6th Jul 2015 09:43
LONDON (Alliance News) - UK stocks are trading lower mid-morning Monday following the 'no' vote in Greece's referendum on Sunday but the resignation of Greek Finance Minister Yanis Varoufakis meant initial indications for a heavier fall in stocks never materialised.
A fall of over 100 points had initially been indicated by futures prices, but this was pulled back upon the early morning news that Greek Finance Minister Yanis Varoufakis had resigned, citing the "loathing" for him by his eurozone negotiating partners.
"Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted 'partners', for my... 'absence' from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today," Varoufakis said in a post on its blog.
"And I shall wear the creditors? loathing with pride," he added.
Holger Schmieding, chief economist at Berenberg says while Varoufakis' resignation is a positive step, it could be purely symbolic.
"[Greek Prime Minister Alexis] Tsipras has booted out his finance minister Varoufakis, who arguably caused capital flight of tens of billions of euros through his confrontational style that made agreement with creditors so much more difficult. That is a positive signal. Eurogroup finance ministers may finally have serious discussions about the actual issues again instead of having to deal with Varoufakis," Schmieding says. "But as Varoufakis was no longer leading the negotiations since April, this may be more symbolic than a change of substance."
In the referendum Sunday, the 'no' vote received 61.3% of the vote, according to the Interior Ministry in Athens, with 'yes' finishing at 38.7%. The wide margin held steady throughout the counting process, after opinion polls had showed the vote too close to call. Athens said it was willing to resume talks with international creditors, and eurozone leaders were planning an emergency summit Tuesday to tackle the crisis, at which it expects a new proposal from the Greek government.
In an address on national television, Tsipras said the referendum was a mandate not against Europe but for "a sustainable solution", saying that renegotiating Greece's debt must now be on the table in renewed talks. He warned that there "are no easy solutions", but a "fair" conclusion could be reached by both sides.
Nigel Green, founder and chief executive of deVere Group, believes that Greece could obtain some debt relief from its creditors but is concerned of the wider implications of a deal.
"With depressing predictability there will be extensive negotiations taking place right now behind the scenes between Athens and its creditors. I suspect that there will be a degree of debt relief for Greece, but eurozone leaders will be aware of the considerable consequences of softening their stance too much," Green says.
"Due to the broader implications of how Greece delivering a bloody nose to Europe affects other debt-shackled eurozone countries' 'anti' view of remaining in the Euro, there is likely to be a widespread uncertainty gripping the markets," Green adds.
The FTSE 100 trades down 0.5% at 6,555.43, the FTSE 250 is down 0.6% at 17,516.44 and the AIM All-Share index is down 0.5% at 759.88.
In Europe, the French CAC 40 is down 1.4% and the German DAX 30 is down 1.3%.
Among individual London stocks, Roll-Royce Holdings is the biggest decliner in the FTSE 100, trading down 9.3% after it slashed its guidance for 2016 due to problems afflicting its Civil Aerospace and Marine divisions. The aerospace and engineering group said its guidance for its Civil Aerospace business in 2015 remains unchanged, with challenges facing its Trent 700 engine programme, business jet and regional aftermarket divisions offset by better-than-expected benefits from contract provision releases and widebody aftermarket growth.
But while its revenue guidance for this year remains unchanged, the group said that is now expects free cash flow to be between a GBP150 million negative and GBP150 million, compared to its previous guidance of GBP50 million to GBP350 million. Given this weaker cash flow outlook, the company said it will discontinue its current GBP1 billion share buyback programme, having completed half of it in the first half.
Miners are also amongst the worst performers in the FTSE 100 and FTSE 250 following a decline in metal prices. Carsten Menke, commodities research analyst at Julius Baer, says concerns over Chinese demand are pushing commodity prices lower, with aluminium, copper, iron ore and steel prices are all moving towards multi-year lows. China announced a string of measures over the weekend to reverse the recent free-fall of Chinese stock markets.
In the FTSE 100, Glencore is down 1.7%, Anglo American is down 1.6% and Antofagasta is down 1.5%. In the FTSE 250, Vedanta Resources is down 4.0%, KAZ Minerals is down 2.3% and Acacia Mining is down 2.3%. The FTSE 350 mining sector index is off 1.3%.
Bovis Homes Group trades up 1.9% after it outlined plans to increase its interim dividend as it said home sales rose in the first half of 2015 at higher prices. Bovis said it is planning to hike its interim dividend for the six months to June 30 to 13.7 pence per share, up 14% from the 12.0 pence per share payout it made a year earlier.
The bigger payout to shareholders follows a rise in legal completions in the first half to 1,525 homes, up from 1,487 a year earlier and a record sales volume for the company in the half. For the full-year, the group expects to legally complete 3,505 homes, up from 3,297 in 2014.
Still ahead in the economic calendar is US Markit service and composite purchasing managers' index at 1445 BST, ISM non-manufacturing PMI at 1500 BST alongside labour market conditions index.
By Neil Thakrar; [email protected]; @NeilThakrar1
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