Global markets fell deeper into the red on Monday as investors braced themselves for further ‘tapering’ of US stimulus, with sharp declines for Vodafone and BG Group placing them at the bottom of a tumbling FTSE 100.
The rout that started last week, triggered by fears over the health of emerging markets, looked set to continue.
Europe followed Asian markets down, with Hong Kong shares down 2% and Japan’s Nikkei falling 2.5%. Japan reported its third largest trade deficit on record.
Britain’s FTSE 100 was heading for a fifth consecutive day of losses, down another 1.1% to 6,586. The blue-chip index fell 2.4% last week as jitters over emerging markets turned in to panic, triggered by weak Chinese factory data, sharp currency declines and political instability in several key markets.
Compacting concerns over money flows out of emerging markets, the US Federal Reserve is expected to conclude its two day policy meeting on Thursday with an announcement of further ‘tapering’ of its stimulus scheme. Economists on balance reckon another $10 billion will be sliced off the Bank’s monthly bond purchase pot, meaning just $65 billion a month is pumped into markets.
Investors in emerging markets will be watching particularly keenly as they fret about the impact of the continued taper on flows into these volatile regions.
Vodafone loses AT&T interest
Shares in Vodafone fell 5.2% to 220p after AT&T said it doesn’t plan to make an offer for telecoms company in the next six months.
The US group’s statement puts paid to long running rumours of a bid of up to £90 billion for the popular UK stock. AT&T could return though, suggested City scribblers. ‘Our view remains that AT&T remains interested in European mobile assets and is likely to target Vodafone later in the year,’ commented James Britton of Nomura.
The bad news doesn’t necessarily stop there for Vodafone. ‘Investors should increasingly factor in that 25% of Vodafone’s value is derived from three of the ‘Fragile 5’ markets most exposed to FED tapering,’ noted analysts at Espirito Santo, who rate Vodafone shares as ‘sell’.
In separate news, Bloomberg reported that Vodafone was seeking to make an acquisition of its own, targeting Spain’s Grupo Corporative ONO SA.
BG Group was faring even worse than Vodafone, with shares down 14% to £10.76 after the oil and gas firm warned that production this year and next would miss expectations.
There was at least some good news for investors on the last Monday morning of January. The January Ifo, a reading of German business confidence, increased to the highest level since July 2011, at 110.6, from 109.5 in December.
In this coming week, investors will also get a first look at the strength of economic growth in the US and UK in the last quarter of 2013. UK growth is expected to have slowed slightly, from 0.8% to 0.7%. In the US, economists are pencilling in a decline to 3.3% from 4.1% the previous quarter.