London open: Stocks sink early on, Essar leads the fall

27th Feb 2012 08:55

- Essar drops after full-year results.- Vedanta confirms merger of Indian subsidiaries.- HSBC beats expectations in 2011.London's blue chip index fell sharply in early trading on Monday after a G20 meeting failed to alleviate concerns over the economic crisis in Europe. Essar Energy and the miners leading the downside, while the reaction to HSBC's full-year results was, on the whole, rather muted.G20 told Europe that it must first work on raising more funds itself if it expects to receive more financial assistance from the rest of the world. Based on their communiqué published on Sunday, at last weekend's meeting of Finance Ministers and Central Bank Governors, the G20 members were content to pat themselves on the back for having "been actively engaged in taking the steps needed to safeguard the global financial system and to avoid adverse scenarios". Yet their discussion on the possibility of increasing the International Monetary Fund's resources was put off as they await "essential input", mainly for the euro are countries to "reassess the strength of their support facilities in March". Currently under discussion in Europe is the possibility of merging the temporary and permanent bailout funds, known as the EFSF (European Financial Stability Facility) and ESM (European Stability Mechanism), respectively. The ESM is supposed to replace the EFSF, but a possible merger would increase this firewall from €500bn to around €750bn. The idea's main opponent is Germany. The Eurozone's motor of growth is worried about footing the bill for the crisis when the root problems have not been snipped out.Also weighing on sentiment was the price of oil. Brent crude futures were down 0.89% at $124.36 by 08:41 on the InterContinental Europe Exchange, but the recent surge has seen the price come near to its highest level since 2008 due to Iran-related supply concerns. Thoughts are now turning to the effect that elevated prices will have on the recovery in Europe.At the weekend, the Managing Director of the International Monetary Fund (IMF), Christine Lagarde, said that the global economy is "still not out of the danger zone" - "The G20 countries must now strengthen resilience to further shocks that could result from the still-fragile financial systems, high public and private debt, and higher world prices...Of equal concern is unemployment, which is still too high in many countries," she said.ESSAR DROPS AFTER FULL-YEAR RESULTSLeading the downside was India-focused power generation and oil and gas group Essar Energy after reporting a sharp drop in profits in the 12 months ended December 31st. When accounting for the reversal of a sales tax benefit - due to the Indian Supreme Court ruling against a sales tax deferment - the group fell to a pre-tax loss of $881.1m, from a profit of $365.5m the year before.Pearson, publisher of Penguin books and the Financial Times, was a heavy faller after seeing sales climb to £5,862m in 2011 from £5,663m in 2010, below the market consensus forecast of £5,919m. Meanwhile, miners were firmly out of favour as metals prices edged lower. Kazakhmys, Eurasian Natural Resources Corp, Anglo American and Xstrata were among the top 10 worst performing stocks.Bucking the trend was Vedanta Resources which, following weeks of speculation, confirmed that it will be merging its Indian iron ore and copper divisions, Sesa Goa and Sterlite, respectively, to create a new multi-metal mining giant - Sesa Sterlite. The combination is expected to create India's natural resources "champion" and is anticipated to be the world's seventh-largest global diversified natural resources major on an EBITDA (earnings before interest, tax , depreciation and amortisation) basis. Just six stocks were on the rise with distribution and outsourcing firm Bunzl leading the way after profits were comfortably ahead of expectations in 2011, with the new bits and the old bits of the company all chipping in with strong performances. Oil group BP followed suit after the court hearing regarding the Macondo oil well explosion which was due to start on Monday February 27th was delayed by one week. The delay is to allow more time for BP and the Plaintiffs' Steering Committee (PSC) more time to continue settlement discussions and attempt to reach an agreement. Global banking colossus HSBC saw strong profits growth in 2011 despite its investment banking arm's profits taking a dive. Reported profit before tax at $21,872m was ahead of expectations and up from $19,037m the year before. Shares nudged slightly lower, while Lloyds and Barclays were also on the fall.Shares in UK-based insurance titan Prudential were also lower after announcing that it could be upping sticks and moving its headquarters outside Europe to avoid strict new capital rules for European insurers.Associated British Foods, the foods group which also owns the Primark clothes store, fell despite saying that adjusted operating profit will be ahead of last year's interim outcome.On the FTSE 250, housebuilder Bovis fell despite posting a 74% increase in annual pre-tax profit after it sold more homes at a wider margin. Profit before tax rose to £32.1m for the financial year ended 31 December 2011 from £18.5m the year before. Revenue for the year increased to £364.8m from £298.6m previously.BCFTSE 100 - RisersBunzl (BNZL) 955.00p +2.63%BP (BP.) 502.90p +1.35%Marks & Spencer Group (MKS) 357.40p +1.13%Admiral Group (ADM) 1,053.00p +0.57%Vedanta Resources (VED) 1,507.00p +0.47%British American Tobacco (BATS) 3,141.50p +0.46%FTSE 100 - FallersEssar Energy (ESSR) 120.20p -4.60%ICAP (IAP) 383.50p -2.91%Kazakhmys (KAZ) 1,130.00p -2.84%Hargreaves Lansdown (HL.) 450.60p -2.47%Pearson (PSON) 1,224.00p -2.16%Eurasian Natural Resources Corp. (ENRC) 723.50p -2.10%Lloyds Banking Group (LLOY) 34.99p -2.07%Anglo American (AAL) 2,640.50p -1.97%Xstrata (XTA) 1,191.50p -1.93%Associated British Foods (ABF) 1,196.00p -1.89%FTSE 250 - RisersCookson Group (CKSN) 691.00p +3.06%JD Wetherspoon (JDW) 405.00p +1.94%Imagination Technologies Group (IMG) 597.50p +1.36%Carpetright (CPR) 680.00p +1.04%Stobart Group Ltd. (STOB) 124.30p +0.97%Phoenix Group Holdings (DI) (PHNX) 570.00p +0.97%Home Retail Group (HOME) 104.20p +0.87%RPS Group (RPS) 231.90p +0.83%Brown (N.) Group (BWNG) 246.30p +0.78%Bodycote (BOY) 403.00p +0.75%FTSE 250 - FallersBovis Homes Group (BVS) 483.40p -4.37%Ferrexpo (FXPO) 313.30p -3.27%Kenmare Resources (KMR) 58.30p -3.08%Spirax-Sarco Engineering (SPX) 2,023.00p -3.02%Senior (SNR) 195.40p -2.79%Spectris (SXS) 1,706.00p -2.51%Laird (LRD) 170.60p -2.46%Exillon Energy (EXI) 234.50p -2.45%JPMorgan Indian Inv Trust (JII) 382.90p -2.42%JD Sports Fashion (JD.) 825.00p -2.25%