FTSE 100 Friday close: US tapering fears on the rise

8th November 2013

The London market stalled on Friday as better-than-anticipated US job numbers accelerated fears the Fed might start reducing its massive $85bn monthly asset purchase package as soon as next month writes Philip Scott.

The far bigger-than-expected 204,000 rise in October’s US non-farm payroll, combined with a cumulative 60,000 upward revision to the gains in the two preceding months will mostly definitely increase speculation that the US Federal Reserve will begin to taper its asset purchases in December asserted research group Capital Economics.

The news that ratings agency Standard & Poor’s had lowered France’s sovereign debt rating to AA, coupled with the an unexpected drop in the UK’s construction output, down by 0.9% month-on-month in September also hit the market.

On Friday, the FTSE 100 index managed to limp ahead by 0.17% or 11.2 points to close at 6,708.42, 0.39% lower than close of play a week ago.

Despite paper maker Mondi posting a 25% rise in third-quarter profits on Wednesday, investors offloaded their holdings, with its shares enduring the steepest fall on the leader-board over the trading week, after shedding 8% to 1,019p.

Also off was fund manager Schroders, down by 7% to 2,438p.

According to reports, HSBC is concerned about discount carrier Easyjet, down 5% at 1,225p. It downgraded it to underweight and said although the business “will see stronger revenue trends than peers this winter” there is concern about “deteriorating revenue” and rising competition from Ryanair.

The recent stormy weather has battered the shares of RSA Insurance, as brokers sold off, sending the stock 6% lower to 120.8p, as a flood of claims are anticipated to hit the business.

Amongst the UK banks, Royal Bank of Scotland was hit hardest over the week, finishing 5% lighter at 322.5p, after S&P downgraded the group to A-/A-2, from A/A-1. In other news the bank was told to pay nearly £100m as a settlement for the misleading sale of complex financial instruments in the United States during 2007 by the US Securities and Exchange Commission.

On Friday it emerged that the Court of Appeal has rejected Barclays’ attempt to have what is seen as a ‘Libor test case’ thrown out ahead of an anticipated trial in 2014. The bank closed flat over the week at 255.3p. Lloyds, 3% down at 75.16p, was also getting the attention of regulators, as UK City watchdog, the Financial Conduct Authority asked the bank to launch an internal inquiry into the possibility of currency market manipulation.

Elsewhere HSBC, up 1% to 695.4p over the week, reported a 30% jump in profits in the three months to the end of September on the back of robust performance in the UK and Hong Kong, its two core markets, while its Asian competitor Standard Chartered slipped 1% to 1,483.5p.

Leading the blue-chip risers over the week, on the back of welcomed market updates were International Consolidated Airlines, up 7% at 376.9p while aero-engine maker Rolls-Royce, closed 6% higher at 1,210p. In a report issued today the latter group announced it is still trading in-line with management expectations while its order book has grown rapidly, and now stands close to £70bn. Jonathan Jackson, head of equities, Killik & Co says, says: “This provides excellent visibility over future revenue, a valuable asset in today’s uncertain times. Although there is some risk of deferral/cancellation, the economics of replacement – new planes are 20% more efficient – mean airlines have little choice but to invest.”

Also enjoying a week of gains is miner Randgold Resources. The firm which boasted its own positive set of results and a reiterating of ‘hold’ from Investec saw its shares rise 5% to 4,735p while Imperial Tobacco gained 3% to 2,374p as the group announced a dividend rise and declared that it expects modest growth in earnings per share next year.

Next week, sees updates arrive from Admiral, Tullow Oil and Prudential.

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