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Subdued summer of investor uncertainty plagues ICAP

Subdued summer of investor uncertainty plagues ICAP

After a summer of subdued trading, Olympic distraction and eurozone uncertainty, can investors be tempted back into markets? Trading has been ‘more muted than expected’ for interdealer broker ICAP (IAP.L).

And although the London-based business has seen ‘some improvement’ in trading volumes this month, it is too early to say whether recent central bank action will sustain investor confidence, the company reported this morning.

The downbeat trading statement, which projected that revenue in the six months ending 30 September would be around 14% lower than the previous year, pushed shares in ICAP to the bottom of a falling FTSE 100, down 15.8p or 4.5% to 328p.

‘Notwithstanding the more recent pick-up in volumes, activity levels remain difficult to predict and it is not yet clear whether signs of improved confidence are sustainable,’ ICAP stated.

But even if trading volumes in the second half remain at current depressed levels, pre-tax profits for the year to 31 March 2013 will still meet current analyst forecasts of between £307 million to £346 million, the company said, owing to cost cuts.

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Shares in insurance company RSA (RSA.L) followed ICAP lower, down 3.6% or 4p to 114p as they went ex-dividend.

Scottish & Southern Energy (SSE.L) was among a small group of blue chips making gains, after brokers at Liberum increased their target price for the shares to from £15 to £16, reiterating their ‘buy’ recommendation.

Cruise operator Carnival (CCL.L) was subject to a trio of broker price target upgrades from Natixis, Deutsche Bank and Investec, after yesterday’s report of better than expected profits. Jefferies, however, went the other way, lowering the shares to a ‘hold’ for valuation reasons.

Meanwhile, Seymour Pierce raises Topps Tiles (TPT.L)'s target from 35p to 46p, while maintaining its ‘hold’ recommendation. Though earnings are unlikely to grow ‘beyond a pedestrian rate’ over the next three years, the company will benefit from ‘increasing direct sourcing and the competitive threat from B&Q appears to have abated following a re-engineering of its tile offer,’ analyst Freddie George said.

China at new low

Wider markets reflected the same concerns about global growth and the eurozone crisis that have hit ICAP’s trading. Ever-falling confidence in China’s economy saw the Shanghai composite index close down 1.2%, to its lowest level since February 2009.

With little UK economic data due this morning to distract investors, the focus was on Spain, where prime minister Mariano Rajoy is under pressure to make a decision on the need to request financial aid. Spain’s benchmark index dropped 2.5%, while its borrowing costs were again on the rise.

Britain’s FTSE 100 was 1% lower at 5799, while the euro dropped 0.25% to $1.286.

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Profile: Kevin Doran's formula for success at AJ Bell

Profile: Kevin Doran's formula for success at AJ Bell

From a degree in theoretical physics to teaching and becoming one of the youngest chief investment officers in the UK, Kevin Doran has certainly had an interesting career.

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