15.30: London shares hovered close to their lows for the session in late afternoon trade as US stocks started cautiously as tensions in Ukraine remained high and following recent weak manufacturing data from China.
With an hour of trading to go, the FTSE 100 index was down 26.9 points at 6,792.9, just above the day’s low point of 6,785.32 having reached as high as 6,828.62 in opening trade.
In early deals on Wall Street, the Dow Jones Industrial Average shed 59.0 points, or 0.4 per cent to 16,479.5, with the broader S&P 500 index and the tech-laden Nasdaq Composite indices both off 0.2 per cent.
US drop: Early falls on Wall Street after recent record highs kept up the pressure on the Footsie today.
With major US indices near record levels after recent advances, investors hesitated to push the market any higher for now. Tuesday’s economic data was a touch disappointing as the US trade deficit fell 3.6 per cent to $ 40.4billion, slightly above the consensus forecast of $ 40 billion.
Financials were among the worst off sectors today, continuing their slide from the previous session following weaker than expected results from JPMorgan Chase, and after US Attorney General Eric Holder’s announced possible criminal prosecutions against banks.
In London, Barclays was a big faller after the bank posted a fall in earnings for the first quarter, with its finance director Tushar Morzaria warning that the weakness seen in the quarter had continued into April.
Barclays shares dropped nearly 5 per cent, or 12.4p to 246.1p.
13.05: The Footsie remained weak at lunchtime weighed by a big fall from Barclays following disappointing first quarter results as the wider stock market struggled for direction.
By mid session, the FTSE 100 index was down 19.0 points to 6,803.5, just holding off the morning low of 6,796.09.
Any cheer over strong figures for the UK services sector today was held back by disappointing Chinese manufacturing figures and ongoing anxiety over Ukraine.
Footsie falls: Weakness in mining stocks and a big fall by Barclays weighed on the UK blue chip index today.
On currency markets, the pound surged to highs not seen since 2009 following data showing a better-than-expected April Markit purchasing managers index (PMI) for the dominant UK services sector, which prompted speculation that a rise in interest rates may be brought forward.
Sterling was up a cent against the greenback to nearly 1.70 US dollars while it was steady against the single currency at just under 1.22 euros.
Among equities, mining stocks were under pressure following the HSBC Chinese PMI manufacturing data which missed forecasts over the weekend, with BHP Billiton down 38.5p to 1,892.5p, while Rio Tinto shed 53p to 3,194.0p.
Anglo American, down 34.5p at 1,530.5p, was also knocked by news that strike action at its South African platinum mines is set to continue.
Elsewhere in the top-flight, Barclays was down nearly 5 per cent, or 12.1p to 246.6p after posting a fall in earnings for the first quarter, with the bank’s finance director Tushar Morzaria warning that the weakness seen in the quarter had continued into April.
The banking sector overall was also weak on concerns over US Attorney General Eric Holder’s announcement of possible criminal prosecutions against banks.
Jasper Lawler, market analyst at CMC Markets said: ‘The banking sector may be in play again today after Eric Holder said no companies were “too big to jail” with the US justice department pursuing criminal charges against BNP Paribas and Credit Suisse. For now it is foreign banks but this is likely a test case for follow-up criminal investigations into US banks.’
HSBC managed to fight against the gloom, however, adding 1.8p at 607.5p ahead of the global banking giant’s first quarter update due tomorrow.
Also on the up, housebuilders bucked the weaker trend, helped by another upbeat broker report on the sector. Following hot on the heels of positive comment on the sector from Citi on Friday, Barclays weighed in today.
‘We see strong fundamentals: greater visibility provided by the extension to the Help to Buy scheme; a largely disciplined land market; and a more supportive planning system. Where headwinds exist, notably the threat of rising interest rates, they remain relatively benign in our view, and 2016 valuations look highly attractive,’ Barclays analysts said in a note.
Among the beneficiaries, the bank raised its target price for Persimmon to 1,540p from 1,333.6p, sending its shares up 49.0p to 1,376.0p.
On the second line, comment from Barclays also helped shares in set-top box maker Pace rebound after falling sharply at the end of last week following a report that two of its US customers – AT&T and DirecTV – could agree a takeover deal.
Barclays said the falls were overdone: ‘While we understand the immediate concerns for Pace (AT&T, DirectTV and Comcast together represent around 57 per cent of Pace’s revenue), we believe the potential outcome from such consolidation – if it is agreed to by the companies and approved by the US Department of Justice and the Federal Communications Commission – would be a net positive for Pace.’
But on the downside, Balfour Beatty suffered a shares plunge that wiped almost a fifth off its market value today after its chief executive quit in the wake of a profits warning.
Balfour was down 18 per cent, or 51.6p, to 234.2p, as Andrew McNaughton resigned from the group with immediate effect, following the disclosure of a £300million shortfall in its UK construction arm.
And baby products retailer Mothercare suffered a City backlash after it emerged that it is renegotiating the terms of its bank loans just seven months after it secured a £90million refinancing facility.
Its shares fell by as much as 9 per cent in the wake of the disclosure in a Sunday newspaper, which was confirmed by sources. It compounded the dire performance of the stock so far this year which has seen it fall by more than half since January.
Mothercare clawed back some of the session’s early losses after the group issued a statement saying it expected to remain within banking covenants. But shares were still down nearly 7 per cent, or 12.4p, at 174.4p.
10.10: The FTSE retreated further from Friday’s nine-week high as the morning session progressed, dragged down by weak results from the likes of Barclays and Aberdeen Asset Management.
By mid morning, the FTSE 100 index was down 19.5 points at 6,802.8, having hit its highest level since late February on Friday.
Fund manager Aberdeen Asset Management was the top FTSE 100 faller, dropping nearly 5 per cent with a 21.5p fall to 424.4p after the firm posted a bigger than expected 3 per cent fall in interim pretax profits as clients pulled money out of its core emerging market and Asian equity funds over the period.
Footsie cautious: US markets found gains yesterday but London shares were still in retreat today
Barclays nearly matched that decline, shedding 12.0p to 246.5p after its first quarter adjusted pre-tax profits fell 5 per cent to £1.69billion as earnings from its investment bank slumped by half, driven by a decline in fixed income, credit and commodities revenues.
The lender’s finance director Tushar Morzaria warned that the weakness seen in the quarter had continued into April.
Richard Hunter, head of equities at Hargreaves Lansdown said: ‘The outcome of the quarter is largely a continuation of the themes outlined at the full year numbers, with Thursday’s strategy announcement likely to be rather more consequential.
‘Inevitably there is likely to be some volatility up to and including Thursday’s announcement … Nonetheless, if some of the rumoured changes are implemented, resulting in a more streamlined and obviously profitable bank, the recent upgrade of the market consensus to a buy will have been vindicated.’
Elsewhere, AstraZeneca shares lost 87.2p to 4,720.8p as some of the takeover speculation fizz evaporated after the Anglo-Swedish firm talked up its portfolio of cardiovascular medicines as it announced regulatory approval for one of its heart drugs in the United States.
Traders suggested the good news on its drugs pipeline could be a counter to Pfizer’s £63billion takeover approach which AstraZeneca rejected on Friday – the third time it has rebuffed the US firm’s overtures.
On the second line, Balfour Beatty was the biggest casualty, losing a fifth of its value after the group’s chief executive quit following a profits warning.
Balfour shares plunged 20 per cent, or 56.4p to 229.4p as Andrew McNaughton resigned from the FTSE 250 company with immediate effect, following the disclosure of a £300million shortfall in its UK construction arm.
With all this bad corporate news around, the market failed to be enlivened by a robust UK service sector purchasing managers’ survey.
Markit’s April services PMI report reinforced the impression that the UK economy got off to a strong start to the second quarter following GDP growth of 0.8 per cent quarter-on-quarter in the first quarter.
The improved services activity in April follows on from other PMI surveys last week which showed manufacturing expansion at a five-month high and construction activity at a robust level.
In total, the composite output index for services, manufacturing and construction output improved to a five-month high of 59.2 in April after easing back to 57.8 in March.
The PMI surveys have added to the ongoing upbeat news on the UK economy, which saw the European Commission now forecast that Britain’s economy will grow by 2.7 per cent this year, compared with a forecast of 2.5 per cent in February.
08.30:The Footsie slipped back first thing, swiftly reversing an opening tick higher as Barclays took a drop after its first quarter update disappointed, while miners reacted negatively to some weak manufacturing data from top metals consumer China.
In early deals, the FTSE 100 index shed 3.5 points at 6,818.9 in cautious trading following the long May UK bank holiday weekend, having ending 13.55 points higher on Friday at its highest close since March 4.
Investors also remained nervous about the situation in Ukraine, with more than 30 pro-Russian separatists killed in fighting near the rebel stronghold of Slaviansk in eastern Ukraine, Interior Minister Arsen Avakov said on Tuesday.
Bank bashed: Barclays was the biggest FTSE 100 faller after the bank said its underlying profits fell 5 per cent in the first quarter from a year ago.
William Nicholls, dealer at London Capital Group said: ‘The markets are struggling for direction at the moment, with good news and bad news counteracting each other in seemingly perfect harmony.
‘The situation in Ukraine looks set to be something that will continue to influence financial markets for a considerable amount of time, and markets will struggle to push much higher until investors can see a real improvement in the situation over in Eastern Europe.
‘On the other hand, economic data is improving all the time in what is becoming an increasingly stable financial situation.
‘‘Today there is a whole host of services data to look forward to in the Eurozone and the UK, followed by the Trade Balance in the US this afternoon. However, given the relatively small impact that resulted from Friday’s non-farm payrolls, this isn’t expected to stir up a storm,’ Nicholls added.
Traders drew some heart from news that Britain’s growth forecasts have been upgraded by the European Commission in another boost for Chancellor George Osborne’s economic policy.
In its latest health check of the 28 members of the European Union, it said growth in the UK was ‘broadening’ and becoming ‘firmly established’. It now expects Britain’s economy to grow by 2.7 per cent this year, compared with a forecast of 2.5 per cent in February and 2.2 per cent in November.
Miners featured heavily among the UK blue chip fallers after the final April HSBC China manufacturing purchasing managers index (PMI) reading of 48.1, released over the weekend, missed estimates (48.4) and showed continued contraction, as well as giving up ground on the preliminary reading (48.3) even if it did tick up from the 48.0 reading seen in March.
Barclays was the biggest FTSE 100 faller, dropping nearly 4.5 per cent, or 11.5p to 247.0p after the bank said its underlying profits fell 5 per cent in the first quarter from a year ago as its investment bank struggled due to a slump in fixed income revenues.
Stocks to watch include:
ASTRAZENECA – The company’s chairman Leif Johansson has urged the British Prime Minister to be neutral as the drug company prepares to step up its defence against Pfizer’s takeover bid, The Financial Times reported. AstraZeneca also said it has won US approval for Epanova, a new pill for heart disease.
GLENCORE XSTRATA – The miner met market forecasts with a 24 per cent increase in copper production in the first quarter of 2014 helped by production expansion at its African and Australian operations.
ABERDEEN ASSET MANAGEMENT – The fund manager posted a 3 per cent fall in pretax profit in the six months to March 31, as clients pulled money out of its core emerging market and Asian equity funds.
REXAM – The company said it has completed the sale of the pharmaceutical devices and prescription retail packaging divisions of its healthcare business.
ROYAL DUTCH SHELL, BG GROUP – Brazil’s oil and natural gas output rose to a 26-month high in March as companies such as Shell and BG Group made up for stagnant output from state-run oil company Petrobras, oil regulator ANP said on Monday.