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| | London Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | | US budget impasse continues to knock investor sentimen Stocks bounced off their lows on Monday but still finished firmly in the red as the US government shutdown extended into its second week with politicians continuing to wrangle over the budget and impending debt ceiling.
The FTSE 100 in London finished 16.6 points lower at 6,437.28, rallying in afternoon trade from the intraday low of around 6,400 reached earlier on.
David Jones, Chief Market Strategist at IG, said: “As was the case last week the 6,400 area proved to be the support again for the FTSE 100, suggesting that, while investors just wish there would be a speedy resolution to this, they are far from being in panic mode at the moment, which tells us that they are just not willing to take on any additional risk while the US remains in stasis.”
Lawmakers failed to reach an agreement on either the budget or the debt-ceiling over the weekend in Washington, heightening fears that the US could run out of the money it needs to pay its debts later this month. House Speaker John Boehner rejected the proposal to raise the debt limit without setting pre-conditions as Republicans continue to demand a delay to the Affordable Care Act.
The Treasury has already said that it will exhaust measures to avoid going over the borrowing limit by October 17th, while the Congressional Budget Office claims that cash reserves will run dry between October 22nd and October 31st.
With both sides determined not to give up ground over President Barack Obama's flagship health-care bill, investors are concerned the debate will go down to the wire.
“It almost feels like the Republicans are spoiling for a fight, as politicians play Russian roulette with the markets, and this appears to be finally filtering through into overall investor sentiment,” sad Senior Market Analyst Michael Hewson from CMC Markets.
“If anything the positioning of the two parties appears to be becoming more polarised and not less, and as a result it seems unlikely that we will see a swift conclusion to the current impasse, which is sure to stoke even more uncertainty, as we close in on the October 17th deadline.”
FTSE 100: M&S weakens after broker comments
High Street department store Marks & Spencer was trading in the red after Credit Suisse retained its 'underperform' rating, saying that full-year forecasts "look demanding" after a weak first-half. The bank said the shares - trading at a 20% premium to the long-term average - look "overbought" after a 30% rise so far this year.
Shares in British luxury brand Burberry were also under heavy selling pressure this morning after its Chief Executive Officer Angela Ahrendts told French newspaper Les Echos that the slowdown in China may be more than temporary; in fact, it could be the new reality.
Precious metals group Fresnillo was among the few risers after UBS raised its rating for the stock from 'neutral' to 'buy', saying the recent weakness provides a buying opportunity. The stock has fallen by 30% since the end of August.
Power systems group Rolls-Royce was also higher after receiving an order from Japan Airlines to deliver its Trent XWB engines for a new fleet of 31 Airbus A350s. Rolls-Royce also announced that it was awarded two contracts worth a combined $496m to support T56 engines for US government aircraft.
Insurance firm Aviva was extending gains after last week selling its US business for $2.6bn, significantly higher than the previously announced sum of $1.8bn. The stock was given a lift by Societe Generale today which raised its target from 400p to 560p.
Sportswear firm Sports Direct came off recent highs, as investor appetite was hit by the ongoing budget saga in the US. The stock hit an all-time high of 729p in early September but has fallen by around 6% since.
FTSE 250: Cranswick falls after first-half update
UK food producer Cranswick fell despite a 15% increase in total sales in the first half, as it warned that pig prices reached a record high during the period. The firm said that the extent of and time-lag involved in recovering these higher input costs, along with the start-up costs of its pastry business, will mean that first-half operating profits will be flat year-on-year.
Petra Diamonds rose after saying it remains on track to meet its production guidance of three million carats of diamonds for fiscal year 2014 following a strong production rate in the fiscal first quarter.
Fashion retailer SuperGroup was registering losses as the wider retail sector took a hit. The stock hit a 52-week high in early September following strong gains so far in 2013 but has been under pressure over the last few weeks. |
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| | UK Event Calendar | | FTSE 100 - Risers
Fresnillo (FRES) 931.50p +1.97%
Aviva (AV.) 422.60p +1.88%
ITV (ITV) 181.80p +1.85%
Aggreko (AGK) 1,468.00p +1.80%
Associated British Foods (ABF) 1,905.00p +1.17%
SABMiller (SAB) 3,038.00p +0.83%
Meggitt (MGGT) 542.50p +0.65%
GlaxoSmithKline (GSK) 1,566.00p +0.64%
Randgold Resources Ltd. (RRS) 4,380.00p +0.57%
WPP (WPP) 1,261.00p +0.56%
FTSE 100 - Fallers
Sports Direct International (SPD) 674.50p -4.33%
easyJet (EZJ) 1,260.00p -2.85%
Marks & Spencer Group (MKS) 480.30p -2.77%
Travis Perkins (TPK) 1,640.00p -2.67%
International Consolidated Airlines Group SA (CDI) (IAG) 336.90p -1.66%
Weir Group (WEIR) 2,237.00p -1.63%
Sage Group (SGE) 324.30p -1.43%
Babcock International Group (BAB) 1,188.00p -1.41%
Croda International (CRDA) 2,640.00p -1.38%
G4S (GFS) 249.30p -1.35%
FTSE 250 - Risers
Daejan Holdings (DJAN) 4,019.00p +3.16%
Alent (ALNT) 334.50p +2.92%
Cable & Wireless Communications (CWC) 40.38p +2.59%
Petra Diamonds Ltd.(DI) (PDL) 119.30p +2.49%
Bank of Georgia Holdings (BGEO) 2,045.00p +2.35%
Moneysupermarket.com Group (MONY) 150.50p +2.03%
Carpetright (CPR) 628.00p +1.87%
Ocado Group (OCDO) 428.70p +1.85%
Evraz (EVR) 125.40p +1.70%
WH Smith (SMWH) 863.50p +1.23%
FTSE 250 - Fallers
Supergroup (SGP) 1,115.00p -5.19%
Cranswick (CWK) 1,096.00p -4.36%
Betfair Group (BET) 971.00p -4.15%
esure Group (ESUR) 227.60p -3.76%
Imagination Technologies Group (IMG) 288.50p -3.64%
EnQuest (ENQ) 121.00p -3.20%
Telecity Group (TCY) 784.00p -2.85%
Galliford Try (GFRD) 1,027.00p -2.56%
Marston's (MARS) 141.70p -2.54%
Menzies(John) (MNZS) 788.50p -2.53% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Stocks mixed as US stalls on debt ceiling deal FTSE 100: -0.26%
DAX: -0.36%
CAC 40: 0.03%
FTSE MIB: 0.66%
IBEX 35: -0.41%
Stoxx 600: -0.23%
European equities were mixed as US lawmakers continued to hold back on a decision to avoid hitting the debt ceiling.
Greece to post budget surplus
Greece’s primary budget surplus will rise to €2.8bn in 2014 or 1.6% of gross domestic product after a surplus of €340m this year, according to a draft 2014 budget.
Alternate Finance Minister Christos Staikouras said the overall deficit will be 2.4% of GDP this year and next.
The budget was submitted to parliament today and comes after the nation was handed €240bn from the euro-area and International Monetary Fund to help eliminate the primary deficit this year.
In Germany, a top aide to Chancellor Angela Merkel said her Christian Democratic Union party could form a coalition with the Green party, according to Bloomberg.
Social Democrats have also signalled their readiness to join Merkel's conservative party.
The CDU and the Bavarian Christian Socialists will hold talks with the leadership of the Greens on October 10th.
It comes two weeks after Merkel failed to win a majority vote in the federal election to secure leadership of Europe’s biggest lender.
Meanwhile, the World Bank has cut its growth forecasts for China to 7.5% this year and 7.7% next year from its prior estimates of 8.3% and 8%, respectively.
While it will meet the Chinese government's 7.5% target, it would represent the slowest pace of expansion in 23 years.
M&S, Burberry
Marks & Spencer fell after Credit Suisse estimated that the UK retailer’s same-store sales dropped 1.5% in the second quarter of its financial year.
Burberry Group declined after the luxury-goods maker’s Chief Executive Officer Angela Ahrendts said a slowdown in Chinese sales may extend.
SAP slid after Reuters reported that the enterprise-software company, along with Cisco Systems and Google, have held talks to buy all or part of BlackBerry.
European Aeronautic Defence & Space Co. advanced after its subsidiary Airbus SAS won its first order from Japan Airlines Co.
Solvay rose after saying it will buy US chemicals maker Chemlogics Group for $1.35bn.
German utilities EON SE and RWE AG rallied following reports the European Commission has proposed scaling back a fixed-price guarantee for renewable energy.
Singapore´s sovereign wealth fund Temasek and Chinese outfit Sinopec are reportedly interested in acquiring a 25% stake in Gas Natural Fenosa, Spanish business daily Expansión reported.
Other asset classes edge higher
Brent crude futures increased $0.082 to $109.550 per barrel on the ICE.
The euro rose 0.09% to the 1.3570 US dollar. |
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| | US Market Report | | Stocks bounce off their lows of the session Dow Jones Industrials: -0.53%
Nasdaq Composite: -0.39%
S&P 500: -0.44%
US stock benchmarks were bouncing off their lows of the day as the government entered its second week of a shutdown after failing to agree on passing a budget bill and raising the nation’s debt limit.
Lawmakers have continued to butt heads over the budget, with Republicans urging President Barack Obama to change his controversial healthcare bill and Democrats refusing to budge.
"The US government shutdown has already extended to four working days and there is a rising risk that it could last for two weeks or more," economists at ABN Amro wrote this morning. The government went into deadlock after missing the budget deadline last Monday and now has until October 17th before reaching its $16.7trn borrowing limit. US House Speaker John Boehner has ruled out increasing the debt ceiling without setting preconditions, prompting fears of a possible default. “If that scenario was to play out, we are potentially looking at credit rating downgrades galore for the US, a huge flight out of US assets: dollar, equities, bonds, and holders of large amounts of US debt, such as China, taking a massive hit,” according to Ishaq Siddiqi, Market Strategist at ETX Capital. “On top of that, US economic recovery at the risk of being derailed; 800,000 federal workers still on unpaid leave and a huge number more expected if an agreement by lawmakers is not reached; businesses also stand to take a significant hit,” Siddiqi went on to explain.
With the release of most economic data on hold due to the government shutdown, investors will turn to company news.
IBM takes it on the chin
Google’s shares dragged after Reuters reported that the tech giant, along with SAP and Cisco Systems, held talks to buy all or part of Blackberry.
Wal-Mart Stores Inc. advanced after the Chief Executive of its Asia division, Scott Price, said the company has transformed its practices and legal compliance in the region and is considering acquisitions in China.
IBM declined after Barclays downgraded its rating on the shares to ‘equal weight’ from ‘overweight’.
Cooper Tire & Rubber Co. fell following reports Apollo Tyres wants to cut its 42.5bn offer to buy the company after US and Chinese workers challenged the takeover.
Toll Brothers slumped after Goldman Sachs reduced its recommendation on the US luxury-home builder to ‘neutral’ from ‘buy’.
The US earnings season will kick-off tomorrow with Alcoa, the country’s biggest aluminum producer, after the close of trading.
Twitter is the object of a fair bit of coverage in today´s financial press, with columnist Jeff Reeves over at Marketwatch.com, giving it a very favourable review.
The worst performing industrial groups at the moment are: Tires -3.96%, Toys -1.58% and recreational products -1.54%.
Crude slips lower
Ten-year US yields were down three basis points to 2.62%.
West Texas Intermediate crude futures dropped 1.31% to $102.50 per barrel on the NYMEX. |
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| | Broker Tips | | Abcam: Investec raises target from 504p to 552p and retains a buy recommendation.
Britvic: Nomura raises target from 630p to 680p maintaining its buy recommendation.
Cranswick: Panmure Gordon reduces target from 1200p to 1140p and maintains a hold recommendation.
First Group: Jefferies cuts target from 150p to 130p and retains a hold recommendation.
Fusionex International: Panmure Gordon takes target from 344p to 362p and reiterates a buy recommendation.
Hochschild Mining: Liberum Capital lowers target from 219p to 174p and keeps its hold recommendation.
ITV: Credit Suisse ups target from 220p to 250p and maintains an outperform rating.
Ladbrokers: Bank of America reduces target from 235p to 170p and downgrades to neutral.
Tate & Lyle: Citi cuts target from 1000p to 900p, while staying with its buy recommendation.
William Hill: Bank of America ups target from 450p to 500p upgrading to buy. | | |
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