Slowing Japan data sparks new global economy worries
With global economy fears somewhat cooled in the previous session following strong GDP results from Germany and France, the FTSE has been succumbed to a new raft of concerns after Japan data revealed under-performing results. However, the FTSE 100 is being helped by a major deal in the oil and gas sector between miner Vedanta Resources (LON:VED) and Cairn Energy (LON:CNE).
Rob Hull
shareprices.com - Monday, August 16, 2010
Japan announced Gross Domestic Product grew at an annualised rate of 0.4 per cent in the second quarter, shocking analysts who had initially forecast a growth of 2.3 per cent. The country is also suffering from rises in the yen which could hamper economic growth for the future, making the outlook for the nation very strict.
Asian markets fell on the report, hitting new lows since June. However, Chinese shares gained after GDP figures for China passed those of Japan, confirming it as the world’s second largest economy behind the US.
The Japanese slowdown was enough to restrict investor interest in high risk assets, mainly banking stock.
Royal Bank of Scotland (LON:RBS) headed the blue-chip losses, down more than 1.7 per cent. And Barclays (LON:BARC), Lloyds Banking Group (LON:LLOY) and Standard Chartered (LON:STAN) are all also in the region of 0.5 and 0.9 per cent down.
Also adding to the decline are insurers after it was confirmed that Aviva (LON:AV) rejected a £5bn approach from RSA Insurance (LON:RSA). RSA fell over one per cent with Aviva trading flat. However, the news also dragged fellow sector stock down with Legal & General Group (LON:LGEN) losing 0.9 per cent.
Prudential (LON:PRU), an insurer that knows much about losing takeover bids after its botched attempt to buy AIG’s Asian arm earlier in the year, is the exception to insurer losses with a gain of 1.4 per cent on the back of a strong interim profits announcement last week.
Prudential’s gains were overshadowed however by two outstanding stock this session – Vedanta and Cairn Energy.
Investors have been buoyed by Cairn Energy’s plans to sell 51 per cent of its Indian operations to Vedanta Resources for a fee close to £5bn.
Cairn Energy’s share price grew over three per cent on the news, but Vedanta Resources surged 5.5 per cent ahead with investors supporting the bid.
Firmer commodity prices helped the wider sector as well as the Cairn deal. Heavyweight mining stock including Anglo American (LON:AAL), Randgold Resources (LON:RRS), Xstrata (LON:XTA) and Kazakhmys (LON:KAZ) are all gaining between 0.8 and 1.1 per cent.
One commodity stock that is suffering however is BP (LON:BP). With news surrounding the Gulf of Mexico spill and capping operations thinning out, the stock was hit with a new wave of fears of a colossal legal bill in the US following the disaster. The shares are topping the FTSE 100 fallers with a decline of 1.7 per cent.
At 11:00BST, the UK’s top index is over 0.2 per cent down, shedding 13 points to drop to 5,262.66.
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