Equity markets jittery as bailout talks rumble on

canstockphoto3882330A week that got off to a positive start on optimism that the Cypriot bailout would soon be behind us, soon turned sour as comments yesterday afternoon from Jeroen Dijsselbloem – the Dutch Finance minister who heads the Eurozone group of Finance Ministers – implied that uninsured deposit holders may be called upon to bail out other European if required. There was always a suspicion that once such a measure had passed it was likely to be replicated elsewhere in future, but early validation of those fears from such a senior figure gave the market an unwelcome reality check, and stocks quickly dipped lower.

After a failed attempt at pushing on again in early trade this morning, stocks are largely holding yesterday’s levels as the absence of any significant macro data keeps all eyes on Cyprus, though a busy day on the UK earnings calendar has provided a welcome distraction.

Home improvement retail group Kingfisher see their stock trade better after overcoming difficult trading conditions in the UK and France to meet analyst expectations. The first fall in profits for four years left the board ‘not in a position to return cash’ to shareholders, though speculation over a share buy-back continues and has helped send the stock higher early on.

Life insurance specialists Resolution are also edging higher as the group overcame integration costs and a considerable IT spend to deliver better than expected profits and a 6.3% increase in the annual dividend. The board sees strong operational progress that will see them focus on generating cash from existing assets and abandon acquisition plans in the short term.

Plumbing supplies specialist Wolseley are underperforming after delivering profits in line with analyst expectations. Whilst strong growth in their US business fed a 5% increase in their bottom line, a more difficult backdrop in the UK and Europe diminished the prospect of a special dividend.

Also struggling to keep pace are catering services group Compass. The firm delivered earnings in line with estimates, but also see US performance outstripping Europe in the medium term. Cautious wording over the Eurozone backdrop saw RBC and Numis reduce their respective weightings in the stock, though Investec maintain a more bullish outlook with a 900p price target.

Outside of the blue chip index, property firm Savills are under pressure as news broke that Credit Suisse are handling the sale of 7.8m shares (equivalent to around 5.8% of the outstanding shares) for Oaktree Capital.

Miners Kazakhmys trade down almost 10% after posting a loss and slashing their dividend as they were forced to make write downs relating to their stake in struggling ENRC. The stock is down 75% since the start of 2011 and is making new 4 year lows this morning…

Durable Goods Orders out of the US at 12:30 and New Home Sales at 14:00 provide highlights of the afternoon calendar, as we await confirmation of when banks are likely to resume trading in Cyprus amidst continued speculation.

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