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Energy companies among few winners on a falling FTSE 100

MARKET BLOG: Global markets fall, with SSE and Centrica among the few London blue chips making gains.

Energy companies among few winners on a falling FTSE 100
  • Global markets lower; FTSE drops below 5,800 level
  • Energy companies among few stocks making gains
  • Greek prime minister calls for more time to meet austerity targets
  • Stagecoach profitability 'good' as boss steps back
  • BHP Billiton cuts expansion plans as profits slump

15.30: Just a handful of London-listed blue chip shares are finding investor favour this afternoon, with Scottish & Southern Energy (SSE.L) leading a falling FTSE 100 after the energy company announced it is to increase its gas and electricity bills.

Though shareholders may be eyeing greater returns, pushing shares up 1.4% to £13.57, the rise – and any subsequent hikes from other Big Six energy companies – will spark concerns that consumer finances will be squeezed even further, hitting UK inflation rates.

Centrica (CNA.L), the owner of British Gas, is following in SSE’s wake, up 0.4% at 327p.

The wider FTSE 100 is down 1.1%, with most shares being sold off (see post below). Major European markets are all showing losses, and Wall Street has opened slightly lower, having hit a four-year intra-day high yesterday. The Dow and S&P 500 are both off nearly 0.2%.

Investors have little economic news to focus on, though data on US existing home sales in July showed an improvement, at 4.47 million, from 4.37 million in the previous month. The figure was, however, not as good as expected by the market, raising fresh questions about the strength of the US property market recovery.

‘While sales are moving in the right direction, it will take a long time for the housing market to return to full health. Temporary setbacks in sales are a distinct possibility, but the trend should remain positive’, said Teunis Brosens of ING Bank. 

Markets slide as Greece calls for delayed austerity targets

12.30: European markets have continued to slide in Wednesday trade as Antonis Samaras, prime minister of Greece, has called for more time for the country to meet its austerity targets.

However, Samaras emphasised that the country did not require an additional, third bailout from its international creditors, the European Central Bank (ECB) and the International Monetary Fund (IMF).

The comments were published in German newspaper Bild ahead of a meeting with Eurogroup leader Jean-Claude Junker later today, when Samaras is expected to ask for a two-year extension. This is hoped to kick-start the Greek economy to help the country meet its bailout targets and pay back its debts.

Samaras also warned that a eurozone exit would be a ‘nightmare’, and could mean the end of democracy in the country.

The FTSE 100 shed 1.16%, or 68 points, to 5,790 and the Mid-250 index gave up 1.32%, or points, 154 to 11,486.

Other European stock markets also backtracked: Germany’s DAX index lost 0.86% to 7,029, France's CAC 40 index reversed 0.69% to 3,489, and the FTSEurofirst 300 index of top European shares fell 1% to 1,099.

Stagecoach profitability 'good' as boss steps back

09.49: Investors are selling shares in Stagecoach (SGC.L) today after the group announced that co-founder Brian Souter will step back from the day-to-day running of the transport group and instead become chairman.

The bus and train company announced a string of executive changes alongside a trading statement that broadly met City expectations, with overall profitability ‘good’ according to the company.

In May 2013, Sir George Mathewson will retire from his role as chairman, with a ‘substantive’ role to be taken on by 58-year-old Souter, who will be replaced by finance director Martin Griffiths as chief executive.

Analysts were little fazed by the changes, which will also see Ross Paterson, director of finance and company secretary, appointed as finance director. Joe Spooner of Jefferies, which has a ‘buy’ target for the company, commented: ‘All are well known to the market in their current roles and highly respected, so we expect the progression to be seen as a natural development.’

Stagecoach provided an upbeat outlook: ‘Overall current trading remains good and we believe the prospects for the Group remain positive.’

Analysts at Shore Capital said: ‘We retain our BUY recommendation, despite the outperformance recently, the company to our minds retains decent growth prospects, defensive characteristics and robust cash generation.’

Stagecoach has a 49% holding in Virgin Rail, which last week lost out on the West Coast Trains rail franchise to FirstGroup. But Stagecoach today emphasised that it had been shortlisted for both of the other UK rail franchises it applied for: ‘we are making good progress with our bid for the Great Western franchise.  We will also consider other rail franchise opportunities as these arise.’

Shares, which have risen by 21% over the past year, are down 2.5% this morning, at 289p.

BHP Billiton cuts expansion plans as profits slump

08.44: BHP Billiton (BLT.L) has joined the list of miners hit by weak commodities prices, with its earnings before interest and taxes dropping 15% in 2012.

In a bid to strengthen its balance sheet the company is to abandon a $30 billion (£19 billion) expansion plan at its Olympic Dam copper and uranium mine in Australia and seek cheaper alternatives to developing the site.

Weaker prices for copper, iron ore and coal contributed to the group’s downturn in profits. Losses on the group’s Fayetteville shale gas project, its Nickel West assets in Australia, and charges for the closure of expansion operations at its Olympic Dam project also dented the miner’s balance sheet.  

Marius Kloppers, chief executive of BHP Billiton, has agreed to forgo his bonus following the poor results.

Kloppers said: ‘As we finalised all the details of the project in the context of current market conditions, our strategy and capital management priorities, it became clear that the right decision for the company and its shareholders was to continue studies to develop a less capital intensive option to replace the underground mine at Olympic Dam.’

Analysts at Nomura retained their ‘buy’ status on the stock, as they noted that the full-year 2012 results were in line with estimates. 

Shares lost 32p, or 1.6%, to £19.47 in early Wednesday trade.

FTSE 100 set to fall as Japanese figures disappoint

08.00: Britain’s FTSE 100 is set to open lower, tracking Asian markets overnight, after Japanese export figures disappointed investors.  

The FTSE 100 is expected to open 40 points lower at 5,818 and Germany’s DAX is forecast to open down 42 points at 7,047.

Japan’s trade balance retreated as exports fell 8.1% year-on-year in July, far greater than analysts’ expectations of a 2.9% decline.   

The biggest drop was in exports to Europe, down 25%, and goods sold to the country’s major trade partner, China, fell 12%.

Miner BHP Billiton (BLT.L) and construction services company Carillion (CLLN.L) are expected to be among the movers on the FTSE index with the release of their respective full and interim results.

3 comments so far. Why not have your say?

Rose G

Aug 22, 2012 at 14:08

While on holiday in Corfu, I got speaking to one of the crew on our boat and he was not happy with how Germans apparently could buy their cars from Greece for less than the Greeks could get the same car in their country or in Germany.

How does this come about? What kind of trade agreements between EU countries that allow this to happen?

In Corfu, the whole economy is aimed at tourists. I was disappointed that even locally people hardly bothered with growing their own vegetables as their produce (in terms of effort & price), cannot cope with products and prices in the EU.

Corfu is one of the greenest of the Greek islands yet their main crop remains olives, which I could not find in their local shops, and qumquats (tiny oranges). During my travels from north to south, there were just olives galore - not sure if they are exporting these or just for local use because when I ordered a Greek salad, I was not very happy, because apparently olives are a separate order - what constitutes a Greek salad then?

On a more positive note, at least they (Corfiots) inspite of being invaded by all and sundry, have not industrialised their country like we have in the UK. During my travels, I noted just one quarry where they were digging out local stone/products. They have not raped their country till it bleeds and for that we can only admire them.

On the whole, I hope the Greeks make it in one piece, but only the future will reveal what it holds for the people in Greece - shame they decided to get involved in Germany's pet project, the Eurozone and are having to pay the price for it!

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Blind Jack

Aug 22, 2012 at 17:31

You ask how they can have such bizare economics that Germans can buy German cars in Greece cheaper than in Germany or that Greeks can buy. I have seen this before between Germany and Spain in the 90's.

Germany exports cars to Greece without paying domestic purchase tax (to encourage exports).

Greece also then allows any of its cars to be exported without domestic tax, including German imports.

Germany then allows imports from Greece (including anything they have exported to Greece and Greece is then exporting on). Germany does not charge import tax presumably because it is from an EU country.

So anybody in Germany buying a German car from Greece gets a bargain.

O what a tangled web we weave, when we set out to deceive. The EU has alot to answer for.

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part timer

Aug 23, 2012 at 10:59

what about price of Scotch whisky in most of EU or Gib as compared to UK

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