Equity markets start the day in tentative fashion ahead of Euro Bond Auctions

European equity markets started the day in tentative fashion ahead of mid-morning bond auctions by Spain and Italy.

At 9am the FTSE100 was down -23.5 points at 6027, the DAX +0.5 point at 7069.5 and the CAC40 +4 points at 3949.

The weaker start to the UK market was lead by Tesco’s, the largest supermarket chain in the UK, who disappointed the market with their Christmas trading update. The retail bellwether confirmed that like-for-like sales, excluding VAT and fuels, for the 6 week period up to Jan 8th failed to meet market expectations of +0.8% and were actually weaker at +0.4%. Contrast this with yesterday’s update by Sainsbury’s, whose figure for the same period was +2.8%, and you can see why investors were unimpressed early this morning; the stock was trading down -8.15p (1.9%) at 415.6 at 9am. One highlight from the update that may pacify some investors and bear fruit at a later date was that international sales were up 14.2% in the same period.

The UK Index was also dragged lower by the big hitting Mining and Oil and Gas stocks. Rio Tinto was down -29p @ 4513.5, Xstrata down -14.5p at 1520 whilst RDSA and RDSB were both down -26p at 2114p and  -31.5p at 2103p respectively.

The UK banking sector bucked the trend and showed continued signs of strength with Barclays posting a high of 308p (up +5.4p) and RBS a high of 42.68p (+1.48p).

One stand out positive perform on the UK market was IMI, the Industrial Engineering firm, who posted an early morning high of 1000p (up +89.5p or 9.8%) following an upgrade to BUY from NEUTRAL by BofA-Merrill Lynch.

Overall this morning’s open has a fairly subdued and cautious feel to it. Investors are awaiting this morning’s bond auctions by Italy and Spain, the outcome of which are expected to be as successful as Portugal’s yesterday. If proved correct I am sure markets will consolidate around current levels and await Initial Jobless Claims out of the US at 1.30pm GMT. If this proves to be insignificant then today’s session may remain subdued until the Intel update after the US close this evening. The US technology firm have been the subject of much speculation of late regarding consolidation in the sector, with ARM Holdings in the UK being a possible target for Intel. Looking slightly further ahead investors will be eagerly awaiting JP Morgan’s fourth quarter update out at midday tomorrow.