Worries about US fiscal cliff and Greek bailout delay leave investors nervous at end of momentous week
A successful resolution to two major events - the US election and parliamentary approval for Greece's austerity measures - were meant to give leading shares a lift this week.
But even though Barack Obama was re-elected, an outcome supposedly favourable to markets, and the Greek package was passed, investors immediately moved onto other worries. The US fiscal cliff - the tax rises and spending cuts due to come into effect next year - was the main concern, although reports of a delay in Greece receiving its next €13.5bn bailout tranche and continuing concerns about Spain added to the uncertainty.
So the FTSE 100 lost almost 100 points over the course of the week to 5769.68, with 6.37 points of the fall coming on Friday. In the US the Dow Jones Industrial Average was down around 400 points following the election result, although it was around 40 points higher by the time London closed on Friday, following better than expected consumer confidence figures.
Banks came under pressure after reports of possible arrests related to the libor-fixing scandal, with Barclays down 6.45p at 230.15p and Royal Bank of Scotland 4.3p lower at 270.1p.
Car insurer Admiral bucked the trend, accelerating 35p to £10.54 after a double upgrade from Bank of America Merrill Lynch. The bank moved its recommendation from underperform to buy, with an £11.80 target price. Analyst William Hardcastle said:
"The 2013 estimated dividend yield of 9.1%..is now the highest in the sector (and FTSE 100) and can't be ignored in our view. We now see Admiral as an income rather than growth stock."
Elsewhere Diageo added 14p to £18.03 as it confirmed it would buy a controlling stake in India's United Spirits group. If the deal is approved, Diageo would end up paying £1.28bn for a 53.4% stake.
Miners were lower despite better than expected economic data from China, a key consumer of commodities. Eurasian Natural Resources Corporation lost 4.6p to 290p in the wake of an update on Thursday, while Russian steelmaker Evraz, controlled by Chelsea owner Roman Abramovich, fell 6p to 236.4p in the wake of a profit warning from rival NLMK.
Among the mid-caps broker Tullett Prebon dropped 22p to 240p after revealing that revenues for the four months to the end of October had fallen 12% due to challenging market conditions and subdued activity levels.
Finnish miner Talvivaara Mining Company lost nearly 15% to 103.5p on reports its Sotkamo mine in the east of the country was leaking water again, after it thought it had fixed the problem, first detected on Sunday. The company said it had set up a committee to investigate the "unfortunate incident".
Rentokil Initial, the pest control to parcels group, fell 1.05p to 87p as it reported a 9.9% rise in third quarter profit but said its struggling parcels group City Link was likely to remain loss making in the final three months of the year. It had hoped the business would return to profit by the end of the year, but said it had been hit by lower than expected demand during the Olympics. Peel Hunt said:
The third quarter results were in line with expectations. However organic revenue growth continued to soften given the challenging conditions across Europe. Furthermore the loss reduction at City Link was below expectations and management now expect a small loss for fourth quarter instead of a modest profit. As a result forecasts are likely to be reduced and the shares go weaker.
In the US Apple recovered around 2% yesterday in early trading, but has still lost around 20% of its value since its peak in September, on worries about competition from Samsung, supply shortages for the iPhone 5 and concerns the iPad mini could cannibalise sales of its larger sibling.
Still with technology companies, chip designer Arm added another 3p to 712.5p on Friday. The company is part of a consortium which carved up US chip pioneer MIPS Technologies, taking the bulk of its historic patents while Imagination Technologies, up 1.8p to 483p, bought the operating assets.
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