London midday: Markets shrug off UK growth as earnings disappoint

25th Jul 2013 12:07

An expected pick-up in UK economic growth in the second quarter wasn't enough to lift London's FTSE 100 into positive territory on Thursday morning as markets reacted to a series of disappointing results from a number of blue-chip firms.Capita, BT Group, Unilever and Johnson Matthey were all trading in the red by midday which - along with broader weakness in the heavyweight mining sector - dragged the benchmark index down around 1.2%.Wall Street benchmarks finished lower on Wednesday night as stocks focused on some poor results from companies like AT&T, Caterpillar and Broadcom and shrugged off better-than-expected manufacturing and housing data from the States."While the earnings season isn't going fantastically, I don't think it's going badly either. It looks to me like some results, such as AT&T and Caterpillar, are being used as an opportunity to sell at the current highs, creating another opportunity to buy the dips," said Market Analyst Craig Erlam from Alpari.US stock futures on Thursday were also pointing to a weaker start when the opening bell rings, as investors await durable goods orders and weekly jobless claims figures, in addition to more earnings from bellwethers Amazon, 3M and General Motors.Erlam said: "There are plenty of companies reporting second-quarter earnings on Thursday. With fundamentals now playing a much bigger part in the markets, these are likely to have a significant impact again today."UK recovery gathering pace; German IFO surveys broadly in lineThe initial UK gross domestic product (GDP) growth estimate for the second quarter of the year was bang in line with forecasts, with growth accelerating from 0.3% in the first three months to 0.6%."While the Government and policymakers will declare this first estimate of second-quarter GDP as a major step forward, deep down the markets will be disappointed by the rate of growth," said Marcus Bullus, Trading Director at MB Capital."0.6% is double what we had in the previous quarter but it still shows that the recovery is meek, not mind-blowing."The IFO surveys in Germany were also out this morning and more or less met expectations: the business climate index improved from 105.9 to 106.2 in July, beating the 106.1 consensus estimate by a whisker; the current assessment index also came in ahead of forecasts, rising from 109.4 to 110.1; but the expectations indicator unexpectedly fell from 102.5 to 102.4.FTSE 100: Markets react to barrage of earningsOutsourcing giant Capita was a heavy faller this morning after it saw margins shrink in the first half despite the booming market for its services. Although it enjoyed record levels of contract wins, the group's underlying operating margin was 80 basis points lower at 12.5% in the six months to end-June.Telecoms titan BT scored a solid rise in underlying profit but recorded a slight pullback in revenue in the first quarter, causing the stock to take a hit today.Consumer products giant Unilever also fell after admitting in its interim results that the economic environment remains tough and growth in the emerging markets is starting to slow.Chemicals firm Johnson Matthey was under the weather after saying that its performance in the second quarter will be lower than the first due to planned summer shutdowns in the auto industry.Building materials group Travis Perkins meanwhile was subdued despite recording a 19% increase in first-half pre-tax profit as traders digested the news that CEO Geoff Cooper is to retire next year after eight years with the company.However, not all results disappointed this morning: Rolls-Royce Holdings rose strongly after reporting a 34% jump in pre-tax profits to £840m for the first half as the engine maker secured more orders. Reed Elsevier also impressed with strong growth from its key academic publishing and legal solutions businesses as margins continued their upward trend.In contrast, chip designer ARM Holdings was heavy faller today, extending losses made yesterday after its interim results, after analysts at Sanford C Bernstein said that the stock's valuation could fall in the second half.Miners were also providing a drag on the FTSE 100 this morning as metals prices weakened. Fresnillo, Anglo American and Vedanta were among the worst performers.FTSE 100 - RisersReed Elsevier (REL) 828.50p +3.43%Rolls-Royce Holdings (RR.) 1,219.00p +3.31%United Utilities Group (UU.) 716.00p +0.77%Intertek Group (ITRK) 3,106.00p +0.36%BG Group (BG.) 1,188.00p +0.25%Severn Trent (SVT) 1,746.00p +0.23%Travis Perkins (TPK) 1,712.00p +0.12%Standard Life (SL.) 377.80p +0.05%Tullow Oil (TLW) 1,021.00p 0.00%Sainsbury (J) (SBRY) 394.60p -0.05%FTSE 100 - FallersARM Holdings (ARM) 828.00p -6.81%GKN (GKN) 323.50p -5.16%Fresnillo (FRES) 1,015.00p -5.05%Capita (CPI) 988.50p -4.68%SABMiller (SAB) 3,121.50p -3.66%Anglo American (AAL) 1,386.50p -3.58%Hargreaves Lansdown (HL.) 965.00p -3.11%Vedanta Resources (VED) 1,142.00p -2.97%Old Mutual (OML) 191.70p -2.79%BT Group (BT.A) 332.70p -2.72%FTSE 250 - RisersHowden Joinery Group (HWDN) 287.00p +4.17%Lancashire Holdings (LRE) 809.00p +3.32%QinetiQ Group (QQ.) 189.10p +2.16%Bank of Georgia Holdings (BGEO) 1,833.00p +2.12%RPS Group (RPS) 233.50p +1.70%Bumi (BUMI) 228.00p +1.33%Wetherspoon (J.D.) (JDW) 759.50p +1.27%Halma (HLMA) 529.00p +1.24%IG Group Holdings (IGG) 572.50p +1.15%Devro (DVO) 302.40p +1.14%FTSE 250 - FallersAZ Electronic Materials SA (DI) (AZEM) 303.40p -7.10%Kazakhmys (KAZ) 264.60p -5.84%Ferrexpo (FXPO) 165.30p -5.49%Hochschild Mining (HOC) 163.70p -5.27%Mitchells & Butlers (MAB) 404.40p -5.25%Evraz (EVR) 101.00p -4.63%Synergy Health (SYR) 1,102.00p -3.67%Imagination Technologies Group (IMG) 245.40p -3.61%Smith (DS) (SMDS) 241.60p -3.05%Marston's (MARS) 159.60p -2.98%BC