14th Jun 2016 11:08
LONDON (Alliance News) - Growing fear that the UK will vote to leave the European Union next week sent share prices in London lower Tuesday, as opinion polls continued to point toward Brexit.
The FTSE 100 was down 1.2%, or 72.03 points, at 5,972.94 at midday. The blue-chip index fell below 6,000 points for the first time since late February. The FTSE 250 was off 1.9% at 16,256.08 and the AIM All-Share was down 1.6% to 718.65.
In mainland Europe, the French CAC 40 was down 1.2% and the German DAX 30 down 0.6%.
"Panic appears to be gripping markets as the headlines fill up with references to a possible Brexit," said IG senior market analyst Chris Beauchamp.
After the London equities market close on Monday, a pair of ICM polls for The Guardian - one by telephone the other online - had Leave ahead by 53% to 47% if the "don't knows" are excluded. This echoed the findings of polls by YouGov and for the Bruges Group over the weekend.
Furthermore, the UK's most widely read tabloid, The Sun, committed its support to the Leave campaign.
IG's Beauchamp said the move in the polls has been matched by a "noticeable shift" in the IG Brexit binary. The analyst said IG's clients now think that the chance of the UK voting to leave has now hit 40.5%, up from the low-30 percentile on Monday.
"What is interesting is, despite the sharp selloff in sterling in recent days, the pound is still holding on above USD1.41," Beauchamp noted. "Either this is a symptom of limited volumes as traders abandon the field, or a sign that the market still thinks the status quo will win out in the end."
The pound was quoted at USD1.4172 at midday, having touched a two-month low of USD1.4110 earlier Tuesday. Sterling stood at USD1.4262 at the London equities close Monday.
The pound barely reacted to Office for National Statistics data showing that UK inflation remained stable at 0.3% year-on-year in May, though 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.
Rises 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, while economists expected it to rise 1.3%.
Capital Markets analyst Paul Hollingsworth said UK inflation looks set to remain fairly subdued for most of the second half of this year. However, he said inflation should gather more pace next year, regardless of which way the EU referendum vote goes next week.
"If the UK votes to leave the EU next week, we expect sterling to fall sharply, which would put significant upward pressure on inflation further ahead," noted Hollingsworth. "On the other hand, if the UK votes to remain, then sterling could recover a bit. But the economy would probably get a post-referendum rebound too."
Still in the economic calendar Tuesday, US retail sales are at 1330 BST, business inventories at 1500 BST, and API crude oil stocks at 2130 BST. The Federal Open Market Committee begins its two-day US monetary policy setting meeting Tuesday, with its decision announced on Wednesday.
In New York, stocks were called for a negative open, with the Dow 30 and the S&P 500 indices both seen down 0.1% and the Nasdaq 100 pointed down 0.2%.
In Asia, the Japanese Nikkei 225 index ended down 1.0%, while the Shanghai Composite closed up 0.3% and the Heng Seng in Hong Kong fell 0.6%.
Among individual stocks in London, Ashtead Group was up 1.0%, the best performer among a handful of gainers in the FTSE 100. 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.
Centrica was another blue-chip stock avoiding losses, up 0.2% after Swiss bank UBS lifted the British Gas-owner to Buy from Sell.
In the FTSE 250, FirstGroup was up 5.0%, the biggest mid-cap gainer, 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.
Shore Capital analyst Martin Brown said FirstGroup's expected cashflow strength next year "should now be at the forefront of investors minds", after FirstGroup said there is "significantly increased cash generation expected in 2016/17".
"The strength of the cashflow that we believe is building in the background is absolutely pivotal to out Buy recommendation," said Shore's Brown.
Shares in Ted Baker were up 3.8% after the fashion retailer reported growth in revenue in the 19 weeks to June 11 and said it is on track to meet the board's expectations for its full financial year to January 2017.
Indivior was another gainer, up 2.5%, after Morgan Stanley upgraded the drugmaker to Overweight from Equal-Weight.
In 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 has 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 were up 50% at 164.00 pence Tuesday midday.
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.
By Daniel Ruiz; [email protected]
Copyright 2016 Alliance News Limited. All Rights Reserved.
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