FTSE 100 close: Markets gives up gains in final hour
Hard-earned gains, based on continuing hopes for the econony, were lost in the final hour of trading.
Price check: How will shares react to news from the Bank of England?
Having traded as high as 5175 in mid-morning and mid-afternoon, a weak opening on Wall Street was enough to send the FTSE 100 into negative territory - just. It closed down 3.2 points at 5139.4.
Earlier, investors lapped up attempts by housebuilders to raise cash. As expected, companies in the sector continued their quest to raise money from the market.
Barratt Developments announced a rights issue to raise £720.5m to beef up its balance sheet and prepare for new land acquisitions. It also reported a loss of £486.6m for the year to the end of June, down from a £86.4m profit a year before.
Investors were undaunted by size of the money-raising exercise, despite it exceeding the expected £600m-£700m, chasing the shares up 7.2p at 275.7p.
Redrow also announced a rights issue, saying it needs £150m - more than the £100m expected - but again, shareholders were happy to buy in the market today, pushing the shares up in early trading. The stock later closed 6.4p down at 227.1p. Persimmon rose 1.8p at 490.9p while Bovis, which has already raised £60m, was up 5.1p at 489.8p.
Investors continue to hang on the hope that, with Britain almost certainly out of recession in the third quarter, a longer recovery is underway. The bears insist that the market is pricing in two years of solid and rising growth - an unlikely prospect with the backdrop of rising unemployment.
The Confederation of British Industry helped buoy confidence today by saying it expected the economy to have grown 0.3% between July and September, and forecast an expansion of 0.4% for the fourth quarter. Only in June it was warning that growth would not return until early next year.
But it said the pace of recovery in 2010 will be slow, with tight credit and weak domestic demand.
As expected, minutes published at 9.30am from the Bank of England Monetary Policy Committee meeting from two weeks ago showed a 9-0 decision to maintain rates. There was no news on extending the £175bn quantitative easing programme or making it more effective by slashing the interest paid on bank reserves, with the aim of getting them to lend rather than hoard.
Stock markets, and other assets, have felt considerable benefit from the Bank's mass money printing, even if it is just from raised confidence. The release initally stripped 10 points from the Footsie's earlier gains.
On the economic front, investors can also expect the outcome of the latest two-day Federal Reserve Open Market Committee meeting at around 7pm British summer time. No change is expected to US monetary policy but investors will hope for further hints that rates will remain low for a good while yet. The Dow Jones stood 0.38 points up at 9830 by the London close.
Pubs commanded attention with traders today. A bearish broker note put the sector under pressure. UBS advised selling four of the biggest operators: Enterprise Inns, Marston's, Greene King and Mitchells & Butlers. Analysts think the improved economic outlook, England qualification for the World Cup and changes to the rules on pub gaming machines have sent shares too high. They also warned that the margins for leased and tenanted pubs are unlikely to return to former highs.
Enterprise Inns, down 11.2p to 132.4p, ranked among the biggest fallers in the FTSE 250. Greene King was off 11.6p to 436.3p, Marston's sank 2p to 104.5p and M&B slipped 14.4p to 284.2p. JD Wetherspoon, which remains UBS's preferred pick with a neutral rating, fell 0.2p to 496.1p.
Also among the mid-cap losers was Yell Group, the publisher of Yellow Pages, after it announced plans to raise at least £500m to help cut its £4bn-worth of debt. Yell, down 10p at 64.35p, has been in talks over a refinancing package since June. Its plans had received indications of support from a 'significant proportion' of its main lenders, the company said. It also said trading conditions continued to be 'challenging' with revenues in the third quarter likely to be be down 16% from a year before.
Among smaller companies, carbon offset aggregator EcoSecurities recommended an increased bid for the company from a JPMorgan Chase & Co vehicle. Carbon Acquisition Company said it had increased its offer to 105p from 100p per share, valuing EcoSecurities at £129m. It also bought a further 18.3m EcoSecurities shares, or almost 15.5% of the company. Rival bidder Pedro Moura Costa, the co-founder and former president of EcoSecurities, had previously made an offer of 90p a share and may yet make another approach. The shares were up 2.5p at 107p.
Four FTSE 100 companies trade ex-dividend today, with Aviva, Centrica, G4S, and Petrofac knocking 1.94 points off the blue chip index.
Gold stood at $1,014.00 an ounce by 5pm, compared with $1,013.80 yesterday. It remains near last week's 18-month high and is supported by dollar weakness.
Looking ahead to tomorrow
Retailer JJB Sports is expected to post a £40m loss for the first six months of the year. Analysts expect a double-digit year-on-year decline in sales. It will mean more negative headlines following news last week that it is being investigated by the Serious Fraud Office for alleged price fixing.
Lloyd's of London, the world's largest insurance market, is expected to report improving figures at its half-year results. Positive investment returns have boosted some of its biggest firms, including Catlin and Hiscox, and analysts expect this to feed through to Lloyds's interim update to the market.
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