Date: Wednesday 11 Jul 2012
LONDON (ShareCast) - 1630:Close State austerity plans could lead to 4.5m more people losing their jobs in the Eurozone by 2016, according to the International Labour Organisation (ILO). The ILO today said unemployment in the Eurozone could reach almost 22m over the next four years, up from 17.4m, unless policies "change course in a concerted manner". Meanwhile, Fitch Ratings decided to keep the USA´s AAA rating, although the outlook remains negative due to the countrys fiscal position and downside risks emanating from Europe. Elsewhere, Spain announced that it will increase taxes and cut salaries in order to meet its deficit target, to the tune of 65bn over two and a half years. Back in the UK Burberry sank into the bottom spot after underlying sales growth slowed down from 15% in the fourth quarter to 11% in the first quarter. Glencore and Xstrata were amongst the day´s best as investors bet that Glencore will in the end submit a higher second offer. As well, some references were heard today in the market to the effect that Glencore might benefit from rising grain prices given its recent acquisitions in the space. The FTSE 100 ended the day flat at 5,664.
1625: Shares in Vodafone are heading higher in late trading with market commentary citing it as one of three possible buyers of Telia Sonera´s stake in Yoigo, along with France Telecom and America Movil.
1552: US markets have opened easier, offering little encouragement for Footsie to pull out of its slump. Engine designer Rolls-Royce is in the red, despite the company announcing several contract wins this week at the Farnborough Air Show; Airbus, one of the company's major customers, has abandoned its sales target for its A380 airliner. Mid-cap pubs group JD Wetherspoon is on the up, however, after a well-received trading update. 'To achieve 16% earnings growth in this market is a notable achievement, proving once again that it is wrong to bet against Wetherspoon,' says Peel Hunt, which has a 'buy' recommendation on the stock. FTSE 100 is down 15 at 5,649.
1317: Footsie is back in the red. In the mid-cap space Britvic, the soft drinks maker, is getting well-and-truly squeezed. Panmure Gordon notes that the company has not been able to speedily resolve the safety issue relating to its Fruit Shoots product line, which has been subject to a product recall. The broker moves from 'hold' to 'sell' on the Chelmsford firm. 'Whilst Britvic cannot control the weather, we believe the issue surrounding the product recall was avoidable. We have downgraded our forecasts by 25% in FY 2012E [fiscal 2012] and reduced our price target from 350p to 250p,' the broker said.
1203: London equities have made a run for the blue, possibly on the back of better sentiment -at least for today- after Spain announced new budget deficit consolidation measures worth 65bn euros over a two and a half year time span. ARM Holdings is now firmly in the lead on the top share index, while Burberry keeps dropping away following its latest trading statement. FTSE 100 up 6 at 5,671.
1055: More so than ever, under the current circumstances one must be careful not to exaggerate things. However, while the President of the Bundesbank, Jens Weidmann, yesterday seemed to minimise the need to move quickly to solve the crisis in the periphery, other observers seem a tad more worried. Thus, analysts at Credit Suisse write this morning that, although the recent European summit failed to deliver anything substantive in terms of detail or prompt action, the statements were significant inasmuch as they suggest the authorities have finally acknowledged that the institutional architecture of the euro is flawed, as well as features of their rescue policies (
) given the rapid pace at which private sector capital is leaving peripheral countries, failures and setbacks are likely to carry a heavy cost in terms of both financial stability and economic activity in the periphery. The situation, particularly in the case of Spain, is starting to look self-fuelling. So time may be limited. And, in the meantime, economic and financial stress looks set to continue." Thus, investors are now trying to gauge by how long the ESM´s approval will be delayed. Some traders are also looking out to tonight´s minutes of the last meeting of the Federal Reserve´s Open Market Committee for any clues regarding a possible third round of quantitative easing Stateside.
1012: The Footsie has pared earlier losses and is trading just six points lower at 5,659 with ARM, ICAP and Aviva extending gains to lead the risers on the blue-chip index. Leading the fallers is still Burberry after seeing sales growth slowdown from 15 per cent in the fourth quarter to 11 per cent in the first quarter. Sector peers Johnson Matthey and Croda are suffering from downgrades by UBS after it reviewed its coverage of the European chemicals sector, saying that there is 'little value left in crowded defensives'.
0856: Nomura has wasted little time reacting to Burberry's disappointing trading update, lowering its target price for the fashion firm to 1,450p from 1,530p. Merchant Securities, meanwhile, is sticking with its 'hold' recommendation and Morgan Stanley has reiterated its 'equal weight' rating and 1,310p price target. Elsewhere in the retail sector, Marks and Spencer has had its target price trimmed to 385p from 410p by UBS following yesterday's trading update. FTSE 100 is down 23 at 5,641.
0812: It is not often that luxury brand Burberry disappoints the market but it has managed to do so this morning with the shares sharply lower after the firm released underwhelming sales figures for the April to June quarter. Burberry's weakness is contributing to the Footsie's fall, but drugs giant Glaxo is propping up the top-share index a little after it drew attention to positive results in a trial of an HIV drug being developed by a joint venture company in which it has a stake. FTSE 100 is down 27 at 5,637.