Investing
London open: stocks at six-week low as earnings disappoint
Heavy falls from Wood Group, CRH and a host of miners were weighing on the FTSE 100 in early trading on Tuesday, pushing the index to levels not seen in over six weeks.
London’s benchmark index sunk by around 0.8% this morning, heading towards the 6,400 mark; the last time it closed lower was on 5 July when it finished the day at 6,375.52.
Rising US bond yields and concerns over an impending withdrawal of stimulus by the Federal Reserve have weighed heavily on market sentiment over recent weeks. Investors are now choosing to scale back risk ahead of the minutes of the Federal Open Market Committee (FOMC) meeting due out tomorrow.
“Traders will be meticulously dissecting the minutes with a view to finding out whether the recent spell of positive data from the US will encourage officials to begin with the supposed tapering of stimulus measures,” said financial trader Shavaz Dhalla from Spreadex.
“Furthermore, with another day thin on economic data, there really isn’t much chance for sentiment to be swayed,” he said.
Oil and gas services company Wood Group slumped this morning after scaling back its EBITA growth guidance for the full year from 15% to “10-15%”, reflecting some project delays and further weakening in Canada. EBITA in the first half was up 18.6% year-on-year.
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CRH also fell sharply after swinging to a loss for the half-year period. The building materials firm reported a loss before tax of €71m, down from €102m the year before, while sales fell 3.0% to €8.01bn.
Mining stocks were also out of favour today as falling metals prices and results from BHP Billiton and Glencore Xstrata failed to impress. Vedanta, Fresnillo and Anglo American were also registering steep losses.
BHP said lower commodity prices wiped $8.9bn off its underlying earnings which plunged 22.4% in the year to the end of June. Meanwhile, Glencore Xstrata was forced to write down $7.7bn in assets as it reported a 9.0% drop in adjusted EBITDA.
Defensive stocks were in demand early on as relatively ‘riskier’ assets (such as those in the resources sectors) were sold off. Telecom groups BT and Vodafone were among the best performers, along with utility National Grid and real estate firm British Land.
Housebuilder Persimmon was also a high riser after first-half profits jumped 38%. The company also said its order book was running 21% ahead of last year as the government’s ‘Help to Buy’ scheme boosted demand.
Source: ShareCast