FTSE drops 150 points on Greece, Portugal worries

The FTSE 100 dropped 150 points or 2.6% today to finish at 5,604 whilst the DOW Jones industrials are currently down 101 at 11,101. The FTSE was hit hard as commodity related stocks took a dive as the "safe haven" U.S. dollar strengthened (e.g. BHP Billiton down 4.2%, Rio Tinto down 5.2%). The reason was debt rating agency S&P's cut to Greece’s credit rating to junk and also cut its rating on Portuguese government debt.

Greece’s rating on the short-term debt is cut to BB+ from BBB+, while the long-term rating has been lowered to B from A-2. Both ratings are below what is considered “investment grade”. The outlook for Greece is also negative. Portuguese government debt was cut by two notches to A- FROM A+, saying the downgrade reflects “the amplified risks Portugal faces” and the outlook on its rating is negative.

FTSE 100 component Reckitt Benckiser also fell over 4% to £34.97 as the company issued a strong performance in Q1 with earnings rising 14% to £461 million but warned of the potential impact of generic Suboxone competition in the U.S. during 2010 (these risks have been highlighted in a previous Contrarian Investor UK story).

FTSE drops 150 points on Greece, Portugal worries

The FTSE 100 dropped 150 points or 2.6% to finish at 5,604 whilst the DOW Jones industrials are currently down 101 at 11,101. The FTSE was hit hard as commodity related stocks took a dive as the "safe haven" U.S. dollar strengthened (e.g. BHP Billiton down 4.2%, Rio Tinto down 5.2%). The reason was debt rating agency S&P's cut to Greece’s credit rating to junk and also cut its rating on Portuguese government debt. 

Greece’s rating on the short-term debt is cut to BB+ from BBB+, while the long-term rating has been lowered to B from A-2. Both ratings are below what is considered “investment grade”. The outlook for Greece is also negative. Portuguese government debt was cut by two notches to A- FROM A+, saying the downgrade reflects “the amplified risks Portugal faces” and the outlook on its rating is negative.

FTSE 100 component Reckitt Benckiser also fell over 4% to £34.97 as the company issued a strong performance in Q1 with earnings rising 14% to £461 million but warned of the potential impact of generic Suboxone competition in the U.S. during 2010 (these risks have been highlighted in a previous Contrarian Investor UK story).

BP shows strong earnings growth on high oil price

BP (BP.) today announced 1st quarter results which exceeded analysts’ expectations. Replacement cost profit, which strips out the effect of changes in the value of inventories and fluctuations in the oil and gas price, was $5.6 billion for the quarter, up from $2.39 billion in the same period a year ago and ahead of expectations of $4.8 billion . Earnings per share were up 134 per cent at 29.82 cents, boosted by oil prices which averaged $71.86 during the quarter, compared with $41.26 during the same period last year.

Stripping out exceptionals, the rise in earnings was 118 per cent, well above analysts’ average expectations of a rise of about 85 per cent. The oil and gas exploration and production business reported a 94 per cent rise in operating profit over the year to $8.3bn, although this was slightly lower than in the final quarter of 2009. In refining and marketing, profits fell 33 per cent compared to the first quarter of 2009 to $729m. However, this still marked a sharp improvement from the $1.9bn loss reported for the fourth quarter of 2009. BP’s net debt dropped to $25.2bn at the end of March, down from $26.2bn at the end of last year. The company said that oil and gas production was unchanged at 4.01 million barrels of oil equivalent per day. TNK-BP, the group’s Russian joint venture, also lifted overall profits. Net income from TNK-BP increased to $543 million, compared with $134 million a year ago. The group kept its dividend frozen at 14 cents per share.