Profit-taking in banks and miners pushed London’s blue-chip FTSE 100 Index into the red this morning.
Investors are, perhaps, beginning to fear that corporate earnings will not grow enough to justify current levels.
The mining sector took the most points off the FTSE after copper prices retreated on concerns that China’s demand for the metal may slow. Rio Tinto’s share price was 2.4% lower at 2673p, while BHP Billiton was trading 1.74% below its previous close at 1719.5p.
Kazakhmys declined 2.3% to 1098p after Citigroup reduced the equity’s rating to ‘hold’, while Vedanta Resources fell 2% to 1970p after Goldman Sachs downgraded the company to ‘neutral’. Antofagasta and Eurasian managed to buck the negative trend prevailing across the sector, however, after Goldman and Citigroup upgraded the companies to ‘buy’. Antofagasta’s shares climbed 1.11% to 774.5p while Eurasian added 0.4% to 895.5p.
In the meantime, the Independent newspaper has reported that Xstrata is increasingly likely to walk away from its proposed merger of equals with Anglo American. Xstrata’s share price dropped 2% to 945.50p, while Anglo American was 1.7% lower at 2037p.
Energy major Tullow Oil was also weaker, down 3.4% to 1139p after the Wall Street Journal reported that Italy’s Eni is not considering Tullow as one of its takeover targets, saying the company is too expensive. In contrast, Royal Dutch Shell managed to gain 0.3% to 1755p after Bank of America-Merrill Lynch upgraded the company to ‘buy’.
Banks were also treading in negative territory today. Royal Bank of Scotland, the sector’s worst performer, was down 3.2% to 54.5p after unidentified sources told Bloomberg News that it is mulling over a potential rights issue to reduce its dependence on the UK government’s Asset Protection Scheme (APS). The equity placement is expected to be ‘modest’, in the region of around £3 billion to £4 billion.
Lloyds Banking Group fell 1.8% to 108.65p, Standard Chartered declined 2% to 1467p, Barclays lost 1.4% to 368.4p while HSBC retreated 1% to 722.5p.
Elsewhere, Thomson Reuters made the headlines this morning after agreeing to acquire Oslo-based news provider Hugin Group from NYSE Euronext. Thomson Reuters said the acquisition was part of a strategy of providing corporate clients with investor relations and public relations services. Thomson Reuters’ share price climbed 1.3% to 1892p this morning.
Land Securities was also in the spotlight after announcing that it sold its one-third ownership of the Bullring, Birmingham to Future Fund for £210 million. Land Securities said it will use the funds to increase flexibility. Shares in Land Securities fell 1% to 680p.
On the macro front, property website Rightmove has reported that the asking price for homes in England and Wales rose by 0.6% in September to £223,996, following a 2.2% decline August. Rightmove attributes the rise in prices to a lack of available homes for sale. There are no other UK economic indicators scheduled for release today.
Looking ahead to the US, the Conference Board’s leading economic indicators index for August is scheduled for release at 3pm (London time) today. Bloomberg News expects the gauge to increase by 0.7%, a fifth straight monthly rise.
By around 10.45am (London time) the FTSE 100 Index was 51.43 points lower (-1%) to 5121.46, while the broader FTSE 250 was 77.09 points (-0.83%) below its previous close at 9229.84. In the meantime, December Dow and S&P 500 futures were down by around 0.60% this morning, suggesting that the market currently expects Wall Street to open lower this afternoon.
