14th Jun 2016 16:03
LONDON (Alliance News) - New polls led to rising concerns that the UK will vote to leave the European Union in next week's referendum, prompting investors to avoid riskier assets such as equities in favour of gold and other safe havens, hitting UK stocks on Tuesday.
The FTSE 100 fell 2.0%, or 121.44 points, to 5,923.53, finishing in the red for fourth consecutive session. It was the first time the blue-chip index closed below the 6,000 line since late February. The FTSE 250 ended down 2.1%, or 341.97 points, at 16,232.25. The AIM All-Share dropped 2.1%, or 15.52 points, to 714.90.
"If this trend continues all the way until the referendum the markets could be left in a pretty bleak state even before the result is revealed," said Spreadex analyst Connor Campbell. The UK's referendum is scheduled for Thursday next week.
The fall in stocks came in response to a pair of ICM polls published by the Guardian newspaper after the London equities market close on Monday, one by telephone and the other online, which had Leave ahead by 53% to 47% when the "don't knows" were excluded. This echoed the findings of polls by YouGov and for the Bruges Group over the weekend.
Another poll released on Tuesday by TNS online said the Leave campaign has taken a seven percentage-point lead. The poll found that 47% of people are likely to vote to leave the EU, with 40% to vote to remain. TNS said 13% were undecided or wouldn't vote at all.
Furthermore, the UK's most widely read tabloid, the Sun, committed its support to the Leave campaign.
The pound was standing at USD1.4108 at the London equities close Tuesday, having touched a two-month low of USD1.4097. Sterling stood at USD1.4262 at the London equities close Monday.
Although the pound experienced some gyrations around lunchtime in London, it barely reacted to Office for National Statistics data showing that UK inflation remained stable at 0.3% year-on-year in May, below economists' expectations for a 0.4% rise. On a monthly basis, consumer prices gained 0.2% after rising 0.1% in April. Economists had forecast a 0.3% rise.
Increases in transport costs, restaurant and hotel bills and the price of telecommunication services were the main upward contributors to inflation. Core inflation, which excludes prices of energy, food, alcoholic beverages and tobacco, held steady at 1.2% year-on-year. Economists had expected it to rise to 1.3%.
The risk-off sentiment across the market was beneficial for gold and other safe haven assets such as bonds, while crude continued its decline from the 2016 high reached last week.
Gold was quoted at USD1,285.77 an ounce at the close, compared to USD1,283.52 at the same time Monday. The precious metal was on its way to close higher for a fifth consecutive day, moving closer to its 2016 high of 1,303.59 reached in early May.
"Safe haven demand in the countdown to the EU referendum is adding to demand for gilts, sending yields on the UK 10-year to fresh record lows," said CMC Markets analyst Jasper Lawler, adding that "sky high demand for fixed income has sent German 10 year bund yields negative for the first time in history".
Meanwhile, Brent oil was quoted at USD49.65 a barrel at the London equities close, down from the USD50.62 late Monday. Still in the economic calendar Tuesday, American Petroleum Institute crude oil stocks are due at 2130 BST.
In Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt fell 2.3% and 1.4%, respectively. The euro stood at USD1.1207 at the London equities close, down compared to USD1.1295 on Monday.
US stocks were also in the red at the European equities close, with the Dow 30, the S&P 500, and the Nasdaq Composite each down 0.5%.
Retail sales in the US increased by more than expected in May, according to a report released by the US Commerce Department. The report said retail sales climbed by 0.5% in May after surging up by 1.3% in April. Economists had expected sales to rise by 0.3%.
Back to London stocks, CMC's Lawler said a report from Jefferies suggesting Barclays might be the most exposed bank to a Brexit added to the misery on the whole banking sector. Lloyds Banking Group, the UK's biggest mortgage lender, could suffer in the event of an economic slowdown.
"Barclays is thought to be most exposed through its exposure to investment and corporate banking, whilst the impact on Lloyds would be through any economic slowdown because of its mortgage portfolio," Lawler said.
The FTSE 350 Banks sector index fell 2.1%, with Barclays suffering the most among its peers, ending down 3.1%. Lloyds fell 2.1%.
Insurance and mining were also among the worst performing sectors, with the FTSE 350 Insurance/Assurance sector index down 2.4% and the FTSE 350 Mining sector index down 3.6%.
Among individual stocks in the FTSE 100, Ashtead avoided losses, rising 2.0%. The equipment rental company announced a share buyback and substantially raised its dividend following growth in profit and revenue in the year to the end of April.
Ashtead said it will start a GBP200.0 million share buyback in the 2017 financial year. This comes in addition to a final dividend of 18.5 pence, which means its total dividend payout for the year rises 48% to 22.5p from 15.25p the year before.
The growth in the returns to shareholders was driven by pretax profit for the financial year to April 30 rising 24% year-on-year to GBP616.7 million from the GBP473.8 million made a year earlier, as Ashtead benefited from a rise in revenue to GBP2.55 billion from GBP2.04 billion.
In the FTSE 250, Ted Baker ended as the best mid-cap performer, up 9.8%. The fashion retailer reported growth in revenue in the 19 weeks to June 11 and said it is on track to meet board expectations for its full financial year to January 2017.
Shares in FirstGroup rose 6.0%, after saying its pretax profit grew to GBP113.5 million in the year to the end of March. This was despite the bus and rail services provider's revenue falling 14% to GBP5.22 billion from GBP6.05 billion, reflecting the end of the First Capital Connect and First ScotRail franchises.
Indivior also ended in the green, up 1.9%, after Morgan Stanley upgraded the opioid addiction treatment drugs company to Overweight from Equal-Weight.
On the Main Market, Premier Farnell agreed to a takeover offer from Swiss manufacturing company Datwyler Holding, in an all-cash deal that values the London-listed company at GBP615 million.
Datwyler agreed to buy the technology products distributor for 165 pence in cash per share, which is about 51% higher than Premier Farnell's closing share price of 109.3 pence on Monday. Shares in Premier Farnell ended up 50% at 164.10 pence Tuesday.
The directors of Premier Farnell said they plan to recommend unanimously that shareholders vote in favour of the deal, and intend to do so for their 0.1% stake in the company. Datwyler has acceptances for its offer already representing 18.4% of Premier Farnell shares.
In the UK corporate calendar Wednesday, Berkeley Group Holdings, Oxford Instruments, Castings, RM2 International, Accsys Technologies and Severfield publish full-year results. Jimmy Choo issues a trading statement.
The US Federal Reserve will be the main focus Wednesday in the economic calendar. The policy-setting Federal Open Market Committee will finish its two-day monetary policy meeting, with its interest rate decision announced at 1900 BST and a press conference with Fed Chair Janet Yellen at 1930 BST.
Also Wednesday, UK's ILO unemployment rate is due at 0930 BST. US MBA mortgage applications are due at 1200 BST, while New York manufacturing index is at 1330 BST, as well as the US producer price index. US industrial production is due at 1415 BST, while EIA crude oil stocks are due at 1530 BST.
By Daniel Ruiz; [email protected]
Copyright 2016 Alliance News Limited. All Rights Reserved.
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