FTSE 100	5518.2, -147.9	Dow	11453.4, -358.4
FTSE 250	9107.26, -213.98	Nasdaq	2321.37, -79.89
FTSE All Share	2808.24, -72.91	S&P 500	1283.15, -38.8
Nikkei	13544.4, -278	Hang Seng	21998.2, -457.5
Oil (Brent)	$139.26	Gold	$915.10
Base Rate	5%	10 Yr Gilt	5.012%
£/$	1.984	£/€	1.2605

 

Markets

London - The FTSE 100 Index fell 2.6% yesterday after investors were spooked by a sudden spike in oil prices and fears over inflation in the UK and US. Comments from cartel OPEC that oil could reach $170 a barrel this summer combined with fresh concerns over inflation from the Bank of England and the US Federal Reserve in a miserable session for blue-chips. The London market eventually closed 147.9 points down at 5518.2 - the lowest since March - wiping £35bn from blue-chip stocks.

A poor opening for US markets increased the pressure on London’s blue-chip stocks late in the session after the downgrades on corporate giants General Motors and Citigroup. The decline left just a handful of Footsie firms in positive territory, as oil and commodity stocks gained from the higher prices. Banks, retailers and travel groups, many of whom enjoyed gains yesterday, were heavy casualties.

News of a new rights issue from Belgian bank Fortis also hit sentiment in the banking sector as Barclays lost all the ground it made up yesterday after confirming plans to raise £4.5bn of new capital from wealthy overseas investors. Shares were down 27.75p to 303.75p. HBOS, whose shareholders overwhelmingly backed its £4bn rights issue today, slipped 16p to 276p - just a penny above the "discounted" rights price. Lloyds TSB was another loser, off 21.75p to 306.75p, with Royal Bank of Scotland down 11.25p to 218p. A rare gainer in the sector was Bradford & Bingley despite its plans for a US cash injection and rights issue being branded "unacceptable" by the Association of British Insurers. Its shares were up 4.5p to 80p.

The session’s gloom also hit blue-chip fashion chain Next, which slid 48.5p to 978.5p, while Carphone Warehouse was down 6.65p to 1981p. Pay-TV firm BSkyB was also on the back foot following a broker downgrade citing risks to advertising income in a deteriorating economy. Shares were down 24p to 470,75p.

Top faller was London Stock Exchange, which fell almost 13%, or 123.5p to 828.5p, after the announcement of a tie-up with US bank Lehman Brothers for a trading facility under whelmed investors excited yesterday by stake building rumours.

The few Footsie firms in positive territory were led by mining firm Lonmin, which gained 92p to 3159p, although Anglo American also added 18p to 3303p after the losses of the previous session.

New York - US markets plunged yesterday with the Dow suffering its second worst trading day of the year, closing at a 21 month low. Record oil prices continued to weigh on the market as the price of the commodity climbed above the $140 a barrel mark for the first time. Goldman Sachs added to the woes after downgrading two key Dow components and urging investors to sell bank and automaker shares.

The Dow Jones tumbled 358.4 points to finish at 11,453.4, the S&P 500 dropped 38.8 points to close at 1,283.15. The Nasdaq plummeted 79.89 points to end at 2,321.37.

Citigroup was one of the worst affected financials following Goldman’s downgrade of investment banks from "attractive" to "neutral". The Dow component suffered further after it was added to Goldman’s "conviction sell" list, shares in the company slumped 6%. Others of note included Merrill Lynch, down 6.8%, Lehman Bros, off 8.4% and Morgan Stanley which lost 3.5%.

General Motors closed at its lowest level in 33 years yesterday after Goldman’s downgraded the stock, warning that they could have to raise capital and cut dividends in a brutal slowdown for the auto industry. Shares ended the day a whopping 11% lower, dragging the rest of the auto sector with it.

Technology shares took a beating after weak profit outlooks from two major players. Even though Oracle Corp topped analyst’s expectations with its fourth quarter figures, shares closed 5% due to its conservative guidance for the next period. Research in Motion not only missed targets for the current quarter, it also forecast weaker than expected profit growth for the next quarter. As a result shares in the BlackBerry fell more than 13%.

US light crude oil for August delivery gained $5.09 to settle at $139.64 a barrel. Earlier in the session the price rose above $140 for the first time ever after Libya said it may cut production in response to possible US action against producer countries.

COMEX gold for August delivery added $32.80 to close at $915.10 an ounce.

Treasury prices rose, lowering the yield on the 10 year note to 4.04% from 4.10% late Wednesday.

Tokyo - The Nikkei sank 278 points to close at 13,544.4 this morning. Japanese stocks are now suffering their worst run for seven months, driven by the rallying oil prices and figures out from the government that said household spending fell while inflation surged last month. Fanuc Ltd, the world’s largest maker of industrial robots, dropped the most in more than two months.

Hong Kong - The Hang Seng is currently 457.5 points lower at 21,998.2. Foxconn International Holdings Ltd, the world’s biggest contract maker of mobile phones, plunged for a second day to its lowest in more than two years. China Petroleum & Chemical Corp, Asia’s biggest oil refiner, slumped the most in a week as oil topped $140.

Economics

UK GDP (Q1, final)

The final release of Q1 GDP is expected to be unrevised, with headline growth at 0.4 percent on the quarter. There is not expected to be any major revisions to the components. This release provides the full breakdown of the national accounts. The most closely watched area tends to be the savings rate, which is likely to tick back down in Q1, further highlighting ongoing imbalances within the household sector.

US Personal income and spending (May) 13.30 bst

With aggregate hours down 0.1 percent in May and average hourly earnings up 0.3 percent, personal income is expected to remain muted at 0.2 percent. Meanwhile, strong retail sales and the surge in gasoline prices should push personal spending up 0.7 percent. The headline PCE prices are expected to have risen 0.5 percent, mostly reflecting an 8 percent rise in gasoline. This suggests a 0.2 percent increase for real PCE in May. Meanwhile, the core PCE deflator is expected to have risen 0.17 percent, which would take the year on year rate up to 2.15 percent, rounding to either 2.1 percent to 2.2 percent.

US University of Michigan confidence (Jun, final) 15.00 bst

The preliminary June reading fell to a new low of 56.7, down from 59.8 in May. Recent reading from ABC.Washington Post suggest that the initial Michigan June reading could be revised higher, although each further increase in the gasoline price continues to sting. The final reading could be revised up to 58. The preliminary survey in June showed five year median inflation expectations unchanged at 3.4 percent, while the one year median fell to 5.1 percent from 5.2 percent.

Corporate

BAE Systems said today COO Ian King would become chief executive with effect from September 1. King will succeed Mike Turner who announced in October last year that he would retire at the end of August.

Micro Focus International had a 34 percent increase in full year pre-tax profit while revenues rose by 33 percent, it said today. Adjusted pre-tax profit before tax was $88.6m in the year to April 30, after $66.2m last year, the company said today. Revenues were up to $228.2m, compared with $171.6m the year before. The company proposed a final dividend of 9.4 cents a share, with total dividend for the year up to 30 percent to 13 cents.

Berkeley Group reported a 3.2 percent increase in annual pre-tax profit, at the lower end of estimates, and said it was confident in its future despite an extremely challenging current housing market. Berkeley posted profits before tax of £194.3m, compared to the £210m average forecast.

National Express said today it was "confident" of combating rocketing fuel bills with pricing promotions and cost savings. The company said it was planning to use "innovative pricing mechanisms" to help offset soaring oil prices, which yesterday broke through the $140 a barrel mark.

National Express is expecting "significant" year on year earnings growth for the half year and full year results, adding that it hoped to benefit from the switch to public transport amid sky high petrol prices.

The firm moved to reassure that fuel costs, which have weighed heavy on stock market listed transport firms, represent a fraction of total revenue, at 5 percent for its trains business, 14 percent for coaches and 10 percent for buses. National Express has also "hedged" itself against rising oil prices for 100 percent of its fuel needs this year and 47 percent for 2009.

The above details are provided for information only and are not intended to be construed a solicitation for the sale or purchase of any particular investment nor as specific investment advice.

Posted: June 27th, 2008 under Asset Management.
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