FTSE CLOSE: Obama fiscal cliff fears continue; Iberia plan

| November 9, 2012 | 0 Comments

By
This Is Money Reporters

04:13 EST, 9 November 2012


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12:40 EST, 9 November 2012

5.30 (CLOSE): London’s blue chip share index remained in the red today on persistent fears over how President Obama will tackle America’s looming fiscal cliff.

But the FTSE 100 Index pared back earlier losses, closing down 6.4 points at 5769.7, as Wall Street’s Dow Jones Industrial Average pulled out of its two-day nosedive.

Figures revealing a better-than-expected rise in US consumer confidence helped turn the Dow Jones around, up around 0.3 per cent in early trade, and offset fears of a drawn-out battle over the looming fiscal cliff, which will mean automatic tax increases and spending cuts from January 1.

In corporate news, International
Airlines Group was higher after unveiling details of a turnaround plan
for ailing Spanish carrier Iberia.

Turnaround plan: Shares in International Airlines Group were up after a rescue package was revealed for ailing Spanish carrier Iberia.

Turnaround plan: Shares in International Airlines Group were up after a rescue package was revealed for ailing Spanish carrier Iberia.

The British Airways owner will cut
4,500 jobs, as well as reduce capacity by 15 per cent and downsize Iberia’s
fleet by 25 aircraft, as it looks to revive the airline, which made
losses of 262 million euros (£210 million) in the first nine months of
this year.

Iberia’s troubles and the impact of
superstorm Sandy, which grounded flights into and out of the US east
coast last month, mean IAG expects an operating loss of around 120
million euros (£96 million) this year.

Shares responded well to the restructuring announcement, lifting 2.6p to 170.6p or 2 per cent.

In currency news, the pound fell to 1.25 euros after gains yesterday following the Bank of England’s decision to hold off from further economy-boosting measures under its quantitative easing programme.

Sterling was also down at 1.59 US dollars as investors looked to the greenback as a safe haven from stock market turbulence.

Miners dominated the FTSE 100 fallers board, with Evraz off 6p at 236.4p and Anglo American down 18p at 1866p.

Banks and financial stocks were likewise under pressure, with Barclays off 6.5p at 230.2p, Royal Bank of Scotland down 4.3p at 270.1p and insurer Aviva off 4.9p at 325.4p.

Car insurance specialist Admiral was the biggest riser, up 3% or 35p to 1054p after Bank of America Merrill Lynch introduced a buy note on the stock.

An upgrade also buoyed chemicals specialist Croda International, which added 61p to 2271p.

Elsewhere, shares in Hornby recovered from earlier falls seen after the company swung to a half-year loss and pulled its half-year dividend.

The group said while sales of London 2012 goods such as model taxis and buses helped amid tough trading in the UK, performance of its Olympics range was weaker-than-expected and was not enough to prevent it reporting losses of £541,000, against profits of £959,000 a year earlier.

Hornby added that profit margins on Games-related products were low and it had put cash aside to cover unsold stock.

Shares initially fell 3 per cent, but later clawed back to close 2.25p higher at 60.25p.

The biggest FTSE 100 risers were Admiral up 35p to 1054p, Croda International ahead 61p to 2271p, Tate Lyle 17p higher at 747p and Smith Nephew up 14p to 656.5p.

The biggest FTSE 100 fallers were Barclays down 6.5p to 230.2p, Evraz off 6p to 236.4p, G4S 5.8p lower at 253.4p and National Grid down 11p to 689p.

11.30: The Footsie has fallen 26.4 points now (0.5 per cent) to 5,750.

Alastair McCaig, market analyst at IG, commented: ‘European markets are soft this morning over fears for the Greek austerity measures being pushed through and the imminent resolution of the US debt ceiling.

‘But it appears the 24-hour delay to publishing the UK trade balance figures was worth the wait, as they have fallen to -£8.4 billion, better than the expected -£9.1 billion. That follows Germany’s weak industrial figures earlier in the week, and we have seen France post some equally disappointing figures.

Regarding IAG’s announcement of large job cuts, he said ‘Willie Walsh will have some tough scraps ahead of him, as this time he will be battling the Spanish Workers Union.’

Brokers: The leading index was pulled down on Thursday by cyclical stocks such as energy, banks and miners

Brokers: The leading index was pulled down on Thursday by cyclical stocks such as energy, banks and miners

HSBC is back in the news ‘for all the
wrong reasons – fresh from being fined in the US for some
less-than-savoury account handling, the bank has been advised by the
British tax authority that over 4000 of their Jersey-based clients are
to be investigated. The company’s PR department is becoming as busy as
Barclays’,’ said McCaig.

Read our report here.

09.15:

The slump in markets following
President Obama’s re-election continued today as fears persisted over
potential gridlock on America’s fiscal cliff.

Wall Street’s Dow Jones lost another 1
per cent overnight and triggered falls of a similar size in Asia, while
the Footsie has edged lower now, 14.1 points down at 5762.4.

The
declines come amid fears of a drawn-out battle over the looming fiscal
cliff, which will mean automatic tax increases and spending cuts from
January 1.

Miners dominated the fallers
board, with Eurasian Natural Resources off 8.7p at 286.1p and Anglo
American down 27p at 1857p.

Insurer Admiral was the biggest
riser, up 36.5p to 1055.5p after Bank of America Merrill Lynch
introduced a buy note on the stock.

In corporate news, International
Airlines Group was higher after unveiling details of a turnaround plan
for ailing Spanish carrier Iberia.

The British Airways owner will cut
4,500 jobs, as well as reduce capacity by 15 per cent and downsize
Iberia’s fleet by 25 aircraft, as it looks to revive the airline, which
made losses of €262million (£210million) in the first nine months of
this year.

Iberia’s troubles and the impact of
superstorm Sandy, which grounded flights into and out of the US east
coast last month, mean IAG expects an operating loss of about
€120million (£96million) this year.

Shares responded well to the restructuring announcement, lifting 2p to 170p.

08.50:

The FTSE 100 was seen opening flat – and one hour in, there is no change at all to the close price yesterday of 5,775.

The leading index was pulled down on
Thursday by cyclical stocks sensitive to risk sentiment, such as energy,
banks and mining, as mixed earnings reports combined with concerns
about the eurozone’s economy and debt troubles weighed on sentiment.

Today UK trade data is due out, while in the U.S. import and export prices are set for release, as well as inflation figures.

There were mixed signals for the
mining sector after China’s annual industrial output growth quickened
more than expected in October and fixed asset investment also ticked
higher, cementing investors’ expectations of a modest rebound in the
final three months of 2012, which also helped lift metal prices.

China’s annual consumer inflation
eased to its slowest pace in nearly three years in October, official
data showed, giving policymakers scope to further loosen monetary policy
if needed to support growth in the world’s second-biggest economy.

However, pressure will remain on the
mining sector after Australian shares eased, weighed down by miners with
investors fretting about U.S. fiscal woes and the global economic
outlook, though the market trimmed earlier losses on bargain hunting and
ended flat for the week.

The International Monetary Fund on
Thursday urged the United States to quickly reach an agreement on a
permanent fix to avoid automatic tax hikes and spending cuts early next
year, saying a stop-gap solution could be harmful to the global economy.

Stocks to watch

LONMIN: The platinum miner will price
its $800million rights issue at around a 45 percent discount on Friday,
according to three people familiar with the matter, representing the top
of its expected range.

BP: The U.S. state of Alaska will
collect $255million related to the oil major’s pipeline leaks and a
resulting shutdown in 2006 in the Prudhoe Bay oilfield, drawing a line
under an accident that contributed to the British company’s U.S.
troubles. BP’s share is $66million.

BP and lawyers representing over
100,000 individuals and businesses claiming economic and medical damages
from the 2010 Gulf of Mexico oil spill on Thursday urged a U.S. judge
to approve a proposed $7.8billion class-action settlement.

HSBC: Tax authorities have obtained
details of every British client of HSBC in Jersey after a whistleblower
secretly provided a detailed list of names, addresses and account
balances earlier this week, according to the Telegraph.

TATE LYLE: The maker of
sweeteners and starches said quality problems with the U.S. corn
harvest, primarily due to aflatoxin, the byproduct of a grain fungus,
were raising costs and forcing changes to the firm’s buying program.

ROLLS-ROYCE reveals a trading update.

HAMMERSON releases its third-quarter trading update.

BEAZLEY issues a third-quarter trading update.

GALLIFORD TRY hosts its AGM.

HORNBY posts first-half results.

RENTOKIL INITIAL unveils a tradaing update.

TULLETT PEBON posts a third-quarter trading update.

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