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| | London Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | | Stocks jump on improvement in global data London’s FTSE 100 jumped on Thursday as investors temporarily shrugged off an underwhelming set of minutes from the Federal Reserve and instead focused on improving data from across the world which brightened the global economic outlook.
The FTSE 100 ended the day at 6,446.87, up 56.03 points on the day after closing at a six-week low of 6,390.84 on Wednesday. The last time the index closed lower than that was July 5th when it finished at 6,375.52.
Data shows improving picture
Markets started out strongly this morning after the Chinese manufacturing purchasing managers’ index (PMI) improved from 47.7 to 50.1 in August, well ahead of the 48.2 consensus forecast - the 50-point mark separates expansion from contraction.
The preliminary Eurozone composite PMI (which measures activity in both manufacturing and services sectors) rose from 50.5 to 51.7 in August, the largest expansion in the last 26 months. Analysts were expecting a smaller riser to 50.9.
The 'flash' US manufacturing PMI also rose this month from 53.7 to 53.9 as growth picked up, though this slightly missed the consensus forecast of 54.2.
FOMC minutes underwhelm
Minutes from the Federal Open Market Committee's July 30-31st meeting failed to shed any more light on a timeframe for the central bank's imminent tapering of quantitative easing (QE). Policymakers said they were "broadly comfortable" with the plan to taper stimulus by the end of the year, as they have said in the past, with the labour market having "improved substantially" and economic growth expected to "strengthen further" in the second half.
Stocks have been choppy over recent weeks in anticipation of the minutes as expectations increased that the Fed would begin to withdraw stimulus in September. While the outcome of this impending decision is still uncertain, these expectations have (arguably) now been priced into markets.
“Investors are coming to terms with the likelihood that the market might already be moving on from the tapering bonanza and is concerned more with how money will move once the asset purchases slow,” said David White, Financial Trader from Spreadex.
“Equities have today demonstrated that the appetite for risk is much improved now compared with the previous two times markets were faced with an ending, something likely as a result of improved underlying conditions. Bottom line, investors seem to be happier in the market than out.”
FTSE 100: IMI jumps on upbeat outlook
IMI’s shares rallied after the engineering company forecast an improvement in trading for the second half as it takes on higher-margin contracts at its Severe Service business. Revenues were flat at £1.09bn in the first half and while pre-tax profit rose 1% to £170.1m.
Plumbers merchant Wolseley was making gains after UBS upgraded its rating for the stock from 'neutral' to 'buy', saying it is optimistic about growth in the US after positive readacross from the company's peers.
Mining stocks were broadly higher after the better-than-expected manufacturing data from top metals user China. Rising metals prices today were also doing their bit to lift equities.
Vedanta Resources rebounded following a slump on Wednesday after reports four Indian tribal councils voted against the company’s plan to mine bauxite in eastern India's Niyamgiri Hills. Glencore Xstrata was performing well as the miner continues to recover after disappointing the market with its first-half report earlier this week.
Sugar and sweeteners producer Tate & Lyle slumped on the back of concerns over the recent falls in sugar prices due to the weakness in emerging-market currencies.
FTSE 250: Hochschild Mining rebounds strongly as brokers lift targets
Precious metals producer Hochschild Mining was rebounding strongly after falling sharply the day before as it suspended its interim dividend. Nevertheless, Westhouse Securities, JPMorgan Cazenove and RBC Capital Markets all upgraded their target prices for the stock today with the latter citing the company’s cost savings programme which should have a positive impact going into the second half.
Newsagent chain WH Smith was on shopping lists after saying it expects full-year results to be in line with market expectations as it continues focus on tight cost control and improving margins.
Carillion, the building and support services firm, was the worst performer of the day despite reporting a 13% increase in pre-tax profits as revenues fell 9% in the first half. The decline was mainly due to the planned rescaling of the UK construction business.
Premier Oil was also a heavy faller after record half-year financials still came up short of estimates. The company said that its full-year production target of 63,000 barrels of oil equivalent per day depends on the performance of its Huntington field in the second half. |
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| | FTSE 100 - Risers
IMI (IMI) 1,491.00p +5.82%
Fresnillo (FRES) 1,215.00p +4.38%
Wolseley (WOS) 3,330.00p +4.26%
RSA Insurance Group (RSA) 123.60p +3.00%
Glencore Xstrata (GLEN) 313.85p +2.99%
Vedanta Resources (VED) 1,194.00p +2.93%
Royal Bank of Scotland Group (RBS) 343.00p +2.66%
International Consolidated Airlines Group SA (CDI) (IAG) 311.80p +2.60%
GKN (GKN) 345.30p +2.52%
Serco Group (SRP) 621.50p +2.22%
FTSE 100 - Fallers
Experian (EXPN) 1,169.00p -1.18%
Eurasian Natural Resources Corp. (ENRC) 225.20p -0.84%
Burberry Group (BRBY) 1,574.00p -0.76%
Hargreaves Lansdown (HL.) 991.50p -0.50%
William Hill (WMH) 430.00p -0.46%
Prudential (PRU) 1,121.00p -0.36%
Croda International (CRDA) 2,567.00p -0.35%
National Grid (NG.) 737.50p -0.34%
Old Mutual (OML) 187.10p -0.32%
Tate & Lyle (TATE) 812.00p -0.25%
FTSE 250 - Risers
Diploma (DPLM) 636.50p +6.08%
Hochschild Mining (HOC) 237.80p +5.92%
Ferrexpo (FXPO) 185.20p +5.05%
Cable & Wireless Communications (CWC) 41.46p +4.72%
WH Smith (SMWH) 850.00p +4.55%
Ashmore Group (ASHM) 340.00p +4.04%
Man Group (EMG) 84.70p +3.93%
Home Retail Group (HOME) 150.30p +3.58%
IP Group (IPO) 138.00p +3.45%
Smith (DS) (SMDS) 260.00p +3.30%
FTSE 250 - Fallers
Premier Oil (PMO) 346.50p -2.94%
Carillion (CLLN) 289.80p -2.52%
NMC Health (NMC) 350.00p -2.51%
Ultra Electronics Holdings (ULE) 1,892.00p -2.42%
Rathbone Brothers (RAT) 1,585.00p -1.55%
Phoenix Group Holdings (DI) (PHNX) 735.00p -1.34%
Synergy Health (SYR) 1,110.00p -1.25%
Brewin Dolphin Holdings (BRW) 268.40p -1.18%
Beazley (BEZ) 206.20p -1.15%
Menzies(John) (MNZS) 737.00p -1.14% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Stocks higher after upbeat data in Eurozone, US FTSE 100: 0.69%
DAX: 1.35%
CAC 40: 1.10%
FTSE MIB: 2.56%
IBEX 35: 1.89%
Stoxx 600: 0.97%
European stocks ended Thursday on a higher note after the Eurozone’s purchasing managers’ index for manufacturing and services showed expansion in the industries in August.
The Markit composite PMI for the Eurozone rose to 51.7 points from 50.5 in July, the fastest pace in two years.
Services jumped to 51 this month from 49.8 last month while manufacturing grew to 51 from 49.8.
A reading above 50 signals expansion.
Growth was led by German which rose 53.4 in August from 52.1 in July, driven by manufacturing expansion.
However, France's PMI contracted, falling to 47.9 from 49.1 due primarily to a slump in services.
“A big question mark still hangs over France's ability to return to sustained growth,” said Chris Williamson, Chief Economist at Markit. "Although the French PMI is well above the lows seen earlier in the year.”
Nevertheless, ETX Capital Market Strategist, Ishaq Siddiqi, pointed out that the Eurozone data should come as good news to the European Central Bank’s President Mario Draghi and its members.
“Big sigh of relief for Draghi and Co who now have an even greater excuse to hold back from adjusting monetary policies as growth appears to be on board,” he said.
“ECB forecasted an improvement in the euro zone economy by the latter half of 2013 so today’s figures are fulfilling policymakers’ expectations in Frankfurt and Brussels. On top of that, calm in euro-area peripherals with little fresh noises on the political and fiscal front add to the current market optimism that worse of the crisis is over in the Eurozone.”
US data signals further recovery
The number of US jobless claims in the month ended August 17th dropped to 330,500 a week on average, the least since November 2007, according to a Labor Department report.
Compared with a week earlier, claims rose by 13,000 to 336,000, in line with the median forecast of economists surveyed by Bloomberg.
The prior week's figure was revised up by 3,000 to 323,000, a five-year low.
Separately, Markit said US manufacturing activity hit a five-month high in August as hiring picked up and new orders increased at their fastest pace since January.
The manufacturing PMI grew to 53.9 from 53.7 in July.
Another report from The Conference Board, showed its Leading Economic Index for the US rose 0.6% in July to 96.0 following no change in June, and a 0.3% increase in May. It beat economists’ forecasts for a 0.5% increase.
The raft of upbeat data comes as the Federal Reserve weighs up whether to start scaling back its $85bn per month in bond purchases.
Minutes of the Federal Open Market Committee's meeting last month showed members were broadly comfortable with Chairman Ben Bernanke’s plan to begin cutting stimulus this year as long as the economy continues to improve.
Several participants said tapering may be needed soon as the FOMC indicated that it expects economic growth will continue to improve in the second half.
Economists expect the Fed will begin trimming quantitative easing in September at the central bank’s next policy meeting.
IMI, Wolseley
Shares in IMI gained after the engineering company reported an increase in first-half profit on bigger margins at its severe service business.
Wolseley jumped after UBS AG raised its recommendation on the world’s largest distributor of plumbing and heating products to ‘buy’ from ‘neutral’, citing growth in the US.
Wienerberger AG slumped after UBS AG lowered its recommendation on the shares to ‘neutral’ from ‘buy’.
Royal Ahold advanced after the Dutch supermarket owner reported second-quarter underlying operating income that exceeded analysts’ expectations.
Premier Oil declined after the energy explorer reported first-half net income which missed analysts’ expectations.
Other asset classes mixed
The euro/dollar fell 0.07% to the 1.3346 dollar mark.
Brent crude futures recovered from a morning slump, rising $0.055 to $109.870 per barrel on the ICE. |
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| | US Market Report | | Stocks rise as jobless claims fall to a five-year low US stocks edged higher as data in the world’s largest economy showed jobless claims fell to a five-year low over the past month.
The number of claims in the month ended August 17th dropped to 330,500 a week on average, the least since November 2007, according to a Labor Department report.
Compared with a week earlier, claims rose by 13,000 to 336,000, in line with the median forecast of economists surveyed by Bloomberg.
The prior week's figure was revised up by 3,000 to 323,000, a five-year low.
The report comes as the Federal Reserve weighs up whether to start scaling back its $85bn per month in bond purchases.
Minutes of the Federal Open Market Committee's meeting last month showed members were broadly Chairman Ben Bernanke’s plan to begin tapering stimulus this year as long as the economy continues to improve.
Several participants said tapering may be needed soon as the FOMC indicated that it expects economic growth will continue to improve in the second half.
“While it's far from a certainty, the minutes from the FOMC meeting back in late July appear to support our view that the Fed will begin to slow its monthly asset purchases at the next meeting in mid-September,” according to Paul Ashworth, Chief US Economist at Capital Economics.
Ashworth suspects that officials may begin with an initial reduction of $10bn to $75bn.
President of the Federal Reserve bank of Boston, Eric Rosengren, said any tapering should be "limited” in an interview with The Wall Street Journal after the release of the minutes on Wednesday.
He said he was still forming a judgment about whether the economy was improving as expected. "This is a good time to be patient and very watchful," Rosengren said.
On the company front, shares of Hewlett Packard plunged following the release of its latest quarterly results after last night's close.
It came alongside poor results out from the likes of Stage Stores, Hormel Foods, Sears and the iconic fashion-retailer Abercrombie&Fitch.
Wells Fargo gained following reports it would lay-off 2,300 people in its mortgage production unit.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.37% in July from 4.07% in June, and is the highest since July 2011 when it was 4.55%; the rate was 3.55% in July 2012.
Acting as a backdrop, of the 482 companies in the S&P 500 that have reported quarterly earnings this period, 71% surpassed profit estimates, Bloomberg data shows. Company earnings are one of the relatively few bright spots although some analysts believe it will be a few months yet before they may translate into higher equity prices.
Conference Board index rises
The Conference Board’s Leading Economic Index for the US rose 0.6% in July to 96.0 following no change in June, and a 0.3% increase in May.
It beat economists’ forecasts for a 0.5% increase.
Ataman Ozyildirim, Economist at The Conference Board, said: "Following moderate growth in the last few months, the US LEI picked up in July, with widespread gains among its components. The pace of the LEI’s growth over the last six months has nearly doubled, pointing to a gradually strengthening expansion through the end of the year. In July, average workweek in manufacturing was the weakest component".
Other asset classes slide
10 year US Treasury yields were down 0.02 basis points to the 2.88% mark.
Front month West Texas crude futures fell $0.298 to $104.160 per barrel on the ICE. |
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Capital at Risk. |
| | Broker Tips | | Aggreko: RBC Capital reduces target from 1850p to 1680p, while its neutral rating remains unchanged.
Aviva: JP Morgan raises target from 393p to 436p and retains an overweight rating.
BHP Billiton: Canaccord Genuity takes target from 1950p to 2050p maintaining a hold recommendation.
Cairn Energy: RBC Capital moves target from 440p to 450p and reiterates its outperform rating.
Cropper (James): Westhouse Securities ups target from 300p to 350p, while downgrading to add.
Faroe Petroleum: Liberum Capital lowers target from 188p to 183p, while leaving its buy recommendation unchanged.
Ferrexpo: Cantor Fitzgerald reduces target from 373p to 290p, but stays with its buy recommendation.
Glencore Xstrata: JP Morgan cuts target from 410p to 390p retaining its overweight rating.
Hikma Pharmaceuticals: Jefferies ups target from 1200p to 1250p and keeps a buy recommendation.
Hochschild Mining: Westhouse Securities increases target from 150p to 200p and reiterates a neutral rating. JP Morgan moves target from 75p to 80p, while keeping an underweight rating. Citi shifts target from 133p to 132p and maintains its sell recommendation. RBC Capital ups target from 220p to 260p and stays with its neutral rating.
IMI: Investec places both its target prev.: 1350p and its hold recommendation under review.
Intertek Group: Credit Suisse reduces target from 3850p to 3600p, while retaining an outperform rating. IP Group: Numis lowers target from 129p to 124p, while its hold recommendation remains unchanged.
John Wood Group: JP Morgan cuts target from 963p to 951p and stays with its neutral rating. Liberum Capital reduces target from 892p to 874p.
Legal & General Group: Morgan Stanley moves target from 184p to 192p and maintains an equal-weight rating.
Lloyds Banking Group: Jefferies shifts target from 65p to 69p reiterating a hold recommendation.
Sportech: Investec lowers target from 110p to 105p and leaves its buy recommendation unaltered.
Stagecoach Group: Deutsche Bank raises target from 330p to 350p staying with its buy recommendation.
Summit Corporation: N+1 Singer shifts target from 8.80p to 10.70p keeping its buy recommendation.
Vitec Group: Investec increases target from 740 to 810p and retains a buy recommendation.
Wolseley: UBS upgrades from neutral to buy with a target of 3500p. | | |
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