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FTSE 100 pulls back, Dow Jones and S&P 500 rise in early trade - UPDATE

Published: 15:05 27 Mar 2012 BST

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UK stocks reversed early gains this afternoon with the blue chip FTSE 100 index falling to 5,894 by midday, down eight points (0.15 percent) from Monday’s close.

The early rally was sparked by overnight gains in US and Asian markets on the back of comments from Federal Reserve chairman Ben Bernanke, who said the job market wasn’t yet out of the woods despite recent improvements.

He said further support form the Fed was required to speed up economic growth in the US, which would push the unemployment rate further down.

The comment were interpreted as a sign that the Fed is highly unlikely to make any changes to its loose monetary policy and could potentially consider launching another round of quantitative easing.

Traders are now looking to today’s US consumer confidence data for March, which will be released later this afternoon.

“We could see a somewhat mixed market reaction as a weaker than expected reading could help to inspire investors that QE3 remains around the corner, whilst a stronger reading may boost growth expectations but at the same time weaken QE3 expectations,” said market analyst at City Index Fiona Cincotta.

Royal Bank of Scotland (LON:RBS, up 4pct at 28.87p) topped the FTSE 100 leaderboard this afternoon, driven by speculation that the UK government is in talks with Abu Dhabi wealth funds over the sale of a large stake in the bank.

Sector peers Barclays (LON:BARC, up 2.2pct at 253.2p)Standard Chartered (LON:STAN, up 2pct at 1,628p) andHSBC (LON:HSBA, up 1.6pct at 570.2p) rose in sympathy.

Investors also bought mining stocks including Kazakhmys (LON:KAZ, up 3.2pct at 955p) and Rio Tinto (LON:RIO, up 1.8pct at 3,425.5p), which is considering selling its diamond mining business.

Meanwhile, insurance group Resolution (LON:RSL, down 3.4pct at 265.5p) was the heaviest faller in the blue chip index after unveiling plans to break up into two businesses.

Caterer Compass Group (LON:CPG, down 3.1pct at 647p) also fell as it revealed that revenue growth slowed compared to the previous year.

Other notable fallers included oil and gas group BG (LON:BG., down 2.1pct at 1,487p), gold producer Randgold Resources (LON:RRS, down 1.8pct at 5,675p) and power generation company International Power (LON:IPR, down 1.3pct at 377.3p).

US markets

US equities edged higher in early trade on Wall Street.

The Dow Jones Industrial Average (DJIA) climbed nine points (0.1 percent) to 13,251 and the broader S&P 500 index held steady at 1,417.

Earlier today, Standard & Poor's said its Case-Shiller home price index for America’s 20 major metropolitan markets fell 0.8 percent in January from the previous month and 3.8 percent year on year.

This was the first monthly drop in a row, pushing home prices to the lowest level in nine years.

On the corporate front, United Technologies (NYSE:UTX) said EU regulators decided to take a closer look at its proposed takeover of Goodrich Corporation. The European Commission now have until August 9 to decide whether the deal would reduce competition in the European market.

Shares un United technologies fell 0.33 cents to US$83.17 on the news this morning.

UK corporate news

Builders’ merchant Wolseley (LON:WOS, down 2.7pct at 2,451p) benefited from the ongoing recovery in the US, which helped it to a surge in half-yearly profits despite continuing weakness in Europe.

In the six month period to January 31, pre-tax profits across the group jumped 28 per cent to £250 million and headline earnings were up 30 per cent at 78 pence per share as like-for-like revenues climbed five per cent compared with the same period last year to £6.84 billion.

The strong financial performance prompted Wolseley to raise its interim dividend by 33 per cent to 20 pence per share.

In the FTSE 250, Afren (LON:AFR, up 3pct at 134.9p) reported record results for the full year to end-December 2011. 

Turnover rose 87 per cent year-on-year to US$597 million on the back of higher prices and increased production, and pre-tax profit nearly tripled, coming in at US$221 million compared to US$79 million a year earlier.

Afren said it achieved the production rate it had targeted for the end of the year, and over the period, produced an average 19,154 barrels of oil equivalent per day, up from 14,333 boepd over 2010.

Other news in the FTSE 250 included trading updates from midcaps Babcock International (LON:BAB, up 3pct at 798.5p) and PZ Cussons (LON:PZS, down 9.6pct at 302p)

Support services group Babcock said its financial performance in the current year remains in line with expectations amid a positive trading environment and reported an increase in its order book from £12 billion in the past 18 months to £12.5 billion.

During the second half of the financial year, Babcock secured preferred bidder status on a number of new long-term contracts and signed extensions to existing contracts totalling £2 billion.

Furthermore, the company today announced two more contract wins by its marine and technology and defence and security divisions worth a combined £485 million.

While Babcock remains on track to hit its full year targets, PZ is set to miss expectations due to the impact of unrest in Nigeria, one of its key markets.

PZ, which owns the Imperial Leather soap, said its performance has been in line with forecasts elsewhere, however, the trading environment will remain tough in most of its markets due to continuing pressure on customers’ disposable incomes.

On a positive side, PZ expects to return to profitable growth in all markets in the new financial year starting in July as a result of its supply chain optimisation project, which will include shutting down its manufacturing facilities in Australia and Ghana.

 

 

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