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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 fall on fears of valuations, global economy - Icahn spooks investors, warns of 'big drop'
- OECD cuts global growth forecasts
- Plosser calls for fixed amount of asset purchases
- easyJet impresses with profit jump
techMARK 2,644.23 -0.34%
FTSE 100 6,698.01 -0.38%
FTSE 250 15,265.60 -0.16%
UK markets finished firmly in the red on Tuesday as concerns about equity valuations and the global economy weighed on investor sentiment.
The FTSE 100 closed 25.45 points lower at 6,698.01, a fall of 0.38%.
Anxiety over the recent run on equity markets dampened stocks on Wall Street last night after activist investor Carl Icahn was reported as saying that a "big drop" could be around the corner. According to Reuters, Icahn said he was "very cautious on equities today" given that valuations are rich and earnings are bolstered by low borrowing costs rather than management's efforts to improve results.
"Confidence is fickle, and markets found that precious commodity in short supply […]. Traders appeared flustered by US city sage Carl Icahn's warning of equity overvaluation," said Market Analyst Alastair McCaig from IG.
Meanwhile, investors were restrained today after OECD revised down its global growth forecasts "significantly", blaming a slowdown in emerging markets. It expects the global economy to expand by just 2.7% in 2013 and 3.6% in 2014, compared with previous estimates in May of 3.1% and 4% growth, respectively.
Comments from Philadephia Fed President Charles Plosser were in focus today ahead of the October Federal Open Market Committee meeting minutes due to be released tomorrow. As speculation continues about the impending taper of quantitative easing, Plosser called for a fixed dollar amount on the Fed's asset purchase programme, proposing an end to the scheme once that limit is reached.
"We cannot continue to play this bond-buying game by ear and risk the Fed's credibility while creating lingering uncertainty about the course of monetary policy," he said.
The German ZEW economic sentiment survey, which attempts to predict economic conditions in six months' time, failed to move markets this morning despite showing an improvement month-on-month. The survey rose from 52.8 to 54.6 this month, ahead of the 54.0 level expected.
easyJet flying high as profits surge
Budget airline easyJet surged after boosting annual profits by more than half and saying it is returning £308m to shareholders. easyJet said its allocated seating strategy, website improvements and its Europe by easyJet advertising campaign helped it to boost pre-tax profit in the year to September 30th rose 51% to £478m.
Fund manager Aberdeen was in the red, pulling back after a 15% surge on Monday following the announced acquisition of the Scottish Widows Investment Partnership Group from Lloyds, as well a strong increase in annual profits. Numis downgraded the stock to 'hold' this morning but lifted its target from 465p to 495p.
Technology business Smiths Group was trading lower as investors were underwhelmed by the company's announcement that it was trading in line with expectations in the first quarter. ITV also failed to impress with third-quarter revenues rising ahead of guidance.
Product testing firm Intertek was out of favour after saying that the industry-wide headwinds experienced in the first half have persisted for longer than expected.
Shareholders reacted positively to the news that Enterprise Inns' founder and Chief Executive Ted Tuppen would step down after more than two decades at the helm. The pub group also announced like-for-like (LFL) net income grew by 0.6% in its final quarter.
Afren, the oil and gas exploration and production company, jumped after reporting that well data indicated the recoverable resources at the Ogo-1 well were "significantly" ahead of pre-drill expectations.
Bodycote retreated after it said economic growth in both Europe and North America continues to be muted. The stock was down around 5% by the close despite the firm reiterating its confidence in meeting full-year expectations. |
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| | FTSE 100 - Risers
easyJet (EZJ) 1,345.00p +7.09%
Randgold Resources Ltd. (RRS) 4,621.00p +1.96%
Persimmon (PSN) 1,185.00p +1.72%
Amec (AMEC) 1,184.00p +1.46%
Johnson Matthey (JMAT) 3,090.00p +1.34%
G4S (GFS) 260.10p +1.28%
GlaxoSmithKline (GSK) 1,628.00p +0.90%
Sage Group (SGE) 348.70p +0.87%
Severn Trent (SVT) 1,843.00p +0.82%
Standard Life (SL.) 339.90p +0.74%
FTSE 100 - Fallers
Aberdeen Asset Management (ADN) 475.20p -2.96%
Anglo American (AAL) 1,400.00p -2.68%
Intertek Group (ITRK) 3,102.00p -2.48%
International Consolidated Airlines Group SA (CDI) (IAG) 353.50p -2.35%
Smiths Group (SMIN) 1,400.00p -2.30%
William Hill (WMH) 361.30p -2.03%
Petrofac Ltd. (PFC) 1,177.00p -1.92%
Glencore Xstrata (GLEN) 321.00p -1.80%
Vedanta Resources (VED) 971.00p -1.77%
Royal Bank of Scotland Group (RBS) 327.60p -1.71%
FTSE 250 - Risers
Enterprise Inns (ETI) 154.00p +11.59%
Afren (AFR) 161.00p +8.13%
Thomas Cook Group (TCG) 147.50p +4.98%
Keller Group (KLR) 1,048.00p +4.28%
Serco Group (SRP) 441.00p +4.08%
Imagination Technologies Group (IMG) 264.40p +3.36%
Redrow (RDW) 268.60p +3.19%
Halma (HLMA) 584.00p +2.28%
3i Group (III) 352.80p +1.94%
IP Group (IPO) 153.90p +1.92%
FTSE 250 - Fallers
Bodycote (BOY) 618.50p -4.55%
Hays (HAS) 120.00p -3.69%
Partnership Assurance Group (PA.) 305.00p -3.63%
Bwin.party Digital Entertainment (BPTY) 129.50p -3.00%
IG Group Holdings (IGG) 599.50p -2.44%
Kier Group (KIE) 1,674.00p -2.39%
Kazakhmys (KAZ) 243.20p -2.33%
Lonmin (LMI) 325.10p -2.17%
Spirent Communications (SPT) 105.70p -2.04%
Ashtead Group (AHT) 655.50p -2.02% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks slide ahead of FOMC meeting minutes - Investors wait on FOMC minutes
- Ichan warns of stock market decline
- German confidence rises
- OECD cautions on Eurozone deflation
FTSE 100: -0.38%
DAX: -0.35%
CAC 40: -1.12%
FTSE MIB: -1.77%
IBEX 35: -1.57%
Stoxx 600: -0.66%
European stocks declined as investors waited on tomorrow's release of the US Federal Open Market Committee (FOMC) meeting minutes.
The FOMC minutes are expected to shed further light on the Federal Reserve's reason behind its decision to maintain its monthly $85bn bond buying programme and keep interest rates near zero.
Most economists expect the Fed to hold off on scaling back quantitative easing until next March, however recent mixed comments from policymakers have fuelled uncertainty.
The President of the Federal Reserve Bank of New York said on Monday that he was "getting more hopeful" about the economic recovery, citing labour market improvements and stronger-than-expected growth in the third quarter.
Activist investor Carl Icahn yesterday cautioned that a tapering of monetary stimulus was on the horizon.
At the Reuters Global Investment Outlook Summit, he also said low interest rates were bolstering company results at the moment rather than management's efforts so the market could face a "big drop" soon.
"Now, this type of comment is something we've heard repeatedly this year from a whole host of people in the industry, but this time it's really hit a nerve with investors, and I think there's a couple of reasons for that," noted Craig Erlam, Market Analyst at Alpari.
"The most obvious reason is that Icahn is a big player in the industry so his views are always worth listening to. The second, and probably most important, is that traders were already getting a little nervous about the sustainability of the rally, with Fed tapering just around the corner."
German confidence, ECB deflation
ZEW's German economic sentiment index, which attempts to predict economic conditions in six months' time, climbed to 54.6 in November from 52.8 last month.
It exceeded the consensus of 54 and the 50 reading that signals expansion.
The report comes a day after Bundesbank said Europe's biggest economy is growing solidly and its upturn will likely be consolidated in coming months, boosted by residential construction and private consumption.
Meanwhile, the OECD today said the European Central Bank (ECB) must consider buying government and corporate bonds to help the Eurozone avoid a Japanese-style deflationary spiral.
Inflation in the Eurozone fell to its lowest in nearly four years in October at 0.7%, well below the ECB's target of just below 2%.
"Risks of deflation may be slowly increasing," OECD Chief Economist Pier Carlo Padoan told Reuters. "The ECB must be very careful and be prepared to use even non-conventional measures to beat any risk of deflation becoming permanent."
Separate data today showed European new car sales rose for two consecutive months for the first time since 2011. The European Automobile Manufacturers Association said registrations in October increased 4.6% from a year earlier to 1.04m autos, driven by demand in Spain.
In Italy bad loans rose to the highest level in almost 14 years as the recession continued. Gross non-performing loans as a proportion of lending climbed to 7.5% in September from 5.9% a year earlier, according to data from the Italian Banking Association today.
easyJet, Paddy Power
easyJet soared as the European carrier said it will pay an additional dividend after full-year profit increased 51%.
Paddy Power declined after the Irish betting company cut its forecast for full-year profit growth.
KBC slumped as trading at the Belgian bank resumed following a temporary suspension.
Afren was higher after beating its estimate for recoverable oil from the Ogo prospect off the coast to Nigeria.
Royal KPN jumped as Credit Suisse raised its rating on the phone company to 'outperform' from 'neutral', saying it predicts the stock will rise following the sale of KPN's German business to Telefonica SA.
Intertek Group tumbled after the products inspection company said revenue excluding acquisitions increased 3% in the July-to-October period, down from 6.3% in the first half.
Brent crude falls
Brent crude futures dropped $0.575 to $107.850 per barrel on the ICE.
The euro rose 0.17% to $1.3529. |
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| | US Market Report | | US open: Markets subdued on concerns over global growth, Fed stimulus - OECD cuts global forecasts, warns of US risks
- Plosser calls fixed amount of asset purchases
- Bernanke in focus ahead of speech
- Best Buy, Campbell Soup fall sharply early on
Dow Jones: 0.15%
Nasdaq: 0.18%
S&P 500: 0.03%
It was a rather lacklustre start for US markets on Tuesday as concerns over global growth and nervousness about the tapering of stimulus dented risk appetite amongst investors.
This follows a mixed session on Wall Street on Monday as caution set in after the Dow Jones Industrial Average and S&P 500 briefly topped record intraday levels of 16,000 and 1,800, respectively.
Anxiety over the recent run on equity markets dampened sentiment yesterday after activist investor Carl Icahnwas reported as saying that a "big drop" could be around the corner. According to Reuters, Icahn said he was "very cautious on equities today" given that valuations are rich and earnings are bolstered by low borrowing costs rather than management's efforts to improve results.
Meanwhile, investors were restrained today after OECD revised down its global growth forecasts "significantly", blaming a slowdown in emerging markets. It expects the global economy to expand by just 2.7% in 2013 and 3.6% in 2014, compared with previous estimates in May of 3.1% and 4% growth, respectively.
The OECD also said that the tapering of asset purchases and brinkmanship in Washington over the debt ceiling were potential risks that could derail the global recovery. “These episodes could easily be replayed, quite possibly in a more virulent form, in the period ahead,” warned Pier Carlo Padoan, Deputy Secretary-General and Chief Economist of the OECD.
Eyes were also beginning to turn to tomorrow's release of the minutes of October's Federal Open Market Committee (FOMC) meeting. Comments from Philadephia Fed President Charles Plosser were in focus after the FOMC voting member called for a fixed dollar amount on the Fed's asset purchase programme, proposing an end to the scheme once that limit is reached. "We cannot continue to play this bond-buying game by ear and risk the Fed's credibility while creating lingering uncertainty about the course of monetary policy," he said.
At least two Fed speakers were scheduled to hit the wires later on Monday, including the Chairman Ben Bernanke who is due to leave the central bank in January. “Traders will be looking for clues from Bernanke about when we can expect the first round of tapering from the Fed, particularly, whether it is possible in December. Any suggestion that this is likely will probably be met with further selling in the coming days,” said Market Analyst Craig Erlam from Alpari.
Best Buy, Campbell Soup under selling pressure
Consumer-electronics retailer Best Buy slumped after it warned that margins could come under pressure as it attempts to keep up with promotional activity across the industry on Black Friday and throughout the Christmas shopping season.
Campbell Soup also fell sharply after its fiscal first-quarter net income dropped 30%, coming in well below analysts’ estimates.
Tesla Motors gained strongly after Chief Executive Elon Musk outlined a plan on a company blog to ease fears amongst investors regarding recent incidents involving its electric cars.
Horizon Pharma surged after agreeing to buy the US rights for AstraZeneca's Vimovo treatment for osteoarthritis and rheumatoid arthritis. |
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| | Broker Tips | | Broker tips: Aberdeen, Petrofac, easyJet Aberdeen Asset Management was trading in the red on Tuesday morning as the share price pulled back from its near-15 per cent surge the day before following the company's acquisition of Scottish Widows Investment Partnership (SWIP) from Lloyds.
Numis Securities was also weighing on the stock after downgrading its rating from 'buy' to 'hold', saying that the share price is "now up with events" and that the SWIP purchase is now "more than priced in".
UBS has slashed its target for oilfield services group Petrofac by almost a quarter after the company warned on Monday that contract delays could hamper growth in 2014 and possibly beyond.
However, the bank maintained its positive 'buy' recommendation for the stock, saying that its new target of 1,400p (down from 1,850p) is set at 12 times 2014 earnings, below the five-year average forward multiple of 12.3. This is still well above current levels, especially after Monday's near-17% decline.
Panmure Gordon retained its 'buy' rating for airline group easyJet, saying that it remains optimistic about the long-term prospects of the business after its strong annual results, unexpected special dividend and decent outlook.
The broker said: "We are not concerned about longer-term pricing pressure as there does not appear to be significant new capacity entering the short-haul market. The company has a strong structural cost advantage over most of its competitors, creating a highly attractive value proposition." | | |
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