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London close: Stocks finish up after US data
Mon, 21 May, 2012
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London close: Stocks finish up after US data
Thu, 2 Feb 2012, 17:09:00
After a morning session in the red, UK stocks erased losses in afternoon trading after some better-than-expected data Stateside helped the outlook for the world's largest economy. Leading the rise on the Footsie were the miners after some M&A rumours bolstered gains. 
 
 Nevertheless, analysts at Digital Look are warning not to get too excited after the recent string of gains until the FTSE 100 clearly breaks through the technical resistance level of 5,850.
 
 <b>US initial jobless claims</b> fell by 12,000 last week to 367,000, the Department of Labor said today, in a sign that the labour market may be slowly recovering. Expectations were for a reading of 371,000. Barclays Capital (BarCap) analyst Peter Newland said: "the consistent downward trend in initial claims points to a gradually improving labour market. 
 
 Chinese Premier Wen Jiabao is considering increasing <b>Beijing's involvement in the Eurozone's rescue fund</b>, he told reporters in a media briefing with German Chancellor Angela Merkel. according to Reuters. He did not make any explicit commitments, however. 
 
 Meanwhile, <b>Greece's</b> deal with private creditors is said to be only hours away. According to a Wall Street Journal (WSJ) report, people close to the negotiations say that only small differences remain so the agreement could be concluded "in hours". 
 
 The main delay however is, according to the paper, "the rift between the IMF and Germany". According to the Fund, cutting the €200bn in Greek debt simply won't do the job of getting Athens's debt down to 120% of gross domestic product by 2020. The IMF thinks it's necessary for the "official sector", such as the European Central Bank (ECB), to also swallow losses on its own Greek bond holdings. 
 
 <b>M&A ACTIVITY BOOSTS MINERS 
 </b>
 Confirmation of a merger between Swiss commodities giants <b>Glencore and Xstrata</b> sent the two stocks to the top of the pile today, with Xstrata jumping 10% and Glencore rising 7%. A merger of mining outfit Xstrata and commodities trader Glencore could create a leviathan valued at around £52bn. 
 
 Chris Searle, corporate finance partner at BDO LLP, said that this was no real surprise given that Glencore already owns a substantial stake in Xstrata. "Whether this merger triggers another round of consolidation in the industry remains to be seen, given anti-trust concerns around the world, but other companies may feel forced to merge just to keep up with this new giant," he said. Sector peers <b>Vedanta Resources, Antofagasta and Anglo American</b> were also making decent gains. 
 
 Another reason for the strength in the mining sector today could be that, according to a report in South African newspaper Business Day, the country's ruling ANC government has decided that the nationalisation of mines would be unconstitutional and too expensive, Bloomberg writes. Not coincidentally, some industry executives warned of such risks at the recent World Economic Forum in Davos. 
 
 However, not all miners joined in with the rise, with <b>Eurasian Natural Resources Corp</b> (ENRC) in the red with a London-based trader telling Reuters that markets were perhaps pricing in Glencore buying <b>Kazakhmy's</b> stake in ENRC.
 
 Also on the rise was medical devices maker <b>Smith and Nephew</b>. Fourth quarter sales came in a touch shy of market expectations, but showed a modest improvement on the previous year's fourth quarter figure. 
 
 <b>BIG HITTERS DISAPPOINT 
 </b>
 Shares in consumer goods giant <b>Unilever</b> were left on the shelf after the Anglo-Dutch company reported revenues below expectations and expressed worries over input costs and the global economy. 
 
 Drugs giant <b>AstraZeneca</b> took a hit after the company lowered its forecast for revenue contribution from recently launched and pipeline products. Astra also warned that both revenues and earnings will decline in 2012 due to government interventions on pricing and ongoing generic competition. The company also revealed 7,300 job cuts in order to "enhance productivity" and reduce costs. 
 
 Anglo-Dutch integrated oil behemoth<b> Royal Dutch Shell</b> fell after underlying fourth quarter earnings came in below expectations. Net income on a current cost of supplies (CCS) basis, excluding various exceptional items such as gains from divestments and fair value accounting adjustments, rose to $4.8bn from $3.1bn the year before, but were below the $5.2bn the market was expecting. 
 
 <b>ARM Holdings</b> was among the worst performers with market chatter pointing to the possibility that should equity markets perk up then the chip designer may lose some of its 'safe-haven' appeal.
 
 The same could be said for the defensive utilities sector, with stocks such as <b>Severn Trent, United Utilities, National Grid and SSE</b> falling late on.
 
 BC
 
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