FTSE falls on euro zone bailout woes, growth concerns
* Miners retreat as Alcoa results miss expectationsBy David BrettLONDON, Oct 12 (Reuters) - Britain’s top share index fell
early on Wednesday, as Slovak lawmakers rejected a plan to
expand the euro zone rescue fund and growth worries continued to
stifle momentum after Alcoa kicked off the earnings season in
the U.S. with whimper.The parliament of tiny Slovakia — the only country in the
17-member currency zone that has yet to approve the plan —
stalled the expansion of a bailout fund to rescue the euro zone
from its debt crisis on Tuesday.Deutsche Bank said although there maybe some near-term
uncertainty it is still inclined to doubt that this is the end
for the EFSF.”Another ‘no’ vote would be likely to put some pressure on
the ECB, with ‘intervention’ by the European Central Bank in
bond markets perhaps needed in order to ensure some stability in
markets while policy makers work through the issues,” Deutsche
Bank said.But the ‘no’ vote raised fears among investors that
governments keen to look after their own interests would only
exacerbate the debt crisis.”Concerns are growing amongst traders that this is another
sign that Europe’s bureaucratic process is just too cumbersome
to deal with the debt crisis,” Jonathan Sudaria, a dealer at
Capital Spreads, said.”The fact that countries are beginning to resort to
protectionism as a policy tool to stimulate their stagnant
domestic economies has traders worried that an era of trade wars
could be looming, hitting global growth.”Evidence the fallout from the ongoing troubles in the euro
zone was reaching beyond its boarders came as third-quarter
results of U.S. aluminium group Alcoa, the traditional
curtain-raiser for the U.S. earnings season, disappointed.Alcoa’s chief executive CEO Klaus Kleinfeld warned of weak
economic conditions through the year, particularly in Europe,
“as confidence in the global recovery faded.”In the UK, riskier assets such as financials and miners led
the fallers, as London’s blue chip index continued to
retreat away from the psychologically important 5,400 barrier.The index was down 23.49 points, or 0.4 percent at 5,372.21
by 0751 GMT, having snapped a four-day winning streak on
Tuesday.Banks were among the top fallers, as Societe
Generale cut target prices across the sector.Europe’s banks will have to achieve a significantly stronger
capital position under a quick-fire regulatory health check and
may need to raise some 100 billion euros, banking and regulatory
sources said on Tuesday.VOLATILE MARKETSThe tumultuous market conditions continued to be a problem
for the world’s largest listed hedge fund manager Man Group
, which reported its flagship AHL fund fell 5.5 percent
last week.Man’s shares fell 6 percent, while Goldman Sachs cut its
target price on the firm to 230 pence from 290 pence.Miners continued to beat a retreat having the led the index
higher during its brief bull run — the sector gained near 20
percent in four days - as Credit Suisse cut its near-tem rating
on the sector to “benchmark” from “overweight” citing headwinds
seen in key emerging markets.London-listed Fresnillo fell 5 percent after
precious metals miner cut its cut its silver production guidance
for 2011.”Fresnillo has delivered its first disappointing production
results since listing,” Oriel Securities says in a note.But Gold miner Randgold Resources topped the short
list of FTSE 100 gainers, up 1.5 percent reflecting an edge
higher in the price of the yellow metal as investors fled
to so-called safer assets.Elsewhere, Europe’s biggest defence contractor BAE Systems
fell 1.4 percent as it warned its sales could be hit
from U.S floods and budget doubts.Utilities suffered as brokers downgraded their ratings on
firms across the sector. Traders said United Utilities ,
down 1.4 percent, was being hit after Morgan Stanley cut its
recommendation on the firm to “equalweight”.Scottish and Southern (SSE) fell 1.2 percent as
Goldman Sachs added the firm to its conviction sell list, while
International Power (IPR) shed 1.2 percent as the same
broker cuts its rating to “sell” from “neutral”.”SSE Trades at a sector premium despite below average
growth, high leverage and strong gearing to UK spreads. On our
estimates, IPR trades at a premium, despite a weak UK spread
outlook and recent FX weakness,” Goldman Sachs says.Ex-dividend factors knocked 2.70 points off the FTSE, with
Capital Shopping Centres , Old Mutual , Smith &
Nephew , Tesco , Wolseley , and WPP Group
all losing their payout attractions.On the macro front, British jobless numbers will be released
at 0830 GMT, with the claimant count seen rising by 25,000 in
September, after a 20,300 increase in August, while August ILO
unemployment rate is forecast to rise to 8.0 percent, up from
7.9 percent in the previous month.
