Bank shares prop up the FTSE but the Euro’s woes continue – HMV shares hit by guidance warning
City Index December 9, 2010 4:07 PM
<p>Financials remained the shining light in London today holding on to earlier gains and adding over 5 points to the index. RBS and Barclays topped the gainers […]</p>
Financials remained the shining light in London today holding on to earlier gains and adding over 5 points to the index. RBS and Barclays topped the gainers leader board following on from good overnight performances for U.S. and Asian banking stocks. Mining company’s also advanced after a snap back for bullion prices after yesterdays rout in gold and silver. BHP Billiton was the top sector performer, climbing over 1 percent after it said that costs at its Tupi and Guara fields in Brazil will be lower than expected.
MPC leaves no suprises
The outcome of the Bank of England’s monetary policy committee meeting caused little in the way of market reaction at midday this afternoon. The BoE decided to leave the UK benchmark interest unchanged at 0.5 and made no new asset purchases to its quantitative easing programme.
Euro woes continue
Problems for Ireland and Europe continued to rumble on throughout the afternoon after reports that the Irish opposition party would vote against the IMF’s bailout package. The price of the Euro against the Dollar fell back below the 1.32 level on the news, with FX traders now eyeing the late November lows.
Slightly weighing on sentiment has been the Far East and especially China, as most of the major indexes remain below their November highs, unlike their European and U.S. counterparts. Recent weakness has been attributed to the pull back in metal and commodity prices, and also continued talk that property prices in the region remain overvalued. Investors are also concerned over what impact another hike of the reserve requirement rate by the PBOC will have on commodity and stock prices.
Equity traders however continued to put sovereign debt woes in the eurozone to the back of their minds and look for bargains within risky asset classes today, helping to keep Indices on the front foot. This helped European shares to hit a new 26 month high today.
European sovereign debt problems have by no means disappeared overnight, and whilst we can take heart from the fact that traders seem to not be overly obsessed with fear about the debt crisis, the market remains liable to bouts of volatility and profit taking should new debt problems rear its ugly head again, particularly within those eurozone states that have question marks over them such as Portugal and Spain.
HMV shares hit by guidance warning and dividend cut
HMV woes continued today with its shares aggressively sold out of by investors fearing a visit by the Christmas Grinch after the retailer warned that shoppers were staying at home thanks to the freezing temperatures in the UK and this is likely to impact the holiday sales performance. In a stark warning to shareholders today, the firm announced that first half losses were worse than originally expected, coming in at £41.3m hit by sales slumping 11.5% at stores open more than a year whilst its dividend was more than halved to just 0.9p.
CEO Simon Fox admitted he was concerned over the firms near term outlook and having seenGAME group announce earlier this week that margins were being pressurised to attract buyers, shareholders clearly fear that whatever sales HMV can attract over the Christmas season may have to come at a significantly compressed profit margin. The firms shares have slumped as much as 67% this year alone, badly underperforming the retail sector and naturally one may fear that this Christmas performance could be the most important ever for the 89 year old retailer.
HMV shares fell as much as 25% at one point before a soft rally into the close left shares 17% down on the day.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.