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| | London Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | | Markets finish lower despite late rally Markets rallied in afternoon trade on Wednesday, helped by dovish remarks from Bank of England Governor Mark Carney and a decent start on Wall Street, but stocks still finished in the red as escalating concerns about Syria continued to dampen sentiment.
The FTSE 100 finished down 10.91 points at 6,430.06, well off its intraday low of 6,393.65.
While the Syrian government has so far denied the use of chemical weapons, US Vice President Joe Biden has said there is “no doubt” that Syria carried out the attacks last week that killed well over a thousand people. White House spokesman Jay Carney said: “There must be a response […] What form that response will take is what the President is assessing now.”
West Texas crude futures were trading at a two-year high of $112.24 a barrel today while Brent crude jumped to a six-month high of $117.34 on fears that the crisis in Syria could disrupt oil supplies from the Middle East.
Markets are now concerned about how much further oil has to go and what impact elevated prices will have on the global economy. According to analysts at Societe Generale, Brent may jump as high at $150 a barrel if supplies are disrupted.
Capital Economics analysts estimate that every $10 rise in the price per barrel of Brent could shave 20-30 basis points of global economic growth. “A rise to, say, $150, could therefore knock one percentage point off global growth, turning what is already a lacklustre recovery into something approaching stagnation.”
Carney speech in focus
Providing some support this afternoon were stocks in the banking sector after Mark Carney’s much-anticipated speech today, his first as BoE Governor. Carney relaxed strict liquidity requirements for UK banks that had passed a minimum capital threshold in an effort to encourage lending.
In a relatively dovish speech at the University of Nottingham, Carney also attempted to reassure markets that a Bank Rate hike wouldn’t necessarily come as soon as unemployment hit the Monetary Policy Committee’s 7% target. Instead, he stressed that this level was not a trigger but just a guide. Households and businesses can operate in the “certainty that interest rates will not rise too soon”, he said.
He also said that the possibility of further quantitative easing remains open under the BoE’s forward guidance plan and stimulus tools will be used if the economy needs a boost.
Joe Rundle, Head of Trading at ETX Capital, said that Carney was “being a bit of a bear by reminding us that we shouldn’t get too excited too quickly about the current growth momentum we have seen in the UK this year because it’s clearly not strong enough”.
FTSE 100: Oil and banking stocks on the up
Oil producers were tracking crude prices higher today with BG Group, Royal Dutch Shell, Tullow and BP in demand on the FTSE 100.
Oil strength however was having an adverse effect on airline stocks given concerns about how they will feed into jet fuel costs - IAG and easyJet were heavy fallers today..
Banking shares including RBS, Lloyds and Barclays were making gains this afternoon after Carney’s relaxed rules on liquidity requirements.
Meggitt, the aerospace, defence and energy group, fell after unveiling plans to acquire Piezotech, a US ceramic devices producer, for $41.2m.
A number of FTSE 100 stocks went ex-dividend today, meaning that new investors won't have access to the companies' latest payouts. These include: CRH, Glencore Xstrata, Legal & General, Tullow Oil and Wood Group.
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| | FTSE 100 - Risers
Eurasian Natural Resources Corp. (ENRC) 227.60p +5.86%
BG Group (BG.) 1,267.50p +4.75%
G4S (GFS) 252.40p +2.89%
Anglo American (AAL) 1,530.50p +2.20%
Royal Dutch Shell 'B' (RDSB) 2,221.00p +2.02%
Royal Dutch Shell 'A' (RDSA) 2,130.00p +1.79%
Royal Bank of Scotland Group (RBS) 336.00p +1.79%
Lloyds Banking Group (LLOY) 73.89p +1.73%
Barclays (BARC) 284.55p +1.37%
BP (BP.) 452.65p +1.24%
FTSE 100 - Fallers
International Consolidated Airlines Group SA (CDI) (IAG) 287.00p -4.49%
Legal & General Group (LGEN) 187.40p -3.45%
Randgold Resources Ltd. (RRS) 5,195.00p -2.62%
Associated British Foods (ABF) 1,838.00p -2.60%
Aggreko (AGK) 1,572.00p -2.24%
GKN (GKN) 324.10p -2.20%
Carnival (CCL) 2,431.00p -2.09%
Shire Plc (SHP) 2,373.00p -2.02%
Rolls-Royce Holdings (RR.) 1,092.00p -1.97%
WPP (WPP) 1,178.00p -1.92%
FTSE 250 - Risers
African Barrick Gold (ABG) 179.90p +5.64%
Hochschild Mining (HOC) 235.00p +5.33%
Alent (ALNT) 363.80p +5.17%
Xaar (XAR) 869.50p +4.76%
EnQuest (ENQ) 127.20p +4.26%
Enterprise Inns (ETI) 145.50p +4.08%
Hansteen Holdings (HSTN) 99.00p +3.12%
esure Group (ESUR) 243.50p +2.57%
Soco International (SIA) 386.00p +2.52%
Drax Group (DRX) 702.50p +2.33%
FTSE 250 - Fallers
Kenmare Resources (KMR) 27.00p -8.63%
Berkeley Group Holdings (The) (BKG) 2,087.00p -6.16%
Polymetal International (POLY) 698.00p -5.80%
Halfords Group (HFD) 364.20p -5.60%
Ashtead Group (AHT) 638.50p -4.42%
Ferrexpo (FXPO) 172.50p -4.33%
Countrywide (CWD) 565.00p -4.24%
Henderson Group (HGG) 167.40p -3.90%
Mondi (MNDI) 989.00p -3.79%
Victrex (VCT) 1,566.00p -3.39% |
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Capital at Risk. |
| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Syria crisis and Carney speech rattle markets FTSE 100: -0.11%
DAX: -1.05%
CAC 40: -0.25
FTSE MIB: 0.98%
IBEX 35: 0.14
Stoxx 600: -0.38%
European stocks were mixed as the tensions in Syria grew and as the Bank of England’s new Governor said the central bank could add more stimulus.
Concerns over Syria mounted on Wednesday after the US said it was ready to launch military action in the troubled Middle Eastern country.
UK Prime Minister David Cameron held talks on the situation at Downing Street after insisting that he West must not "stand idly by".
The UK was due to put a resolution to the United Nations Security Council "authorising necessary measures to protect civilians" in Syria.
While the UK, the US and France are behind military action, Russia and China is expected to block the efforts as the nations have previously vetoed resolutions critical of Syria.
The reports pushed the price of Brent crude up by $1.329 to $115.90 per barrel and West Texas Intermediate futures up by $1.286 to $110.430 per barrel.
“Once filtered through to the real global economy, the increase in oil prices will put a halt to the current pace of economic momentum we are currently experiencing in major parts of the world,” said Ishaq Siddiqi, Market Strategist at ETX Capital.
“It’s plausible that Brent oil prices could be over $120 per barrel in the coming days – and, if oil prices spike even higher [above $130 per barrel], it wouldn’t be out of the question for the Federal Reserve to hold off on tapering stimulus measures this year.”
BoE’s Carney does not rule out QE
Bank of England Governor Mark Carney on Wednesday said the policymakers would add stimulus if investor expectations for higher interest rates rose too far and trampled recovery.
In his first speech since taking over from Mervyn King, Carney reiterated his plan to keep interest rates at record lows until a 7% unemployment rate is achieved.
He was optimistic about the UK's recovery but explained that the option of further stimulus remained part of the "forward guidance" announced earlier this month.
Carney focused his remarks on unemployment, alluding to inflation concerns.
“This announcement highlights the BoE’s proclivity to explore methods of stimulus other than QE [quantitative easing],” Barclays said. “Although QE is still part of the BoE’s toolkit, it can no longer be presumed to be the policy of first resort, and instead forms just one component of a 'mixed strategy' for securing the economic recovery.”
The Governor also announced that rules on banks would be relaxed if they meet new capital requirements. Major UK lenders will be able to reduce their required liquid asset holdings by £90bn if the minimum 7% capital requirement is met. His remarks pushed banking stocks higher.
US pending home sales, German confidence
US pending home sales declined 1.3% in July, compared to a 0.4% fall in June, a report from the National Association of Realtors revealed.
Economists had predicted no change in the data which signalled a slowing momentum in the housing market amid rising mortgage rates.
Separately, German consumer confidence eased slightly from a six year high heading into September, according GfK figures.
The GfK Consumer Confidence Survey’s forward-looking sentiment indicator fell to 6.9 going into September from 7 in the previous month. It was the highest level since before the global financial crisis and undercut forecasts for the reading to hold steady.
Accor, Ryanair
Accor declined after reporting first-half profit that fell short of analysts’ expectations.
Ryanair Holdings slumped after UK regulators ordered the budget carrier to cut its stake in Aer Lingus Group to 5% from 30% due to concerns over hurting competition in Ireland.
Polymetal International tumbled as the gold and silver miner posted a first-half net loss of $255m, compared with a $157m profit a year earlier.
Bouygues advanced as the French contractor reported a 10% increase in second-quarter profit which exceeded forecasts.
Meggitt retreated as the British aerospace and defence manufacturer agreed to pay $25m to resolve hundreds of possible export control violations the company uncovered in a review of operations dating back to the mid-1990s.
Vestas Wind Systems rallied as Stoxx Ltd. said the company is among the 12 stocks that will be added to the Stoxx 600 as of September 23rd.
Statoil gained after the Norweigan energy company made its third oil discovery off the coast of Canada in the Flemish Pass basin and Bank of America raised the stock to ‘buy’ from ‘neutral’. |
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| | US Market Report | | Markets rebound after heavy falls despite Syria fears US stocks edged higher on Wednesday morning in New York with the Dow Jones rebounding after hitting a two-month low the day before despite some disappointing figures from the housing market.
Markets have fallen sharply over recent days on concerns over a possible US military intervention in Syria following last week’s alleged chemical weapons attack. The Dow and S&P 500 fell over 1% on Tuesday while the Nasdaq dropped over 2%.
While the Syrian government has so far denied the use of chemical weapons, US Vice President Joe Biden has said there is “no doubt” that it carried out the attack and it must be held accountable.
West Texas crude futures were trading at a two-year high of $112.24 a barrel this morning while Brent crude jumped to a six-month high of $117.34 on fears that the crisis in Syria could disrupt oil supplies from the Middle East. Markets are now concerned about how much further oil has to go and what the knock-on effect of elevated prices on the global economy will be.
“A further rise in oil prices would threaten to turn a lacklustre global recovery into something approaching stagnation,” said Chief Global Economist Julian Jessop from Capital Economics.
“However, the ‘worst-case’ scenario of significant disruption to energy supplies from the region still seems highly unlikely,” he said.
The National Association of Realtors’ pending home sales index for the month of July unexpectedly fell by 1.3% month-on-month in July, worse than the 0.4% decline the month before. The consensus forecast was for no change from June.
Meanwhile, the mortgage bankers’ association weekly mortgage application index fell by 2.5% last week, though this was an improvement from the 4.6% decline the week before.
Shares of digital-video recorder maker TiVo were on the rise after the firm reported a second-quarter net income of $268.9m, compared with a loss of $27m the year before.
Wireless communications firm Avago Technologies rocketed after reporting third-quarter results that beat consensus estimates.
Jewellery retailer Zale was also a high riser after fourth-quarter revenues came in ahead of forecasts.
Tech stocks were performing well this morning with Groupon, Netflix and Apple giving the Nasdaq a lift. |
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| | Broker Tips | | African Barrick Gold: Nomura takes target from 155p to 250p and reiterates its buy recommendation.
Antofagasta: Deutsche Bank cuts target from 1050p to 1035p and retains a hold recommendation. JP Morgan reduces target from 1005p to 975p, while its neutral rating remains unchanged. UBS ups target from 960p to 990p leaving its buy recommendation unaltered.
Astra Zeneca: JP Morgan cuts target from 3400p to 3300p, while staying with its neutral rating.
Berendsen: UBS revises target from 750p to 900p staying with its neutral rating.
Big Yellow Group: Morgan Stanley increases target from 395p to 445p maintaining an equal-weight rating.
British Land: Morgan Stanley ups target from 630p to 670p and reiterates an overweight rating.
Bunzl: Berenberg takes target from 910p to 1050p, but still recommends selling.
Capital & Counties Properties: Morgan Stanley takes target from 340p to 370p and retains an overweight rating.
Chime Communications: Numis raises target to 380p and keeps a buy recommendation.
Derwent London: Morgan Stanley increases target from 2450p to 2900p retaining an overweight rating.
Great Portland Group: Morgan Stanley ups target from 610p to 670p and stays with its overweight rating.
Hammerson: Morgan Stanley moves target from 530p to 540p and leaves its equal-weight rating unchanged.
Intu Properties: Morgan Stanley lowers target from 310p to 300p keeping an underweight rating.
Land Securities: Morgan Stanley takes target from 940p to 1020p reiterating an overweight rating.
London Metric Property: Morgan Stanley shifts target from 102p to 113p, while leaving its underweight rating unaltered.
Monitise: Berenberg initiates with a target of 70p and a buy recommendation.
Pennon Group: JP Morgan moves target from 670p to 745p upgrading to overweight.
Perform Group: Citi increases target from 430p to 550p reiterating a neutral rating.
Severn Trent: JP Morgan ups target from 1520p to 1680p, while staying with its neutral rating.
Shaftesbury: Morgan Stanley raises target from 590p to 680p, while downgrading to equal-weight.
United Utilities: JP Morgan moves target from 720p to 750p and keeps a neutral rating.
UNITE Group: Morgan Stanley ups target from 400p to 490p, while staying with its overweight rating. | | |
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