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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 to two-week high on hopes over US debt dea Hopes that US lawmakers can lift the debt ceiling and avert a default spurred markets higher on Friday with the FTSE 100 rising to levels not seen in two weeks.
Sentiment was also lifted by the successful stock-market debut of postal group Royal Mail which soared by over a third after attracting a great deal of buying interest. The stock jumped to 455p, up around 38% from the listing price of 330p, fuelling the argument that the shares were underpriced by the government.
The FTSE 100 finished 53.3 points higher at 6,483.79. Since falling to a three-month low earlier in the week, London’s benchmark index has surged over the last two days on hopes of an agreement between US politicians. The last time the index closed higher was on September 27th when it finished the session at 6,512.66.
Indices across Europe registered smaller gains today, though Germany’s DAX 30 in Frankfurt rose 0.45% to an all-time high of 8,724.83.
Wall Street benchmarks also started the day strongly this afternoon, extending gains after an impressive performance on Thursday, despite economic bellwether JPMorgan Chase & Co reporting its first quarterly loss in nearly a decade. The bank booked a third-quarter loss of $380m, the first time it has failed to report a profit since the second quarter of 2004.
Lawmakers look to end political deadlock
House Speaker John Boehner on Thursday afternoon announced a proposal to raise the limit for six weeks without conditions tied to changes in policy. He said he hopes that President Barack Obama would view the "good-faith" move as an attempt to meet him halfway on negotiations over the budget.
Obama and House Republicans failed to come to a deal following a 90-minute meeting late last night, but showed that they were still willing to negotiate. “After a discussion about potential paths forward, no specific determination was made,” the White House said in a statement. “The President looks forward to making continued progress with members on both sides of the aisle.”
While any deal would not automatically re-open the government - lawmakers still need to agree on a new budget - confidence in averting a default has now undeniably increased on the markets.
FTSE 100: Whitbread jumps after broker upgrade
Restaurant and hotels owner Whitbread advanced after Citigroup upgraded the stock to 'buy', saying: "Improved sentiment around the European economies suggests that we could be at the start of a renewed upgrade cycle for European focused hotel names". Whitbread gained strongly on Thursday after one analyst cited the possibility that it could spin off its Costa coffee chain.
Standard Life was a high riser after JPMorgan Cazenove reiterated its positive stance on the stock, reassuring investors about net inflows in the third quarter. Diageo gained after Exane BNP Paribas raised the drinks giant to 'outperform'. Meanwhile, Travis Perkins received a boost today after Liberum Capital raised its target and reiterated its 'buy' rating on the builders' merchant and home improvement retailer.
In contrast, speciality chemicals firm Croda International was a heavy faller after analysts at Liberum Capital downgraded the stock to 'hold'. JP Morgan also lowered its view on the shares today, to 'neutral' from 'overweight'.
Stocks heavily exposed to the US defence markets, such as BAE Systems and Meggitt, were trading in the red after some cautious comments from sector peer Chemring.
Anglo American was performing well after an 11-day strike over job cuts at its platinum division in South Africa came to an end. Mining peer Glencore Xstrata was also higher; however precious metal producers Fresnillo and Randgold finished in the red as gold and silver prices fell.
FTSE 250: Chemring shares plunge on warning
Military equipment manufacturer Chemring sank sharply this morning after saying that its North American business continues to be affected by the US government shutdown and said the full impact was unknown - although it would have a definite impact on October order intake and deliveries in the US Department of Defense.
It has suffered quality and production issues, particularly at Kilgore, and will also suffer from an adverse move in the sterling/dollar exchange rate, reducing operating profits by around £8m.
N Brown was regaining lost ground after falling earlier this week on the back of an unimpressive set of results. The group revealed that first-half profits before tax came in at £45m, below analysts’ forecasts, due to a worse-than-expected margin performance, which offset better like-for-like sales growth.
Howden Joinery was performing well after it received a positive broker rating on the previous day from Goodbody Stockbrokers, which upgraded the stock to 'buy'. |
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| | FTSE 100 - Risers
Travis Perkins (TPK) 1,678.00p +3.26%
Whitbread (WTB) 3,210.00p +3.08%
Glencore Xstrata (GLEN) 335.90p +2.83%
Diageo (DGE) 1,973.00p +2.71%
Shire Plc (SHP) 2,445.00p +2.69%
Standard Life (SL.) 355.50p +2.63%
Aberdeen Asset Management (ADN) 393.40p +2.61%
Anglo American (AAL) 1,512.00p +2.44%
Schroders (SDR) 2,644.00p +2.32%
Amec (AMEC) 1,085.00p +2.26%
FTSE 100 - Fallers
Croda International (CRDA) 2,477.00p -4.80%
BAE Systems (BA.) 436.30p -3.19%
Royal Bank of Scotland Group (RBS) 376.90p -2.08%
Wolseley (WOS) 3,169.00p -1.00%
Meggitt (MGGT) 541.00p -0.92%
Fresnillo (FRES) 927.00p -0.91%
Aggreko (AGK) 1,477.00p -0.87%
Randgold Resources Ltd. (RRS) 4,304.00p -0.74%
Coca-Cola HBC AG (CDI) (CCH) 1,728.00p -0.40%
Pearson (PSON) 1,292.00p -0.39%
FTSE 250 - Risers
Brown (N.) Group (BWNG) 502.00p +5.53%
Howden Joinery Group (HWDN) 308.50p +4.51%
Ferrexpo (FXPO) 183.70p +3.96%
Galliford Try (GFRD) 1,098.00p +3.10%
Ladbrokes (LAD) 190.70p +3.08%
Hays (HAS) 121.60p +2.96%
Redrow (RDW) 248.00p +2.95%
International Personal Finance (IPF) 637.50p +2.91%
Investec (INVP) 420.20p +2.84%
Ophir Energy (OPHR) 316.40p +2.79%
FTSE 250 - Fallers
Chemring Group (CHG) 220.00p -22.64%
Kenmare Resources (KMR) 25.70p -11.65%
Polymetal International (POLY) 559.00p -5.25%
Keller Group (KLR) 1,010.00p -3.81%
Hochschild Mining (HOC) 152.70p -3.78%
Euromoney Institutional Investor (ERM) 1,060.00p -2.75%
Ocado Group (OCDO) 434.90p -2.69%
Alent (ALNT) 338.20p -2.68%
Diploma (DPLM) 615.00p -2.54%
RPC Group (RPC) 453.90p -2.26% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Stocks mixed on talks over debt ceiling increase FTSE 100: 0.88%
DAX: 0.45%
CAC 40: 0.04%
FTSE MIB: 0.24%
IBEX 35: -0.03%
Stoxx 600: 0.42%
European equities ended the week mixed as the US lawmakers continued to work to reach a deal on extending the nation’s borrowing limit and reopening the federal government.
The Obama administration and Republicans met on Friday to discuss a proposal to raise the $16.7trn debt ceiling for the next six weeks to avoid a default that would otherwise come next week.
The Treasury will exhaust its borrowing authority on October 17th and would run out of funds to pay all of its bills sometime between October 22nd and October 31st, according to the Congressional Budget Office.
The government went into partial shutdown on October 1st after failing to approve a budget as lawmakers clashed over Obama’s controversial health care bill.
“While the impact of the shutdown is nowhere near as severe as hitting the debt ceiling would be, the longer it goes on, the more it will weigh on growth in the fourth quarter and therefore damage the recovery,” said Craig Erlam, Market Analyst at Alpari.
Erlam raised questions over the Republicans’ short-term debt ceiling increase proposal, saying it “doesn't appear to include an agreement on the budget which would end the government shutdown”.
European Central Bank President Mario Draghi said yesterday the prolonged US debt stalemate could hurt the global economy.
He also reaffirmed his vow to keep interest rates low, saying the ECB stands ready to cut borrowing costs if market volatility resumes.
“The Governing Council has unanimously agreed to incorporate an easing bias that explicitly provides for further rate reductions, should the volatility in money market conditions return to the levels observed in early summer,” Draghi said at the Economic Club of New York yesterday, according to Bloomberg.
German, UK inflation
German inflation remained unchanged in September, in line with market expectations.
The Federal Statistics Office Destatis said the consumer price index came in at 1.6% last month, the same as in August.
Germany's DAX 30 index closed at an all-time high on Friday, up 0.45% to 8,724.83.
In the UK, economists expect inflation to have slowed in September. They predict next week’s report from the Office for National Statistics to show consumer prices rose 2.6% from a year earlier compared with a rise of 2.7% in August.
Separately, data today showed construction output declined in August by 0.1% from July but was 4% higher than a year ago, driven by a rise in new work.
Royal Mail launches IPO
Royal Mail’s shares jumped as high as 38% to 456p as the UK postal service made its debut on the London Stock Exchange today.
Barclays edged higher after announcing it has signed up to the UK government’s Help to Buy mortgage scheme.
Swedish Match declined after saying earnings at its US cigars and chewing tobacco unit will fall.
A gauge of mining companies including Anglo American and Vedanta Resources gained as copper prices rose for a second day in London.
Geberit fell after Goldman Sachs cut its rating of the Swiss maker of toilets and bathroom-piping systems to ‘sell’ from ‘neutral’.
Danish cancer drug developer Genmab advanced after saying its ofatumumab drug showed a significant reduction in cumulative number of new brain lesions in a multiple sclerosis study.
German utilities EON SE and RWE AG slumped along with a number of sector peers on the Stoxx 600.
Other asset classes mixed
The euro rose 0.26% to the 1.3555 US dollar.
Brent crude futures fell $0.648 to $111.080 per barrel on the ICE. |
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| | US Market Report | | Some analysts cautious on very short-term prospects for equities Dow Jones Industrials: 0.13%
Nasdaq Composite: 0.14%
S&P 500: 0.09%
US equity benchmarks were slightlly in the green on Friday after Republicans proposed a temporary debt ceiling increase to stave off a default.
House Speaker John Boehner yesterday laid out a recommendation to raise the $16.7trn borrowing limit until November 22nd to postpone a default that would otherwise come next week.
“The only downside to this is that the deal doesn't appear to include an agreement on the budget which would end the government shutdown,” said Craig Erlam, Market Analyst at Alpari.
“While the impact of the shutdown is nowhere near as severe as hitting the debt ceiling would be, the longer it goes on, the more it will weigh on growth in the fourth quarter and therefore damage the recovery.”
The Treasury will exhaust its borrowing authority on October 17th and would run out of funds to pay all of its bills sometime between October 22nd and October 31st, according to the Congressional Budget Office.
The government went into partial shutdown on October 1st after failing to approve a budget, as lawmakers clashed over Obama’s controversial health care bill.
Turning to the earnings session, JPMorgan advanced despite the bank reporting its first quarterly loss under Chief Executive Officer Jamie Dimon. The third-quarter loss came to $380m, compared to a profit of $5.71bn a year earlier.
However, its quarterly adjusted pro-forma earnings per share came in at $1.42, versus the $1.30 estimated by the consensus.
Safeway declined after the US grocery-store chain said that identical-store sales will rise as much as 1.9% this year.
US memory chip maker Micron fell despite reporting fiscal fourth-quarter sales that exceeded analysts’ estimates. Wells Fargo & Co. lowered its rating on the shares to ‘underperform’ from ‘market perform’ following the report.
Of interest, some “market chatter” is indicating that Deutsche Bank is warning clients that if a debt deal is not reached by Monday then the S&P 500 could fall to 1,650.
The University of Michigan´s preliminary reading on US consumer confidence slipped in October, to the 75.2 point level from 77.5 in the month before Consensus: 76.0 .
10-yield government yields were down 2 basis points to 2.66%.
West Texas Intermediate crude futures were down 1.24% to $101.77 per barrel on the NYMEX. |
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| | Friday newspaper round-up | | Barratt Developments: Deutsche Bank moves target from 365p to 391p reiterating its buy recommendation.
Bovis Homes Group: Deutsche Bank raises target from 901p to 1001p and keeps a buy recommendation.
Croda International: Liberum Capital downgrades to hold with a target of 2480p.
Diageo: Exane upgrades to outperform with a target of 2033p.
Entertainment One Group: JP Morgan initiates with a target of 274p and an overweight rating.
Hays: JP Morgan ups target from 102p to 118p and reiterates a neutral rating.
Informa: Alphavalue shifts target from 550.50p to 554.40p and upgrades from reduce to add.
InterContinental Hotels Group: Citi reduces target from 2200p to 2050p, while staying with its buy recommendation.
ITV: JP Morgan shifts target from 181p to 189p keeping a neutral rating.
Kofax: Canaccord Genuity ups target from 400p to 425p and maintains a buy recommendation.
Persimmon: Deutsche Bank takes target from 1202p to 1274p maintaining a hold recommendation.
Polar Capital Holdings: Numis upgrades to add with a target of 462p.
Premier Foods: Citi increases target from 80p to 170p, while leaving its neutral rating unaltered.
Reckitt Benckiser: Citi cuts target from 5100p to 5000p, while its buy recommendation is maintained.
Redrow: Deutsche Bank ups target from 258p to 278p reiterating a hold recommendation.
SAB Miller: Deutsche Bank reduces target from 3400p to 3100p and retains its hold recommendation. JP Morgan cuts target from 3520p to 3270p, while its overweight rating remains unchanged.
Smith (WH): Deutsche Bank ups target from 915p to 960p and stays with its buy recommendation. Citi takes target from 900p to 1000p keeping a buy recommendation. Numis raises target from 850p to 975p and retains an add rating. Cantor Fitzgerald raises target from 900p to 950p reiterating a buy recommendation.
Taylor Wimpey: Deutsche Bank increases target from 1503p to 1581p, while its hold recommendation remains unchanged.
Travis Perkins: Liberum Capital moves target from 1890p to 1900p and maintains a buy recommendation.
UBM: Westhouse Securities upgrades to buy with a target of 855p.
Unilever: Citi reduces target from 2900p to 2500p and keeps a neutral rating.
Whitbread: Citi raises target from 2900p to 3570p upgrading from neutral to buy. | | |
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