Market Blog: FTSE drifts as US markets dampen spirits

• European markets rise on ESM hopes
• ARM and Capita winners in FTSE earnings frenzy
• Pound drops but FTSE shakes off weak GDP
• Investors sell GSK as results disappoint
• European economies in focus as markets punish Spain

17.00: Britain’s FTSE 100 has closed flat as US markets opened on the back foot following Apple’s shock earnings miss.  

The benchmark UK index of blue-chip shares shed 0.02%, or one point, to hit 5,498 and the Mid-250 index fell 0.12%, or 13 points, to close at 10,273.

ARM Holdings (ARM.L) rose 8.6%, or 41.7p, to 526.5p to the top of the FTSE 100 after beating analyst expectations, and outsourcing group Capita (CPI.L) added 36p, or 36p, to 713.5p as it secured £1.3 billion in major contracts in the first six months of the year.

One beneficiary from Capita’s performance is the Invesco Perpetual High Income fund, managed by Neil Woodford. The fund holds 3% of the company and Woodford has been increasing his holding since April.

US markets stalled for a second day as investors sold technology stocks after Apple, the biggest constituent of the S&P 500, failed to meet analyst expectations.

On Wall Street the Standard & Poor's 500 index shed 0.18% to 1,336, the Nasdaq Composite index gave up 0.35% to 2,853, and the Dow Jones Industrial Average inched ahead 0.18% to 12,640.  

European markets rise on ESM hopes

15.00: European markets have regained lost ground on hopes that the eurozone bailout fund, the European Stability Mechanism (ESM), could be boosted with funds from the European Central Bank (ECB).

Ewald Nowotny, head of Austria’s central bank and a member of the European Central Bank, said there were ‘pro arguments’ for expanding the firepower of the ESM by giving it a banking licence to allow it to tap the ECB for liquidity.  

The comments came as figures from the Institute for Economic research showed the eurozone crisis is eroding German business confidence as it dropped for the third consecutive month, from 105.2 to 103.3.

However, European stock markets focused on the prospect of a stronger bailout fund: Germany’s DAX index took on 1% to 6,455, France's CAC 40 index gained 0.94% to 3,104, and the FTSEurofirst 300 index of top European shares added 0.26% to 1,021. The Spanish stock market took on 1.24% and Italian Borsa added 1.69%.

 

Investors buy ARM, sell GSK in FTSE earnings frenzy

12.17: Shares in GlaxoSmithKline (GSK.L) have just taken a noontime dive, as investors react to results showing a worse than expected decline in sales and a warning that the outlook for Europe has materially worsened.

The pharmaceutical giant reported earnings per share (EPS) of 26.4p for the second quarter, even less than analysts had been hoping for.

Turnover dropped by 4% to £6.46 billion in the second quarter. ‘Pressures in Europe and the US are responsible for the sales decline we have seen in the second quarter,’ the company stated.

It confirmed a 6% increase in the Q2 dividend to 17p.

Shares are trading down 1.9% at 1417p.

Pound drops but FTSE shakes off weak GDP

10.10: A shockingly steep decline in UK GDP in the second quarter of the year is no less than a ‘disaster’, according to economists.

Read the full story here.

‘Overall – my glass half-full just spilt all over the desk. It is looking very unlikely that UK GDP growth on average for this year can get on the right side of zero – more likely a small contraction,’ said Alan Clarke of Scotiabank.

Howard Archer of IHS Global Insight said while part of the GDP contraction can be attributed to the Jubilee celebrations and wet weather ‘the economy’s weakness clearly runs far deeper than that’.

James Knightley of ING took a different stance, pointing to the lack of statistical information available to the ONS for its first estimate of GDP – one of three – as well as wider questions about the accuracy of the GDP readings. ‘The “final” GDP number has on average been 0.4ppt different to this initial first release once more information comes in,’ he said.

The pound dropped sharply after the data was published, to $1.548 against the dollar. The FTSE 100, which is comprised of mainly outward-facing international companies, was little moved on the data, slightly higher at 5,506.

Another supposed safe haven, Germany, was also hit with more signs of weakness. German business confidence dropped for the third month in a row in July to the lowest in 28 months, according to the Ifo business climate index.

ARM and Capita winners in FTSE earnings frenzy

08.31: Outsourcing group Capita (CPI.L) is competing with ARM Holdings (ARM.L) (see post below) for top spot on the FTSE 100 this morning after announcing it secured a record £1.3 billion of major contract wins in the first half of the year and saw a ‘bouyant sales environment’.

Alongside a string of bullish comments from chief executive Paul Pindar, the company announced that group sales increased by 15% in the half year to £1.607 billion. Organic growth was flat, with sales boosted by acquisitions.

Underlying profit before tax increased by 10% to £190.7 million.

Caroline de La Soujeole, an analyst at Seymour Pierce, commented: ‘The statement paints the picture of a company with strong momentum behind it. We remain buyers with a 770p target price.’

Capita shares are up 2.8% to 696p

Chip designer ARM beats expectations

08.17: Shares in chip designer ARM Holdings leapt to the top of the FTSE 100 after results for the second quarter of the year beat analyst expectations.

Shares in the Cambridge-based company, whose technology powers Apple's iPads and iPhones, rose 1.9% to 494p on a falling FTSE.

ARM announced profit before tax of £66.5 million in Q2 2012, while it hiked its interim dividend by 20% to 1.67p.

Management were confident about the outlook: ‘ARM enters the second half of 2012 with a record order backlog and a robust opportunity pipeline,’ the statement said.

‘Building on our strong performance in the first half, we expect overall Group dollar revenues for full year 2012 to be in line with market expectations.’

European economies in focus as markets punish Spain

07.59: Spain continues to snatch the market’s attention, with bond yields rising again on a day packed with company earnings numbers on the FTSE 100 and the first revision of UK economic growth in the second quarter of 2012.

Spanish 10-year government yields – which move inversely to the price – are up again to a high of 7.74%.

Investors today will receive German IFO business confidence data and the UK Q2 GDP reading, which is expected to show a continuation of recession.

Overnight US and Asian markets followed European shares down, after another day in which investors were spooked by growing fears that Spain will be forced to accept a sovereign bailout.

Technology company Apple missed Wall Street revenue and earnings forecasts for the third quarter of its year.

Outsourcing group Capita (CPI.L) is competing with (see post above) for top spot on the FTSE 100 this morning after announcing it secured a record £1.3 billion of major contract wins in the first half of the year and saw a ‘bouyant sales environment’.