Profit-takers move in on blue-chips
Last week's 5% rise led profit-takers to leave the market on Monday, with the commodities sector suffering a sell-off
The FTSE 100 index closed down 0.6%, having lost 26.6 points, at 4,435.5, tentatively remaining 1.3 points higher than it started 2009. The FTSE 250 index dropped 2.5%, or 195.8 points, to end the day at 7,610.4.
A correction in the market following last week’s 5% rally and total gains of 28% since early March was to be expected but many were pleasantly surprised by today’s marginal falls. “I had expected a greater correction than this and to still be on positive ground is a bonus,” one London-based trader as the market closed. The general consensus, however, remains that the UK market will need to pause for breath some time soon.
At the time of the UK close, Wall Street was also feeling the pressure after the Obama administration increased its budget deficit forecast for 2009 up by $89 billion to $1.8 trillion: accounting for almost 13% of GDP. A survey of economists that revealed consensus is looking for the US economy to return to growth in the third quarter failed to detract investors from the staggering budget figures.
Among equity performances, commodities plays, which enjoyed a strong performance last week on the back of higher raw materials prices amid rising hopes that a turn in the global economic climate could be imminent, fell foul of profit-takers on Monday.
Miner Kazakhmys plunged 13.6% to 663p, Lonmin dropped 10.0% to 1,460p and Eurasian Natural Resources fell back 4.3% to 649.5p. Lonmin was also under the cosh after its first-half results disappointed and it announced a right issue to raise $457 million.
In the oil & gas segment, a near-dollar fall in the price of light, sweet crude dragged Royal Dutch Shell, Tullow Oil, BG Group and BP down 1.3%-3.3% each.
Travel and tourism stocks, some of which had enjoyed something of a rebound in recent sessions following swine flu-related falls, were back in the red on Monday. Thomas Cook Group lost 4.9% to 263p, British Airways dipped 4.1% to 162.4p and TUI Travel was off 3.2% at 259.75p.
Not all was doom and gloom, however. G4S led the blue-chip risers with a gain of 6.3% to 212.25p after reporting a strong start to the year. The security services firm posted improving margins in the first quarter and said it remains confident of delivering a strong performance in 2009.
Centrica was in second place, 6.0% higher at 241.25p, as investors and analysts alike cheered the utility provider’s deal to buy a 20% stake in EDF’s UK nuclear energy unit, British Energy. Centrica will pay £2.3 billion for the stake—a 6% discount compared to the price EDF paid for it. The UK group also forecast profit growth to be in line with expectations in 2009.
In third place on the FTSE 100 was pharmaceuticals giant AstraZeneca, which this morning reported clinical trials for its Brilinta drug proved it was more effective in preventing heart attacks and strokes than competitors Sanofi-Aventis and Bristol-Myers Squibb’s Plavix. Astra shares jumped 5.5% on the news to close at 2,529p.
Finally, turning to financials, the sector put in a mixed performance on Monday as Standard Chartered and Royal Bank of Scotland succumbed to profit taking, sliding 6.8% to 1,200p and 2.7% to 46.1p, respectively, while Barclays and HSBC each took on 2.1% to 287p and 0.1% to 578p.
Shares in Barclays were in demand following weekend press reports that CVC Partners’ bid to buy the bank’s iShares business could have been trumped by a late-comer, with speculation flourishing that other interested parties could be hovering on the sidelines.
And HSBC managed to creep out of the red by close of play as the market digested its first quarter figures, which revealed that, like other UK banks, the group has benefitted in early 2009 from strong growth in Global Banking & Markets revenues.
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