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Sep 19, 2013

Evening Euro Markets Bulletin

 
ADVFN III Evening Euro Markets Bulletin
Daily world financial news Thursday, 19 September 2013 18:18:45
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London close: Strong finish for UK markets after Fed decision

After a strong day's trading at around 90 points above the opening bell, the FTSE eased somewhat lower in late trading to close at 6,625.39, 66.57 points (1.01 per cent) above yesterday's finish.

The surge came after the Federal Reserve surprised market participants with its decision to maintain its bond-buying strategy on the back of softer growth.

Acting as a modest counter-balance, data showed that UK retail sales growth suffered a slowdown in August following a particularly strong July.

Worth noting nevertheless, economists at UBS raised their forecasts for GDP growth in the UK to 1.5% for 2013 (from 1.1%) and to 2.3% in 2014 (from 1.8%) previously.

Back across the Atlantic, initial weekly US unemployment claims rose by 17,000 to 309,000 in the week ended on September 7th (Consensus: 330,000).

The Federal Reserve bank of Philadelphia's monthly manufacturing index improved to 22.3 points from 9.3 in August [Consensus: 10.3].

Federal Reserve holds bond-buying at $85bn a month

Following its two-day policy meeting, the Fed announced it had decided to stick with its approach of buying $85bn of debt a month, but said it could still potentially scale back this sum by the end of the year.

In its report, the Fed said that while household spending and business fixed investment has advanced, and the housing sector has been strengthening, mortgage rates have risen further and fiscal policy is "restraining economic growth".

As such, and as a part of its goal "to foster maximum employment and price stability", it has "decided to await more evidence that progress will be sustained before adjusting the pace of its purchases".

UK manufacturing recovery continued in September, CBI says

The recovery in the UK's manufacturing sector continued in September, according to the results of the Confederation of British Industry's [CBI] latest industrial trends survey.

At +9.0 the totals orders index is now at its highest since the start of the financial crisis, versus a reading of 0.0 for the month before and an expected print of +2.0.

Commenting on the survey Stephen Gifford, CBI Director of Economics, pointed out the fact that: "Firms are more upbeat about growth prospects in the coming quarter than at any time since 1995."

UK August retail sales suffer in comparison to strong July

UK retail sales growth suffered a slowdown in August after July proved a particularly strong month.

Customers reined in their spending, particularly on food items, causing volumes to drop 0.9% month-on-month, falling short of expectations for a 0.4% rise. Food sales alone declined 2.7% month-on-month. Annually, the rate of growth slowed to 2.1%, versus forecasts for a gain of 3.3%.


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FTSE 100: Miners track metal prices higher

Mining stocks were the biggest risers on Thursday as the price of precious metals jumped. Randgold Resources, Fresnillo, Anglo American and Antofagasta were among the miners who gained on an increase in commodity values.

Aberdeen Asset Management was rebounding today after yesterday suffering a target cut from Morgan Stanley.

Regulatory price increases have allowed water and sewage group United Utilities to raise revenues and profits in the first half of the year, prompting the stock to rise. The company said it anticipated underlying operating profits would be moderately higher than the first half of last year in the six months to the end of September due to tight control of costs.

Vodafone was one of just small handful of fallers, which commentators were attributing to recent director sales (some post exercise).

Supermarket chain Tesco was down after Nomura cut its rating from 'buy' to 'neutral' and reduced its target to 400p from 430p.

FTSE 250: African Barrick Gold rises on appointment of CFO

African Barrick Gold led the risers on the news it has appointed a new Chief Financial Officer, Andrew Wray, who originally joined the company as Head of Corporate Development and Investor Relations in 2010. He will retain his existing responsibilities in addition to those of his new role. Jaco Maritz, who assumed the role of Acting Chief Financial Officer earlier this year, will revert to his original position of Vice President of Finance.

On the top tier, mining stocks were the biggest risers as precious metal prices jumped. Making the strongest gains were Polymetal, Lonmin, and Hochschild.

FTSE 100 - Risers
Randgold Resources Ltd. (RRS) 4,841.00p +8.11%
Aberdeen Asset Management (ADN) 390.80p +6.40%
Fresnillo (FRES) 1,069.00p +6.05%
Petrofac Ltd. (PFC) 1,412.00p +4.67%
Anglo American (AAL) 1,635.00p +3.65%
Schroders (SDR) 2,608.00p +3.57%
SABMiller (SAB) 3,303.50p +3.56%
Tullow Oil (TLW) 1,080.00p +3.55%
Unilever (ULVR) 2,588.00p +3.31%
Standard Chartered (STAN) 1,564.00p +3.30%

FTSE 100 - Fallers
Johnson Matthey (JMAT) 2,852.00p -1.45%
easyJet (EZJ) 1,294.00p -1.22%
G4S (GFS) 250.00p -0.99%
Rexam (REX) 491.60p -0.79%
Vodafone Group (VOD) 209.75p -0.76%
William Hill (WMH) 419.20p -0.66%
GlaxoSmithKline (GSK) 1,576.00p -0.57%
Next (NXT) 5,115.00p -0.49%
BT Group (BT.A) 341.30p -0.44%
Smiths Group (SMIN) 1,406.00p -0.42%

FTSE 250 - Risers
African Barrick Gold (ABG) 156.70p +15.39%
Polymetal International (POLY) 705.50p +7.87%
Lonmin (LMI) 348.30p +5.45%
Ashmore Group (ASHM) 402.20p +5.32%
Ocado Group (OCDO) 420.00p +4.14%
Jupiter Fund Management (JUP) 382.50p +3.60%
JPMorgan Indian Inv Trust (JII) 328.30p +3.56%
Hochschild Mining (HOC) 212.80p +3.10%
Barratt Developments (BDEV) 335.00p +2.92%
Genesis Emerging Markets Fund Ltd. (GSS) 540.00p +2.76%

FTSE 250 - Fallers
Rank Group (RNK) 159.00p -3.87%
Menzies(John) (MNZS) 774.00p -3.85%
Computacenter (CCC) 524.50p -3.76%
Euromoney Institutional Investor (ERM) 1,113.00p -3.64%
BBA Aviation (BBA) 309.80p -3.19%
Daejan Holdings (DJAN) 3,836.00p -3.08%
Fidessa Group (FDSA) 2,100.00p -3.05%
National Express Group (NEX) 257.20p -3.02%
Xaar (XAR) 772.00p -2.77%
Beazley (BEZ) 214.90p -2.50%

FTSE TechMARK - Risers
Ark Therapeutics Group (AKT) 0.44p +4.76%
Skyepharma (SKP) 84.88p +4.14%
Vislink (VLK) 48.50p +3.74%
BATM Advanced Communications Ltd. (BVC) 16.25p +3.17%
Promethean World (PRW) 17.50p +2.19%
Gresham Computing (GHT) 138.50p +1.28%
Filtronic (FTC) 63.75p +0.79%
Ricardo (RCDO) 544.50p +0.65%
IShares Euro Gov Bond 7-10YR UCITS ETF (IEGM) € 177.34 +0.60%
Oxford Biomedica (OXB) 2.60p +0.58%

FTSE TechMARK - Fallers
RM (RM.) 108.00p -5.47%
CML Microsystems (CML) 530.00p -2.03%
Puricore (PURI) 40.00p -1.23%
E2V Technologies (E2V) 137.50p -0.90%
Innovation Group (TIG) 29.75p -0.83%
Wolfson Microelectronics (WLF) 178.75p -0.83%
NCC Group (NCC) 160.00p -0.78%
Sepura (SEPU) 151.00p -0.49%
Microgen (MCGN) 127.00p -0.49%
Torotrak (TRK) 27.38p -0.45%

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Europe close: Stocks rise after Fed decision, US data

- Traders welcome Fed's QE decision
- US existing home sales rise
- US unemployment claims increase
- ECB fears banking reviews will deter investors

FTSE 100: 1.02%
DAX: 0.51%
CAC 40: 0.63%
FTSE MIB: 1.16%
IBEX 35: 0.69%
Stoxx 600: 0.47%

European equities extended gains Thursday as investors welcomed the Federal Reserve's surprise announcement that it would maintain monetary stimulus.

The central bank's Federal Open Market Committee (FOMC) said it keep up its $85bn of monthly asset purchases until it sees more evidence of recovery.

"Conditions in the job market today are still far from what all of us would like to see," Fed Chairman Ben Bernanke said at a press conference in Washington after European markets closed Wednesday.

Economists had expected the Fed to reveal a tapering of between $10bn to $15bn per month. Bernanke first indicated a trimming of the bond buying programme this year in May.

ETX Capital Market Strategist Ishaq Siddqi predicts the Fed will announce a of trimming its bond buying programme at the end of the year.

"Bernanke had his chance to fire the first round but held back," he said. "His reasons appear to be valid; there's going to be a big fiscal showdown in US Congress over the new budget to lift the debt ceiling. That said, Bernanke is on his way out with a new Fed president replacing him at the start of 2014.

"Given that market participants were prepared for tapering and that logically, it would have been sensible for Bernanke to start the taper ball rolling, I feel the Fed failed to seize on the opportunity to send the market a strong message by withdrawing its favourite drug.

"Risk sentiment may have got a nice kick up after the Fed meeting but the momentum behind this rally is certainly not credible, just like the Fed's reputation at the moment."

Also in the US, a report on existing home sales showed an increased annualised rate of 5.8m in August from 5.39m the month earlier, trouncing the consensus for an annualised rate of 5.25m.

The Federal Reserve Bank of Philadelphia's monthly manufacturing index improved to 22.3 points from 9.3 in August, beating expectations for a reading of 10.3.

Initial weekly US unemployment claims rose by 17,000 to 309,000 in the week ended September 8th, compared to the previous week's 294,000 and economists' estimates of 330,000.

The country's current account deficit improved to -$98.9bn in the second quarter, from -$104.9bn in previous three months. Economists had expected -$97.0bn.

In the UK, the Confederation of British Industry's total orders index for UK manufacturing in September rose to +9.0, from 0.0 the month before (Consensus: +2).

As an aside, economists at UBS raised their forecasts for gross domestic product growth in the UK to 1.5% for 2013 from 1.1% and to 2.3% in 2014 from 1.8% previously.

UK retail sales grew by 2.1% year-on-year in August, versus forecasts for a gain of 3.3%, another report showed.

ECB fears bank review will scare investors

The European Central Bank has voiced fears that investors might be scared way by its reviews of banks next year when it takes over supervision of all euro-area lenders.

The ECB will conduct a risk review, analyse banks' balance sheets and implement stress tests in collaboration with the London-based European Banking Authority.

The central bank is trying to avoid releasing conflicting numbers at different times, particularly for banks that are financially unstable, at risk of deterring investors.

ECB Executive Board member Peter Praet and Governing Council member Ewald Nowotny said two companies must avoid giving different estimates of how much extra capital banks will need to raise.

Meanwhile, the Swiss National Bank said its cap on the franc remains "very, very important" for the country's economic growth despite signs of recovery in Europe.

The SNB has kept its ceiling on the franc at 1.20 per euro. The central bank set the cap in September 2011, citing the risk of deflation and a recession after investors concerned about the region's sovereign debt crisis pushed the franc close to parity with the euro.

"The global recovery is very slow," Swiss National Bank President Thomas Jordan told Swiss Radio SRF in an interview after the Zurich-based central bank's quarterly policy review on Thursday. "The risks may have receded, but they've not disappeared."

Miners gain on rising commodities

Randgold Resources and Fresnillo advanced as the price of gold and silver rose.

Petrofac jumped after announcing its consortium won a contract for works on KLPE's integrated petrochemicals complex and infrastructure project in Kazakhstan.

Asos surged as Jefferies International issued a 'buy' rating after the online fashion retailer beat fourth quarter forecasts.

ThyssenKrupp gained after Steinbrueck, who leads the opposition party Social Democrats, said it was "imperative" to prevent a break-up of the German steelmaker.

Havas declined after Barclays downgraded the French advertising company to 'equal weight' from 'overweight'.

Euro rises, oil falls

The euro bounced up 0.11% to the 1.3536 US dollar.

Brent crude futures fell $0.600 to $109.940 per barrel.


This major London estate agent is listing on the LSE.

Your free report on the Foxtons IPO includes:

  • IPO parameters (price range/market cap etc)
  • Full breakdown of dates, including grey-market period.
  • Performance of peers and recent similar IPOs.

Click here for your free Foxtons IPO report

Losses can exceed deposits.


US Market Report

US close: Stocks leap on surprise Fed decision

US stock markets closed significantly higher on Wednesday after the Fed surprised with its decision to maintain its bond-buying strategy on the back of softer growth.

Following its two-day Committee meeting, the Fed announced it had decided to stick with its approach of buying $85bn of debt a month, but said it could still potentially scale this sum back by the end of the year.

In its report, the Fed said that while household spending and business fixed investment has advanced, and the housing sector has been strengthening, mortgage rates have risen further and fiscal policy is "restraining economic growth".

As such, as part of its goal "to foster maximum employment and price stability", it has "decided to await more evidence that progress will be sustained before adjusting the pace of its purchases".

The statement continued: "Accordingly, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40bn per month and longer-term Treasury securities at a pace of $45bn per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction."

The Fed believes this strategy should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. The expectation is that this in turn should "promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate".

Chairman Ben Bernanke also added that the Fed currently has no plans to increase short-term interest rates.

The news prompted the S&P 500 to rise to a record intraday high of 1,729.44, while the Dow Jones hit its own intraday record of 15,709.58, and ended up at a record 15,676.94.

In other news, J.P Morgan Chase is reportedly set to face a fine in excess of $900m in relation to last year's trading debacle. The fine would be imposed by the Financial Conduct Authority, the Securities and Exchange Commission, Office of the Comptroller of the Currency, and the Federal Reserve.

Oracle shares took a hit after the company said it expects second quarter revenue growth of between -1% and +2%, compared to expectations of +3%.

Other Markets

Crude oil ended the session up 0.31% at $108.41 a barrel, while gold closed up 4.19% at $1,307.60.

Investors embarked on a dollar sell-off following the surprise Fed decision, taking the dollar index, which measures the US dollar against a basket of six rivals, to 80.081, its lowest level in seven months. On Tuesday the index traded at 81.167.



S&P 500 - Risers
Adobe Systems Inc. (ADBE) $52.58 +9.22%
Newmont Mining Corp. (NEM) $30.87 +8.24%
D. R. Horton Inc. (DHI) $21.33 +6.92%
Lennar Corp. Class A (LEN) $37.33 +6.54%
Aon plc (AON) $73.95 +5.63%
PulteGroup Inc. (PHM) $17.93 +5.47%
HCP Inc. (HCP) $43.95 +5.24%
Salesforce.Com Inc. (CRM) $52.49 +5.19%
FedEx Corp. (FDX) $116.25 +5.03%
Boston Properties Inc. (BXP) $110.89 +4.91%

S&P 500 - Fallers
Charles Schwab Corp. (SCHW) $21.36 -5.65%
Express Scripts Holding Co (ESRX) $62.89 -4.64%
WellPoint Inc. (WLP) $84.39 -4.40%
Sears Holdings Corp. (SHLD) $59.62 -3.89%
CIGNA Corp. (CI) $81.25 -2.95%
E*TRADE Financial Corp. (ETFC) $16.98 -2.86%
Electronic Arts Inc. (EA) $26.86 -2.68%
Humana Inc. (HUM) $96.95 -2.66%
MetLife Inc. (MET) $48.63 -2.51%
Lincoln National Corp. (LNC) $43.82 -2.47%

Dow Jones I.A - Risers
Alcoa Inc. (AA) $8.56 +3.57%
Home Depot Inc. (HD) $77.37 +2.07%
Coca-Cola Co. (KO) $39.59 +2.06%
Cisco Systems Inc. (CSCO) $24.80 +1.74%
Wal-Mart Stores Inc. (WMT) $76.42 +1.69%
General Electric Co. (GE) $24.86 +1.68%
Pfizer Inc. (PFE) $29.04 +1.40%
E.I. du Pont de Nemours and Co. (DD) $60.44 +1.38%
Travelers Company Inc. (TRV) $85.91 +1.23%
Chevron Corp. (CVX) $125.82 +1.19%

Dow Jones I.A - Fallers
Unitedhealth Group Inc. (UNH) $73.04 -1.71%

Nasdaq 100 - Risers
Adobe Systems Inc. (ADBE) $52.58 +9.22%
Randgold Resources Ltd. Ads (GOLD) $79.19 +7.60%
Regeneron Pharmaceuticals Inc. (REGN) $309.17 +4.23%
Dollar Tree Inc (DLTR) $57.82 +3.56%
Autodesk Inc. (ADSK) $40.62 +3.33%
Cognizant Technology Solutions Corp. (CTSH) $83.59 +3.07%
Expeditors International Of Washington Inc. (EXPD) $45.23 +3.05%
Biogen Idec Inc. (BIIB) $246.35 +2.62%
Amazon.Com Inc. (AMZN) $312.03 +2.59%
Priceline.Com Inc. (PCLN) $995.09 +2.56%

Nasdaq 100 - Fallers
Catamaran Corp (CTRX) $50.82 -8.20%
Express Scripts Holding Co (ESRX) $62.89 -4.64%
Sears Holdings Corp. (SHLD) $59.62 -3.89%
Western Digital Corp. (WDC) $64.28 -1.24%
Vertex Pharmaceuticals Inc. (VRTX) $77.11 -1.18%
Check Point Software Technologies Ltd. (CHKP) $58.05 -0.84%
Xilinx Inc. (XLNX) $47.69 -0.64%
Henry Schein Inc. (HSIC) $105.20 -0.41%
Comcast Corp. (CMCSA) $44.27 -0.40%
Intuitive Surgical Inc. (ISRG) $372.50 -0.39%


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Broker Tips

Broker tips: Asos, Sinclair, Booker

Online fashion retailer Asos impressed investors on Thursday as it beat fourth quarter forecasts to wrap up the year in style.

The AIM-listed company lifted retail sales 47% to £208m in the fourth quarter to produce a 40% increase to £754m for the full year, supported by rapid growth in Europe and the US.

Jefferies International recommended a 'buy' rating and a target of 6,200p following the report.

"The trading update today demonstrated robust revenue growth, +46.4% for the fourth quarter, +33% for the first half – ahead of consensus expectations for full year (FY) 2013 at +37%. The 1:5:5 aspiration very much in play, drives consensus FY15 earnings per share to 86p," the broker said.

Sinclair IS Pharma was issued a 'buy' rating by Jefferies International after reporting a jump in pre-tax profit for the full year 2013.

Adjusted profit before tax and exceptional items soared 69% to £4.3m as sales rose 7.7% to £55.4m, driven by aesthetic non-surgical facelift products.

"Strong growth of aesthetic brands and partners' revenues from Asia/MENA [Middle East and North Africa] offset the challenging European Union environment, which together with substantial operating leverage drives adjusted earnings before interest, tax, depreciation and amortisation [EBITDA] 15% ahead of our estimate," Jefferies said, issuing a target of 48p.

However, the broker said the company's outlook was "vague" with management saying they expect European Union growth to accelerate and international operations and aesthetics to be the primary top-line drivers. "No specific like-for-like revenue or profitability targets are outlined in the press release," the broker added.

Booker Group's shares rose as Investec reiterated a 'buy' rating for the UK food wholesale operator as it reported its interim results.

Total sales in the 24 weeks to September 13th, including cash-and-carry wholesaler Makro, rose by 16.5% on the same period last year, as the warm summer weather boosted customer numbers.

"We expect continued progress from the core Booker business, and are looking for around 8% profit before tax (PBT) progress in the first half – i.e. PBT of £55m," Investec said. "This implies earnings per share of 2.55p after accommodating the extra shares issued for Makro."

 

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