FTSE live: market report - as it happened October 18, 2011

Monday, 24 October 2011 09:30

Written by Markets Reporter

Harking back to the so-called “Nifty Fifty” of the 1960s and 1970s – 50 American blue-chip stocks, such as General Electric and Walt Disney, that enjoyed a prolonged run of strong performance – analysts argued that their 20 stocks were good candidates for a new “Nifty Fifty”.

“In a low-growth, low-return environment, companies with a sustainable growth or competitive advantage should significantly outperform, similar to the 'Nifty Fifty’ in the 1960s-1970s,” said the broker.

It added: “Conditions are ripe for genuine growth stocks to flourish. When screening for such stocks, qualities to look for could include innovation, emerging technologies, dominant franchises enabling pricing power and/or market share gains, or exposure to higher growth markets.”

“In that context, Morgan Stanley’s '20 for 2015’ list – stocks chosen by the European research department as long-term winners in their industries – seem like good candidates for potential 'New Nifty Fifty’ status,” analysts said.

There was not much sign of a “Nifty Fifty” on Tuesday, though, as figures showing China grew at its slowest pace since early 2009 during the third quarter of this year dragged on the benchmark index. The FTSE 100 dropped 26.35 points to 5410.35, while the FTSE 250 retreated 71.5 points to 10178.89.

12.50pm: Banks lag as FTSE retreats

Banks are dragging on the benchmark index this afternoon, including Royal Bank of Scotland, which is off 2.9pc. Not helping the high street lender is a note from Morgan Stanley, cutting its price target on RBS to 25p from 39p and lowering its rating from "equal-weight" to "underweight".

In a note entitled 'Recovery Still Distant', analysts said:

Significant progress has been made since 2008 in reshaping RBS, but revenue pressures mean the earnings recovery is still some way off. We downgrade to UW, as we believe the shares are fairly valued on our revised forecasts, and we see greater share price upside at other European banks.

Other banks are on the wane too, with Barclays sliding 4pc and Standard Chartered losing 4.7pc.

11.15am: Whitbread froths up on rise in half-year sales

Whitbread continues to be buoyed by its rise in half-year sales, with the owner of Premier Inn and Costa Coffee putting on 1.6pc. Interim sales at the hotel and coffee shop operator rose 10pc to £891.2m and Whitbread upped its interim dividend by 55.6pc to 17.5p.

Analysts at Numis remained buyers of Whitbread, saying:

We believe that the promising organic growth potential of Premier Inn and Costa in both UK and overseas markets is undervalued by the market and our target valuation is supported by substantial property assets.

Joining Whitbread amongst the winners is its peer, InterContinental Hotels (IHG). The hotel group has advanced 0.8pc after signing 12 contracts for its new China hotel brand, with the first opening expected in late 2012 or 2013.

IHG also intends to expand the China branded hotel overseas in 2-3 years to cater to Chinese tourists abroad, said Keith Barr, IHG's chief executive for the Greater China region.

The move to expand the Chinese hotel brand overseas is aimed at attracting the large number of Chinese tourists who will travel worldwide as disposable income rises, he said.

9.10am: Miners lead the blue-chips lower

The FTSE 100 fell 1.5pc at the open to 5,357.5.

Miners led the fallers after data showed China's economy expanded at its slowest in two years, with analyst saying the data was unlikely to make Beijing loosen monetary policy any time soon.

Rio Tinto, Xstrata, and Vedanta fell between 4.7pc and 4.4pc on worries that demand for metals could fall.

The fall came despite figures from Xstrata showing record thermal coal production in the third quarter and a more than 7pc rise in overall coal output, die to the start of operations at its Mangoola mine and an ongoing recovery from a flood-hit start to 2011.

Continued talks about the need to recapitalised banks weighed on banks. Barclays, RBS and Lloyds dropped 3.6pc, 2.8pc and 2.2pc respectively.

Asia-focused bank Standard Chartered dropped 4.7pc - the biggest faller in the index - on concerns over growth in the region after the Chinese data.

G4S, the security firm which fell on Monday after announcing a £5.2bn deal to buy Danish company ISS, and Whitbread, the budget hotel and Costa coffee chain operator, were the only risers. Up 0.9pc and 0.2pc respectively.

Whitbread gained after it reported higher-than-expected first-half pretax profit and increased its dividend by over 50pc.

07.00 Asian markets tumble

Asian stock markets fell sharply on Tuesday on Germany's warning that there was no quick fix for the eurozone debt crisis and a slight slowing in China's economic growth.

Japan's Nikkei 225 lost 1.5pc, Hong Kong's Hang Seng fell 4.4pc, South Korea's Kospi dropped 1.4pc, Australia's S&P 500 slipped 2pc and the Shanghai Composite in mainland China fell 2.3p.

Expectations that a solution to the crisis could be reached at a European summit in Brussels this weekend helped lift stocks last week. But stock markets in Europe and the US tumbled on Monday after German Finance Minister Wolfgang Schaeuble said those expectations were too optimistic.

Also weighing on sentiment was a warning from Moody's that it could place France's triple-A credit rating on negative outlook in the next three months if the costs for helping to bail out banks and other eurozone members stretch its budget too much.

France and Germany are the two strongest economies among the 17 euro zone members, and they are spearheading a plan to be presented at an EU summit on Sunday to help resolve the region's debt crisis.

China's economic expansion slowed in the third quarter to its weakest pace since early 2009, but core domestic drivers of growth remained robust, suggesting little chance that monetary policy can be relaxed in the near term.

Gross domestic product rose 9.1pc in the third quarter from a year earlier, moderating from 9.5pc in the previous quarter as the pace of exports softens. The rise was slightly below forecasts for a 9.2pc increase.

Shares in Hong Kong and Australian slipped after the figures, which showed the economy's third-consecutive quarterly slowdown in annual growth and the weakest pace of expansion since 8.1pc in the second quarter of 2009.

Stephen Green, economist at Standard Chartered in Hong Kong, said:

GDP growth was surprising for the market on the downside. There is clearer deceleration in the third quarter. No change in policy. Small signs of ad-hoc loosening but no macro change in policy.

The Dow Jones industrial average dropped 2.1pc to close at 11,397. The S&P 500 lost 1.9pc and Nasdaq composite fell 2pc.