23rd Oct 2018 17:12
LONDON (Alliance News) - Stocks in London ended firmly in the red on Tuesday amid a stand off between Italy and the European Union and worries about global economic growth as Asia markets fell steeply overnight."Much of the selling had its footing in the sharp deterioration in China overnight, coming after markets cast doubt over whether the recent measures are going to be enough to paper over the cracks in their economy amid the recent trade war," said IG market analyst Joshua Mahony.The FTSE 100 index closed down 1.2%, or 87.59 points at 6,955.21, its lowest closing level since late March. The FTSE 250 ended down 2.2%, or 406.10 points, at 18,352.12, and the AIM All-Share closed down 2.0%, or 19.41 points, at 977.44.The Cboe UK 100 closed down 1.1% at 11,821.11, the Cboe UK 250 closed down 2.1% at 16,633.62, and the Cboe UK Small Companies closed down 0.9% at 11,566.61."Continued uncertainty over Italy along with geopolitical tensions have sent stocks tumbling. Italy's Prime Minister, Giuseppe Conte already stated there is no 'plan B'. This has worried investors as they are afraid it could spark another round of the eurozone debt crisis," said David Madden, market analyst at CMC Markets.On the London Stock Exchange, gold miner Fresnillo ended as the best blue chip performer, up 9.1% and peer Randgold Resources also closed up 3.8% tracking spot gold prices higher.Gold was up quoted at USD1,233.80 an ounce at the London equities close against USD1,221.20 late Monday. The precious metal hit an intraday high of USD1,239.49 - its highest level since mid-July. In addition, British American Tobacco and Imperial Brands ended up 4.2% and 1.5%, respectively. Deemed defensive assets, tobacco stocks often rise during times of market turmoil. At the other end of the large cap index, St James's Place closed down 5.3% despite the wealth manager posting a rise in third quarter funds under management due to increased investment returns and continued fund inflows.The company's funds under management stood at GBP100.59 billion at September 30, up from GBP85.69 billion a year ago. The rise in assets was also attributed to strong retention of client funds, which stood at 96%."Shares have fallen 17% since mid-June on the back of the general market sell off and concerns around Brexit. St James's Place continues to deliver market leading flows and has reached GBP100 billion of funds under management for the first time despite the market pressures," said Shore Capital.Whitbread closed down 1.5% as the hospitality firm put its faith in its Premier Inn hotel offering as a means to generate growth, with the company in the process of selling its Costa Coffee shop business. The company also warned that recent the economic environment and political issues, such as Brexit uncertainty, alongside inflationary pressures in the consumer sector would be detrimental to growth."The combination of our commitment to the investment programme and the current UK consumer environment naturally means our near-term profit growth may be lower than in previous years," Whitbread said.In the FTSE 250, Plus500 ended as the best performer up 9.0% after the contracts-for-difference provider said it expects full-year trading to be ahead of expectations despite a weaker third-quarter performance, as it also initiated a share buyback programme. For the nine months ended September, revenue rose 86% to USD565.6 million from USD304.9 million the year prior. This was after the number of active customers rose 74% to 278,529 from 160,090 the year before. This was helped by a jump in new customers to 114,832 over the first nine months compared to 96,373 new adds the period prior. In addition, Plus500 approved a USD10 million share buyback programme to be started immediately. In Paris the CAC 40 ended down 1.7%, while the DAX 30 in Frankfurt ended 2.2% lower. The euro was flat at USD1.1483 at the European equities close, against USD1.1467 late Monday after the Italian budget was rejected by the European Commission and the country was granted three weeks to submit a revised plan.The European Commission stated that the draft budgetary plan constituted serious non-compliance with the fiscal recommendation addressed by the Council in July. Consequently, Italy was told to submit a revised draft budgetary plan within three weeks.In response, Italian Interior Minister Matteo Salvini said the country would not make any changes to its budget plan despite the European Commission having rejected it."Nothing will change, the speculation can stop, there is no way back," Salvini said according to the Ansa news agency.Italy's flagship FTSE MiB index closed down 0.9%. The pound was flat quoted at USD1.2982 at the London equities close, compared to USD1.2982 at the close Monday.In domestic political news, UK Prime Minister Theresa May has ordered weekly updates from senior ministers on preparations for EU withdrawal either with or without a deal.The updates will be delivered at the regular Cabinet meeting by Brexit Secretary Dominic Raab, who told ministers on Tuesday that "good progress" was being made on preparing for both possibilities.The meeting came as May faced increasing pressure for a breakthrough in talks with the EU, after last week's summit ended with no deal.May told MPs on Monday that the terms of Britain's withdrawal from the EU were 95% agreed but the "sticking point" remained the issue of the Irish border.However, critics on all sides in the Commons took aim at the prime minister after she confirmed that she could accept a short extension to the transition period after the UK leaves in order to secure a final settlement.Stocks in New York were sharply lower at the London equities close as weakness in overseas markets spread across the pond. The DJIA was down 1.5%, the S&P 500 index down 1.6% and the Nasdaq Composite down 1.8%.Computer hardware, steel, transportation, and chemical stocks are also seeing substantial weakness, reflecting a broad based sell off on Wall Street."Equity prices have also been hit by valuation concerns, which is especially the case on Wall Street. Compared to the rest of the world, US shares had been getting extra support due to a stronger US economy and more recently as a result of Trump's tax cuts and companies buying back their own shares," Forex.com analyst Fawad Razaqzada said ."But the impact of the tax cuts are beginning to fade and with employment at full throttle and interest rates on the rise, the economic expansion could be slowing soon at the world's largest economy," Razaqzada added.In the bond market, treasuries have moved significantly higher amid the sell-off on Wall Street. As a result, the yield on the benchmark ten-year note - which moves opposite of its price - is down by 7.6 basis points at 3.120%."Stocks are undermined by growing concerns over rising bond yields with a few major central banks being on a hike of cycle with a few more set to join them next year. As the so-called 'risk-free' yields rise, this reduces the appeal of other higher-yielding assets such as stocks," noted Razaqzada.In US corporate news, Caterpillar shares were down 7.2% in New York, falling to their lowest level this year, after the construction equipment maker reaffirmed its full-year earnings guidance as opposed to raising its forecast. In addition, the company's comments about the impact of tariffs may also be weighing on the stock."Manufacturing costs were higher due to increased material and freight costs. Material costs were higher primarily due to increases in steel prices and tariffs," the company said.McDonald's was up 5.8% in New York after the burger chain reported earnings and revenues for the third quarter that trumped Wall Street analysts expectations.McDonald's profit dropped to USD1.64 billion, or USD2.10 per share, from USD1.88 billion, or USD2.32 per share, the previous year.Last year's bottom line included a gain of USD0.56 per share. Excluding one-time items, earnings per share increased 19% from last year.On average, 27 analysts polled by Thomson Reuters expected earnings of USD1.99 per share for the quarter. Analysts' estimates typically exclude special items.McDonald's revenues fell 6.6% to USD5.37 billion from USD5.75 billion last year. Analysts had a consensus revenue estimate of USD5.32 billion for the three-month period.Post-It note maker 3M said it now expects adjusted 2018 earnings to be in the range of USD9.90 to USD10.00 per share versus prior expectation of USD10.20 to USD10.45. The company noted that the update to the ranges reflects an estimated full-year earnings headwind of USD0.05 per share from foreign currency versus a prior expectation of a benefit of USD0.10 per share.3M shares were down 5.9%. Brent oil was sharply lower quoted at USD76.93 a barrel at the London equities close from USD79.78 at the close Monday.Oil prices fell after Saudi Arabia said it would play a "responsible role" in energy markets, ahead of upcoming sanctions on Iran, CNBC reported.According to the American broadcaster, Saudi Energy Minister Khalid al-Falih told a conference in Riyadh on Tuesday the oil market was in a "good place" and he hoped oil producers would sign a deal in December to extend cooperation to monitor and stabilise the market.The economic events calendar on Wednesday has PMI readings from France, Germany, the eurozone and US at 0815 BST, 0830 BST, 0900 BST and 1445 BST. There is also UK mortgage approvals figures at 0930 BST, while the Bank of Canada announces its interest rate decision at 1500 BST. The UK corporate calendar on Wednesday has third quarter results from lenders Barclays and Metro Bank and third quarter production results from miners Fresnillo and Antofagasta.Related Shares:
Plus500British American TobaccoRandgold ResourcesSt James's PlaceWhitbreadFresnilloImperial Brands