Markets Slip on Global Growth Concerns

WEDNESDAY MARKET UPDATE: There was a bearish feeling in the markets after the IMF cut its global growth forecast 

Alanna Petroff 10 October, 2012 | 6:33PM
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The UK market was downbeat on Wednesday, with both the large-cap and mid-cap benchmarks sliding lower. The FTSE 100 index dropped by 0.6% and closed the trading day at 5,777, while the FTSE 250 index was knocked back by 0.7% to close at 11,828.

Worries about a global growth slowdown continued to weigh on investor sentiment.

"After cutting global growth forecasts, the International Monetary Fund (IMF) maintained its gloomy prognosis warning that the eurozone debt crisis fix is 'critically incomplete' and that it remains a key threat to global financial stability," said Mike van Dulken, head of research at Accendo Markets. "Without swift resolution, the region's banks would likely suffer from capital flight [and] balance sheet contraction[s]."

The earnings season, meanwhile, kicked off in the US on a rather glum note, with aluminium giant Alcoa (AA) cutting its forecast for demand and reporting a net loss of $143 million on account of legal and settlement charges. The company lowered its 2012 global aluminium consumption estimate to 6% from 7%, citing a slowdown in China. 

Alcoa is the first among the Dow Jones industrial average listed stocks to report numbers, and is often regarded as a barometer of the broader economy. Investors turned cautious following the announcement, fearing Alcoa's results could be an indication of things to come, even as other big companies prepare to release their results.

In other corporate developments, the London-traded BAE Systems (BA.) and the Euronext-traded EADS (EAD) announced they were pulling the plug on their merger talks. The companies jointly announced an end to the talks, citing political resistance.

Morningstar analyst Neal Dihora was sceptical about the would-be merger.

"Potential synergies around a deal are difficult to quantify," he said in his latest research report. "It appears that political forces were too great, at least during the current period, leading to an end to discussions."

With additional reporting by Gazala Parveen, an assistant site editor for Morningstar based in Mumbai, India.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Airbus SE129.12 EUR-0.68
BAE Systems PLC1,281.00 GBX-4.08Rating

About Author

Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.

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