21st Sep 2015 15:48
LONDON (Alliance News) - UK stocks closed mixed Monday, with the FTSE 100 holding firm despite downward pressure from the mining sector and a massive fall in RSA Insurance shares after Zurich Insurance had pulled out of takeover talks.
The FTSE 100 index closed up 0.1% at 6,108.71, the FTSE 250 ended down 0.3% at 16,893.31, and the AIM All-Share fell 0.3% to 739.82.
In Europe, the CAC 40 in Paris outperformed other indices to close up 1.1%, while the DAX 30 in Frankfurt added just 0.3%. Shares in Volkswagen weighed on the German index and closed the session down 19% after the European car giant was accused by the US government of installing software to defeat emissions controls on nearly half a million diesel vehicles sold in the US since 2008.
The US Environmental Protection Agency charged that Volkswagen used software, dubbed a "defeat device", on these vehicles that turned off emission controls during all normal driving conditions and turned the full emissions controls on only during an emission test.
Volkswagen's Chief Executive Officer Martin Winterkorn apologized for customers' "broken trust". The company has ordered an external investigation of the matter and said it would halt American sales of popular diesel-powered cars.
In New York at the London close, the Dow Jones Industrial Average traded up 1.0%, while the S&P 500 index and the Nasdaq Composite both were up 0.9%.
Following the US open, the National Association of Realtors said existing home sales in the US fell by much more than expected in the month of August.
NAR said existing home sales tumbled by 4.8% month-on-month to a seasonally adjusted annual rate of 5.31 million in August from a downwardly revised 5.58 million in July. Economists had been expecting existing home sales to dip to a rate of 5.50 million from the 5.59 million originally reported for the previous month.
Despite the monthly decrease, NAR noted existing home sales have risen year-over-year for 11 consecutive months and are 6.2% above a year ago.
Spreadex financial analyst Connor Campbell said it is difficult to determine whether the fall in existing home sales helped drive US stock gains.
"Traditionally in 2015, weak American data has been a boost to the markets, but the violent reaction to the Fed’s decision to keep rates the same last week complicates the bad data/strong Dow relationship that had been so strong this year," Campbell said.
In London, RSA Insurance closed down 21% at 403.30 pence, by far the worst performer in the FTSE 100, after RSA confirmed an earlier statement by Zurich Insurance Group saying it had pulled out of talks to buy RSA.
RSA said that as a result of the recent deterioration of trading conditions in Zurich's general insurance arm, it had decided to pull out of the talks. RSA said Zurich had confirmed its due diligence findings were in line with its expectations and it had not found anything related to RSA that would have prevented it from going ahead with the talks.
Zurich cited deteriorating conditions in its general insurance business, both due to wider trading issues but also thanks to a loss of approximately USD275.0 million that the general insurance arm will book related to the series of explosions which took place at a container storage station at Tianjin port in China in mid-August. The explosions in the northern port city killed 145 people and left 28 missing.
Zurich originally disclosed an interest in bidding for RSA at the end of July, a statement which was then followed by weeks of speculation about when a bid would emerge and reports that it was making progress on hiring investment banks to advise on the takeover. That culminated in Zurich making a 550.00 pence per share offer for RSA in August, valuing RSA at around GBP5.59 billion, which RSA then said it would be willing to recommend to its shareholders.
RSA shares are now below their price of 435.50p before Zurich confirmed its interest in July.
Mining stocks were also heavy fallers in London, with Glencore closing down 5.5%, Anglo American down 3.5% and Antofagasta down 2.4%. Miners also were amongst the worst midcap performers with Petra Diamonds ending down 8.9%, KAZ Minerals down 7.3% and Polymetal International down 2.7%.
Standard Chartered closed down 4.2%. The Financial Times reported that the emerging markets-focused bank may be at risk of facing new fines and penalties in the US after an investigation conducted by the FT showed it had continued seeking new business from Iran and Iran-connected companies after committing to stop doing this in 2007.
The FT said the bank, which has paid fines of nearly USD1 billion to US regulators for sanction branches and compliance failures, sought to carry out foreign exchange transactions which would have involved the US dollar, according to documents the paper has seen.
Wolseley ended as one of the best FTSE 100 performers, up 2.1% to 4,223.00 pence after Credit Suisse lifted its price target on the building materials, plumbing and heating supplies company to 4,900 pence from 4,400p, keeping an Overweight rating. The bank believes the company's outperformance in the US can be maintained, as well as its share price strength.
Rotork shares closed down 6.2% after a number of broker downgrades following its profit warning last Thursday. JPMorgan Cazenove and Exane BNP Paribas both cut their target prices on the actuators and flow control products manufacturer, adding to the slew of ratings and price target downgrades at the end of last week.
Meanwhile in Greece, Alexis Tsipras was set to be sworn in for the second time as prime minister as he promised to take steps to repair the near-bankrupt nation's finances.
"Now we have the possibility to climb in the long run," Tsipras said Monday before meeting with Panos Kammenos, the leader of likely junior coalition partner Independent Greeks.
On Sunday, Tsipras claimed a surprise victory in the Greek elections, clinching nearly as many votes as when he rose to power on an anti-austerity platform in January.
Still ahead in the economic calendar Monday, Federal Reserve Bank of Atlanta President Dennis Lockhart speaks before the Buckhead Rotary Club in Atlanta at 1800 BST. On Tuesday, UK public sector net borrowing is at 0930 BST, before the Confederation of British Industry's Industrial Trends Survey at 1100 BST. In the afternoon, the US Redbook index is at 1355 BST just before the housing price index at 1400 BST.
In the UK corporate calendar Tuesday, there are half-year results from Card Factory, Dairy Crest Group, soft drinks company AG Barr and roadside assistance firm AA. Banking and asset management company Close Brothers Group reports full-year results, while spread betting and contracts-for-difference provider IG Group releases first quarter results. In addition, cruise ship operator Carnival releases third-quarter results.
By Neil Thakrar; [email protected]; @NeilThakrar1
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
Anglo AmericanKAZ.LPetra DiamondsStandard CharteredRSA.LRotorkPOLY.LGlencoreWOS.L