London close: Stocks fall as Spanish bond yields jump

9th Jul 2012 16:30

- Spanish yields back above 7.0 per cent- All eyes on Eurogroup meeting- Defence stocks rise on contract hopesStocks were trading near their lowest levels of the day by Monday's close as bond yields in Spain surged while European officials met in Brussels.By the close in London, the yield on a 10-year Spanish bond was 10.8 basis points up at 7.062%. Officials at the Eurogroup meeting today are expected to discuss the issues raised at the EU summit in June, including the recapitalisation plan for Spanish banks.Spanish Prime Minister Mariano Rajoy is expected to reveal a plan to close the deficit gap by €30bn, which may include a sales tax hike, a new energy tax, a reform to the pension system, a reduction in public salaries, new highway tolls, and another drastic cut to regional spending, according to reports. In a surprisingly upbeat assessment, the head of the European Central Bank, Mario Draghi, has told politicians he thinks the fundamentals of the Eurozone are "sound". But he said for the single currency to thrive countries needed to move towards greater fiscal, financial and economic integration. Investors were also keeping an eye on the US, where a disappointing jobs report on Friday fuelled concerns over economic growth. Meanwhile, aluminium producing giant Alcoa kicks off the second-quarter earnings season after the closing bell this evening. Chinese consumer inflation hit its lowest level in almost two and half years, according to the latest figures from the National Bureau of Statistics. The consumer price index rose by 2.2% year-on-year in June, down from 3% in May. Marcus Huber from ETX Capital said that the data certainly gives China room to implement additional stimulus measures. FTSE 100: BAE, Meggitt, Rolls rise as Farnborough Airshow takes offDefence group BAE Systems was advancing on reports that it could be close to securing a £7.1bn contract with the US Air Force, according to the Sunday Telegraph. Investors are hoping for more deals to be signed at the 2012 Farnborough Air Show which starts today. Some reports also hold that the government might allow the Eurofigher to be sold abroad with more sophisticated weapons systems than up until now, so as to increase its export appeal. Sector peer Meggitt was also in demand despite what some observers described as a rather restrained atmosphere at Farnborough.Power systems group Rolls-Royce gained after saying that it has signed an agreement with Malaysia Airlines for long-term TotalCare services support for Trent 900 engines that will power its new fleet of six Airbus A380 aircraft. Earlier today, the firm said that it had won a $183m contract to service M250 engines for the US Army's OH-58D Kiowa Warrior scout helicopters. Mining group Xstrata was lower despite Jefferies saying that it believes potential partner Glencore will raise the terms of their merger. The broker said this morning that it thinks that Glencore will eventually up its proposed merger ratio from 2.8 to at least 3.0 Glencore shares per Xstrata share in order to win the approval of Xstrata shareholders, especially Qatar Holdings, the 10.4% stakeholder that has come out and demanded better terms. Luxury brand Burberry was under the weather ahead of a trading update later this week. All eyes will be on the performance in China, a key growth market for the group. FTSE 250: Miners face heavy sell-off on second-tier indexHead coal and coke producer New World Resources was a heavy faller after Bank of America Merrill Lynch downgraded its rating on the stock to 'underperform'.Mineral sands group Kenmare was sold off after shares in its closest peer Iluka sank 24% in Australian trade on the back of a weak outlook for demand. The group said that the gloomy economic environment was "likely to influence sales volumes materially over the remainder of 2012", as it slashed its near-term forecasts.Gold miner Centamin dropped after an Egyptian newspaper cited an unnamed government source as saying that there has been breaches of the company's concession agreement at its flagship Sukari mine. The company denied this speculation.Recruitment firm Michael Page dropped after saying it had seen a tough first half and expects more of the same in the third quarter. FTSE 100 - RisersMeggitt (MGGT) 403.90p +2.64%Polymetal International (POLY) 883.00p +2.14%Royal Bank of Scotland Group (RBS) 205.70p +2.08%CRH (CRH) 1,170.00p +1.65%Experian (EXPN) 956.00p +1.38%BAE Systems (BA.) 296.90p +1.37%Rolls-Royce Holdings (RR.) 885.00p +0.97%Marks & Spencer Group (MKS) 321.00p +0.94%Petrofac Ltd. (PFC) 1,434.00p +0.91%Wolseley (WOS) 2,374.00p +0.89%FTSE 100 - FallersIMI (IMI) 810.00p -3.34%Ashmore Group (ASHM) 333.80p -2.97%Anglo American (AAL) 2,042.50p -2.92%Burberry Group (BRBY) 1,255.00p -2.64%ITV (ITV) 72.85p -2.61%ARM Holdings (ARM) 495.90p -2.57%Eurasian Natural Resources Corp. (ENRC) 410.30p -2.24%Xstrata (XTA) 815.60p -2.21%Randgold Resources Ltd. (RRS) 5,815.00p -2.19%Aviva (AV.) 282.50p -1.91%FTSE 250 - RisersAvocet Mining (AVM) 72.75p +15.48%Balfour Beatty (BBY) 311.00p +3.43%Dechra Pharmaceuticals (DPH) 500.00p +2.86%SDL (SDL) 694.50p +2.74%Rank Group (RNK) 122.20p +2.69%Euromoney Institutional Investor (ERM) 784.00p +2.48%Dunelm Group (DNLM) 561.00p +2.00%Genus (GNS) 1,285.00p +1.98%Home Retail Group (HOME) 84.60p +1.93%Howden Joinery Group (HWDN) 128.00p +1.59%FTSE 250 - FallersNew World Resources A Shares (NWR) 317.10p -11.42%Kenmare Resources (KMR) 34.24p -10.34%Aquarius Platinum Ltd. (AQP) 41.59p -9.80%Centamin (DI) (CEY) 66.50p -9.46%Ferrexpo (FXPO) 199.60p -9.15%Elementis (ELM) 194.80p -3.85%Renishaw (RSW) 1,315.00p -3.80%Michael Page International (MPI) 350.90p -3.76%Lonmin (LMI) 701.00p -3.64%Carillion (CLLN) 243.20p -3.26%BC