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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: Footsie continues orderly retreat The ongoing debt-ceiling debate saw the Footsie slip moderately lower on Wednesday, with the nomination of arch-dove Janet Yellen to the Chair of the US Federal Reserve doing little to assuage market worries.
London's benchmark FTSE 100 index ended Wednesday's session at 6,337.91, a level not seen since July 3rd when it closed at 6,229.87.
From a technical point of view the top-flight index today probed the bottom part of a downwards-sloping price channel. Nevertheless, trading volumes were light and it had still to move convincingly below its 200-day moving average, although downside risks remained – and could intensify - so long as the debt stand-off continues.
Alastair McCaig, Market Analyst at IG, said of the price action: "Confidence that the US will get its act together is slowly turning into fear, and the chances of the FTSE seeing a 6,200 handle in the coming days are increasingly likely."
In its Global Financial Stability report, released on Wednesday afternoon, the International Monetary Fund (IMF) said that the primary challenge for policymakers was to manage the current side effects — and the eventual withdrawal — of easy money policies such as low interest rates and bond buying by the US central bank – the Federal Reserve.
Spain´s Ibex 35 outperformed the rest of the Continent after the country´s Treasury managed to get off a €4bn issue of 31-year bonds. The sindicated sale saw strong demand from overseas investors, who took almost two-thirds of the same.
Ahead on Wednesday evening lay the release of the minutes of the US Federal Open Market Commitee´s (FOMC) last meeting. They were expected to shed further light on the Fed's shock decision to maintain its $85bn per month in bond purchases until seeing further signs of economic recovery.
UK data fails to impress
Domestic economic data provided some downwards pressure on markets after industrial production unexpectedly declined by 1.1% in August, its biggest fall since September 2012. This was worse than the revised 0.1% expansion in July and well below than the 0.4% increase expected.
Manufacturing production meanwhile slipped by 1.2%, missing the consensus forecast for 0.4% growth.
"August's weak industrial production and trade figures signal that gross domestic product (GDP) growth in the third quarter might not be quite as strong as the business surveys have suggested," said UK Economic Samuel Tombs from Capital Economics.
Nevertheless, he pointed out that these falls do not reverse all of the rise in production seen in the previous two months. "Indeed, industrial production is still on track to make a small positive contribution to GDP growth in third quarter."
ONS also cautioned not to read too much into the dip, given similar falls in August of 2012 and 2011.
Today´s August non-EU trade figures raised concerns at Barclays Research about the competitiveness of UK exports and their ability to penetrate new markets.
Impasse continues Stateside
There were some, albeit small, developments on the debate over the debt ceiling overnight after President Barack Obama said he was open to a short-term deal to raise the debt ceiling and reopen the government but only if it is not attached to conditions.
He said he was willing to hold budget talks with the Republicans as long as they lift "threats" against the economy and stop demanding concessions in policy in exchange for a deal. "[They] don't get to demand ransom in exchange for doing their jobs," the President said.
According to reports, Senate Democrats were planning a test vote in the coming days over whether to give Obama to authority to raise the debt ceiling in the short - term.
However, House Speaker John Boehner remained defiant, saying that an immediate increase in the debt ceiling without conditions was "unconditional surrender". He said: "There's going to be a negotiation here [...] It's time to have that conversation." |
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| FTSE 100: Vedanta slumps despite strong Q2
Vedanta Resources delivered record oil and gas production and a rise in the output of refined zinc, lead and silver in the second quarter. However, the stock was among the worst performers this morning after reportedly being downgraded by Morgan Stanley to 'underweight'.
Precious metals mining group Fresnillo also fell despite announcing that the temporary suspension of Minera Penmont's explosives permit at Noche Buena has been lifted and operations have restarted. Falling gold and silver prices this morning are likely to have weighed on the stock, with sector peer Randgold also trading in the red.
A number of blue-chip stocks were also falling after going ex-dividend today, including Aviva, Smith & Nephew, Tesco, Travis Perkins, Wolseley and WPP.
Housebuilding stocks performed well after upbeat comments from Goldman Sachs over the outlook for the market, driven in part by the government's mortgage guarantee scheme, 'Help to Buy'. The bank said that the scheme, along with recent economic data, indicates a "rebound in activity". Persimmon was a high riser on the FTSE 100, bouncing from technical support at its 200-day moving average.
Financials were also doing their best to support the index with Standard Chartered, Lloyds, Aberdeen Asset Management and Barclays making gains.
FTSE 250: N Brown falls after first-half results
Online and catalogue retailer N Brown fell after reporting an 8% rise in revenue and 5.9% increase in operating profits in the first half. Adjusted earnings per share however were broadly flat, up just 0.6% at 12.55p.
Pubs owner and ale brewer Marston's was among the best performers after saying that trading in the second half-year has been encouraging, with the heatwave over the summer offsetting poor weather during the first half-year. Numis today upgraded the shares to buy.
UK bakery chain Greggs advanced after seeing the rate of like-for-like sales decline ease in the third quarter, while total sales growth was helped by the opening of new shops.
Housebuilders Barratt Developments and Bovis Homes were sharply higher after Goldman upgraded both stocks to 'buy'. Sector peer Taylor Wimpey meanwhile was labelled as a 'conviction buy'.
FTSE 100 - Risers
Persimmon (PSN) 1,131.00p +5.01%
William Hill (WMH) 402.50p +1.39%
InterContinental Hotels Group (IHG) 1,785.00p +1.25%
SSE (SSE) 1,454.00p +1.11%
National Grid (NG.) 743.50p +1.09%
Aberdeen Asset Management (ADN) 372.90p +1.08%
Smith & Nephew (SN.) 755.50p +1.07%
Marks & Spencer Group (MKS) 468.70p +1.06%
Kingfisher (KGF) 364.80p +1.00%
Pearson (PSON) 1,254.00p +0.89%
FTSE 100 - Fallers
Vedanta Resources (VED) 1,020.00p -4.67%
ARM Holdings (ARM) 945.50p -3.27%
Randgold Resources Ltd. (RRS) 4,295.00p -2.83%
ITV (ITV) 178.90p -2.56%
Sage Group (SGE) 312.90p -2.40%
Capita (CPI) 967.50p -2.32%
Standard Life (SL.) 333.20p -2.32%
Legal & General Group (LGEN) 186.50p -2.20%
Reed Elsevier (REL) 821.50p -2.09%
Burberry Group (BRBY) 1,550.00p -2.08%
FTSE 250 - Risers
Ladbrokes (LAD) 179.80p +6.39%
Taylor Wimpey (TW.) 103.80p +5.17%
St. Modwen Properties (SMP) 328.90p +4.85%
Crest Nicholson Holdings (CRST) 343.50p +4.15%
Bellway (BWY) 1,320.00p +3.94%
Carpetright (CPR) 652.00p +3.66%
Barratt Developments (BDEV) 320.00p +3.59%
Fisher (James) & Sons (FSJ) 1,132.00p +3.57%
Computacenter (CCC) 525.50p +2.84%
Redrow (RDW) 235.80p +2.83%
FTSE 250 - Fallers
Ted Baker (TED) 1,660.00p -5.41%
Imagination Technologies Group (IMG) 262.10p -5.21%
Brown (N.) Group (BWNG) 489.00p -5.14%
Supergroup (SGP) 1,069.00p -3.95%
Dechra Pharmaceuticals (DPH) 687.50p -3.85%
Genus (GNS) 1,321.00p -3.65%
Kazakhmys (KAZ) 246.00p -3.60%
Euromoney Institutional Investor (ERM) 1,046.00p -3.59%
Halma (HLMA) 528.00p -3.39%
Balfour Beatty (BBY) 264.00p -3.23%
FTSE TechMARK - Risers
Ark Therapeutics Group (AKT) 0.37p +15.62%
Antisoma (ASM) 1.53p +10.87%
XP Power Ltd. (DI) (XPP) 1,402.00p +2.94%
Kofax (KFX) 366.50p +1.81%
RM (RM.) 112.00p +1.70%
Torotrak (TRK) 27.00p +0.93%
E2V Technologies (E2V) 142.75p +0.88%
Wolfson Microelectronics (WLF) 153.25p +0.82%
Vislink (VLK) 44.00p +0.57%
FTSE TechMARK - Fallers
Electronic Data Processing (EDP) 67.00p -4.29%
SDL (SDL) 286.00p -2.05%
Sepura (SEPU) 140.75p -1.92%
Skyepharma (SKP) 88.50p -1.67%
BATM Advanced Communications Ltd. (BVC) 16.25p -1.52%
Phoenix IT Group (PNX) 153.00p -1.45%
Anite (AIE) 109.50p -1.35%
Promethean World (PRW) 17.12p -0.72%
Vectura Group (VEC) 110.00p -0.68% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks little changed on Fed, US debt ceiling - Yellen to be nominated Fed Chair
- Debt ceiling talks continue
- Fed releases meeting minutes
- German and UK industrial data released
FTSE 100: -0.55%
DAX: -0.61%
CAC 40: -0.27%
FTSE MIB: 0.97%
IBEX 35: 1.25%
Stoxx 600: -0.65%
European stocks were little changed as Janet Yellen was to be nominated as the new US Federal Reserve Chair and as debt ceiling talks continued.
Obama was due at 15:00 in Washington to to put forward Yellen as the candidate to succeed Ben Bernanke when he steps down next year.
Yellen is the favoured choice among investors as she has supported the central bank's stimulus programme.
"Yellen, the current Vice Chairwoman of the Fed, is believed to be even more dovish than Ben Bernanke, who's term ends on January 31st," said Craig Erlam, Market Analyst at Alpari.
"It's therefore no surprise to see investors respond positively to the news of President Barack Obama's nomination, especially given that he was previously believed to be more in favour of a much more hawkish Lawrence Summers."
The Federal Reserve was also set to release the minutes of last month's policy meeting today.
The meeting minutes will shed further light on the Fed's shock decision to maintain its $85bn per month in bond purchases until seeing further signs of economic recovery.
Yellen's appointment should come as good news for the market following the negativity surrounding the debt ceiling.
The US government shutdown has continued into the second week as Congress continues to wrangle over the federal budget.
The Treasury has until October 17th before reaching the $16.7trn debt ceiling, unless the Treasury takes remedial measures. If the government does not find a resolution by then, the US could theoretically default on its debt, which would send shock waves throughout the rest of the world. In any case, nervousness is expected to increase as the deadline creeps ever closer.
German industrial output rises unexpectedly
German industrial production rose 1.4% in August from July when it fell a revised 1.1%, according to the Economy Ministry in Berlin.
It beat forecasts for an increase of 1%, signalling a further uptick in the recovery of Europe's biggest economy.
In contrast, UK industrial production contracted sharply by 1.1% month-on-month in August, compared to consensus for a rise of 0.4%, the Office for National Statistics said. Manufacturing activity fell by 1.2%, missing economists' predictions for an increase of 0.4%.
Saint-Gobain, Alcatel-Lucent
Cie. De Saint-Gobain fell after Morgan Stanley cut its rating on the European supplier of building materials to 'underweight' from 'equal weight'.
Alcatel-Lucent declined after French Prime Minister Jean-Marc Ayrault said the network-equipment maker's restructuring plans won't be approved without an agreement limiting job cuts.
Royal Bank of Scotland's shares fell after a Bloomberg report said the lender has sent records of chats between a former currency trader and other firms to the UK's Financial Conduct Authority (FCA) to be examined for possible violations.
Taylor Wimpey advanced after Goldman Sachs gave the house builder a 'conviction buy' rating.
PSA Peugeot Citroen rose following news China's Dongfeng Motor Corp. will buy a stake in the European carmaker for 10bn yuan.
Vedanta Resources slumped after saying second-quarter copper output in Zambia fell by 26%.
Other asset classes slide
The euro fell 0.41% to the 1.3518 US dollar.
Brent crude futures were down $1.250 to $108.800 per barrel on the ICE. |
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| | US Market Report | | US close: Stocks sink as ongoing shutdown hits risk appetite - Shutdown continues into second week
- Obama to nominate Yellen as Fed Chair
- IMF cuts global growth outlook
Dow Jones: -1.07%
Nasdaq: -2.00%
S&P 500: -1.23%
US stocks sank sharply on Tuesday as the ongoing government shutdown and nervousness ahead of the start of third-quarter reporting season sparked a steep sell-off.
The International Monetary Fund (IMF) also dampened sentiment after cutting its outlook for global economic growth and warning that a US default could "seriously damage" the world economy.
The Dow Jones Industrial Average fell nearly 159.71 points (or -1.07%) to finish at 14,776.53, while the S&P 500 extended a one-month low to finish down 20.67 (-1.23%) at 1,655.45. The last time the latter ended lower was on September 6th. Meanwhile, a number of internet stocks such as Facebook and Yahoo were registering deep losses, pushing the tech-heavy Nasdaq down 75.54 (-2%) to 3,694.83.
Risk appetite was also being scaled back ahead of the start of US third-quarter reporting season in the US with Alcoa kicking off proceedings with its results after the close. Nevertheless, the aluminium producer edged higher in after-market trade after beating analysts' profit forecasts, as its smelting division returned to profitability and its engineered products business saw profits jump.
Also after the closing bell, stock futures advanced on the back of the news that Obama will nominate well-known dove Janet Yellen to replace Ben Bernanke as the Chairman of the Federal Reserve. Yellen will be the first female at the head of the US central bank and is anticipated argue for a continuation of aggressive monetary easing started by her predecessor.
"This is generally seen as a positive appointment for financial markets as Yellen is widely regarded as even more dovish than Bernanke, which could help prolong the Fed's asset purchases well into next year," said Market Analyst Craig Erlam from Alpari.
Shutdown continues, IMF cuts global outlook
Lawmakers in the US continue to butt heads over the budget debate and the debt ceiling, extending the partial shutdown of the US government into its second week. According to reports, Senate Democrats are planning a test vote in the coming days over whether to give President Barack Obama to authority to raise the debt ceiling.
The US government has until October 17th before it reaches its $16.7bn borrowing limit and risks going into default. The Treasury is expected to run out of cash to pay its bills at some point between October 22nd and October 31st.
The IMF now expects the global economy to grow by 2.9% this year and by 3.6% in 2014, compared with its previous estimates in July for growth of 3.1% and 3.8%, respectively. The forecasts however factor in an assumed short US shutdown and an agreement being made before the October 17th deadline.
"The effects of any failure to repay the debt would be felt right away, leading to potentially major disruptions in financial markets, both in the US and abroad," said IMF Chief Economist Olivier Blanchard at a press conference.
Xerox slumps
Printing group Xerox slumped after the Securities and Exchange Commission said it was looking into the accounting practices of Affiliated Computer Services, a technology outsourcing firm that Xerox purchased in 2010 for $6.5bn.
McKesson jumped following reports the company is in advanced talks with majority shareholder Franz Haniel & Cie GmbH to buy German drug wholesaler Celesio for almost €22 a share.
Talisman advanced after Activist investor Carl Icahn said he has taken a 5.97% stake in the Canadian energy producer.
Amazon gained after winning a court ruling over a $600m CIA cloud-computing contract.
S&P 500 - Risers
Monster Beverage Corp (MNST) $53.59 +3.76%
McKesson Corp. (MCK) $133.72 +3.16%
Xcel Energy Inc. (XEL) $27.58 +1.51%
PG&E Corp. (PCG) $40.65 +1.45%
Wal-Mart Stores Inc. (WMT) $72.90 +1.43%
Duke Energy Corp. (DUK) $67.20 +1.30%
Southern Co. (SO) $41.01 +1.28%
Varian Medical Systems Inc. (VAR) $75.42 +1.15%
Consolidated Edison Inc. (ED) $55.42 +1.15%
Edison International (EIX) $46.51 +1.06%
S&P 500 - Fallers
TripAdvisor Inc. (TRIP) $71.70 -5.47%
Masco Corp. (MAS) $19.40 -5.27%
Alexion Pharmaceuticals Inc. (ALXN) $108.47 -5.26%
Netflix Inc. (NFLX) $302.32 -4.98%
Red Hat Inc. (RHT) $43.30 -4.73%
Biogen Idec Inc. (BIIB) $225.50 -4.69%
Electronic Arts Inc. (EA) $24.07 -4.67%
Tesoro Corp. (TSO) $41.65 -4.34%
Priceline.Com Inc. (PCLN) $998.13 -4.18%
Citrix Systems Inc. (CTXS) $67.61 -4.03%
Dow Jones I.A - Risers
Wal-Mart Stores Inc. (WMT) $72.90 +1.43%
Procter & Gamble Co. (PG) $76.33 +0.90%
Coca-Cola Co. (KO) $37.28 +0.62%
Dow Jones I.A - Fallers
Verizon Communications Inc. (VZ) $46.05 -2.62%
AT&T Inc. (T) $33.11 -2.62%
JP Morgan Chase & Co. (JPM) $50.87 -1.85%
International Business Machines Corp. (IBM) $178.72 -1.81%
E.I. du Pont de Nemours and Co. (DD) $57.07 -1.79%
Intel Corp. (INTC) $22.48 -1.53%
Pfizer Inc. (PFE) $28.24 -1.33%
Travelers Company Inc. (TRV) $82.99 -1.31%
3M Co. (MMM) $117.16 -1.29%
United Technologies Corp. (UTX) $102.76 -1.22%
Nasdaq 100 - Risers
Monster Beverage Corp (MNST) $53.59 +3.76%
Catamaran Corp (CTRX) $46.96 +0.47%
Verisk Analytics Inc. (VRSK) $64.94 +0.43%
Intuitive Surgical Inc. (ISRG) $381.23 +0.06%
Nasdaq 100 - Fallers
Facebook Inc. (FB) $47.14 -6.68%
Baidu Inc. (BIDU) $148.75 -5.58%
Alexion Pharmaceuticals Inc. (ALXN) $108.47 -5.26%
Netflix Inc. (NFLX) $302.32 -4.98%
Biogen Idec Inc. (BIIB) $225.50 -4.69%
Tesla Motors Inc (TSLA) $174.73 -4.56%
Vertex Pharmaceuticals Inc. (VRTX) $72.22 -4.32%
Priceline.Com Inc. (PCLN) $998.13 -4.18%
Citrix Systems Inc. (CTXS) $67.61 -4.03%
Gilead Sciences Inc. (GILD) $59.38 -3.87% |
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| | Broker Tips | | Broker tips: Housebuilders, M&S, BSkyB, Greggs As part of an upbeat review of the UK housing market, Goldman Sachs has added Taylor Wimpey to its 'conviction buy' list and upgraded its ratings for Bovis Homes and Barratt Developments from 'neutral' to 'buy'.
"Partly stimulated by the Help To Buy shared equity scheme, lead indicators such as UK mortgage approvals and RICS survey data strongly indicate a rebound in activity. Moreover, forward sales for UK housebuilders are currently tracking up around 50%, further supporting our view of a meaningful transactions recovery from 2014 onwards from depressed levels," the US bank said.
Nomura has retained its 'buy' rating for High Street group Marks & Spencer (M&S), saying that while the hot summer weather and promotions are likely to have been unhelpful in the second quarter, there is little to suggest it is an underlying problem.
"We are bullish on UK retail, with M&S LFLs highly correlated to consumer confidence, which has been rising sharply in recent months. We also believe M&S is substantially under-earning in margin terms with GM gross margins 51% versus 57–60% for peers. The current strategy to improve product availability and reduce markdown issues in our opinion will significantly narrow this gap, and we believe the division has a credible management team in place to execute on the strategy."
Investec has downgraded its view on pay-TV and broadband group British Sky Broadcasting (BSkyB) from 'hold' to 'reduce' ahead of the company's trading update next week, saying it sees modest downside to current prices.
"While Sky looks a safe haven given current US government issues, micro based competitive dynamics are tough, evidenced by fiscal 1Q BT Sport launch activity (higher Sky costs/lower KPI growth) - we see limited positive catalysts for 1Q or even this year given new Premier League costs and incremental VOD investment."
Canaccord Genuity has retained its 'sell' rating and 330p target for bakery chain Greggs, saying that while the third quarter saw some improvement its underlying investment case remains unchanged.
"Profits will continue to come under pressure over the next two to three years as the group invests in refurbishments and strategically repositions the business towards a 'food-on-the-go' model. This does not come without execution risk alongside the shift of the model into a sub-sector that is probably one of the most competitive in the UK retail landscape." | | |
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