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| | London Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | | London close: Stocks at one-month low on looming US shutdown Stocks were firmly lower on Monday as risk appetite was reduced in the face of a looming partial shutdown of the US government after a weekend of no progress in Washington.
Political instability in Italy also dampened the mood today as well as disappointing economic data from China, with falls in the heavyweight mining sector in London dragging the FTSE 100 to its lowest level in a month.
The index finished 50.44 points lower at 6,562.22 it worst level since August 30th when it ended the session at 6,412.93.
US shutdown in focus
US politicians have so far failed to agree a new spending bill and have only until midnight to reach an agreement that would allow them avert a partial government shutdown. The House of Representatives yesterday voted to tie-in a delay of the 'Obamacare' health act to its Budget 2014 proposal. It is now up to the Senate to approve the bill later today; however, the Democrats have already stated that they would not agree to such a measure.
"Markets do seem resigned to the fact that we will get a short-term shutdown in the US government, but one has to hope that once and if that happens, wiser heads will prevail and both parties in this political tug-of-war will see sense and at least pass a temporary budget," said Senior Market Analyst Michael Hewson from CMC Markets.
Meanwhile without an agreed increase in the debt ceiling, investors are concerned that the US could reach its borrowing limit of $16.7tn by October 17th, by which time the government could run out of cash to fulfil its debt obligations.
Market Strategist Ishaq Siddiqi from ETX Capital said that a potential government shutdown comes at "an extremely fragile time" for the US economy. He said if it becomes a protracted affair, "there's a possibility the US could default which will bring out the rating agencies ready with their knives to chop the sovereign's rating," he said.
Political chaos in Italy
Italy's coalition government looks to be on the verge of collapse as five ministers from Silvio Berlusconi's People of Liberty party (PdL) on Saturday resigned from the alliance formed with Prime Minister Enrico Letta last April.
Though Berlusconi said the ministers walked out due to a government decision to raise sale taxes, Letta labelled the excuse an "enormous lie" implying that the walk out was due to Berlusconi's tax fraud conviction and an October 4th parliament vote that would ban him from holding public office.
Letta is expected to undergo a confidence vote on Wednesday with results uncertain. On the one-hand, some of Berlusconi's own party members are distancing themselves from the resignations, though Letta would need to grab votes from PdL or the far-left wing 5 Star Movement party. |
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| | FTSE 100: Miners sink sharply after Chinese data
Mining stocks declined sharply today after disappointing data from the world's top metals user, China. The HSBC China purchasing managers' index came in at 50.2 in September, significantly below estimates of 51.2 and under last month's reading of 50.1, with HSBC saying that growth is "bottoming out". Fresnillo, Glencore Xstrata, Anglo American, Antofagasta, and Rio Tinto all finished in the red.
Leading the upside was housebuilder Persimmon, bolstered by the news that the second phase of the UK government's 'Help to Buy' is being launched earlier than planned. Upbeat data on house prices and mortgage approvals also helped stocks across the sector higher today, while JPMorgan Cazenove upgraded Persimmon to 'overweight'.
Sectors such as pharmaceuticals and utilities were performing well due to their defensive characteristics. SSE, United Utilities and Centrica edged higher, along with AstraZeneca and Shire. Shire was also being helped by a JPMorgan upgrade to 'overweight'.
Similarly, High Street bookie William Hill was higher after Deutsche Bank lifted its recommendation for the shares to 'buy'.
However, drugs giant GlaxoSmithKline was heading south after revealing that it is selling its thrombosis drug brands and a related factory to South Africa's biggest generic drug maker Aspen Pharmacare for £700m. The company has decided to let go of its Arixtra and Fraxiparine brands after experiencing falling sales.
FTSE 100 - Risers
Persimmon (PSN) 1,086.00p +2.36%
Vedanta Resources (VED) 1,082.00p +0.84%
Centrica (CNA) 369.70p +0.74%
Burberry Group (BRBY) 1,634.00p +0.68%
Shire Plc (SHP) 2,478.00p +0.45%
AstraZeneca (AZN) 3,215.50p +0.45%
SSE (SSE) 1,474.00p +0.41%
easyJet (EZJ) 1,278.00p +0.31%
International Consolidated Airlines Group SA (CDI) (IAG) 338.30p +0.30%
William Hill (WMH) 403.00p +0.25%
FTSE 100 - Fallers
GKN (GKN) 342.00p -2.87%
Fresnillo (FRES) 973.00p -2.70%
BAE Systems (BA.) 454.40p -2.64%
ARM Holdings (ARM) 986.00p -2.38%
Whitbread (WTB) 2,964.00p -2.18%
Aberdeen Asset Management (ADN) 378.60p -2.15%
Glencore Xstrata (GLEN) 336.70p -2.12%
Tullow Oil (TLW) 1,024.00p -2.10%
London Stock Exchange Group (LSE) 1,537.00p -1.85%
BP (BP.) 433.10p -1.81%
FTSE 250 - Risers
Bellway (BWY) 1,315.00p +4.20%
Thomas Cook Group (TCG) 153.40p +4.00%
Keller Group (KLR) 1,039.00p +3.69%
Taylor Wimpey (TW.) 100.40p +3.51%
Computacenter (CCC) 534.50p +3.09%
Redrow (RDW) 233.00p +2.64%
Dignity (DTY) 1,450.00p +2.55%
Bank of Georgia Holdings (BGEO) 1,932.00p +2.33%
Barratt Developments (BDEV) 308.60p +2.15%
Brewin Dolphin Holdings (BRW) 270.70p +2.15%
FTSE 250 - Fallers
Imagination Technologies Group (IMG) 326.00p -3.83%
Greggs (GRG) 423.60p -3.02%
Kazakhmys (KAZ) 266.00p -2.88%
Man Group (EMG) 83.90p -2.72%
Polymetal International (POLY) 654.00p -2.39%
Telecity Group (TCY) 830.00p -2.35%
Premier Oil (PMO) 325.50p -2.34%
QinetiQ Group (QQ.) 191.60p -2.34%
Cobham (COB) 287.30p -2.15%
Centamin (DI) (CEY) 44.42p -2.05% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks fall amid fears over US budget and Italy - US government faces budget deadline
- Chicago PMI increases
- Italy's political woes heighten
- Eurozone inflation rises at slower pace
- UK mortgage approvals climb
FTSE 100: -0.77%
DAX: -0.77%
CAC 40: -1.03%
FTSE MIB: -1.20%
IBEX 35: -0.61%
Stoxx 600: -0.56%
A potential US government shutdown and political turmoil in Italy provided a drag on European equities on Monday.
The US government has until midnight on Monday to reach a deal on a new budget or it will come to a screeching halt. The Senate convenes at 14:00 in Washington.
It would mark the first time in 17 years of a government shutdown, which economists predict would reduce fourth-quarter economic growth by as much as 1.4 percentage points.
Policymakers have been wrangling over whether to extend the current debt-ceiling limit of $16.7tn. Last week Treasury Secretary Jack Lew said the US would hit the ceiling on October 17th unless it was allowed to extend its borrowing limit.
A temporary government shutdown became almost inevitable after the House of Representatives on Sunday refused to pass a budget unless it involved a delay to Barack Obama's signature healthcare reforms.
"We shouldn't be too surprised really that Congress failed to agree on a new budget over the weekend," said Craig Erlam, a market analyst at Alpari.
"As we've seen in the past, the months leading up to the deadline are simply seen as an opportunity for both sides to gain political points, while making a villain out of the opposition. It's only in the final 24 hours that any actual progress tends to be made. We can only hope that this is what we're seeing again."
Also making waves in the US on Wednesday was a report which showed manufacturing rose more than expected. Chicago's purchasing managers´ index (PMI) for the manufacturing sector rose to a seasonally adjusted 55.7 in September from a reading of 53 in August. Economists had pencilled in a reading of 54. A reading above 50 signals expansion.
Italy's political crisis
Woes over political stability in Italy heightened on Monday after centre-right leader Silvio Berlusconi pulled his Il Popolo della Libertà (PDL) party ministers out of the ruling coalition over the weekend.
Berlusconi's move, which comes amid facing expulsion from the Senate due to a conviction for tax fraud, fuelled speculation over the possibility of new elections.
Prime Minister Enrico Letta is now battling for support in parliament to avoid going to the polls. A confidence vote will be held in parliament on Wednesday.
On Monday, Reuters reported that 20 Italian centre-right lawmakers may break with Berlusconi if he tries to bring down the coalition.
"If Silvio doesn't agree to take a step back from what the hawks are proposing, we could have a new moderate group by Wednesday," according to a source.
Eurozone inflation rises
Eurozone inflation increased in September, at the lowest rate since February 2010. The consumer price index (CPI) rose 1.1% year-on-year this month, down from 1.3% in August. A 1.2% increase was forecast.
The decline was driven by energy and food prices. However, core inflation, which excludes food, alcohol and tobacco was also down 1% from 1.1%.
The news could encourage the European Central Bank to cut interest rates again if recovery across the Eurozone stalls.
"September's Eurozone flash CPI figures confirmed that the ECB enjoys plenty of room to loosen monetary policy further," according to Capital Economics.
Miners drop on China data
A gauge of miners fell, including Fresnillo and Rio Tinto, after Chinese manufacturing data missed analysts' estimates.
China's manufacturing gauge rose to 50.2 in September, down from 50.1 in August, according to a Purchasing Managers' Index from HSBC Holdings Plc and Markit Economics. Economists predicted a reading of 51.2. A reading above 50 signals expansion.
House builder Persimmon edged higher after upbeat data from the UK housing market and an upgrade from JPMorgan to 'overweight'.
The Bank of England (BoE) revealed on Monday that mortgage approvals for house purchases came to 62,226 in August, up from 60,914 in July. It was the biggest jump since February 2008 and beat the forecast for 61,500 approvals, signalling further recovery in the housing market.
Telecom Italia advanced amid rumours that Chief Executive Officer Franco Bernabe will resign.
Crop chemicals supplier Syngenta declined after Citigroup downgraded its rating on the shares to 'neutral' from 'buy', citing the impact of lower grain prices.
Stora Enso Oyj slumped as UBS lowered its recommendation on the European paper maker to 'sell' from 'neutral'.
Other asset classes mixed
The euro rose 0.10% to the 1.3536 US dollar.
Brent crude futures fell $0.621 to $107.960 per barrel on the ICE. |
| | 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.
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| | US Market Report | | US open: It's D-day for US budget as government shutdown looms US stocks sank as investors braced for a US government showdown over the budget as the deadline for an agreement loomed.
The US has until midnight to reach a deal on a new spending bill as the government wrangles over whether to extend the current debt-ceiling limit of $16.7tn.
The Senate convenes at 14:00 in Washington.
If an agreement is not made in time, the government will come to a screeching halt. It would be the first government shutdown in about 17 years.
Economists predict a shutdown would reduce fourth-quarter economic growth by as much as 1.4 percentage points, depending on the length of a closure.
On Sunday, the House of Representatives on Sunday refused to pass a budget unless it involved a delay to Barack Obama's signature healthcare reforms, making the prospect of a closure more likely.
“We shouldn’t be too surprised really that Congress failed to agree on a new budget over the weekend,” said Craig Erlam, a market analyst at Alpari.
“As we’ve seen in the past, the months leading up to the deadline are simply seen as an opportunity for both sides to gain political points, while making a villain out of the opposition. It’s only in the final 24 hours that any actual progress tends to be made. We can only hope that this is what we’re seeing again.”
A Bloomberg National poll on Monday showed Americans narrowly blame Republicans for stalling on a budget deal. A CNN/ORC International poll also revealed that 46% would blame congressional Republicans for a shutdown, while 36% would hold President Barack Obama responsible.
In other noteworthy US news, the Chicago manufacturing sector purchasing managers' index (PMI) rose to a seasonally adjusted 55.7 in September from a reading of 53 in August. Economists had pencilled in a reading of 54. A reading above 50 signals expansion in the industry.
Turning to companies, eBay is lower after a US judge refused the online retailer's attempt to dismiss a civil lawsuit over its alleged agreement with Intuit to refrain from recruiting each other's employees.
GlaxoSmithKline dropped after announcing the sale of thrombosis drugs brands to Aspen Pharmacare Holdings for $1.13bn.
Shares in Active Network, which makes software for event management, surged following news it will be acquired by Vista Equity Partners for about $1.05bn.
Achillion Pharmaceuticals tumbled after US regulators decided to keep the firm’s experimental hepatitis C drug on hold due to abnormal liver results.
10-year US Treasuries were down three basis points to the 2.60% mark.
Front month West Texas crude futures were down $1.530 to $101.320 per barrel on the NYMEX. |
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| | Broker Tips | | Broker tips: UK banks, Housebuilders, Countrywide Bank of America Merrill Lynch (BAML) said that the top-line recovery across the European banking sector should be the most striking in the UK, helped by the ongoing improvement in the macro-economic picture.
"Helping explain the preference for the UK banks is the economy recovery underway currently. As we show in the margin. Investors expect the UK economic recovery to continue in 2014, with gross domestic product (GDP) [growth] of 1-2%, house price inflation of 1-5% and loan growth of 1-3%," BAML said. "With our economist forecasting 2.2% UK GDP [growth] and house prices already growing at 5%, the responses [to a survey] suggest that there may be upside to investors macro expectations, which could feed through positively to share prices."
Housebuilding peers Persimmon and Barratt Developments were making gains on Monday morning after JPMorgan Cazenove upgraded its ratings for both stocks to 'overweight'.
"Despite taking what we view as a conservative stance on house price inflation, volume growth and cost inflation, our earnings per share estimates for 2014 and 2015 are around 25% ahead of Bloomberg consensus. We view the recent sell-off as a buying opportunity."
Credit Suisse has reiterated its 'outperform' rating for housebuilder Countrywide, saying that an earlier-than-expected start to 'Help to Buy' should give the company a boost.
"Countrywide's share price has been weak during the past few weeks owing to share placings and uncertainty over a possible change/cancellation of 'Help to Buy' 2. With these removed, we strongly reiterate our 'outperform' rating and 705p price target." | | |
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