Thursday saw markets around the world meander nervously to a modestly higher close. At the centre of the current storm, markets in Europe managed to recover some poise as Greece appeared to be close to forming a new coalition government; the Eurostoxx 50 Index closed up 0.98% at 2247.38, about 3% below its level at the start of 2012 and about 14% below its high in mid-March this year. The FTSE gained a modest 14 points (+0.25%) while the S&P 500 closed up by similar percentage.
Among FTSE 100 leaders, BP and BG Group rose by 1.6% and 1.5% ,respectively, apparently on bargain hunting after the weakness of recent sessions. Tullow closed up by 2.2% . Favourable broker comment pushed Arm Holdings, major chip supplier to Apple Inc, up by 4.1% .
Reckitt Benckiser shares lost 3.5% in value on news that the Riemann Family, Reckitt’s largest shareholder, had sold a 4.9% stake and raising around £1.2 Billion as part of its support for Coty’s bid for Avon Products Inc. The view that the dividend announcement that accompanied good fourth quarter results from BT Group did not meet expectations left the shares 2.6% lower at 211.5p. The news from the Bank of England of no further Quantitative Easing for now and maintained low interest rates came as no surprise to most of the market.
A feature on Wall Street was a 4.8% rise in the shares of News Corp on better-than-expected results and a doubling of its share buyback scheme. However, the I.T. sector witnessed some carnage as Cisco Systems, maker of computer-networking systems, fell by 10% on disappointment with its forecasts on the back of slower Q3 sales growth than expected by the market. This knocked onto Juniper (-4.9%) and Oracle (-2.7%).
Asian markets closed lower overnight, weighed down by the weakness in the oil price and concern about industrial production numbers for China which grew by 9.3% in April against expectations of nearer 12.2%. Retail sales for April also disappointed, coming in at +14.1% year-on-year against estimated growth of 15.2%. Providing a degree of comfort, however, CPI for April showed an increase of 3.4% against 3.6% in March. The possibility of a cut in reserve ratio requirement for the banks is heightened as the Central Bank looks to provide some stimulus without stoking up more inflation.
The shock news for markets to digest today is the revelation by JP Morgan – perceived as the ‘Captain Sensible’ of the international banking fraternity – that it generated, through ‘egregious’ trading errors initiated in 2009,a $2 Billion trading loss from hedge positions it took in credit securities. In after-market trading last night, JPM shares fell by 6.7% along with falls of around 2% to 3% in other major banking group shares as investors were reminded of the risks often lurking just under the surface.
The impact of this news has hit markets in Europe and London, with financials, unsurprisingly, in the firing line. The disappointing data from China have hit mining stocks. Across Europe, the Spanish market is currently down 1.7% and France down almost 1%. The Eurostoxx 50 is 0.9% lower, the FTSE 100 0.5% lower and the S&P 500 Index futures around 8 points or 0.6% lower ahead of the Wall Street opening.
This document is issued by Beaufort International Associates Limited and is produced for information purposes only and using sources that we believe to be reliable and does not constitute an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or be taken as investment advice. Potential investors are recommended to take advice before dealing from an authorised professional investment adviser or stockbroker. Beaufort International Associates Ltd is Authorised and Regulated by the Financial Services Authority. The registered office of Beaufort International Associates Limited is at 49, Whitehall, London SW1A 2BX, United Kingdom. Beaufort International Associates Limited is registered in England with number 03604683.
