Market Snapshot
In early Tuesday morning trade, equity markets bounced back from Monday losses, supported by a higher close on US markets overnight, though debt worries continued to weigh on investor confidence.
Shortly after midday, the FTSE 100 index was nearly flat, adding 2 points to 5,553 while the FTSE 250 had lost 0.3% or 30 points and stood at 10,659. Elsewhere in Europe indices were mixed as the fiscal storm was poised to shift from Ireland to other peripheral eurozone economies. “With the market moving rapidly onto Spain and Italy it is possible that too big to fail becomes too big to bail,” pointed out Gary Jenkins, Head of Fixed Income Research at Evolution Securities. European credit default swaps hit record highs and the euro tumbled on the back of debt crisis contagion fears.
Labour market data from the EU did little to disperse the fiscal concerns, as unemployment levels showed continuous divergence in economic performance between Germany and the rest of the EU. The spread between German and eurozone-wide unemployment rates has widened to 3.4%. This is “underscoring the reality of a two-speed common market that has made dealing with recent sovereign risk flare-ups all the more difficult,” said Ilya Spivak, Currency Strategist for Daily FX.
On a brighter note, Eurostat expects the eurozone CPI for November to remain unchanged from October, in line with expecations.
In London, while the Office of Budget Responsibility has recently upped its economic growth forecast for 2010, UK consumers aren’t so optimistic. The GfK consumer confidence survey showed consumer confidence regarding the "general economy” over the last 12 months has fallen November. Brits on average also have a negative outlook for the economy in the next year, whereas a year ago they were feeling optimistic, albeit by a small margin. The greatest change in consumers’ expectations was recorded in the outlook for their personal financial situation over the next year, standing at -7 index points in November down from -2 in October.
US futures point to a weaker start on Wall Street ahead of PMIs from Chicago, consumer surveys and the S&P/Case-Shiller Home Price Index for November.
Market Risers
Cairn Energy (CNE), BG Group (BG.) up 0.6%-2.7%: Recover losses, having been among the top fallers on Monday.
African Barrick Gold (ABG), Rio Tinto (RIO), up 0.6%-0.9%: Gold miners gain, with gold prices benefitting from investors seeking a ‘safe haven’. In addition, the Rio Tinto 40%-owned Bengalla mine in New South Wales announced it is to increase production to 9.3 million tons a year from 7.8 million tons.
Compass Group (CPG), up 0.8%: Company announced the acquisition of Life's A Party Group (LAPG) in Victoria, Australia for a cash consideration of up to £14.1 million.
Market Fallers
Barclays (BARC), down 1.9%: Tops fallers list, reversing Monday’s climb, as European debt worries weigh.
British Airways (BAY), down 1.5%: 15%-owned regional airline Flybe announced its plan to proceed with a £60 million IPO, and in a u-turn to its original intention, BA said it will subscribe to the offer in order to maintain its pre-admission stake.
Sage Group (SGE), 0.6%: Dips ahead of preliminary annual results announcement tomorrow.
