19th Aug 2015 09:48
LONDON (Alliance News) - Shares in UK and other major European stock indices are trading lower Wednesday mid-morning, as investor sentiment is unsettled by Chinese stock-market volatility, while German and Dutch parliamentary votes on the third Greek debt bailout get underway.
The FTSE 100 is down 1.0% at 6,459.06, the FTSE 250 is off 0.8% at 17,481.64, and the AIM All-Share is down 0.3% at 749.17 points.
In Europe, the CAC 40 in Paris is down 1.1% and the DAX 40 in Frankfurt is down 1.3%.
Gyrations on the Chinese stock markets have spooked investors across Europe, with the Hang Seng Index closing down for fourth consecutive session Wednesday, dropping 1.3% at 23,167.85 points.
Meanwhile, the Shanghai Composite closed up 1.2% at 3,794.10, having touched an intraday low of 3,558.45 points. The index fell Tuesday 6.2%. The drop came after National Bureau of Statistics data showed a monthly rise in Chinese house prices in July, which analysts said could hamper the ability of the People?s Bank of China to cut interest rates for fear of reinflating a housing bubble.
Oanda analyst Craig Erlam says a number of reasons have been given for the instability of Chinese markets, but the analyst thinks that investors just may have not "faith" in them at the moment.
"Particularly not the retail investor, of which there are a large number in China, who will have been seriously stung by recent moves and may not be too keen to get involved again for now," writes Erlam.
In Europe, votes from several European parliaments on Greece's third bailout in five years are the main focus among investors. The German parliament is expected to approve the deal, as the Spanish body did on Tuesday. The Dutch parliament also is due to vote Wednesday.
German Chancellor Angela Merkel's task of convincing sceptical lawmakers to back the rescue plan has been made that much more difficult because the role of the International Monetary Fund in the rescue plan has still not been resolved. A spokeswoman for German Finance Minister Wolfang Schaeuble, Marco Semmelmann, said on Monday that IMF involvement was absolutely essential in the bailout, which was the culmination of six months of negotiations that almost resulted in Greece crashing out of the euro.
Speaking to the Bundestag on Wednesday, Schaeuble called for approval of Greece's bailout while warning of its risks.
"Of course, there is no guarantee that everything will work, and doubts are always permitted," Schaeuble said in a speech backing the EUR86 billion rescue plan.
He called the IMF participation in the rescue plan "vital," adding that he has no doubts that it will join the bailout. "The decision on a further support program for Greece was not easy," Schaeuble told the Bundestag, saying that cash-strapped Greece was "an extraordinarily difficult case" from the start of the euro debt crisis five years ago.
Wednesday's Bundestag vote is to be held just one day before Greece is due to make EUR3.4 billion in loan repayments to the European Central Bank.
The eurozone finance ministers are expected to hold a conference call at 1800 BST to finalise the Greek bailout deal.
In the US, the Federal Reserve is scheduled to release the minutes from its most recent monetary policy meeting, held on July 28 and 29, at 1900 BST. Fed Chair Janet Yellen has repeatedly said that the US central bank will raise US interest rates later this year, and analysts expect the first US rate hike in nine years to come in the September 16-17 meeting.
Societe Generale analyst Kit Juckes does not expect the FOMC minutes to "magically" clear the fog surrounding the US central bank's policy.
"Most likely, the [FOMC] minutes will be seen to support the view of the consensus amongst the commentators, but will fail to allay the fear of inaction amongst the traders and investors," says Juckes. "And that would most likely leave markets still wracked by uncertainty, about the Fed, global growth and China."
On the London Stock Exchange, miners are trading lower, with the FTSE 350 Mining Sector index down 3.2%, the worst performing sector index. Anglo American, down 3.3%, BHP Billiton, down 2.2%, and Rio Tinto, down 2.1%, are amongst the worst blue-chip performers. In the FSTE 250, Lonmin is the biggest faller, down 9.5%.
However, by far the worst performer in the FTSE 100 is Glencore, down 7.8%, having set a new record low since listing in 2011. The miner reported Wednesday a substantial fall in earnings, as expected, in the first half of the year, due to weaker commodities and oil prices and following the company's mixed production results earlier this month. The multi-commodity miner reported a pretax loss of USD527.0 million in the first half of 2015, swinging from a USD2.49 billion profit a year before, as revenue dropped to USD85.70 billion from USD114.06 billion.
Glencore, like its peers, is suffering from steep declines in commodity prices such as iron ore and copper, whilst also battling the decline in oil prices, compounded by a slowdown in economic growth in China, the world's largest importer of metals.
Outside mining, insurer Admiral Group leads a handful of gainers in the FTSE 100, up 4.6%. The insurer beat analyst forecasts to declare an 'up' first half, after reserve releases for prior year claims in its UK car insurance business helped drive its overall profit performance. Admiral said it made a GBP181.7 million pretax profit in the six months to the end of June, slightly down on the GBP183.3 million reported in the corresponding period the prior year. Excluding minority interests, pretax profit was up 1% to GBP186.1 million. Customer numbers increased by 6% to just shy of 4.2 million.
The insurer increased its interim dividend per share to 51.0 pence from 49.4p, while earnings per shares increased by 4% to 54.8 pence. Thirteen analysts polled by the company had expected a dividend of 45.6p and earnings per share of 47.0p.
Admiral is followed by Hikma Pharmaceuticals, up 4.3%. The company reiterated its revenue guidance for 2015, although it reported a fall in pretax profit for its first half, as revenue was hit by the strength of the dollar and a good performance in Hikma's Branded and Injectibles segments was offset by a decline in its Generics segment.
Still in the economic calendar Wednesday, alongside the FOMC minutes, due at 1900 BST, the US consumer price index and EIA crude oil stocks are expected at 1430 BST and 1530 BST, respectively.
By Daniel Ruiz; [email protected]
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
AdmiralAnglo AmericanRio TintoHikma PharmaceuticalsBHP Billiton PLCGlencoreLonmin