UK stocks as expected extended Friday’s losses today after Greece said it would miss its 2011 and 2012 deficit targets, throwing the spotlight back on Europe’s fiscal problems.
The Greek government told the European Union, the European Central Bank (ECB) and the International Monetary Fund (IMF) – collectively known as the troika – that its budget deficit will likely reach 6.8 percent of the GDP in 2012.
The latest bailout package granted to Greece set a target of a budget6 deficit of no more than 6.5 percent of the GDP.
However, Athens has also pledged to implement further austerity measures to safe the budget another €6.6 billion.
The FTSE 100 dropped 77 points (1.5 percent) to 5,051 by early afternoon following a loss of nearly 70 points on Friday, which capped off the Footsie’s worst quarter since 2002.
Banks, which have the greatest exposure to the fiscal crisis in Europe among UK stocks, emerged among the top fallers in the top flight today.
Standard Chartered (LON:STAN, down 4.6pct at 1,228p) and Royal Bank of Scotland (LON:RBS, down 4.3pct at 22.47p) slid to the bottom of the banking sector, followed by Barclays (LON:BARC, down 3.9pct at 155p).
Fashion house Burberry (LON:BRBY, down 4.8pct at 1,118p) also was out of favour today, owing to its significant exposure to Asia, whose stock markets fell heavily this morning.
In the meantime, the fresh wave of panic boosted the safe haven appeal of gold and silver, also lifting demand for precious metals focused mining majors Fresnillo (LON:FRES, up 2pct at 1,617p) and Randgold Resources (LON:RR., up 1.7pct at 6,400p).
Traders are now looking to Thursday’s meeting of the ECB, particularly to its decision on interest rates. The ECB is widely expected to slash its interest rates after hiking them twice to 1.5 percent this year.
Analysts at Brewin Dolphin are projecting the ECB to cut its interest rates by 0.25 percent.
“It will be astonishing if, against a backdrop where the risk to financial stability in the eurozone has been steadily worsening... the ECB chooses not to reverse its recent hikes in interest rates. The ECB may fret about the damage this might do to its credibility,” Brewin Dolphin said in today’s “market tactics” note.
Wall Street preview
Across the Atlantic, US stocks are expected to move in the same direction as European equities when trading kicks off on Wall Street today.
Futures for the Dow Jones Industrial Average (DJIA) fell 31 points (0.3 percent) in pre-market trading, while futures for the broader S&P 500 index were down 7 points (0.65 percent).
Today’s US data will include the Institute for Supply Management’s (ISM) manufacturing index for September. Analysts polled by Bloomberg are expecting to see a decline from 50.6 in August to 50.3 in September.
The macroeconomic calendar will also feature an update on construction spending for August.
Notable movers in pre-market included Yahoo (NYSE:YHOO) and Newmont Mining (LON:NEM), which added 5 percent and 2 percent respectively.
UK corporate news
Back in the UK, today’s news in the FTSE 100 included a couple of contract awards.
Oil and gas engineering firm Amec (LON:AMEC) has secured a Front End Engineering Design (FEED) contract for GDF SUEZ E&P UK's Cygnus gas field development, one of the most significant undeveloped gas fields in the North Sea.
The contract includes work on the 'option to proceed' into the detailed design and procurement phase, and is valued at an estimated £50 million.
The FEED, which starts immediately, is scheduled for completion in 2012.
Fellow blue chip, engine and turbine manufacturer Rolls Royce (LON:RR.) has secured its first order for vessels based on its Environship concept.
Rolls-Royce will design and provide power and propulsion systems for two technologically advanced cargo vessels, which have been purchased by Norwegian transportation company, Nor Lines AS.
Meanwhile, commodities trader Glencore (LON:GLEN) said that its acquisition of 70 percent in the Marcobre S.A.C., the sole owner of the Marcona copper property and the Mina Justa project in Peru for US$475 million, has been delayed pending completion of “broader due diligence”.
Glencore added that it is satisfied with its technical due diligence on the assets which it has undertaken to date.
In other news, another FTSE 100 company Cairn Energy (LON:CNE) announced that announced that Cairn India has made a gas discovery in Sri Lanka.
Cairn India said in a statement that its first well of a three well offshore drilling campaign in Sri Lanka intersected a 25 metre hydrocarbon column. Further drilling will be required to establish the commerciality of the discovery.
Cairn Energy currently has a 52.11 percent stake in Cairn India. Following the completion of the proposed sale of an interest in Cairn India to Vedanta Resources (LON:VED), Cairn will retain a 22 percent shareholding.