By Carla Mozee, MarketWatch
British shares drop alongside broader European market
U.K. stocks dropped Tuesday, in step with a selloff across
European equities as bond prices dropped and as Greece's debt
crisis talks reach a crucial point.
London-traded shares remained lower after better-than-expected
U.K. industrial-production data
(http://www.marketwatch.com/story/uk-factories-ramp-up-production-as-oil-recovers-2015-05-12),
but the British pound (GBPUSD) rose to a fresh yearly high above
$1.57. It recently traded at $1.5656 versus $1.5588 late
Monday.
The FTSE 100 fell 1.7% to 6,913.31, with shares of only four
companies rising. Experian PLC shares were up 2.1%
(http://www.marketwatch.com/story/experian-reports-fall-in-fiscal-2015-pretax-profit-2015-05-12-2485378),
with the credit-checking services provider saying it expects
margins for the year to be stable.
The FTSE 100 fell alongside the Stoxx Europe 600 , which lost as
much as 2.1%. In addition to Greece's bleak financial situation,
stocks also wrestled with a renewed selloff in global bonds,
driving yields higher.
The "extent of the bond market selloff is surprising," as the
European Central Bank "has only just started its colossal
bond-buying program, which should keep yields under extreme
pressure for another 1.5 years at least," said Fawad Razaqzada,
technical analyst at Forex.com, in a note. "Indeed, we are of the
view that bond yields will probably head back lower soon, and this
in turn may result in a rebound in European stocks."
On the FTSE 100, EasyJet shares tumbled 10% after the budget
airline warned revenue per seat would fall
(http://www.marketwatch.com/story/easyjet-swings-to-interim-profit-2015-05-12-24855820)
by a low single-digit percentage in the six months to September. It
swung to a first-half profit of 5 million pounds ($7.8 million),
while revenue rose 3.8% to GBP1.8 billion.
"Air traffic control strikes in France have affected airlines
across Europe, and with uncertainty over oil prices and currency
exchange rates it's no surprise to see the airline industry on
shaky ground at the moment," wrote James Hughes, chief market
analyst at eToro.
Shares of British Airways parent International Consolidated
Airlines Group also fell, by 2.6%.
Stock in mining industry giant BHP Billiton PLC (BHP) turned
lower by 0.6%. Earlier Tuesday, BHP said it plans deeper cost cuts
(http://www.marketwatch.com/story/bhp-billiton-plans-deeper-cost-cuts-2015-05-12-24855925)
as weakness in commodity prices persists.
Grexit/Brexit: Fears about Greece's debt problems were
heightened Tuesday, with a Reuters report saying Greece used funds
from an emergency account held at the International Monetary Fund
to repay EUR750 million it had owed the lender, a move made to
avoid default. Greek Finance Minister Yanis Varoufakis on Monday
said the country may be a couple of weeks away from running out of
cash. Varoufakis's comments followed Monday's meeting of Eurogroup
eurozone finance ministers, who said progress was made, but more
work needed to be done.
Meanwhile, the Ecofin group of EU finance ministers was holding
a meeting Tuesday in Brussels. Before the meeting, U.K. Chancellor
George Osborne said he had come with a mandate "to improve
Britain's relationship with the rest of the EU and to reform the
EU", media reports said. The newly elected Conservative government
has promised to hold an in-or-out referendum on the U.K.'s
membership of the EU, raising fears of a "Brexit", or Britain's
departure from the union. Read: Risk of Britain leaving the EU just
got real
(http://www.marketwatch.com/story/risk-of-britain-leaving-the-eu-just-got-real-2015-05-08)
(http://www.marketwatch.com/story/risk-of-britain-leaving-the-eu-just-got-real-2015-05-08)
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