London Market: US interest rates fears cloud profit reports
Sunday 08 August 1999
"The main worry is the direction long bond yields in the US are going to take," said Simon Kirton, manager of UK equities at Aberdeen Asset Management. "It's not going to be solved next week."
Bonds usually fall when interest rates rise, pulling down those financial stocks that hold large bond portfolios. US bonds ex-tended three weeks of decline on Friday after a bigger than expected gain in jobs and wages in July heightened expectations for a Federal Reserve interest rate increase later this month. That pulled UK bonds lower on concern that inflation will spill over to Britain and could hit shares like HSBC, Prudential and Lloyds TSB.
Last week, the FT-SE 100 index dropped 2.66 per cent, which means it has lost 5.59 per cent in the past three weeks.
Phone and computer-related shares led declines, with BT dipping 12.6 per cent, Colt Telecom sliding 15.6 per cent and Vodafone AirTouch losing 11.2 per cent.
The prospect of higher interest rates make investors less willing to bet on future earnings of those companies that command a premium because of their growth prospects; that particularly hurts phone and computer- related companies.
The market is unlikely to be buoyed by corporate profits while the telecoms, banking and pharmaceutical sectors are under a cloud, according to Mr Kirton. "I don't see it setting the heather on fire," he said.
BP Amoco, may rise. It is likely to report second-quarter earnings up 9 per cent to $1.25bn (pounds 77m) as it benefited from a 26 per cent surge in Brent crude oil during the period.
BSkyB is expected to report a fiscal profit for this year on Wednesday. Analysts believe the company will post earnings per share of 3.2p, down from 14.5p a year ago. Investors will be scrutinising results for any indications of growth in subscribers for its SkyDigital service.
CGU, the insurer, is among a string of insurers slated to report a first- half profit. Sun Life and Provincial Holdings and United Assurance Group, which specialises in door-to-door insurance sales, will also post interim results.
Among other companies expected to report first-half earnings are Smith & Nephew and Nycomed Amersham. BOC Group, the world's second-biggest gas supplier will post nine-month earnings.
- 1 Venezuela Expo Tattoo 2015: Extreme body art from 'Vampire Woman' to 109mm earlobes
- 3 Ball pool for adults opens in London
- 4 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Putin opponent reveals Russian President's daughter's secret identity
Ball pool for adults opens in London
Gay couple buy JebBushForPresident.com web domain, and refuse to sell
16 Waitrose customers who could not cope with the end of free coffee
9 reasons Greece's experiment with the radical left is doomed to failure
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
King Abdullah dead: We can't afford not to hold Saudi Arabia's royals to account
iJobs Money & Business
£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...