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Aggreko plunges amid European market sell-off

Fiscal cliff fretting weighs on global markets, but yen weakens and Japanese stock market rises as pro-stimulus Shinzo Abe wins election.

 
Aggreko plunges amid European market sell-off

Shares in Aggreko (AGGK.L) plunged this morning, outpacing a wider market sell-off, after the world's biggest temporary power firm warned over its revenues next year.

Aggreko, which has provided power generation and temperature control systems at events as large as the Olympic Games, the football World Cup and the US Superbowl, dropped nearly 17% to £17.71 after admitting that revenues will be around £100 million lower in 2013.

The company, which matched profit expectations for 2012, warned over a reduction in military revenues as US troops are withdrawn from Afghanistan and uncertainty over Japanese contracts. It will also suffer by comparison with 2012's Olympic boost to revenues.

Despite some support from mining companies including Polymetal International (POLYP.L), Kazakhmys (KAZ.L) and Rio Tinto (RIO.L), the wider FTSE 100 dropped 0.4% to 5,898, with other European markets making similar losses. The euro dropped 0.3% to $1.3151.

Investors were weighing up news that Shinzo Abe was elected as prime minister in Japan, in a landslide victory which is expected to lead to more economic stimulus, bringing down the value of the yen.

‘He will boost the economy and overcome deflation with far-reaching economic stimulus programmes and an expansionary monetary policy,’ commented Marco Wagner of Commerzbank after Abe’s re-election. ‘In the medium-term perspective, the yen is likely to depreciate. At the same time, public debt will rise at a faster pace and antiquated economic structures will be cemented.’

The Japanese currency dropped 0.7% to 83.72 against the dollar this morning in anticipation of more aggressive monetary easing under the Liberal Democratic Party leader.

Japan’s Nikkei 225 equity index rose by nearly 1%.

China’s Shanghai Composite index was also higher, up 0.45%, after China’s new leaders wrapped up their first annual central economic work conference without making any significant changes to the policy path set by their predecessors.

Analysts at ANZ Research summed up: ‘A faster implementation of fiscal programmes centering the urbanization process will propel growth while the monetary policy will tend to be prudent in view of the prevailing uncertainties in the global financial system.’

Ongoing negotiations to avoid the fiscal cliff in the US capped any market gains in Europe today though, as investors fret that a deal won’t be done in time to prevent tax rises and spending cuts automatically starting in the New Year. The Washington Post reports that Republican house speaker John Boehner and president Barack Obama have not spoken since a phone call on Friday.

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