This morning's rally faded as online spread betting markets became less optimistic that Eurozone leaders will deliver a robust package to solve the region's debt crisis, following the German finance minister Wolfgang Schaeuble's comments.
In London the FTSE 100 retreated from its ten-week high and was 0.79% lower at 5422.98 by 3pm (London time). Across the pond, the S&P 500 and Dow Jones both fell almost 0.8% to 1214.56 and 11555.60 respectively, as economic data weighed on the indices.
US economic data showed that September's industrial output gained 0.2% following a downwardly revised reading showing flat output in August. Capacity utilisation came in worse than expected at 77.4% in September, from a downwardly revised August reading of 77.3%.
Germany shatters 'dreams' of swift Eurozone solution
Germany's finance minister Wolfgang Schaeuble dampened hopes that Eurozone leaders were close to agreeing on a plan to help the debt crisis by announcing it was wrong to expect 'a definitive solution' at the weekend's EU summit. He said the summit will not produce a final solution while pressure on banks to accept bigger write-downs on Greek debt is maintained.
Over the weekend Mr Schaeuble said that private bondholders would have to accept steeper voluntary write-downs on their Greek holdings than the 21% initially agreed. The private sector might have to endure a write-down of 50-60% on Greek debt. Mr Schaeuble is due to speak again in London later this afternoon.
Meanwhile, ahead of this weekend's EU summit, talks are taking place amid fresh social unrest in Greece. The country is expected to come to a gridlock as a 48-hour strike gets underway. The strike is expected to peak on Thursday, just as parliament votes on a further round of new controversial austerity measures.
Citigroup reports 74% rise in profit
Citigroup, the third-biggest US bank, announced this afternoon that profit rose 74% against last year as a $1.9 billion accounting gain reduced the impact of declining trading and investment banking revenue.
Citigroup's credit valuation adjustment mirrored a similar announcement posted by JP Morgan last week. However, excluding the accounting adjustment, revenue dropped 8% to $18.9 billion.
Net income for the third quarter jumped to $3.77 billion, $1.23 a share, compared with $2.17 billion, $0.72 a share, in the same period a year earlier. Citigroup posted its seventh profitable quarter in a row after losing a total of $29.3 billion for 2008 and 2009. Shares in the company rose almost 2% to an afternoon high of $29.05.
G4S secures deal
UK-based security company G4S announced today that it has acquired Danish business services provider ISS, saying it would pay £5.2 billion for the facilities management group.
G4S, one of the world's largest security services providers, said the tie-up with ISS will create a global leader in integrated security and facilities services as well as transforming the business.
The deal comes amid declining takeover activity across the world as economic uncertainty chokes the confidence and growth aspirations of business and as increasingly tight credit markets limit their funding options.
The tie-up, which requires regulatory approval, is expected to enhance earnings in the first year with double-digit earnings per share growth expected within three years of completion.
Earlier this year in March, ISS had pulled the plug on a planned $2.8 billion IPO due to market turmoil. G4S shares, on the other hand, fell sharply on the announcement, dropping 13.9% to 243p, making it the biggest decliner on the FTSE 100.
Rio Tinto retreats from aluminium
Rio Tinto signalled this morning that it would retreat from its aluminium business, putting an estimated $8 billion worth of assets up for sale. Rio Tinto said it planned to sell 13 assets, including smelters and alumina refineries, in a move that would redirect more resources to iron ore, which now accounts for nearly 80% of group earnings.
News of the sales comes as aluminium prices have tumbled, dropping nearly 15% in the past quarter and after UBS rated aluminium as the 'least preferred' commodity. Prices are predicted to fall another 8% in 2012. Rio's London shares jumped 3.6% to 3480.37p in morning trade, before falling 1.90% to 3283.00p this afternoon.
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'Citigroup Share Spread Betting Market Higher on Rise in Profits', Article by IG Index, last update: 17-Oct-11
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