By This Is Money Reporters
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17.30 (CLOSE): Blue-chip shares suffered a negative start to the week as escalating tensions over the Ukraine, together with fears over the Chinese economy and the pace of recovery in the eurozone combined to weigh on investor sentiment.
The FTSE 100 Index slipped 36.8 points to 6520.4 as Russian troops seized Ukrainian ships and military installations in the Crimean peninsula.
Tokyo’s Nikkei index had earlier jumped 1.8 per cent on hopes that the latest disappointing manufacturing report from China would prompt leaders to introduce growth measures focusing spending on infrastructure and reforms.
Russian force: Worries about the situation in Crimea weighed on European stock markets today
But there was no such bounce for European stocks after a survey of factory purchasing managers showed the region struggled to make headway in March as the headline index fell slightly to 53.2, indicating very modest growth.
France’s Cac 40 and Germany’s Dax were sharply down, each losing more than 1 per cent. On Wall Street, the Dow Jones Industrial Average was also in the red at the time of the close in London.
On currency markets, the pound held firm at 1.65 US dollars and 1.20 euros.
Energy companies were among the fallers in London after the Sunday Times said regulator Ofgem was expected to announce its intention to refer the big six energy companies to the new Competition and Markets Authority.
As the move could potentially lead to the separation of their power generation and retail arms, SSE and British Gas owner Centrica were down by 35p at 1475p and 6.4p at 331.5p respectively.
Meanwhile, Lloyds Banking Group rose more than 1 per cent after Investec Securities restored its buy rating on the part-nationalised bank. Shares were 1.1p higher at 78.5p.
Fellow state-backed bank Royal Bank of Scotland climbed 4.5p to 303.6p while Barclays lost 1.8p to 234p.
Supermarkets recovered some of the ground lost in recent sessions as Tesco rose 2.4p to 293.4p, Sainsbury’s added 0.9p to 310.4p and Morrisons lifted 1p to 212.2p.
However, bookmaker William Hill continued to lose value in the wake of the Chancellor’s decision to increase duty on fixed-odds betting machines from 20 per cent to 25 per cent at an estimated annual cost to Hills of around 22 million.
Shares dropped by another 3.2p to 335.9p to leave the bookmaker 11 per cent lower than sit was the day before last week’s Budget.
In the FTSE 250 Index, shares in Carphone Warehouse dropped after it was given more time to discuss a potential 4billion merger plan with Dixons Retail.
The Takeover Panel’s deadline for the two companies to announce their intentions was extended from today to May 19.
Details of the possible merger between the owner of PC World and Currys and mobile phone retail giant Carphone Warehouse were revealed last month, sending shares in both companies soaring.
Carphone shares fell 5 per cent or 16.4p to 322.9p after it transpired that the initial deadline would not be met. Dixons stock was also down during the session but recovered to close 0.1p up at 50p.
The biggest FTSE 100 risers were BG Group, up 20.5p to 1082.5p, Royal Bank of Scotland up 4.5p to 303.6p, Lloyds Banking Group up 1.1p to 78.5p and Diageo up 19.5p to 1819.5p.
The biggest FTSE 100 fallers were Randgold Resources down 204p to 4627p, Fresnillo down 33p to 852p, Smiths Group down 43p to 1280p and Hargreaves Lansdown off 40p at 1374p.
15.00: The Footsie stayed weak in midafternoon trade as US stocks also made cautious early progress today with market sentiment fragile due to the tensions in Ukraine and the prospect of slower economic growth in China.
With an hour and a half of trading to go, the FTSE 100 index was down 31.8 points at 6,525.4, reversing all and more of the previous session’s gains.
In New York, the Dow Jones Industrial Average was 46.4 points lower at 16,256.4, extending falls seen in late trade on Friday.
Miners retreat: Weak manufacturing data from China weighed on heavyweight mining stocks today
Miners were weak following a lower-than-expected HSBC purchasing managers index for top metals consumer China, with Randgold Resources down 137.3p to 4,693.7p, Antofagasta off 8.5p to 798.0p, and BHP Billiton 10.0p easier at 1,799.5p.
Keith Bowman, equity analyst at Hargreaves Lansdown, said: ‘We are seeing signs of a slowing Chinese economy. But weaker economic indicators also raise hopes that the authorities will take further action to help stimulate growth. That explains why losses in mining stocks are limited today.’
Energy firms were also under pressure on concerns of possible break-up moves, with SSE off 36.9p to 1,473.1p and Centrica down 6.2p to 331.7p respectively after the Sunday Times said the Competition and Markets Authority could force big energy firms to separate their power-generation and retail arms.
‘A break-up of generation and retail wouldn’t do anything (to gas prices) but increase the cost of operations,’ Kepler Cheuvreux analyst Ingo Becker said.
Elsewhere, International Consolidated Airlines Group, which owns British Airways and Iberia, was the top FTSE 100 faller, down 11.7p to 408.9p after Morgan Stanley removed the stock from its ’Europe Best Ideas’ list.
And housebuilder Barratt Developments fell 7.7p to 395.7p after Davy Research downgraded its rating to ‘neutral’ from ‘outperform’.
12.40: The Footsie continued to struggle today after separate reports fuelled fears over the Chinese economy and the pace of recovery in the eurozone.
The continued tensions in Ukraine also played a part in the disappointing start to the week, with the FTSE 100 index down 20.2 points at lunchtime to 6536.9.
Asian markets had gained overnight, with Tokyo’s Nikkei 225 index jumping 1.8 per cent on hopes that the latest disappointing manufacturing report from China will prompt leaders to introduce growth measures focusing spending on infrastructure and reforms.
Double trouble: Concerns over the economic slowdown in China and the tensions between Russia and Ukraine weighed on European markets today
But there was no such bounce for European stocks after a survey of factory purchasing managers showed the region struggled to make headway in March, with the DAX 30 index in Frankfurt and CAC 40 index in Paris both down 0.6 per cent.
Markit’s eurozone Composite Purchasing Managers’ Index, which is based on surveys of thousands of companies across the continent and is seen as a good growth indicator, edged down to 53.2 from February’s 32-month high of 53.3, just missing economists’ expectations.
Kathleen Brooks, research director UK EMEA at FOREX.com said: ‘The latest PMI data for March has failed to impress the markets. Although French data surprised to the upside, the market does not seem to be buying it.
‘The composite PMI rose to its highest level since 2011, however this is only the first reading and it could be subject to downward revisions, especially since other French data has not been this strong.
‘Of more concern to the market may have been the decline in German data, which suggests that the Eurozone power house is coming off the boil.’
In London, energy companies came under pressure following suggestions they might be broken up as part of a competition investigation, with British Gas owner Centrica losing 5.2p at 332.7p and SSE down 38.9p at 1,478.1p.
Elsewhere chip designer ARM Holding shed 11.0p at 983.5p impacted by a sell note from analysts at Liberum.
‘We forecast Arm’s royalty revenue growth to decelerate to 12.5 per cent over the next 5 years, from 16.7 per cent in the previous five. Assuming licensing growth declines to a high single digit percentage from 2015, we forecast Arm’s five year earnings per share growth to slow to 12.6 per cent compound annual growth rate, well below current consensus of about 20 per cent,’ Liberum analysts said in a note.
But among the blue chip gainers, insurer Legal & General recovered 3.1p to 209.1p after big falls last week falls in the wake of the proposed pensions changes in the Budget.
While Lloyds Banking Group was lifted by an upgrade in rating to buy from Investec Securities, adding 1.1p at 78.5p.
In the FTSE 250 Index, shares in Carphone Warehouse and Dixons Retail dropped after they were given more time to discuss a potential 4billion merger plan.
The Takeover Panel’s deadline for the two companies to announce their intentions was extended from today to May 19.
Details of the possible merger between the owner of PC World and Currys and mobile phone retail giant Carphone Warehouse were revealed last month, sending shares in both companies soaring.
But both stocks fell today, with Carphone down 11.9p at 327.4p and Dixons 0.4p lower at 49.5p.
Industrial group Diploma saw its shares top the FTSE 250 fallers list, dropping over 11 per cent or 87.5p to 687.5p after it warned of the impact of rises in sterling on its results.
Diploma said its first half revenues would grow by 5 per cent, compared to 10 per cent last year, with full year profits now expected to be at the same level as last year.
Shore Capital analyst David O’Brien said: ‘This is very disappointing, particularly when one considers the full year effect of current year and prior year acquisitions.’
But midcap energy services group Kentz gained 50.0p at 783.0p after posting over a 12 per cent rise in annual profits.
Among the small caps, shares in Albemarle & Bond were suspended today after the stricken pawnbroker was told by its lenders that they will not be able to support its plans to save the business.
The banks’ rejection of the management strategy means there are just seven days left to find a solution for the Reading-based group before a March 31 deadline.
It warned that, while it had enough cash to carry on trading, it would be unable to meet liabilities if all its debts are called in at that time.
Trading in the Aim-listed stock was suspended at 6.65p, with the shares having lost about 97 per cent of their value in the last year.
10.10: London shares extended their falls as the morning session progressed as continued uncertainty over Ukraine played a big part in a disappointing start to the week, with energy firms big fallers on worries over a possible competition inquiry.
By midmorning, the FTSE 100 was 24.8 points lower at 6,538.7, just holding off the early session low of 6,526.6.
Markus Huber, senior sales trader/senior analyst at Peregrine & Black: ‘Markets although less than during the last couple of weeks are expect to continue to be driven by political events surrounding Crimea.
Energy probe: Energy firms such as British Gas owner Centrica were weaker today awaiting news on a possible probe into prices
‘Also there are still plenty of worries out there which are weighing on markets that Russia might not be stopping at Crimea and instead might target other Russian speaking areas in the Ukraine and adjoining countries.
‘There is some data out in Europe and the US today although their impact is likely to be rather limited and their effect on markets fairly short-term with traders quickly turning their attention back to the Crimean crisis.
‘Overall despite the outlook for stocks and global growth still remaining positive for 2014, any further substantial move to the upside might have to wait for now as traders continue to take a cautious approach and prefer to wait and see how Crimea plays,’ Huber added.
Energy providers featured heavily on the blue chip fallers list with the Big Six gas and electricity suppliers expected to hear soon, possibly later this week, whether there is to be a full competition inquiry into the industry.
The financial, energy and consumer regulators have been reviewing the working of the market for the past three months, and are expected to publish a final report within days. There is speculation the report could trigger a full competition inquiry.
And Consumer group Which? and the Federation of Small Business (FSB) have united to draft a joint letter to the Office of Fair Trading, Ofgem and the Competition and Markets Authority, saying that competition needs to be increased.
Nine in ten consumers believe the energy market should be referred for further investigation, the groups said, while seven in ten are worried about energy prices. Just one in five trust energy companies, they said.
Among the sector, British Gas owner Centrica was down 3.9p at 334p, while SSE shed 25p at 1,485.0p, and United Utilities lost 13.3p at 791.2p.
Bookmaker William Hill also continued to lose value in the wake of the Chancellor’s decision to increase duty on fixed-odds betting machines from 20 per cent to 25 per cent at an estimated annual cost to Hills of around 22million. William Hill shares dropped another 6.4p to 332.7p.
But among the FTSE 100 gainers, Lloyds Banking Group rose more than 1 per cent after Investec Securities restored its buy rating on the part-nationalised bank.
‘After a 10 per cent 10-week pull-back, we again see reasonable value for a low-risk stock. Upgrade to Buy,’ Investec analysts said in a note.
Lloyds shares were 1.1p higher at 78.5p, while Royal Bank of Scotland and Barclays were both flat at 299.6p and 235.95p respectively.
Supermarkets also recovered some of the ground lost in recent sessions on price wars fears, as Tesco rose 3.95p to 294.85p and Sainsbury’s added 3.65p to 313.15p.
09.15: The Footsie was lower in early deals this morning, slipping back after Friday’s modest gains in tandem with weaker US markets as the twin concerns over the tense situation in Ukraine and a slowdown in the Chinese economy continued to weigh.
After an hour of trade, the FTSE 100 index was down 5.1 points at 6,552.1 having added 14.73 points on Friday.
Michael Hewson, chief market analyst at CMC Markets (UK): ‘Having been caught out a few weeks ago over a weekend it would appear that discretion was the order of the day at the end of a positive week for equity markets overall, in both the US and Europe.
‘This discretion appeared to be validated after Russian troops reinforced their hold on Crimea at the weekend, with further military activity as concerns rose about whether Russia intends to go further with its military incursions.
‘As such, markets in Europe look set to start the week on the back foot as concerns remain about the possible next movements of Russian troops on Ukraine’s eastern border ahead of a visit to Europe by President Obama, with the commander of NATO forces warning of the possibility of a move towards the Moldovan region of Transnistria.
Aside from tensions in Ukraine, worries about the floundering Chinese economy continued against a backdrop of concerns about credit conditions as markets fret about a series of loan defaults from a variety of small Chinese companies.
This morning’s latest HSBC China manufacturing PMI for March showed further deterioration to 48.1, and an eight month low, as the economy looks to try and shake-off its post Chinese New Year lethargy.
‘This weak reading has continued to prompt speculation that the Chinese will embark on some form of program to help mitigate some of the recent weakness, hence this morning’s rebound in Asia,’ CMC’s Hewson said.
No important UK economic data will be released today, but traders will eye Eurozone purchasing managers reports. These are expected to slow slightly to 53 for manufacturing and 52.6 for services PMI.
Stocks to watch include:
STANDARD LIFE -The life and pensions group has announced it is in ‘exclusive and advanced’ talks to buy rival Phoenix Group Holdings’ Ignis Asset Management.
PETROFAC – The oil & gas service provider said it has been awarded an Engineering and Procurement contract by Petroleum Development Oman to provide services for its Rabab Harweel Integrated Project, located in the south of the Sultanate of Oman.
TULLOW OIL – The explorer will become the first oil company to disclose its payments to foreign governments with a level of detail demanded by anti-corruption campaigners, the Financial Times reported.
KENTZ – The energy services firm said it achieved double digit earnings growth, in line with expectations, bucking the trend of rival firms in the sector hit by falling profits as oil companies cut spending.
REXAM – The packaging company said it has received a binding offer worth $ 135 million in cash for the remaining containers & closures division of its healthcare business from Berry.
CO-OPERATIVE GROUP – The troubled Co-operative Bank said it planned to raise around 400million of additional funds via new shares after finding that its capital position was weaker than initially thought.
RSA – The insurer will this week pull the trigger on its emergency cash call to shareholders as Britain’s biggest commercial insurer sets out the terms of its bumper 775million rights issue, The Times reported.
BOVIS HOMES GROUP – The housebuilder said it has signed contracts for two separate private rental sector transactions involving circa 510 homes with a total revenue of approximately 80million.