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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 pull back as investors await Fed decision - US inflation data in focus ahead of Fed meeting
- UK inflation falls, Eurozone inflation picks up
- Supermarket fall on competition from discounters
- Car insurance is too high, claims Competition Commission
techMARK 2,684.75 -0.05%
FTSE 100 6,486.19 -0.55%
FTSE 250 15,348.56 -0.23%
UK markets pulled back on Tuesday following some strong gains the previous session as falls in the supermarket, car insurance and banking sectors weighed on the FTSE 100.
After bargain hunters stepped in on Monday following a four-day losing streak, investors chose to adopt a cautious approach today as financial markets worldwide prepared for tomorrow's outcome of the Federal Reserve's policy meeting.
While expectations remain finely balanced, there is a possibility that the Fed could begin to scale back its stimulus programme in the face of improving economic data and a calmer political backdrop in Washington.
However, US consumer price index (CPI) figures released today showed that the rate of core inflation held steady during November as it continues to undershoot the Fed's target.
"European markets have had a somewhat weaker tone today after yesterday's strong rebound saw the single biggest one day gains since October," said Chief Market Analyst Michael Hewson from CMC Markets. "The rather less exuberant tone is understandable as the long awaited two day Fed meeting gets underway," he said.
The FTSE 100 finished 36.01 points lower at 6,486.19 after a 1.3% surge the day before as the index bounced off its worst level in over two months.
Inflation figures were also in focus on this side of the Pond, the rate of UK CPI inflation unexpectedly fell to 2.1% last month, edging close to the Bank of England's 2% target.
However, the final reading of Eurozone CPI confirmed that inflation picked up to 0.9% in November, in line with the preliminary estimate and up from 0.7% in October.
In other economic data, a German sentiment survey which smashed forecasts by rising to its highest level since April 2006.
Supermarkets, car insurers fall after industry reports
Supermarkets stocks were registering losses on Tuesday afternoon after a report from Kantar Worldpanel revealed that over half the UK shopped in either Aldi or Lidl during the 12 weeks to December 8th for the first time in history. Sainsbury, Tesco and Morrison all finished lower.
Motor insurers declined after the Competition Commission said that car insurance in the UK was too high and that drivers were footing the bill for unnecessary costs incurred during the claims process following an accident. Shares in esure, Admiral and Direct Line were all lower by the close.
General insurer RSA however was making gains as it continues to rebound after being hit hard by a profit warning on Friday, as well as the resignation of its Chief Executive. Yesterday, S&P downgraded its credit rating on the stock on Monday to 'A-' with a 'Developing Outlook', having already downgraded last week, while Fitch cut its outlook to 'Rating Watch Negative'.
Mining stocks were broadly higher with Antofagasta, Rio Tinto and Glencore Xstrata among the best performers.
Barclays fell after calling for the US courts to block energy regulators from collecting $488m of fines for electricity trading market manipulation. Banking peers HSBC, RBS and Lloyds also finished lower.
Consumer electricals group Dixons declined despite beating forecasts with its first underlying profit in six years during if first half. However, the company did warn that the second half would be tougher.
AIM-listed iodine producer Iofina was a big mover, plummeting by 28% after a profit warning. The company said that underlying earnings this year are likely to be similar to 2012 after expected 2013 shipments from its chemical division were delayed into 2014. |
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| | FTSE 100 - Risers
RSA Insurance Group (RSA) 92.40p +2.55%
Sage Group (SGE) 382.30p +1.95%
Mondi (MNDI) 960.00p +1.53%
Antofagasta (ANTO) 779.50p +1.50%
Sports Direct International (SPD) 711.00p +1.21%
Rio Tinto (RIO) 3,255.00p +1.13%
Croda International (CRDA) 2,337.00p +1.08%
Persimmon (PSN) 1,155.00p +0.96%
Carnival (CCL) 2,210.00p +0.91%
Glencore Xstrata (GLEN) 308.00p +0.85%
FTSE 100 - Fallers
Sainsbury (J) (SBRY) 378.60p -4.27%
Petrofac Ltd. (PFC) 1,110.00p -3.73%
Morrison (Wm) Supermarkets (MRW) 256.70p -2.91%
Admiral Group (ADM) 1,233.00p -2.22%
Tesco (TSCO) 324.50p -1.96%
BP (BP.) 465.00p -1.73%
IMI (IMI) 1,440.00p -1.71%
Hammerson (HMSO) 489.60p -1.55%
Barclays (BARC) 251.30p -1.47%
GlaxoSmithKline (GSK) 1,566.00p -1.45%
FTSE 250 - Risers
Ferrexpo (FXPO) 184.00p +4.25%
Fisher (James) & Sons (FSJ) 1,257.00p +4.23%
Cable & Wireless Communications (CWC) 50.80p +3.67%
Perform Group (PER) 244.40p +3.56%
CSR (CSR) 619.00p +3.51%
Go-Ahead Group (GOG) 1,704.00p +3.15%
African Barrick Gold (ABG) 160.80p +3.08%
Pace (PIC) 298.30p +2.86%
Dairy Crest Group (DCG) 525.50p +2.84%
TalkTalk Telecom Group (TALK) 291.20p +2.82%
FTSE 250 - Fallers
Dixons Retail (DXNS) 48.73p -5.01%
Debenhams (DEB) 82.00p -4.48%
Alent (ALNT) 333.80p -4.03%
UBM (UBM) 624.50p -3.92%
Interserve (IRV) 637.00p -3.85%
Kenmare Resources (KMR) 19.32p -3.40%
Shaftesbury (SHB) 598.00p -3.00%
esure Group (ESUR) 240.00p -2.83%
Carpetright (CPR) 530.00p -2.66%
Cranswick (CWK) 1,138.00p -2.65% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks slide before FOMC policy decision - FOMC policy decision looms
- US CPI holds steady
- UK inflation falls, Eurozone rises
- Merkel wins third term as Chancellor
- German economic confidence improves
FTSE 100: -0.46%
DAX: -0.71%
CAC 40: -1.11%
FTSE MIB: -1.63%
IBEX 35: -0.83%
Stoxx 600: -0.67%
European stocks declined as the Federal Reserve began its two-day policy meeting.
Markets showed caution ahead of the US central bank's announcement on whether it plans to begin scaling back its $85bn per month in bond purchases tomorrow when the meeting ends.
A slate of upbeat data pointing to recovery in the world's biggest economy and labour market has increased the likelihood of such a move.
Analysts at Bank of America Merrill Lynch said in a note to clients yesterday that while their base case is for a taper in March, market expectations for a December taper "have risen recently".
"Some have suggested that since the markets are 'ready', the Fed should, and will, taper. But the same arguments were made back in September, and Fed officials paid them no more heed back then," said Michael Hanson and Priya Misra.
Acting as a backdrop today, the Department of Labour revealed the consumer price index (CPI) held steady in November compared with the month before, surprising analysts who had expected a 0.1% rise. The core measure, which excludes volatile food and fuel prices, rose by 0.2%.
"We're not convinced that the low rate of inflation in November will prevent the Fed from announcing tomorrow that it will begin to taper its asset purchases, although the decision remains finely balanced," Capital Economics said.
Eurozone and UK inflation
Eurozone inflation rose to 0.9% in November from 0.7% in October due to an increase in electricity and accommodation prices.
However, wage growth continued to decelerate in the third quarter to the slowest pace in three years.
October's fall in inflation forced the European Central Bank to cut interest rates to a new record low of 0.25% last month.
In the UK, inflation fell unexpectedly to a four-year low of 2.1% in November from 2.2% the previous month, edging closer to the Bank of England's target of close to but under 2%.
Energy and food prices drove the drop in consumer inflation, which was partially offset by a rise in prices in transport, recreation and culture.
Merkel voted in as German Chancellor
Angela Merkel was elected to a third term as German Chancellor today after a vote in the lower house of parliament.
The vote paves the way for her "grand coalition" government to be sworn in and take the lead of Europe's biggest economy.
It comes after Social Democrats voted on Sunday to back a coalition with Merkel's centre-right Christian Democratic Union party following lengthy talks between the two.
Separately Merkel has reportedly recommended Bundesbank Vice President Sabine Lautenschlaeger to fill the seat on the ECB's executive board that will be vacated by Joerg Asmussen.
Also in Germany today, a report from ZEW showed economic confidence grew more than expected in December. The sentiment index rose to 62 this month from 54.6 in November, beating the forecast for a reading of 55.
BP sinks
BP plunged after the Financial Times reported that lawyers representing businesses seeking compensation for losses incurred from the 2010 Gulf of Mexico spill said the oil-company attempted to mislead the court when it won an injunction earlier this month on payments to some claimants.
CGG retreated after the seismic surveyor of oilfields cut its 2013 profit forecast.
Boeing advanced after the plane-maker raised its quarterly dividend by 51% and authorised a $10bn share-repurchase plan.
Rexel declined following reports Ray Investment is selling a stake worth about €368.5m in the electrical goods distributor.
Zurich Insurance gained after appointing George Quinn from Swiss Re Ltd as its Chief Financial Officer. The insurer has been seeking a CFO since Pierre Wauthier committed suicide in August.
Dixons Retail slumped after saying it expects the second half of the year to be more challenging than the first half.
The euro fell 0.04% to $1.3755.
Brent crude futures dropped $0.764 to $108.580 per barrel, ICE data showed. |
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| | US Market Report | | US open: Markets inch lower as FOMC meeting draws near - US CPI unchanged in November
- Current account deficit narrowed in Q3
- Taper speculation continues to drive markets ahead of Fed
Dow Jones: 0.00%
Nasdaq: -0.16%
S&P 500: -0.20%
US stocks were trading flat to slightly lower on Tuesday after some strong gains the previous session, as investors reacted to subdued inflation figures ahead of the all-important Federal Reserve policy meeting.
The Federal Open Market Committee two-day meeting kicks off today with markets waiting anxiously for the decision on whether or not to begin scaling back the central bank's asset purchase programme.
Analysts at Bank of America Merrill Lynch said in a note to clients yesterday that while their base case is for a taper in March, market expectations for a December taper "have risen recently".
"Some have suggested that since the markets are 'ready', the Fed should, and will, taper. But the same arguments were made back in September, and Fed officials paid them no more heed back then," said Michael Hanson and Priya Misra.
CPI holds steady
The consumer price index (CPI) held steady in November compared with the month before, according to the Labor Department, surprising analysts who had expected a 0.1% rise. The core measure, which excludes volatile food and fuel prices, rose by 0.2%.
The annual rate of core inflation was unchanged at 1.7%. This was as expected and only just below the Fed's target of 2%. However, with the closely watched alternative personal consumption expenditure (PCE) measure continuing to run at around 1.1% (in October), core inflation is much lower than the Fed would like.
Nevertheless, Paul Dales, Senior US Economist at Capital Economics, said: "We're not convinced that the low rate of inflation in November will prevent the Fed from starting the taper at tomorrow's policy meeting, although the decision remains finely balanced."
In other economic data, the US current account deficit came in at $94.8bn in the third quarter, below the consensus of $100.2bn. Meanwhile, the second-quarter deficit was revised down to $96.6bn from $98.9bn.
Boeing flying high after share buyback
Boeing advanced after the planemaker raised its quarterly dividend by 51% and authorised a $10bn share-repurchase plan.
Facebook rallied after The Wall Street Journal reported that the social-networking site will run its first video ads on December 19th.
Hewlett-Packard was making decent gains after analysts at JPMorgan Cazenove raised their rating on the stock to 'outperform'. The bank said that the challenges facing the tech group are "easing".
Despite the performance of Facebook and H-P, the tech-heavy Nasdaq was still being weighed down by losses from Microsoft and IBM early on. |
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| | Broker Tips | | Broker tips: RSA, Dixons, ASOS Barclays has maintained an 'underweight' rating on troubled insurance group RSA, saying that a potential equity raise could result in further downside to the stock.
The bank said that "clarity [is] urgently required over the plans to strengthen the solvency, and assurance provided over the group reserve position".
Dixons Retail's valuation is cheap, according to Investec which kept its 'buy' rating for the stock after a better-than-expected first half.
"Valuation undemanding, with the shares trading on a CY14E price-to-earnings ratio of 15.4x falling to 12.9x in CY15E, for a business we believe is capable of delivering double-digit growth per annum for the forecastable future," said Analyst Kate Calvert.
Analysts at Panmure Gordon have cut their rating for online fashion retailer ASOS from 'buy' to 'hold' after the stock's impressive 124% jump so far this year.
The broker has made minor changes to forecasts to reflect modestly reduced sales growth assumptions, which leaves the stock-trading at 59.7 times 2015 earnings with a three-year earnings compound annual growth rate of 32.7%. "We do not believe this rate of earnings growth can support further share-price appreciation in a market that appears to be increasingly competitive," they said. | | |
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