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

<p>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 […]</p>

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.

Join our live webinars for the latest analysis and trading ideas. Register now

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.

For further details see our full non-independent research disclaimer and quarterly summary.