29th Sep 2015 07:35
LONDON (Alliance News) - UK shares opened lower Tuesday, with miners rebounding from the heavy losses seen on Monday and Wolseley taking a hit after reporting lower profit at the end of its financial year.
The FTSE 100 index was down 0.9% at 5,902.14 points, the FTSE 250 was off 0.8% at 16,477.68, and the AIM All-Share was 0.5% lower at 723.09. In Europe, the CAC 40 index in Paris was down 1.5% and the DAX 30 in Frankfurt down 1.3%.
Shares in Wolseley were down 5.0%, the worst performer in the blue-chip index. The building materials company on Tuesday said its pretax profit was lower due to one-off charges, but its trading profit pushed higher and the group said it will return GBP300.0 million to shareholders via a share buyback.
The FTSE 100-listed company said its pretax profit for the year to the end of July was GBP508.0 million, compared to GBP676.0 million a year earlier, due to it booking GBP242.0 million in exceptional charges in the year, mostly related to a GBP234.0 million writedown on its business in the Nordic region.
But trading profit for the group was up to GBP857.0 million from GBP752.0 million a year earlier, driven by revenue rising to GBP13.30 million from GBP11.95 billion a year earlier. Trading profit for the group is defined as operating profit before exceptional items and the amortisation and impairment of acquired intangibles.
Shares in Glencore were up 7.8% at 74.87 pence, rebounding from the sharp losses seen Monday, when it set a new all-time low of 66.67p.
Mining was the best performing sector Tuesday at the open, having been the worst on Monday. The FTSE 350 Mining Sector Index, up 1.1%, was the only sector index posting gains in London, with Anglo American, up 1.2%, Rio Tinto, up 1.0%, Antofagasta, up 0.8% and BHP Billion, up 0.3%, as the only FTSE 100 stocks in the green. The mining sector index fell 9.0% on Monday.
Investec said Monday that it believes nearly all the equity value in mining giants Glencore and Anglo American could "evaporate" if commodity prices remain subdued and the companies do not undertake substantial restructuring measures.
"The challenging environment for mining companies leads us to the question of how much value will be left for equity holders if commodity prices do not improve. We have adopted a price-earnings-based approach to evaluate how the equity value of the major diversified companies might vary over time in proportion to debt and have identified the companies where equity values are most at risk," said Investec analyst Hunter Hillcoat.
In the FTSE 250, Mitie Group was up 0.5% after it said has performed well in the first half of its financial year and said it remains confident of delivering robust organic revenue growth for the year to the end of March.
The outsourcer said its organic revenue has been strong in the first half, ending on Wednesday, with growth driven by new contracts and expansions of existing deals. Mitie said 94% of its target revenue for the full year has been secured and it said its overall performance will be weighted, as normal, to the second half.
Shares in the UK are tracking a negative close on Wall Street and weak trading in Asian stocks.
Concerns about the health of the global economy, especially the Asian giant's, are undermining investor confidence, hitting stocks around the world.
In Asia on Tuesday, the Japanese Nikkei 225 index ended down 4.1%. Meanwhile, in China, the Hang Seng index in Hong Kong trades down 3.4% and the Shanghai Composite ended down 2.0%. Hong Kong is catching up with other markets, as it was closed for a holiday on Monday.
New York ended lower Monday. The DJIA closed down 1.9%, the S&P 500 index ended down 2.6% and the Nasdaq Composite finished down 3.0%.
The International Monetary Fund Managing Director Christine Lagarde said on Monday that global growth outlook is likely to be revised downward due to weak expansion in emerging economies.
In an interview with French newspaper Les Echos, she said, "we are in a recovery process whose pace is decelerating." There is a shift between emerging and developed countries. A growth of 3.3% this year is no longer realistic, nor 3.8% global growth next year, she said. Nonetheless, she expects growth to remain above the 3% threshold.
India lowered its key interest rates by a more-than-expected 50 basis points as economic growth in the current fiscal is forecast to be weaker than previously projected.
The Reserve Bank of India, governed by Raghuram Rajan, cut its repo rate to 6.75% from 7.25% and the reverse repo rate to 5.75% from 6.25% with immediate effect. The bank was expected to reduce the rate by a quarter point today. This was the fourth rate cut so far this year. The bank reduced its key rates by 25 basis points each in January, March and June.
The repo rate is the rate at which the central bank lends to commercial banks and the reverse repo rate is the rate at which it accepts deposits from banks.
In the UK economic calendar Tuesday, consumer credit and mortgage approvals data are due at 0930 BST.
"The recovery in mortgage approvals for house purchases during 2015 has been underpinned by rising new buyer enquiries, real earnings growth, and consumer confidence," says Lloyds Bank.
"These ongoing developments, alongside an August increase in the corresponding British Bankers' Association measure, point to a further jump in Bank of England approvals which are released this morning. We have pencilled in a 1,900 increase on the month to 70,700," forecasts the bank.
On Thursday last week, the British Bankers' Association reported that UK mortgage approvals rose to its highest level since early 2014 in August. The number of mortgage approvals rose to 46,743 in August from 46,315 in July. This was the highest since February 2014, when it totaled 47,581.
After the London close, Bank of England Governor Mark Carney is expected to speak at Lloyds of London at 2015 BST.
Also in the economic calendar, eurozone industrial and consumer confidence are expected at 1000 BST, while the German consumer price index is due at 1300 BST. In the US, the Redbook index is due at 1355 BST, and consumer confidence is at 1500 BST.
By Daniel Ruiz; [email protected]
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
Anglo AmericanRio TintoBHP Billiton PLCMitieGlencoreWOS.L