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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.
- 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 targets12.30: 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 slump08.44: 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%.
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