US attempt to boost slowing economy fails to lift investor interest
Global markets are in negative territory after recent data has showed a slowdown in the economy, sparking new fears of a double-dip recession.
Kate Neilson
shareprices.com - Wednesday, August 11, 2010
The US central bank said overnight that it would reinvest the money from maturing mortgage bonds it holds to reduce the government debt as a counter to the number of recent reports showing signs of economic slowdown. The funding maintained the size of its balance sheet at $2,300bn, but it did very little to improve investor sentiment which remains cautious over fears of a double-dip recession.
US-based stocks rebounded on the news, climbing to their highest prices at the close of Tuesday’s session. However, Asian markets didn’t respond well to the news and cancelled-out the gains made during August to hit a two-week low.
European stocks also dipped, with German and UK markets being the largest-scale losers.
The FTSE 100 is over one per cent down at 10:00BST, losing over 60 points to drop it to 5,313.84 after nudging above the 5,400 bracket at the start of the week.
High-risk blue-chip stock dominated the declines. Heavyweight bankers, Lloyds Banking Group (LON:LLOY) and Royal Bank of Scotland (LON:RBS), are 3.1 and 2.8 per cent down respectively as investors steer clear of stock that would be hammered hardest by a recession repeat.
Other major high-risk stocks heading share price losses are miners. Copper and other base metal prices dropped overnight as the dollar recovered against other currencies.
Xstrata (LON:XTA), Vedanta Resources (LON:VED) and Rio Tinto (LON:RIO) are the three biggest losers in the sector at the moment, all down in the region of 3.2 per cent.
Individual stocks going ex-dividend scattered amongst mining and banking stock at the top of the FTSE fallers. BT Group (LON:BT.A) was the standout decliner, losing over four per cent.
Also continuing a presence in the fallers charts was TUI Travel (LON:TT) after it announced yesterday it expected full-year profit to be at the lower end of expectations. The parent company of Thomson Holidays and First Choice wasn’t helped by mid-cap group Thomas Cook (LON:TCG) which reported a profits statement of equal optimism, dropping TUI Travel’s share price over three per cent lower.
The outstanding performer of the day so far is Smiths Group (LON:SMIN) with talk of the technology firm being broken up. The break-up of Smiths, which makes security scanners for airports, would create significant value for shareholders. The price has climbed to 1165p, 17p up – or 1.5 per cent – with the stock hitting a year-high earlier in the session.
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