8th Oct 2014 16:00
LONDON (Alliance News) - UK shares ended lower Wednesday as investors shed risk ahead of the evening's release of US Federal Reserve meeting minutes.
The FTSE 100 closed the day down 0.2% at 6,482.24. The FTSE 250 touched its lowest level of the year at 14,907.94, but recovered a little to close 1.1% lower at 14,933.52. The AIM All-Share also fell to its lowest level of the year at 726.78 but closed down 1.2% at 727.28.
European equities fared not better. The CAC 40 and DAX both ended the day down 1.0%.
Wall Street was similarly cautious. At the London close, the DJIA traded up 0.1%, the S&P 500 was down 0.1% and the Nasdaq Composite was off 0.2%.
The FTSE 350 sector indices showed a classic defensive picture with traditionally safe stock sectors such as tobacco and utilities all gaining on the day. United Utilities, up 0.9%, SSE, up 0.8% and British American Tobacco, up 0.6%, were all amongst the biggest gainers in the blue-chip index.
"Bonds have become the destination of choice once again as the equity bull market faces its most serious test in months. The danger is now that a hawkish set of Fed minutes, pointing to an earlier hike in rates, could easily put markets into a tailspin from which they could struggle to recover," said IG's chief market strategist Brenda Kelly.
The minutes will outline details of the September 17 meeting, in which the Federal Open Market Committee tapered its monthly asset purchase programme by a further USD10 billion, leaving it on target to make a final reduction of USD15 billion at its October meeting to bringing an end to its quantitative easing operation launched to combat the recession.
Crude oil prices fell notably lower Wednesday morning, fuelled by a reduction in oil prices by Saudi Arabia's Aramco for its Asian and US buyers. In addition, a report released by the American Petroleum Institute Tuesday evening showed US crude inventories to have risen by a larger than expected 5.1 million barrels in the week ended October 3rd.
Crude oil futures for November delivery are down USD0.88, or 1.00%, at USD87.97 a barrel, after declining to a low of USD87.39, an 18-month low. In addition, Brent oil prices fell, to yet another two-year low to USD90.55 a barrel.
Oil prices were put under further pressure Wednesday afternoon as US EIA crude oil stock rose by 5.015 million to 361.7 million barrels during last week.
Tesco ended the day as one of the biggest gainers in the FTSE 100, gaining 1.4%. Several big institutional investors in Tesco have signalled to the group that they would be willing to back a capital-raising plan of GBP1 billion to GBP2 billion in order to strengthen the troubled supermarket chain's balance sheet, The Times reported. In addition, HSBC upgraded the supermarket chain to Neutral from Underweight.
Meanwhile, GKN suffered from a rating change as Bank of America Merrill Lynch downgraded the stock by two-notches to Underperform from Buy. Shares in the automotive and aerospace parts company closed 3.5% lower.
Support services company Interserve gained 3.8%, making its shares one of the best performing stocks in the FTSE 250, after Peel Hunt raised the stock to Buy from Hold. Berenberg also raised its earnings-per-share forecast for Interserve, saying that the recent weakness in the company's share price is unjustified, although it kept its 750 pence price target with a Buy rating. The company's shares ended the day at 610.50p.
Spirent Communications' shares suffered for a second consecutive day, falling 7.7%, following on from the technology testing company's profit warning on Tuesday.
London Mining shares fell a massive 77% after the iron ore miner warned its investors that it thinks there will be little or no value left in its shares and other securities under the proposals currently being discussed for its refinancing.
The company had warned in late September that it had entered talks with a potential strategic investor for a dilutive financing package, after it ran out of money to continue trading. At that time, the company had said the talks were about an investment in the form of funding for a life-of-mine expansion and a material cash injection.
It said the deal would result in a significant dilution to its existing equity and a revised capital structure for the company.
The main focus for European stock markets at the open Thursday will be the content of the Fed's minutes, which are released Wednesday at 1900 BST. German trade balances for August will also be released at 0700 BST Thursday, before the Bank of England's interest rate decision at 1200 BST.
In the afternoon US initial jobless claims for the week ending October 3 and continuing jobless claims for the week ending September 26 will be released at 1330 BST. European Central Bank President Mario Draghi will be speaking at the Brookings Institution in Washington DC at 1600 BST.
In the corporate calendar, there will be a number of releases from FTSE 250 companies. Centamin will be releasing third quarter preliminary production results, Victrex will release a trading statement, and N Brown will report half-year results.
By Neil Thakrar; [email protected]
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Related Shares:
InterserveTescoSpirentCentamin PLCVictrexSSEBritish American TobaccoBrown GroupUnited UtilitiesGKN PLC