News Column

MARKET COMMENT: Stocks Hit By Reports Of Ukraine Incursion

August 15, 2014

LONDON (Alliance News) - The FTSE 100 has put in its best weekly performance since the penultimate week of April, after managing to close higher Friday despite a late knock caused by reports that Ukrainian troops had engaged a Russian military incursion into the east of Ukraine.

The FTSE 100 ended the day 0.1% higher at 6689.08, meaning it was up 1.9% over the week as a whole. The FTSE 250 finished down 0.1% on the day at 15,636.99, while the AIM All-Share ended up 0.1% on the day at 755.63.

Ukraine said its troops attacked and partially destroyed an armed convoy that had crossed the border from Russian territory, Bloomberg and other media reported Friday.

Ukrainian government troops engaged the vehicles that had arrived overnight through a rebel-held section of the border, Andriy Lysenko, a spokesman for the country's military, told reporters in Kiev, according to Bloomberg. Ukrainian soldiers continue to come under shelling, including rounds fired from Russia, Lysenko said.

Stock indices in both the US and Europe had been posting solid gains before the news broke, but they immediately pared their gains, and in some cases moved lower. The FTSE 100 fell approximately 56 points when the reports surfaced. European markets were hit particularly hard, with the CAC 40 in Paris ending down 0.7% and the German DAX down 1.4%

At the close of the European markets, the DJIA was down 0.5%, the S&P 500 down 0.3% and the NASDAQ Composite down 0.2%.

The FTSE 100 had performed strongly during the week as key central banks hinted at continued support for the economy. UK markets got a boost Friday morning after the Office for National Statistics said the UK economy grew as initially estimated in the second quarter, it's second estimate for the period. Quarter-on-quarter, gross domestic product grew 0.8%, the same rate as seen in the first quarter, and in line with the ONS's preliminary estimate. Meanwhile, annual growth was revised up to 3.2%, from 3.1%.

"A feeling of complacency had been creeping back into investor psychology this week with a general feeling that perhaps the declines at the start of the month were overdone. The encounter in Ukraine was a hefty reminder that geopolitics cannot be ignored." CMC Markets UK analyst Jasper Lawler said.

BHP Billiton ended the day as one of the top gainers in the FTSE 100, climbing 1.2%, after the mining company said it is swaying towards demerging some assets as it continues to weigh up options for simplifying its big portfolio. It's going to focus on iron ore, copper, coal, oil and possibly potash, meaning it would be demerging aluminium, nickel and bauxite assets if that option is chosen. Its board will meet next week to decide.

Balfour Beatty again rejected the takeover approaches being made by rival Carillion, deeming the bid "opportunistic". It also says it still plans to sell US arm Parsons Brinckerhoff. Carillion had Thursday said it was speaking with Balfour Beatty shareholders, offering them an additional cash dividend. The renewed rejection from Balfour Friday meant Carillion's shares ended the day down 4%, one of the biggest declines on the FTSE 250. Balfour Beatty ended down 0.1%.

In a quiet day in the data calendar Monday, the latest Rightmove UK house price index reading is scheduled for 0001 BST. Eurozone trade data for June is released at 1000 BST, ahead of the US National Association of Home Builders' housing market index for August at 1500 BST.

In the corporate calendar, FTSE 250-listed Amlin and Bovis Homes Group are scheduled to release half-year results.

By Neil Thakrar;

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Source: Alliance News

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