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FTSE 100 trims heavy losses but Deutsche Bank doubts remain

Friday, September 30, 2016 5:10
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Having briefly flirted with the 6,800 level, Footsie recovered some of its poise, ahead of an anticipated flat start on Wall Street.

The FTSE 100 was down 64 at 6,855 early in the lunchtime session, comfortably above the day’s low of 6,810.

Financials remain a drag on the index, as concerns grow over Deutsche Bank’s ability to handle any fines that may be heading its way from the US Department of Justice.

“With the US Department of Justice aiming to also penalise Barclays and Credit Suisse alongside Deutsche, there is a fear that we could see huge amounts of fines levied across the whole industry, effectively wiping out much of the safety buffers built up in case of emergency,” said Josh Mahony, of spread betting firm IG.

An upward revision to second quarter UK gross domestic product provided a bit of a bounce to stocks, though it was only a minor upgrade – from growth of 0.6% to a quarter-on-quarter rise of 0.7%.

“Second quarter GDP growth was driven by buoyant consumer spending (up 0.9% quarter-on-quarter) reflecting higher employment and decent purchasing power,” noted Howard Archer, the widely-quoted economist at forecasting unit IHS.

“The economy has shown resilience so far in the aftermath of June’s Brexit vote, helped significantly by consumers’ willingness to keep on spending amid still decent fundamentals, and the weakened pound lifting foreign orders for UK goods and services. This resilience has helped consumer (especially) and business confidence rebound from their July lows. Consequently, we expect the economy to have grown around 0.3% quarter-on-quarter in the third quarter of 2016,” Archer said.

While blue-chips are mostly in the red, a number of small caps are making a splash, such as China New Energy Ltd (LON:CNEL), the engineering and technology solutions provider to the bioenergy sector.

The company is considering making an investment in a consortium that has acquired a 75.1% equity interest in Addax Bioenergy Sierra Leone, opening up the possibility of the company being able to tender for technology and service contracts.

The shares shot up by one-sixth on the news.

Interim results from SigmaRoc PLC (LON:SRC) sparked a 13% rise in the share price to 0.4p.

The company, formerly known as Messaging International, posted a pre-tax profit of £272,509 versus a loss of £85,502 the year before. Given the company has embarked on a change of direction, the results are not especially significant, but a profit is a profit …

Savannah Resources (LON:SAV) remains optimistic of first production next year from either of its assets in Oman and Mozambique.

The copper explorer’s shares advanced 9% to 4.03p on the news.

Investors in Vislink PLC (LON:VLK) have taken a bath today, with the “from scene to screen” broadcast technology outfit taking a massive £23.3mln write-down of goodwill and acquired intangibles and revealing it is set to break its banking covenants at the end of this month.

The shares crashed 45% to 8.75p.  


Banks led the market lower in early trading, as nervousness over the parlous state of Deutsche Bank mounts.

The FTSE 100 was off 85 points at 6,834 after 90 minutes trading, with banking titans Barclays PLC (LON:BARC), Royal Bank of Scotland Group PLC (LON:RBS) and Lloyds Banking Group PLC (LON:LLOY) all down by more than two percentage points.

Elsewhere in the financial sector asset managers and pension fund operators Old Mutual PLC (LON:OML), Standard Life PLC (LON:SL.), Aviva PLC (LON:AV.), Schroders PLC (LON:SDR) and St James’s Place PLC (LON:STJ) also suffered collateral damage from the Deutsche Bank fall-out, suffering similar losses to the big banks.

Support services Capita Group PLC (LON:CPI) was the worst performing Footsie constituent, however, after yesterday’s profit warning.

JP Morgan Cazenove responded this morning to the share price collapse by slashing its price target to 760p from 1,080p, while retaining its neutral stance.

Capita shares shed another 30p to 668p.

Risk-averse investors looked to precious metals miners Randgold Resources Ltd (LON:RRS) and Fresnillo PLC (LON:FRES) as a safe harbour; the miners were among a handful of blue-chips to make headway in early trading.

Among the mid-caps, a trading update from Entertainment One Ltd (LON:ETO), which owns the Peppa Pig franchise, brought home the bacon.

Shares rose 1.1% to 215.4p as the media rights owner said operating performance this year was on-track across all divisions.

Small cap Charlemagne Capital Limited (LON:CCAP) brought some much needed cheer to the asset management sector, rising 12.5% to 13.5p, as it agreed to a 14p a share cash offer from Fiera Capital Corporation.

Rurelec Plc (LON:RUR) powered 11.1% higher to 1.25p on the back of interim results. Despite turnover slumping to £116k from £620k the year before the power generator moved into the black with a profit before tax of £2.04mln versus a loss the year before of £14.1mln.

Investors fell in love with Amur Minerals Corporation (LON:AMC) as its half-year report revealed an improved cash position

Alecto Minerals PLC (LON:ALO) is now cashed up as well, after a heavily discounted share placing this morning.

The Africa-focused gold and base metal exploration and development company has raised £600,000 after placing shares at 0.075p, sending the shares tumbling 27% to 0.08p.

Things are getting tense at Independent Oil and Gas PLC (LON:IOG), which is being forced to rethink its plans for the Skipper field as initial results from a pivotal appraisal well are incompatible with the group’s pre-drill view of the project.

New well results reveal the oil at Skipper to be heavy, 11° API, and significantly more viscous than previously expected.

It may now take several months for the company to determine whether or not the field can be commercially viable, IOG said, prompting market makers to lop 39% from the share price.

Opening snapshot at 8.15am

London’s index of blue chip shares fell 91 points to 6,827.5p, weighed down by the banks.

Lloyds Banking Group (LON:LLOY) was the biggest loser, down more than 4% to 53p, after Deutsche Bank shares were hit in Frankfurt. 

Deutsche Bank’s share price has dropped below the €10 mark for the first time in 30 years.

Other banks were taking a hammering with Royal Bank of Scotland down 3.5% and Barclays down 2.9%.

The top winner was mining group Randgold Resources Ltd (LON:RRS) up 0.13% or 10p to 7,895p.


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