Bank of Japan disappoints pulling markets lower; SABMiller reports in line with expectations

<p>The FTSE lost ground in early trading on Tuesday as investors paused for breath after hitting five-year highs in the previous session and markets struggled […]</p>

The FTSE lost ground in early trading on Tuesday as investors paused for breath after hitting five-year highs in the previous session and markets struggled for direction. Acting as a backdrop was news that the Bank of Japan has raised its interest rate target to 2% and an announcement that it will undertake a programme of open-ended asset purchases starting in 2014. The policy announcement overall failed to live up to expectations, putting a negative shadow over Asian and European markets.

Investors also braced themselves as earning season gears up in the US and several bellwethers are due to report later in the day, such as IBM, Johnson & Johnson and Google, which should bring some volume back to the markets following the US bank holiday yesterday.

Here in the UK SABMiller reported third quarter results in line with expectations, with revenue growth accelerating from the first six months of the year. Reported revenues increased by 17% year on year in the three months to December, ahead of the 11% rise reported in the first half. Accelerated growth of organic lager volumes was seen in Latin America; however, this was offset by a slowdown in Europe, Africa and Asia Pacific.

Also reporting, Fresnillo said gold production had exceeded expectations in 2012. Annual gold productions was up 5.4% year on year, above the target, however the actual fourth quarter results were actually down 20.6% compared to the same quarter in 2011. The share price is trading slightly lower in early trading.

Looking towards economic data UK borrowing was reported to be higher than expected in December and also up on the year before. Public sector net borrowing was £15.4bn in December, compared with the forecast of £15.2bn made by economists. The figure was also £0.6bn higher than in December 2011, showing signs of a struggling economy, as weak economic growth has derailed government plans to eliminate Britain’s structural budget deficit by the next election in 2015.

Other economic data due today includes the German economic sentiment survey at 10am which is expected to show an improvement from 6.9 to 12 in January. Although this figure gives clues as to the level of sentiment it would be incorrect to place too much emphasis on the data given Germany’s weak annualised GDP data last week.

Finally looking towards this afternoon, existing home sales figures are due for release in the US at 3pm GMT.

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