With markets under pressure again on fears of rising deficits across Europe in the wake of Greece's problems, as well as uncertainty over the US economy ahead of the key non-farm payroll numbers later today, the last thing investors needed was a host of bad corporate news.
But that is what they are getting. Icap, the interdealer broker recently hit by the fallout from President Obama's proposed banking reforms, has slumped 58p to 307.1p after saying it would miss profit expectations. With new businesses taking longer than expected to become profitable and lower activitiy levels than last year, Icap said profits would be between £295m and £315m. Analysts had been looking for more than £330m.
Richard Curr, head of dealing at Prime CFDs, said:
Although Icap's continues to develop new its business segments, these new revenue streams are very much in their infancy. Chief executive Michael Spencer clearly believes the new businesses will take some time to develop too, as he sold some £45m of shares on January 11. Shares have fallen some 15% below the director share sale price, and with today's statement effectively adding up to a profits warning, there is little to alleviate the generally bearish medium term outlook for the company. Sell.
So Icap is topping the FTSE 100 fallers at the moment, with the leading index itself down 53.17 points at 5086.14, its lowest level since November 3 last year. Wall Street's overnight tumble and a 2.9% drop on the Nikkei set the tone for traders this morning. The US non-farm payrolls will be keenly watched. Predictions are for a 27,000 rise but the range goes from positive to negative, so traders are uncertain which way it will end up, and indeed how the market will judge what they signal for the US economy. Owen Ireland at ODL Securities said:
There is now significant downside pressure on global indices, with fear spreading that the situation in Greece could creep in to other weaker European economies. Confidence is extremely brittle, so the last trading session of the week could prove to be a signal of intent. Will traders see this fall as an opportunity to buy, or are we now at the start of a leg down? Today's nervousness could well be magnified by the release of the non-farms this afternoon.
Close behind Icap comes BG. The gases group is off 38p at £11.11 after it reported a 38% drop in fourth quarter profits due to weak gas prices.
Housebuilders are also weaker after Bellway, down 13.5p at 747p, warned trading conditions would be tough in the first half of the year and house prices were still under pressure. Taylor Wimpey is 1.33p lower at 38.47p while Barratt Developments has lost 3.9p to 119.6p.
Adding to the market weakness was the strength of the dollar, which in turn pushed down commodity prices and hit mining shares. The dollar is gaining from investors moving out of the euro and pound because of the concerns about the deficits in Greece, Spain and Portugal, and the fear that it could spread like a contagion in Lehman-esq fashion.
So among the miners Xstrata is down 36p to 966p while Rio Tinto is off 109p at £29.85.
