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FTSE 100 sinks ahead of dollar printing decision

Published: 17:24 17 Sep 2013 BST

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Britain's blue chip index sank on Tuesday ahead of the Fed’s all-important decision on tapering.

The so-called ‘tapering’ refers to scaling back the US central bank’s dollar printing programme aimed at stimulating the world’s biggest economy.

Fears are that the Fed turns off the taps and the US economy heads back towards recession.

The story has been the main driver of global equity markets this year and tomorrow is seen as a crucial day, with departing chairman Ben Bernanke set to kick off the tapering.

The Federal Open Market Committee’s two-day meeting is expected to lead to a decision to trim the $85bn-a-month dollar printing programme.

Bernanke unveiled plans earlier this year to take the US central bank’s foot off the bond buying pedal following signs of a pick-up from the world’s largest economy.

His successor is yet to be chosen, with frontrunner Larry Summers pulling out of the race earlier this week. It leaves current vice chairman Janet Yellen as the most likely candidate in most people’s eyes.

The Footsie was down 52 points or 0.8% at 6,570 by the close of play, reversing Monday’s gains that stemmed from Summers’ decision to quit the Fed race. 

Citigroup analysts reckon the FTSE 100 will hit 8,000 by the end of next year, suggesting the UK’s benchmark index will rise more than 20% in less than 18 months. 

In a note entitled ‘REV it up’, Citi’s top European equities tipster Anna Esposito is backing a bullish approach by investors into the benchmark.

Esposito thinks negative GDP and earnings growth will be replaced by positive growth next year, sparking the upgrade to her previous target.

Among the losers on Tuesday were big banking stocks Barclays (LON:BARC) and Lloyds Banking Group (LON:LLOY). 

The Lloyds re-privatisation began today with the government selling off a 6% stake at a 3.1% discount to yesterday's closing price.

The shares fell 3.5% to just below the 75p sale price towards Investec’s bearish target price of 65p.

The biggest faller however was Aggreko (LON:AGK) after the temporary power provider was cut to ‘underperform’ by Credit Suisse which questioned the market for power projects.

The top riser were water companies United Utilities (LON:UU.) and Severn Trent (LON:SVT) as defensive stocks came to the fore.

Flying high in London was Invu (LON:INVU), which gained over 46% after the software provider reported a rise in half year pre-tax profit.

In the growth stocks arena, gold digger Pan African (LON:PAF) shone out as shares rose over 13% to stand at 15.5p each.

It unveiled today plans to pay a dividend after a solid year, making it a rarity on the junior AIM market – an income paying mining stock.

The gold digger reported a near 33% uptick in output, which was reflected in a 32% rise in gross revenues to £133.5mln in the year to end-June. 

Gold sold in the year increased by 38.2% to 130,493 ounces compared to 94,449 ounces in 2012.

Also on winners’ row today was Advanced Computer Software (LON:ASW), whose shares strengthened after interim sales surged ahead as strong demand continued from both the public and private sectors.

A first contribution from March acquisition Computer Software boosted the figures, but Advanced Computer said Business Solutions, the group's largest division, also saw above-market organic growth.

Elsewhere, Stratmin Global (LON:STGR) shares dropped 13.8% as it revealed it had brought in £750,000 via a cash call to further invest in the Lohorano property in Madagascar.

The funds are to increase the produced graphite carbon content grade, and for working capital as the company works towards cashflow break even, it said in a brief statement.

The placing consists of 4.16mln shares at 18p each - a discount to yesterday's closing price of 22.625p.

Other notable gainers included ANGLE (LON: AGL), which gained 6.9% and Alecto Minerals (LON:ALO), whose shares were lifted 13.2% to stand at 1.16p.


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