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Investors clobber Spain as crisis deepens

Global markets sour as Spanish bond yields hit 15-year high

Investors clobber Spain as crisis deepens
  • FTSE, euro down as pressure mounts on Spain
  • Vodafone shares drop after trading update confirms weakness in Italy and Spain
  • Resolution cancels plans to dish out £250 million to shareholders
  • Goal! Soccer Centres accepts £73 million bid from Teachers
  • Dawson International inches towards administration
  • Eurozone ministers approve Spanish bank bailout

17.00: Investors clobbered Spanish shares and bonds on Friday afternoon, sending benchmark government bond yields to 15-year highs after the region of Valencia requested state aid.

Spain’s 10-year bond yield rose to 7.3% after eurozone finance ministers approved a loan of up to €100 billion to support the country’s ailing banking system.

The Ibex 35, the country’s benchmark index, tumbled 5.8%. Jitters spread to Italy as the Borsa Italiana fell 4.3%.

John Higgins, economist at Capital Economics commented: ‘As the reliance of the Spanish government on its banks for funding grows, so the likelihood of Spain requiring a full-blown sovereign bail-out grows too. We continue to think the latter is only a matter of time.’

The FTSE 100 shed 1.09%, or 67 points, to 5,652 and the Mid-250 index gave up 0.66%, or 74 points, to 11,169.

It brings to a close a mixed week as the FTSE 100 fell 6 points, and the FTSE 250 added 125 points.

Spain's bank bailout approved

14.45: Eurozone finance ministers have approved a loan of up to €100 billion (£78 billion) to recapitalise Spanish banks.

The loan should serve as a backstop until the full extent of bad debt held by the sector is reported in September. Concerns about the country’s finances have pushed its ten-year bond yields higher to 7.25%, up 23 basis points, in Friday trade.

European stock markets continued their downward trend: Germany’s DAX index shed 0.96% to 6,693; France's CAC 40 index lost 1.45% to 3,216; and the FTSEurofirst 300 index of top European shares gave up 1% to 1,054.

Stateside Microsoft has also recorded its first loss as a public company, with a $492 million (£314 million) net loss in the last quarter.

Its balance sheet was hit as the company wrote down the value of its online business and deferred revenues from its upcoming Windows 8 programme.

Dawson International inches towards administration


11.40: Shares in Dawson International (DINT.L) have tumbled 0.65p, or 56.5%, to 0.5p as the Scottish textile maker inches towards administration as a result of its burgeoning pension deficit.  

It failed to reach an agreement with the Pension Protection Fund (PPF) after seeking a loan to cover its £50 million pension deficit in return for a loan note and an equity stake in the business.

The company has made contributions of £2.2 million in the past year, but deficits widened as it shelled out £1.4 million in advisory fees over the past four years.

In a statement Dawson International said: ‘The company simply has no more to offer… the board cannot understand this decision.’

The biggest shareholder is Asia-based textiles producer Leeds Group (LDSG.L), with a 28.7% holding.

The GAM Exempt Trust UK Opportunities fund also has a large holding in the company, with 2.35% of the company.

Kenmare Resources raises £38 million from investors

11.00: Kenmare Resources (KMR.L), the Irish miner backed by Thomas Dobell of the M&G Recovery fund, slips 2% or 0.75p to just over 34p after completing a £38.4 million placing of new shares. It plans to use the money to expand the Moma titanium mine in Mozambique, its main asset. The shares have fallen 26% this year after reaching a near all-time high of 61p in February.

Goal! Soccer Centres accepts £73m bid from Teachers

10.30: Goals Soccer Centres (GOAL.L), the five-a-side football pitch operator, has accepted a £73.1 million bid from one of Canada's largest pension funds. The Ontario Teachers' Pension Plan has agreed to pay 144p per share, 6.7% more than yesterday's closing price.

The shares have risen 11.3p or 8.4% to 146.3p as investors wait to see if Patron Capital will respond with counter bid. The private equity firm already owns Goals' rival Powerleague and had expressed interest in making an offer.

Top shareholders in Goals include funds run by Aviva Investors, Hargreave Hale and Hermes Fund Managers. The company runs 43 pitches across the country and employs 800 people. Teachers claimed its bid was a 'win win' for investors, employees and customers.

UK misses borrowing forecasts

10.09: Having been warned yesterday by the IMF of the potential need to scale back its austerity plans, the British government's fiscal credibility has taken another blow today after figures showed higher than expected public borrowing. 

Public sector net borrowing was £14.4 billion in June, £0.5 billion higher net borrowing than in June 2011, when net borrowing was £13.9 billion.

‘Three months into the fiscal year, and Mr. Osborne is already facing an almighty struggle to meet his fiscal targets for 2012/13 and looks ever more likely to miss them,’ commented Howard Archer of IHS Global Insight.

Resolution cancels shareholder payout

09.11: Resolution (RSL.L), the UK life-insurance consolidator, has disappointed investors this morning by cancelling plans to dish out £250 million in a capital return.

Shares dropped 6.8% to 212p after the stock market announcement that said it would be 'inappropriate' to offer investors the sweetener amid ‘heightened investment, economic and regulatory uncertainty’.

Mike Biggs, chairman of Resolution, said ‘I understand that shareholders will be very disappointed.’ The company sought to assure investors that its capital position 'remains robust'.

The cash had been pledged over a year ago, alongside another £250 million that was spent on a share buyback.

Eamonn Flanagan of Shore Capital agreed that the announcement was disappointing, but pointed to the share’s appeal: ‘We expect the stock’s income attractions, in particular, to offer some downside protection…we reiterate our HOLD recommendation.’

European weakness weighs on Vodafone shares

08.28: A poor performance in Italy and Spain, which have been hard hit by increased competition and economic weakness, has as expected dragged down Vodafone’s revenues over the past quarter, the company confirmed this morning.

Shares in the dividend favourite, which yesterday hit their highest level in a year, at 186p, are down 1.6% this morning to 180p.

‘Despite the difficult market conditions, particularly in southern Europe, we continue to make progress in the key areas of data, enterprise and emerging markets, while maintaining tight control of our cost base,’ Vodafone (VOD.L) chief executive Vittorio Colao said, commenting on the results for the three months to 30 June.

The company’s 45% stake in US mobile operator Verizon Wireless (VZW) once again proved its saving grace, with service revenue growth of 8.2%. Overall group revenues grew by 0.6%, at the lower range of analyst forecast.

The group left its outlook for the full year unchanged.

Shares and euro drop back as Spain under pressure

08.03: European markets opened down this morning, and the euro was lower as investors turn again on Spain.

The euro is trading down, 0.2% against the dollar at $1.2255, ahead of today’s move by eurozone finance ministers to finally approve Spain’s banking bailout.

The Dutch parliament and German lower house have approved the loans, while the Finnish congress votes today.

‘The precise amount of the loan as well as the potential restructuring needs of Spanish banks, however, will only be determined in September following the bank-by-bank stress test of the country’s 14 largest lenders, which together account for around 90% of Spain’s banking sector,’ Tobias Blattner of Daiwa Capital Markets said.

Spanish benchmark bond yields remain above 7% this morning, while the spread over German debt reached a new record high. Spanish cities were last night again gripped by mass protests against the government’s austerity cuts.

Spain’s Ibex stock index is flat, while Britain’s FTSE 100 is down 0.33% at 5,694.

US stocks made gains yesterday as earnings season continues. Microsoft last night reported its first ever loss, while Morgan Stanley’s quarterly revenue declined due to a slowdown in trading and deal-making volumes.

However, IBM raised its full-year outlook, eBay's profit beat forecasts, Google pleased with a jump in profits and Qualcomm said it expects a ‘strong December quarter’.

Shares in Asia though fell amid speculation China will keep property curbs in place and as US economic reports missed estimates.

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The Accumulator: FTSE see-saws on trade war fears

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