13th Aug 2018 12:02
LONDON (Alliance News) - Stocks in London slumped at the start of the week, with emerging markets-exposed shares the hardest hit following a tumble in the Turkish lira.Shares in companies such as Mondi, Mediclinic and Ashmore were falling at midday on Monday."The recent collapse in the Turkish lira has served to trouble investors around the world and triggered a 'risk-off' mentality. Put simply, investors are less willing to hold assets in higher risk areas such as emerging markets, and are switching instead to assets deemed to be safer havens," said Russ Mould, investment director at AJ Bell.The FTSE 100 index was down 0.5%, or 39.23 points, at 7,627.78. The mid-cap FTSE 250 index was down 0.4%, or 90.17 points, at 20,577.28. The AIM All-Share index was down 0.6% at 1,080.19.The Cboe UK 100 was off 0.5% at 12,924.72, the Cboe UK 250 was down 0.4% at 18,684.94, and the Cboe UK Small Companies was flat at 12,287.28.Over in mainland Europe, the CAC 40 in Paris was down 0.3% and Frankfurt's DAX 30 was down 0.6%.The pound was quoted at USD1.2746 at midday, down from USD1.2776 late Friday, while the euro also declined, quoted at USD1.1384 from USD1.1414."Losses for European currencies will no doubt reflect the European exposure to Turkey, yet for once we are not seeing stock markets boosted by weakened local currencies, with traders instead selling across the board in favour of havens such as the yen and dollar," said IG market analyst Joshua Mahony.However, US stocks also were set to suffer from the crisis in Turkey, with the Dow Jones and Nasdaq set to shed 0.4% and the S&P 500 called 0.3% lower.Turkish lira plunged overnight on Monday to record lows in Asian trading, at times trading at more than TRY7 to the dollar and more than TRY8 to the euro. The currency's freefall was a continuation of Friday's plunge of more than 20% against the dollar.The lira has lost almost 50% of its value since the beginning of the year, amid fears about the strength of the economy and a deepening row with Washington about the detention of a US pastor.US tariffs of 50% on steel, up from 25%, also went into effect at 0401 GMT Monday, after US President Donald Trump announced he was doubling metals tariffs against Turkey in a tweet on Friday.The lira's slump also sparked a wider sell-off in emerging market currencies. Among those suffering was the South African rand. The dollar rose above ZAR14 on Friday for the first time since the start of 2018. The US currency was quoted at ZAR14.41 Monday midday, having spiked as high as ZAR15.44 earlier in the session.Companies listed in both London and Johannesburg, and thus exposed to the rand, were among those trading lower at midday. Paper and packaging company Mondi was down 2.1%, among the worst FTSE 100 performers, while private hospital operator Mediclinic and bank Investec in the FTSE 250 were down 4.3% and 3.3%, respectively.Emerging markets-focused investment manager Ashmore was the worst performer in the mid-cap index, down 5.3%."Ashmore is widely seen as the London-listed bellwether for emerging markets and its shares are unsurprisingly being sold off in the wake of the crisis in Turkey," said AJ Bell's Mould.He continued: "It is a similar story with emerging market funds, many of whom are experiencing price weakness on Monday such as BlackRock Emerging Europe and BlackRock Frontiers Investment Trust."BlackRock Emerging Europe was down 2.7% at midday, while BlackRock Frontiers was 3.4% lower.Outside of the emerging markets-focused slump, the worst performer in the FTSE 100 at midday was bookmaker Paddy Power Betfair, down 3.0% after Citigroup cut its rating on the stock to Sell from Neutral.Jumping to the top of the FTSE 250, up 29% at 261.00 pence, was home and car insurer Esure on news it is in "advanced talks" to be taken over by Bain Capital Private Equity.Bain Capital had submitted a proposal to buyout esure at 280p per share in cash, a 37% premium to the company's closing price of 204p on Friday."The board of esure has indicated to Bain Capital that it would be minded to recommend a firm offer for Esure if made by Bain Capital at the price set out in the proposal," said esure.With 419.1 million issued shares, the offer values Esure at around GBP1.17 billion.Peer Hastings rose 3.2% on a positive read-across for sector merger & acquisition activity, along with larger insurers such as blue-chips Direct Line Insurance Group and Admiral Group, up 2.2% and 1.5% respectively.In second place was Clarkson, up 11% after it said on Monday that conditions in some of its markets are beginning to pick up following a fall in revenue and profit over the first half of the year.For the six months ended June 30, the shipping firm said revenue was down 2.7% to GBP152.6 million from GBP156.8 million a year before. Pretax profit declined 18% to GBP18.0 million from GBP21.9 million last year.On an underlying basis, pretax profit fell even more steeply, by 22% to GBP19.2 million from GBP24.5 million last year.The shipping services firm noted that conditions in some of its markets improved in the second quarter, with Clarkson standing to benefit from these trends over the remainder of the year.Elsewhere on the London Main Market, Plus500 slumped 9.4% despite posting a sharp rise in revenue and profit for the first half.Revenue for the half shot to USD465.5 million from USD188.4 million a year before and pretax profit nearly tripled to USD346.4 million from USD116.3 million.However, in a conference call discussing the results, Chief Executive Officer Asaf Elimelech and Chief Financial Officer Elad Even-Chen said that the earnings before interest, taxes, depreciation and amortisation margin of 75% achieved in the first half of the year, is "not sustainable".Instead the company is targeting a margin of around 65%."75% is something doable but not sustainable, let's be frank about it, if you would like to see an increased level of operations going forward we are targeting more the 65% something like that," the pair said.Chemring tumbled 14% after the military equipment company warned on its annual profit following a fatal accident at a factory in Salisbury, England on Friday.One worker was killed and another badly injured at its flare manufacturing building on its Chemring Countermeasures facility. The incident, Chemring continued, damaged some equipment, and production is now temporarily halted."The impact on our 2018 and 2019 financial years cannot be accurately quantified at this stage as it will be dependent on insurance recoveries, the timeline for the investigation to be completed and the site to re-open, remediation work to be completed and at what rate production resumes," Chemring said.The company did say, however, that underlying operating profit for its financial year ending October is likely to be around GBP10 million to GBP20 million lower than previously expected as a result of the accident.