7th Mar 2016 17:16
LONDON (Alliance News) - London's main indices ended lower Monday amid risk aversion ahead of Thursday's European Central Bank monetary policy meeting, but shares in financial services group Old Mutual shot higher after it said "all options" are being considered in its strategic review.
The FTSE 100 ended down 0.3%, or 17.03 points, at 6,182.40. The FTSE 250 closed down 0.6%, or 99.76 points, at 16,831.43. The AIM All-Share was up 0.2%, or 1.39 points, at 703.88. In Europe, the CAC 40 index in Paris was down 0.3% and the DAX 30 in Frankfurt down 0.5%.
The market has big expectations for ECB President Mario Draghi to announce a bumper stimulus package to support the waning eurozone economy.
Analysts at financial services firm Brown Brothers Harriman said "a combination of renewed deflation and weakening economic data has fanned expectations that the ECB will extend its 'unorthodox' policies".
Nick Matthews, an analyst at Japanese bank Nomura, expects the ECB to cut its deposit rate by "at least" 10 basis points. Matthews also expects the central bank to increase its Asset Purchase Programme by EUR10 billion per month, to EUR70 billion per month, and extend the programme for a further three months to the end of June 2017.
The ECB's deposit rate currently sits at -0.3% and its monthly asset purchases are EUR60 billion a month.
Others such as Hamburg-based bank Berenberg believe the cut to the deposit rate could go further to 20bps, saying it even expects the asset buying programme to increase to EUR80 billion a month and to be extended by six months.
Anatoli Annenkov, an analyst at French bank Societe Generale who also predicts a 20bps cut, does not expect an increase in asset purchases "given the uncertainties over oil prices, the external outlook and liquidity". Nevertheless, Annenkov is looking to an extension of the asset buying programme to December 2017.
The SocGen analyst said that "any increase in the asset purchase programme now would lead to questions over where the ECB could find assets in the future, if the APP is extended". Annenkov said markets are "increasingly unconvinced" about the ECB's power, and believes "we are approaching the 'effective' limit of the central bank's tools".
Ahead of the ECB decision, data from Frankfurt-based research group Sentix showed that eurozone investor confidence dropped to its lowest level since April 2015. The investor sentiment index fell to 5.5 in March from 6.0 in February. The index dropped for the third consecutive month in March and reached its lowest level since April 2015. It was expected to inch up to a score of 8.
At the London close, the euro was at USD1.0988 compared to the USD1.1007 at the close on Friday. Meanwhile, the pound was at USD1.4230 at the close, having stood at USD1.4220 on Friday.
Meanwhile, Japan's leading index declined for the third consecutive month in January to the lowest level in four years, preliminary survey results from the Cabinet Office showed. The leading index, which measures future economic activity, fell more-than-expected to 101.4 in January from 101.8 in December. This was the lowest reading since December 2012, when the score was 98.9. The expected reading was 101.6.
Following the data, Tokyo's Nikkei 225 index ended down 0.6%. In China, the Shanghai Composite ended up 0.8%, while the Hang Seng in Hong Kong dropped 0.1%.
Stocks in New York were higher at the London equities close, with the DJIA up 0.3%, the S&P 500 up 0.2% and the Nasdaq Composite up 0.2%.
After the London close, the focus will be on Federal Reserve Vice Chairman Stanley Fischer, who will be making a speech at the National Association for Business Economics Annual Economic Policy Conference in Washington at 1730 GMT.
On the London Stock Exchange, Old Mutual ended up 10%. The Anglo-South African financial services group said "all options" are being considered for its strategic review but no decision has yet been made, in response to a report from Sky News that the company is planning a break up of its operations.
Sky News reported that Old Mutual is planning to split into four standalone units. This would comprise its stake in South African lender Nedbank, its UK-focused wealth management unit, its South Africa-based emerging markets operation, and its institutional asset management business.
Shore Capital's Eamonn Flanagan believes that a disposal or demerger of Old Mutual Wealth is a possibility. "The interaction with the South African life and banking operations is pretty limited and, indeed, probably introduces the conglomerate discount that the stock has traded on for quite a while," Flanagan said.
Miners ended mostly higher, with the FTSE 350 Mining Sector index ending up for seventh consecutive session. The index added 4.4%.
IG analyst Joshua Mahony said iron ore prices shot up by almost 20%. That helped the likes of Antofagasta to close up 2.4%, Rio Tinto up 5.8% and Anglo American up 6.1%. Shares in mid-cap Evraz soared 12%.
"While weekend comments from China pointed towards higher growth expectations, today's [iron ore price] move seems relatively unwarranted, heightening fears that this boom could be set to peak amid a lack of any fundamentals advances," said Mahony.
"Set against the continued Chinese slowdown, the ability of commodity prices to continue rising will be as much to do with sentiment and the fear of losing out as any real-world economic developments," Mahony added.
Meanwhile, Brent was flirting with the USD40.00 line. The North Sea benchmark was quoted at USD39.86 a barrel at the London equities close, its highest level so far in 2016. That was higher than the USD38.22 seen at the close Friday.
The gold price was at USD1,266.00 an ounce at the London close, having stood at USD1,272.30 an ounce at the close Friday.
In the red, gold miner Randgold Resources ended down 3.0% after being cut to Equal-Weight from Overweight by Morgan Stanley.
Meanwhile, InterContinental Hotels Group, which operates the Holiday Inn and Crowne Plaza hotels, finished down 1.9% after Citigroup downgraded the group's shares to Sell from Neutral.
In the FTSE 250, John Laing Infrastructure Fund ended up 1.6% at 116.20 pence. The infrasturcture investor said it has raised GBP92.9 million through the placing of 81.2 million shares at a price of 114.5p each, with the funds going towards the repaying the debt currently drawn on its revolving credit facility and the financing of future acquisitions.
Howden Joinery Group closed down 2.0% after the kitchen manufacturer was downgraded to Hold from Buy by Jefferies.
Shipping services group Clarkson ended down 1.1%, as it warned on turbulence in shipping and offshore markets in its outlook for 2016.
"The challenges witnessed across the global shipping markets have continued into 2016. The macro-economic environment remains very uncertain and as such we do not anticipate any changes to our markets in the near term," said Chairman James Hughes-Hallett.
Clarkson said it will increase its dividend once again after it achieved a 26% increase in profit and a 27% lift in revenue during 2015. The company said its pretax profit rose to GBP31.8 million in 2015 from GBP25.2 million in 2014, as revenue climbed to GBP301.8 million from GBP237.9 million.
On the UK corporate calendar Tuesday, Worldpay, Paddy Power Betfair, esure Group, Foxtons, Equiniti Group, Grafton Group, Regenersis, Premier Energy & Water Trust, Dialight, Foreign & Colonial Investment Trust, Vertu Motors, Portmeirion Group, Brammer, John Menzies, St Ives, CLS Holdings, Tyman, SQS Software and Forbidden Tech release full-year results. Meanwhile, Ten Alps, Craneware, Close Brothers and Halosource publish half-year results.
In the economic calendar, China's imports and exports data are due at 0200 GMT, while Japan's consumer confidence index is at 0500 GMT. Germany's industrial production data are due at 0700 GMT, while the eurozone's gross domestic product figures are at 1000 GMT. In the US, the redbook index is due at 1355 GMT, while American Petroleum Institute crude oil stock data are due at 2130 GMT.
By Daniel Ruiz; [email protected]
Copyright 2016 Alliance News Limited. All Rights Reserved.
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Anglo AmericanOld Mutual PLCInterContinental HotelsHowden JoineryRio TintoRandgold ResourcesEvrazJohn Laing Infrastructure FundClarkson