped by signs of a gradual rebound in the UK and global economy, IPR’s Mayne said now was not the time to buy into the market.
The FTSE 100 index rose 14.4 per cent in 2013 to post its best annual gain since 2009, but has struggled to break above its 2013 peaks since the start of 2014.
08.30: The FTSE 100 opened down 8.2 points at 6,536.1 after a further cut in the US Federal Reserve’s stimulus programme kept investors on edge.
The Fed said it would trim its monthly bond purchases by another $ 10billion to $ 65billion, as it stuck to a plan to scale back its stimulus despite recent turmoil in emerging markets.
Its ‘tapering’ of the programme has prompted traders to withdraw investments from less developed markets, which have seen massive outflows in the past weeks.
Fed watch: Global stocks have suffered sharp losses amid mounting concerns over a number of emerging economies as the US central bank starts to withdraw stimulus
Global stocks have also suffered sharp losses over the past week amid mounting concern over several emerging economies – including Turkey, India and Brazil – leading investors to dump risky assets such as equities.
Michael Hewson, chief market analyst at CMC Markets, noted that no members of the Federal Open Market Committee had dissented from the decision to keep cutting stimulus, and they also seemed prepared to look past the weakness in the last US jobs report of 2013 given better than expected economic data coming from elsewhere.
‘There had been some suggestion that this week’s volatility in emerging markets might have given the Fed pause, but this was never a realistic possibility as it would merely be delaying the inevitable, and would not have sent a good message to the markets.
‘This rare unanimity also suggests that the bar is likely to be very high for the Fed to even consider slowing down the programme, and that it is very much data dependent and not influenced by factors outside of the US.’
Meanwhile, there was gloom from China as a key manufacturing measure slipped to a six-month low, pointing to a weak start for the world’s second-largest economy in 2014.
The Markit/HSBC China manufacturing survey for January dipped to 49.5 from December’s 50.5. A reading below 50 indicates a contraction while one above shows expansion.
Corporate results will be under the spotlight today, with earnings reports due from US giants Amazon, Google, UPS and Exxon.
The Footsie finished down 28.05 points at 6,544.28 yesterday, marking its lowest closing level in six weeks due to investors’ concerns about the impact a further reduction of US monetary stimulus would have on emerging markets.
Stocks to watch today include:
ROYAL DUTCH SHELL: The oil company said it would step up disposals and seek to return a greater share of earnings to investors as it posted fourth quarter profits in line with its downgraded forecast.
BSKYB: The broadcaster posted better-than-expected first-half operating profit after selling an increased number of HD TV services, on-demand movies and box-sets at Christmas, in part offsetting higher sports rights costs.
DIAGEO: The world’s biggest distilled spirits company reported a 1.8 per cent rise in sales for the half-year to December but it was hurt by weakness in China, Thailand and Nigeria.
KAZAKHMYS: The miner reported annual copper output at the top end of its guidance.
LONMIN: The miner posted an increase in quarterly refined platinum production but said it would have to reassess its guidance for the year due to a strike in South Africa which is disrupting production.
NATIONAL GRID/UNITED UTILITIES: Both the utility companies said they were trading in line with expectations.
3I: The private equity group has completed 29million pounds of exits from investments in the three months to December 31, taking its total proceeds for the year so far to 557million.
JOHNSON MATTHEY: The speciality chemicals group said its outlook had improved and it named Robert Macleod as its new chief executive.
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