A choppy session with concerns over China still weighing on sentiment
Fiona Cincotta July 16, 2012 7:40 PM
<p>European markets have struggled for a direction so far on Monday. Resource stocks put pressure on the main indices as concerns over China’s economy weighed […]</p>
European markets have struggled for a direction so far on Monday. Resource stocks put pressure on the main indices as concerns over China’s economy weighed on sentiment and banks further added to the downward pressure following comments from European Central Bank President Mario Draghi.
Despite a cautiously positive start, the damp mood quickly took hold and the main European Indices have since lost ground. As a result the CAC has given up 0.4%, the DAX 0.2% and the FTSE is trading 0.1% lower.
After China has reported its 6th consecutive quarterly slowdown in growth last week, The Premier Wen Jiabao failed to sooth sentiment by starting that China’s expected economic rebound has not been as strong as forecast. “It should be clearly understood that the momentum for a stable rebound in the economy has not yet been established,” he warned.
Metal prices dropped following these remarks which translated to a broad sell off in resource stocks. Rangold Resources fell 1.6%, Polymetal International was down 1.71% and heavyweight Rio Tinto dropped 1.2%. Nomura added to the pressure on the sector by cutting its target prices of numerous miners due to lower commodity prices.
Banks were also notable losers following comments from ECB President Mario Draghi who is arguing for senior creditors to be held accountable when a bank goes into liquidation. This would be especially relevant for Spain and would mean that the tax payer would not shoulder the burden but share with the appropriate bond holders. Perhaps in principle a good idea to share the pain, however the bond market is extremely fragile right now and this may prove to be too much. Consequently Barclays was down 2.5% tracing European banks such as Santander, down 3.1% lower.
Security firm G4S is by far the biggest loser today after admitting that it will incur a loss on its Olympic Games contract of £35-£50m after falling short in providing the number of security personnel that it agreed to supply. Despite an apology from the CEO Nick Buckles, the company has received downgrades from both UBS and Jefferies. It is currently down over 9%.
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