15th Apr 2014 16:22
LONDON (Alliance News) - UK stocks closed firmly lower Tuesday, with the FTSE 100 more than reversing the modest gains it posted on Monday, as mounting tensions and military action in Ukraine again weighed on equity markets.
London's major equity indices had spent much of the day trading within tight ranges, but markets in the US and Europe slid after an unconfirmed report from Bloomberg quoted Ukraine's First Deputy Prime Minister Vitali Yarema saying on Channel 5 that part of Russia's 45th Airborne Regiment has been spotted on the ground in the eastern Ukrainian cities of Slavyansk and Kramatorsk.
The report came after Ukraine's Acting President Oleksandr Turchynov told parliament that a long-awaited "anti-terror" operation to root-out pro-Russian separatists in the east of Ukraine was under-way. Turchynov said that troops would be deployed to northern Donetsk near the Russian border. He did not provide precise details, saying only that it would be conducted in a "responsible" and "balanced" manner.
Four people were killed in clashes between the Ukrainian military and armed pro-Russian separatists in the eastern region of Donetsk, Russian state television reported. The clashes occurred as the military was retaking control of a small airport near the town of Kramatorsk, Turchynov told parliament. There was no official confirmation of the death toll.
The FTSE 100 closed down 0.6% at 6,541.61, the FTSE 250 closed down 0.7% at 15,590.5, and the AIM All-Share closed down 0.8% at 818.34.
It was a similar story in Europe, where the CAC 40 in Paris and the German DAX 30 in Frankfurt closed down 0.9% and 1.8%, respectively.
On Wall Street, after a strong open, the DJIA, NASDAQ Composite, and S&P 500 are between 0.3% and 0.9% lower at the close of the UK stock market.
The early strength partly reflected a positive reaction to the latest US earnings news, including results from Coca-Cola Co and Johnson & Johnson.
Beverages giant Coca-Cola reported that its first-quarter profit fell 8% from last year, but its adjusted earnings per share matched analysts' expectations, and quarterly revenues topped estimates.
Healthcare company Johnson & Johnson said that its net earnings for the first quarter increased to USD4.73 billion, or USD1.64 per share, from USD3.50 billion or USD1.22 per share in the same quarter last year. Excluding special items, the figure was USD4.43 billion or USD1.54 per share, up from USD4.11 billion or USD1.44 per share in the prior year quarter, and ahead of analysts' expectations of USD1.48 per share for the quarter.
Technology giants Intel and Yahoo are among the companies due to release their quarterly results after Wall Street closes. Investors will be keeping a close eye on the results as concerns linger about the over-valuation of technology stocks in comparison to their earnings.
At the individual UK stock level, gold miners Fresnillo and Randgold Resources were two of the biggest losers in the FTSE 100 Tuesday, closing down 3.3% and 2.4%, respectively. The gold price fell in early European trade as stock stayed firm and the dollar strengthened, but gained some ground as stocks slid later in the day.
At the close of the UK equity markets, gold trades at USD1,301.66, while silver is also down on the day at USD19.52.
FTSE 250-listed Polymetal International, closing down 4.1%, also suffered on the back of the falling price of the precious metals.
In other sectors, G4S closed down 3%, placing it amongst the stand out fallers. Shareholders have criticised the security company after it announced a big pay rise for its new chief executive, despite a recent scandal involving the overcharging of UK taxpayers for tagging offenders. Ashley Almanza, who took over as chief executive last June, was paid GBP1.46 million in 2013, a 23% rise from his predecessor Nick Buckles in 2012, even though the security group was hit by a series of scandals last year.
Further weighing on the shares, Deutsche Bank downgraded the company to Sell, from Buy, lowering its price target to 210.00 pence from 221.00p, saying that it cannot see significant “hidden value” in the company to warrant its current valuation. The bank sees limited scope for large cost savings and, while it trusts the new management's plans for the business can improve operating results, it believes that the benefits are more than priced in.
Rio Tinto was another big loser, closing down 3.1%. The mining giant said that its global iron ore production for the first quarter rose 8% from last year, reflecting the continuing ramp-up of mining operations in the Pilbara region, but fell 6% compared with the previous quarter as heavy rainfall closed ports and coastal rail operations at and near the Pilbara site.
At the other end of the spectrum, Aggreko ended the day up 2.3% after it said revenue grew 5% excluding pass-through fuel and currency movements in the three months to March 31. Although it reported that total revenues decreased by 4% as a result of foreign exchange movements, representing a slower start than in 2013, the company is well ahead of Liberum Capital's 2.5% full-year revenue growth forecast excluding fuel and currency moves. Strong contract wins over the first quarter and first weeks of the second quarter also provide some promise, said Liberum analyst David Brockton.
In the forex market, at the close of the UK equity market, the pound is more or less flat against its major rivals, having dipped sharply in the immediate aftermath of the latest UK consumer price inflation data.
UK CPI slowed in March, rising 1.6% year-on-year, down from the 1.7% recorded in February, and in line with economists' expectations. On a monthly basis, prices rose 0.2%, after increasing 0.5% in the previous month. That was also in line with economists' expectations.
Analysts attributed the falling inflation to high-street discounting, stable commodity prices, as well as the late timing of Easter, which provides a spending boost to the economy.
"Although some of today’s inflation decline will be reversed next month the Easter distortion drops out, that cannot disguise the trend. Inflation is under-control and the downward pressure on wages is easing," said Rob Wood, chief UK economist at Berenberg.
Sterling fell heavily in the wake of the release, but quickly overturned these losses. At the UK stock market close, the pound trades at USD1.6721, EUR1.2108, and CHF1.4720.
"On Wednesday, we get the ultimate piece of the jigsaw," said Kathleen Brooks, research director at Forex.com. "Will wages (including bonuses) have outpaced price increases for the first time since 2010?" she asks. "If wage growth fails to meet expectations of 1.8%, then we could see the pound come under some downward pressure."
UK employment data is scheduled to be released at 0830 GMT.
Also in the data calendar Wednesday, Chinese gross domestic product, urban investment, retail sales and industrial production numbers are released at 0200 GMT. Japanese industrial production data are released at 0430 GMT, ahead of a speech by Bank of Japan Governor Haruhiko Kuroda at 0615 GMT.
Consumer price inflation readings for the eurozone are scheduled for 0900 GMT.
In the US, the Mortgage Bankers Association releases mortgage applications information at 1100 GMT. Building permits and housing starts data are released at 1230 GMT, with industrial production figures at 1315 GMT.
There are also a raft of speeches scheduled from the US. Federal Open Market Committee member Jeremy Stein gives a speech at 1200 GMT, ahead of Federal Reserve Bank of Atlanta President Dennis Lockhart at 1530 GMT, and Fed Chair Janet Yellen gives her second speech of the week at 1615 GMT.
In the corporate calendar Wednesday, FTSE 100-listed Tesco releases full-year results. Blue-chips Hargreaves Lansdown, Burberry Group, Persimmon, and Reckitt Benckiser are joined by mid-caps Evraz and Hunting in releasing trading updates, while BHP Billiton, Fresnillo and Polymetal International release production reports.
By James Kemp; [email protected]; @jamespkemp
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