London midday: Footsie retreats after positive start

14th Nov 2011 12:18

The early optimism faded in late morning trade, with the Footsie now trading nearly 1% lower despite a positive start early on, after an Italian bond sale saw significantly higher yields than last month's. Meanwhile, investors will still be digesting the latest shake-ups in Italian and Greek politics.YIELDS RISE AT LATEST AUCTION, DEMAND STRONGThe Italian Treasury has issued €3bn in five-year debt, meeting its target. The bid-to-cover ratio - which measures demand - improved, according to market sources, coming in at 1.47 versus 1.34 the last time around. The debt however was priced to yield 6.29%, well above the 5.3% seen at the previous auction.Mario Monti has been named as the new Prime Minister of Italy over the weekend, after a tumultuous week for the country in financial markets, which saw former Prime Minister Silvio Berlusconi practically defenestrated. Investec analysts Phillip Shaw and Victoria Cadman said "Although the new government is good news for Italy's medium-term sustainability, the more immediate concern is that bond yields continue to decline which will probably take further efforts by the ECB over the course of the week."In other news, the European Financial Stability Facility (EFSF) has denied reports in the Sunday Telegraph that it bought its own bonds in a 10-year bond sale last week. The paper claimed that the sale was undersubscribed and so had to step in to raise €3bn. However, according to Reuters, an EFSF spokesman said yesterday: "The EFSF did not buy its own bonds and the book was 3 billion euros."Meanwhile, dampening sentiment in the UK was the Chartered Institute of Personnel and Development (CIPD), which predicted that "the employment situation will get worse for the rest of the year, while medium-term prospects are no better." While it is true that fewer firms are planning to transfer jobs performed in the UK to overseas locations, the CIPD also finds that the private sector will grow more slowly in the next 3 months, with an even more sombre outlook for the public sector. SMITH & NEPHEW LEADS THE RISERSMedical equipment manufacturer Smith & Nephew was a high riser helped by Exane BNP Paribas which upped its recommendation on the stock from neutral to outperform.ITV, Britain's biggest private terrestrial broadcaster, was next in line after seeing revenues rise 4% in the nine months to the end of September compared to the same period of 2010.However, it was the financials and miners which were providing a drag at midday. Resolution, Schroders and Barclays were heavy fallers, joined by Vedanta Resources and Xstrata.Oil and gas firm BG Group was also lower despite raising its estimate of potential production from its Carioca discovery, off the coast of Brazil, to around 28,000 barrels of oil per day (bopd). The well is currently producing 23,400 bopd. Premier Foods has seen some volatile swings in its share price today. The company, which just last week was given a bit of breathing space by its bankers - deferring its end-of-year loan covenant tests by three months - was trading over 10% higher early on at 7.5p, but has swung back deeply into the red after UBS downgraded its rating to sell.BCFTSE 100 - RisersSmith & Nephew (SN.) 579.50p +3.85%ITV (ITV) 64.75p +1.73%Admiral Group (ADM) 850.00p +1.19%BAE Systems (BA.) 285.20p +0.67%Vodafone Group (VOD) 181.05p +0.56%Centrica (CNA) 303.90p +0.20%Lonmin (LMI) 1,076.00p +0.19%GKN (GKN) 193.20p +0.16%Burberry Group (BRBY) 1,379.00p +0.15%Smiths Group (SMIN) 947.50p +0.05%FTSE 100 - FallersResolution Ltd. (RSL) 260.50p -3.66%Schroders (SDR) 1,352.00p -2.94%Vedanta Resources (VED) 1,130.00p -2.75%Barclays (BARC) 174.00p -2.74%Legal & General Group (LGEN) 105.10p -2.69%Xstrata (XTA) 1,003.00p -2.62%Pearson (PSON) 1,109.00p -2.46%Standard Chartered (STAN) 1,367.50p -2.46%Petrofac Ltd. (PFC) 1,396.00p -2.38%ICAP (IAP) 361.80p -2.35%