US markets continued to edge lower this afternoon as poor new home sales data combined with the continuing problems in Japan and Libya, making investors cautious about buying equities.
New home sales
Sales of new homes in the US unexpectedly fell to their lowest level since December 2003 in February, increasing the weight of evidence that suggests the housing industry is stuck in a mire. Sales dived 17% to an annual figure of 250,000, while the median price fell 8.9% over the year to $202,100. Wells Fargo noted that there is little incentive for builders to increase construction while home prices continue to decline.
US equities - Bank of America
By 3.30pm (London time), the Dow Jones was down 5.15 points (0.04%) at 12,013.48 and the S&P 500 had fallen 4.25 points (0.33%) to 1289.52. The Nasdaq 100 lost 5.23 points (0.23%) to 2252.73.
Bank of America slumped 3.2% to $13.43 following the Federal Reserve's refusal to allow the bank to increase its dividend this year. The bank said that the Fed had objected to the plan, submitted as part of stress tests for nineteen of the largest US banks, but it was not permitted to give further details. Three other large banks, including Citigroup, have been permitted to increase their dividends, so the refusal highlights weaker capital levels at Bank of America. Bank of America plans to resubmit plans to boost dividends in the summer.
UK Budget statement
Back in the UK, Chancellor George Osborne unveiled his latest Budget, as he attempts to shift the focus of the Government from deficit cutting to promoting growth. Mr Osborne said that the reforms enacted in the June emergency Budget had brought stability and that this new Budget would neither announce new taxes nor make large giveaways. The statement revealed that government borrowing would be £47 billion higher over the next five years than previously thought, but that the structural deficit remains unchanged.
In a bid to make Britain more attractive for companies, Mr Osborne announced a 2% cut in corporation tax for this year, and 1% next year, as well as a loosening of planning restrictions.
The Chancellor also revealed that the independent Office for Budget Responsibility had downgraded UK growth forecasts for the next two years, with economic expansion now forecast to be 1.7% in 2011, as opposed to the earlier figure of 2.1%. 2012 growth is expected to be 2.5% instead of 2.6%.
UK afternoon trading - ENRC, Ferrexpo
The FTSE endured a choppy afternoon, swinging between gains and losses, but was 0.22% higher by 3.30pm (London time) at 5775.14.
Kazakhstan miner ENRC rose 2.4% to 920p after it reported soaring underlying profits for 2010. Like-for-like sales rose 62% and underlying profit jumped 118% to $3.2 billion. However, sales costs rose 46% and the firm said that costs will go higher this year as well.
ENRC said that Chinese growth was the engine behind much of the improved performance, and it expects continued good growth in 2011.
Iron ore miner Ferrexpo said that pre-tax profit soared almost five-fold in 2010 to $498 million, helped by a growth of 14% in production to a record level of ten million tonnes. Operations in the year so far continue at full capacity, and the firm continues to have a plan to double capacity over the year, spending $647 million. Ferrexpo shares gained 4% to 419.6p.
