London close: Merkel comments weigh, Footsie pares gains

13th Dec 2011 16:21

London's blue chip index experienced a boost on Tuesday afternoon, helped by a strong Spanish bond auction and a better-than-expected German confidence survey. However, stocks began to retreat late on after some worrying comments from Angela Merkel and rumours of disruption to oil exports in the Persian Gulf. Meanwhile, no surprises are expected by the Federal Reserve later on tonight.The Footsie finished at 5,490, 62 points higher than yesterday's close of 5,428, but some 36 points off the intraday high of 5,526 reached in mid-afternoon.Late reports from Europe sent stocks tumbling in the final hour: German Chancellor Angela Merkel has apparently has raised issues with the European Stability Mechanism, the region's permanent rescue fund. According to Dow Jones Newswires, the Premier has rejected the idea of upping the ESM's limit.However, one equity analyst has said that Merkel was only repeating what she had already said on Friday, according to an e-mail received by MarketWatch.Meanwhile, West Texas crude jumped above $100 a barrel in the afternoon on market chatter that Iran's military will hold drills to close the Strait of Hormuz, a bottleneck for exports from the Persian Gulf, according to Bloomberg. By 16:00, WTI crude had come back down to $99.80, though still up 2.08% on the day.SPAIN ISSUES €4.94BN, GERMAN CONFIDENCE IMPROVES The Spanish Treasury this morning auctioned €4.94bn in short-term debt. The majority of which, €3.44bn worth, had a maturity of 12 months and was placed at a yield of 4.05%, versus 5.02% the last time around. Yields from the 18-month issue fell to 4.226% from 5.159% before. Both auctions were met with significantly stronger demand.Meanwhile, Germany's economic sentiment index reached a reading of -53.8 points in December compared to -55.2 in the previous month, according to the latest data from the ZEW Institute. The market consensus was looking for a reading of -55.0. This 1.4 point increase marks the end of nine consecutive declining months, however this important leading indicator is far from its historic average of 24.6. ZEW president Wolfgang Franz said "the economic sentiment for Germany seems to have bottomed out. Apparently, the financial market experts expect the economic activity to slow down, but not to plunge during the next six months." Wall Street was trading slightly higher as investors wait with baited breath for this evening's release of the Federal Reserve Open Market Committee's statement. UniCredit has summed up the general opinion: "FOMC meeting unlikely to offer surprises". Pierpoint Securities expects a "quiet meeting," while Barclay's explains that "the relatively firmer US data and the lack of a press conference leave limited expectations that the Fed will offer anything new." "The Fed remains trapped between a slowly improving US economy and a festering sore in the form of European debt markets, the perfect excuse to do nothing at all this evening," said analysts from Digital Look.PETROFAC LEADS OIL-RELATED STOCKS HIGHEROilfield services firm Petrofac kept its pole position after announcing that it expects to deliver like-for-like profit growth in 2011 of at least 20%. "We have a strong pipeline of new opportunities ... which, combined with our existing projects, gives us confidence that we can achieve our target of more than doubling our recurring 2010 group earnings by 2015," according to chief executive Ayman Asfari. Sector peers Wood Group, Lamprell and AMEC were on the rise, with the latter being helped higher by a Citi upgrade from sell to buy. Oil equipment, services and distribution stocks were making average gains of 2.84% today. Oil producers BG Group, Tullow Oil and Royal Dutch Shell roared higher late on as oil prices rose. Oil and gas engineers Weir and IMI also finished in the blue.Miners were also on the up on the back of some confident remarks from 'down under'. Vedanta Resources, Randgold Resources and Rio Tinto rose after Australia's Bureau of Resources and Energy Economics (BREE) upped its guidance for iron ore and thermal coal exports to reflect "recent expansions to mine and infrastructure capacity". Rio Tinto was also being helped higher after winning its battle to win the right to take over its hostile joint-venture partner Ivanhoe Mines.Meanwhile shares in Costa Coffee and Premier Inn owner Whitbread dived on news that LFL sales growth had slowed. For the group as a whole, sales at outlets which have been open longer than a year rose just 2.4% year-on-year compared to 3.3% growth in the first half. FTSE 250 MOVERS: DOMINO PRINTING, IMAGINATION TECH, CARPETRIGHT ON THE RISEPrinting technologies firm Domino Printing Sciences soared 17% after reporting its best ever full year results following a strong global performance and the introduction of new products. Mobile phone and computer chip maker Imagination Technologies wasn't far behind after the firm reported a 52% surge in adjusted pre-tax profit, alongside strong licensing and continued royalty revenue growth.Carpetright was next in line after its first half results. Hit by a challenging trading environment, revenues dropped from £248m to £238.4m, with underlying pre-tax profit down from £10m to £1.4m, slightly ahead of expectations.House-builders were generally out of favour, after UBS issued a downbeat assessment on the sector outlook. "The macro environment is likely to become less supportive into 2012, with no GDP growth (UBSE -0.1%) and banks facing increasingly difficult funding markets," the Swiss broker said. Sector peers Bovis Homes, Bellway and Travis Perkins were among the fallers on the FTSE 250. ECONOMIC NEWSIn domestic news, price rises continued to slow in November, with the Consumer Prices Index (CPI) coming in at 4.8%, according to figures from the Office for National Statistics. The ONS said slower increases in price of food, clothing and transport helped push the CPI rate lower compared to the year before. The Retail Prices Index, which includes housing costs and is often used in wage negotiations, fell to 5.2% from 5.4% in October. The Royal Institute of Chartered Surveyors' (RICS) house price balance for the month of November has risen moderately, to -17 from -24 the month before. That is the highest level since July 2010. Market consensus had been expecting a slight deterioration to -25. BCFTSE 100 - RisersPetrofac Ltd. (PFC) 1,443.00p +5.10%Weir Group (WEIR) 1,958.00p +3.43%Vedanta Resources (VED) 1,101.00p +3.38%BG Group (BG.) 1,367.00p +3.21%Man Group (EMG) 134.30p +3.15%Tullow Oil (TLW) 1,369.00p +3.09%Royal Dutch Shell 'B' (RDSB) 2,388.00p +2.71%Wolseley (WOS) 1,960.00p +2.35%Vodafone Group (VOD) 177.20p +2.34%Experian (EXPN) 827.50p +2.29%FTSE 100 - FallersWhitbread (WTB) 1,514.00p -3.93%Burberry Group (BRBY) 1,190.00p -2.22%Barclays (BARC) 178.60p -1.57%Standard Chartered (STAN) 1,406.00p -0.95%Kingfisher (KGF) 245.80p -0.93%Prudential (PRU) 619.00p -0.80%Royal Bank of Scotland Group (RBS) 20.40p -0.78%InterContinental Hotels Group (IHG) 1,098.00p -0.63%Tesco (TSCO) 389.50p -0.51%Legal & General Group (LGEN) 102.30p -0.39%FTSE 250 - RisersDomino Printing Sciences (DNO) 504.50p +15.58%Imagination Technologies Group (IMG) 498.50p +14.07%Carpetright (CPR) 427.00p +7.99%Go-Ahead Group (GOG) 1,329.00p +7.87%New World Resources A Shares (NWR) 433.30p +5.02%Kesa Electricals (KESA) 72.00p +4.35%Perform Group (PER) 210.00p +3.96%Betfair Group (BET) 813.00p +3.57%Berendsen (BRSN) 425.00p +3.16%Elementis (ELM) 137.30p +3.16%FTSE 250 - FallersRathbone Brothers (RAT) 999.00p -5.67%Northgate (NTG) 205.00p -5.44%Gem Diamonds Ltd. (DI) (GEMD) 180.00p -4.71%Talvivaara Mining Company (TALV) 219.70p -4.44%Rank Group (RNK) 141.00p -4.08%AG Barr (BAG) 1,160.00p -3.01%Thomas Cook Group (TCG) 14.82p -2.95%JD Sports Fashion (JD.) 631.00p -2.92%Ocado Group (OCDO) 78.00p -2.50%TR Property Inv Trust Sigma Shares (TRYS) 66.00p -2.37%