London close: Time to cut the Gordian knot?

20th Jul 2012 17:07

- Spanish bond yields soar- Sicily´s non-collected receivables rise to EUR 15.7bn - Valencia asks Madrid for help- Resolution leads the Footsie lowerEquity markets across Europe tanked on Friday afternoon, presumably on the back of concerns over Spain's financial health, with capital markets in Italy also seeing some pressure. It may be that market participants had hoped for greater official details and celerity on Spain´s bank rescue package after today´s teleconference between Eurozone finance ministers, thus acting as the trigger for selling; although many details were already known and seem to have been confirmed. Light trading volumes and the expiry of equity options in Europe may also have contributed to losses. The Footsie, which hit two-month highs the day before, wiped out all of this week's gains, closing 14 points lower than it did last Friday.Perhaps worth mentioning, in addition to those economists who are adamant that economic reforms are progressing sufficiently in both of the above countries, there are also analysts for whom there is now a hard-to-control snow-ball effect in place in periphery sovereign debt markets. As well, however, there are those who are still scared witless by the profligacy to be seen in so many regions of the Mediterranean. A Gordian knot if ever there was one, but the time may be close for when the European Central Bank will have to step in and cut it, comment analysts at Digital Look. Even in Spain, when it rains, it poursTo make matters worse, Spain today slashed its economic growth forecasts for 2013 and 2014. Whilst saying that it expects a 1.5% contraction this year, better than earlier guidance of a 1.7% fall, the government said that gross domestic product (GDP) will decline by 0.5% in 2013 (down from +0.2%) and will grow by 1.2% in 2014 (down from +1.4%). Nonetheless, it must be said that those forecasts are now simply in line with already published estimates from the IMF for example.The above news flow saw Spain's benchmark Ibex 35 index plummet in afternoon trade, finishing the day 5.8% lower; Italy's FTSE MIB fell 4.4%.On top of all of the above, Valencia's regional government today announced that it will ask for aid from Madrid. The yield on a 10-year Spanish bond was 25.8 basis points higher at 7.269% by the close. As well, Sicily´s total non-collected receivables now stand at €15.7bn, research from Unicredit shows. That may well explain the selling pressure seen in Milan. Lastly, in Eurozone periphery news, the European Central Bank today declared Greek debt inelligible for use, for now, as collateral at its liquidity auctions. Back in the UK, net borrowing by the public sector, excluding the temporary effects of financial interventions (PSNB ex), reached £14.4bn in June 2012; £0.5bn higher than in June 2011, according to the latest data from the Office for National Statistics. The consensus estimate was for a fall to £13.4bn. FTSE 100: Resolution tanks after cancelling capital returnShares in UK life insurance and asset management group Resolution dropped sharply after the group cancelled the cash return of £250m set for the first half of 2012 due to "uncertainty" in the markets. The group said that the return would be wrong "against a backdrop of heightened investment, economic and regulatory uncertainty." ?Telecoms group Vodafone declined after reported revenues fell by 7.7% (up 1% on an organic basis) in the first quarter with unfavourable foreign exchange movements in Europe providing a drag. ?Banking stocks Royal Bank of Scotland, Barclays and HSBC were heavy fallers on the back of the Eurozone debt concerns.Anglo American, one of the largest mining companies in the world, was immune to the sell-off after it reported volume growth across most of its portfolio in the second quarter, with the exception of platinum and diamond production. FTSE 250: HomeServe and Beazley jumpHomeServe, the international home emergency business, advanced after saying it continues to grow its international businesses and is making progress in the UK in simplifying and refocusing the business. Non-life insurer Beazley soared into the black in the first half of 2012, delivering a return on equity of 18% and a combined ratio of 91%.Telecoms firm Cable & Wireless Comms dropped despite saying that the overall trading performance in the first quarter was in line with its initial outlook. The group said that voice revenues continue to decline across the group as market conditions in the Caribbean and Panama remain tough. ?Electricity group Drax fell after Nomura trimmed its target price and keep its 'reduce' rating on the stock ahead of its first-half results at the end of the month. "We expect results to be down relative to 1H 2011, as the benefits of particularly strong hedges in the prior year are no longer felt," the broker said.FTSE 100 - RisersUnited Utilities Group (UU.) 698.00p +1.09%Rexam (REX) 442.10p +0.59%British Sky Broadcasting Group (BSY) 697.50p +0.58%ARM Holdings (ARM) 494.40p +0.57%IMI (IMI) 811.50p +0.50%Weir Group (WEIR) 1,531.00p +0.39%Royal Dutch Shell 'A' (RDSA) 2,217.00p +0.18%Admiral Group (ADM) 1,171.00p +0.17%Imperial Tobacco Group (IMT) 2,513.00p +0.16%Morrison (Wm) Supermarkets (MRW) 274.70p +0.15%FTSE 100 - FallersEvraz (EVR) 234.40p -6.39%Resolution Ltd. (RSL) 215.50p -5.44%Royal Bank of Scotland Group (RBS) 204.70p -3.58%International Consolidated Airlines Group SA (CDI) (IAG) 154.80p -3.31%Barclays (BARC) 159.25p -3.04%Aberdeen Asset Management (ADN) 251.20p -2.97%Rio Tinto (RIO) 2,891.50p -2.97%HSBC Holdings (HSBA) 533.20p -2.95%Eurasian Natural Resources Corp. (ENRC) 381.30p -2.80%Kazakhmys (KAZ) 703.50p -2.76%FTSE 250 - RisersBeazley (BEZ) 159.70p +4.65%JD Sports Fashion (JD.) 725.50p +4.39%Homeserve (HSV) 195.00p +3.50%Dignity (DTY) 837.00p +2.89%Ocado Group (OCDO) 78.95p +2.53%Raven Russia Ltd (RUS) 64.00p +2.40%CSR (CSR) 299.00p +2.29%Brown (N.) Group (BWNG) 272.70p +2.25%Micro Focus International (MCRO) 548.00p +2.05%F&C Asset Management (FCAM) 81.55p +1.81%FTSE 250 - FallersNew World Resources A Shares (NWR) 302.10p -4.88%Bumi (BUMI) 305.00p -4.51%Brewin Dolphin Holdings (BRW) 149.50p -4.41%Telecom Plus (TEP) 830.00p -4.21%Petropavlovsk (POG) 400.50p -3.91%Halfords Group (HFD) 198.20p -3.69%Ferrexpo (FXPO) 190.10p -3.40%Drax Group (DRX) 526.50p -3.39%Rathbone Brothers (RAT) 1,329.00p -3.20%Ashtead Group (AHT) 246.00p -3.19%BC