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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: Markets flat as investors turn cautious ahead of Fed - Stocks trading within narrow range ahead of Fed
- Fed decision due at 19:00 London time
- BoE votes unanimously on policy, warns of sterling strength
- UK unemployment falls to four-and-a-half-year low
techMARK 2,697.26 +0.47%
FTSE 100 6,492.08 +0.09%
FTSE 250 15,366.70 +0.12%
Markets finished broadly flat on Wednesday after erasing earlier gains, as improving economic data from Europe was outweighed by uncertainty surrounding the Federal Reserve’s policy decision due out later this evening.
The FTSE 100 closed just 5.89 points higher at 6,492.08, having traded within narrow range of just 30 points or so for most of the session.
“The main focus though remains very much on whether the Fed will be bold enough to start the long awaited tapering programme later this evening as Ben Bernanke chairs his very last press conference as Fed Chairman,” said Michael Hewson, Chief Market Analyst at CMC Markets.
The Fed decision is due out at 14:00 in Washington 19:00 London time as policymakers wrap up their two-day policy meeting amid rising speculation that they could announce a scaling back of the monthly $85bn bond buying programme.
The recent raft of upbeat data pointing to a recovery in the world’s biggest economy has fuelled speculation that the Fed will begin tapering this month. Expectations, however, remain finely balanced with some saying that below-par inflation will prevent the Fed from making a move this month.
BoE warns of sterling strength, UK unemployment falls
Minutes from this month’s Bank of England meeting were released this morning, revealing the policymakers voted unanimously to keep its Bank Rate at 0.5% and its asset purchase programme at £375bn.
However, the Monetary Policy Committee did warn that further strength in the sterling is currently close to a five-year high against other currencies - could hamper economic growth in the UK. "Any further substantial appreciation of sterling would pose additional risks to the balance of demand growth and to the recovery," the MPC said at its meeting on December 4-5th.
Markets were also digesting labour-market figures this morning, which showed that the UK unemployment rate unexpectedly fell to 7.4% in the three months to October, its lowest since the three months to April 2009. The jobless rate continues to inch towards the MPC’s target of 7%, at which point it would begin to reassess current monetary policy.
Meanwhile, the Germany IFO business climate index rose from 109.3 to 109.5 in December, in line with expectations. While the current assessment sub-index declined month-on-month, the expectations survey rose by more than expected.
M&S hit by UBS downgrade
High Street retailer Marks & Spencer was a heavy faller after analysts at UBS cut their rating on the stock from 'buy' to 'neutral' and lowered their target from 550p to 475p. In a review of the sector, the bank raised concerns about margins given that promotional levels across the industry are up on last year, as it downgraded ASOS and cut its target for Debenhams.
Sainsbury was off shopping lists again today, along with fellow supermarket groups Tesco and Morrison, after a report from Kantar yesterday showed rising competition from discount grocery stores over the past 12 weeks. Deutsche Bank cut its target for Sainsbury slightly this morning, keeping a 'hold' recommendation.
Online gambling group bwin.party surged after saying that the outlook for 2014 remains positive, with new product launches, continued mobile expansion, prospects for further growth in the US and increased betting volumes.
Africa-focused oil and gas group Ophir Energy pleased investors with a farm-out of its blocks in Gabon, while India-focused Essar Energy rose after an update which reported healthy current trading.
Oilfield services firms Petrofac, Wood Group and Hunting were trading lower after a profit warning from French peer Technip.
Oil major BP finished flat despite making its first significant oil discovery in the Gulf of Mexico since 2009, in the Gila deepwater prospect 300 miles off New Orleans. The firm also today completed the upgrade of the Whiting facility in Northwest Indiana, designed to create $1bn per annum of additional future operating cash flow.
RSA Insurance declined after the company revealed today that Ameriprise Financial took its stake in RSA below the 5% threshold last Friday.
United Utilities Group was in the red after going ex-dividend, meaning that from today investors won't be able to get their hands on its latest payout. Grainger, Marston's, Berkeley Group, Greene King and Halfords also went ex-div today. |
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| | FTSE 100 - Risers
ARM Holdings (ARM) 1,027.00p +3.42%
Antofagasta (ANTO) 795.50p +2.05%
Vedanta Resources (VED) 802.00p +2.04%
Reckitt Benckiser Group (RB.) 4,651.00p +2.02%
Rexam (REX) 497.30p +1.88%
Centrica (CNA) 328.70p +1.73%
Coca-Cola HBC AG (CDI) (CCH) 1,658.00p +1.59%
Wolseley (WOS) 3,265.00p +1.52%
Associated British Foods (ABF) 2,329.00p +1.26%
William Hill (WMH) 375.60p +1.24%
FTSE 100 - Fallers
Sainsbury (J) (SBRY) 365.10p -3.57%
United Utilities Group (UU.) 650.50p -2.62%
Marks & Spencer Group (MKS) 441.50p -2.39%
RSA Insurance Group (RSA) 90.55p -2.00%
Petrofac Ltd. (PFC) 1,089.00p -1.89%
Aggreko (AGK) 1,611.00p -1.71%
Tesco (TSCO) 319.05p -1.68%
Burberry Group (BRBY) 1,429.00p -1.58%
Morrison (Wm) Supermarkets (MRW) 253.20p -1.36%
GlaxoSmithKline (GSK) 1,548.50p -1.12%
FTSE 250 - Risers
Bwin . party Digital Entertainment (BPTY) 125.40p +8.38%
Ophir Energy (OPHR) 320.70p +4.80%
Alent (ALNT) 348.90p +4.52%
Ocado Group (OCDO) 441.60p +4.00%
Cable & Wireless Communications (CWC) 52.60p +3.54%
RPC Group (RPC) 577.00p +3.22%
Keller Group (KLR) 1,104.00p +3.18%
Supergroup (SGP) 1,362.00p +2.79%
UDG Healthcare Public Limited Company (UDG) 321.80p +2.48%
International Personal Finance (IPF) 599.00p +2.48%
FTSE 250 - Fallers
Perform Group (PER) 230.00p -5.89%
Imagination Technologies Group (IMG) 165.20p -5.49%
Wood Group (John) (WG.) 668.50p -4.84%
Debenhams (DEB) 78.45p -4.33%
Kazakhmys (KAZ) 194.90p -2.79%
Hochschild Mining (HOC) 126.50p -2.77%
Hunting (HTG) 731.00p -2.73%
Berkeley Group Holdings (The) (BKG) 2,448.00p -2.59%
Marston's (MARS) 143.70p -2.24%
AL Noor Hospitals Group (ANH) 880.00p -2.11% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: German confidence rises to boost stocks - German business confidence grows
- Eurozone agrees backstop deal for banks
- UK unemployment drops unexpectedly
- Federal Reserve to release policy decision
FTSE 100: 0.09%
DAX: 1.06%
CAC 40: 1.00%
FTSE MIB: 1.15%
IBEX 35: 1.07%
Stoxx 600: 0.86%
European stocks gained as German business confidence improved and as Eurozone finance ministers agreed to a backstop for failing banks.
German business sentiment improved in line with expectations in December, according to a survey of about 7,000 companies today.
The Ifo institute's business confidence index climbed to 109.5 from 109.3 in November, the highest level since April 2012.
Meanwhile, Eurozone finance ministers agreed today to provide a common backstop, by at least 2025, to the European Union’s new bank rescue system in case it runs out of money in an emergency.
Ministers agreed a way to finance the closure of banks which fail including a €55bn fund which will be built up over the next decade by levies on banks.
The deal marks a step closer to completing the final details of a banking union across the 17 countries to tackle failing lenders in Europe’s banking union.
UK unemployment falls
UK unemployment declined unexpectedly by 99,000 to 2.39m people in the three months to October, according to the Office for National Statistics.
The unemployment rate, measured by International Labour Organisation methods also fell to 7.4% from 7.6% in the quarter through September – moving closer to the Bank of England’s threshold of 7% at which it will consider raising interest rates.
This morning the BoE released minutes of its December 4th to 5th meeting, which revealed policymakers voted unanimously to keep its Bank Rate at 0.5% and its asset purchase programme at £375bn.
The minutes also showed the central bank's Monetary Policy Committee warned the recent appreciation in sterling could jeopardise British exports.
"Any further substantial appreciation of sterling would pose additional risks to the balance of demand growth and to the recovery," the MPC said in the minutes.
Federal Reserve policy decision
The US Federal Reserve will unveil its latest policy decision later today after it wraps up its two-day meeting.
The central bank may decide to begin scaling back quantitative easing if it deems the economy has recovered enough to cope.
A recent slate of upbeat economic data has fuelled speculation that the Fed may begin tapering today.
"Will they? Won’t they? Tapering is likely the only thing on most investors mind today ahead of the [Fed's] decision on whether to finally taper the unprecedented $85bnn monthly bond-buying scheme," said Alex Conroy, Financial Sales Trader at Spreadex.
"If the last few months are anything to go buy expect huge volatility today as investors attempt to get ahead of the Fed."
Acting as a backdrop was the release of a report on US housing starts which rose more than expected to a seasonally adjusted annual rate of 1.09m in November from 889,000 the previous month.
Centrica gains
Centrica’s shares jumped after the energy company said it would sell its Texas gas-fired power stations to Blackstone for $685m and use the proceeds to extend its share buyback programme.
Technip tumbled after the French oilfield services company warned that it expects margins will fall next year.
TUI AG gained after the tour operator unexpectedly posted a full-year profit.
Elektrobit surged after the Finnish maker of software products for the automotive industry forecast operating profit of about €8m in 2013.
GlaxoSmithKline retreated as Vectura Group said its partner Sandoz has obtained approval to market its asthma inhaler, a generic version of Glaxo’s Advair, in Denmark.
Marks & Spencer Group dropped as UBS downgraded the retailer to ‘neutral’ from ‘buy’, citing lower gross margins.
Vesta Wind Systems advanced after saying it received an order from Enel Green Power for wind turbines to produce 350 megawatts of power.
The euro fell 0.04% to $1.3763.
Brent crude futures rose $0.814 to $109.330 per barrel, according to the ICE. |
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| | US Market Report | | US open: Markets mixed on housing starts, Fed uncertainty - Fed decision due at 14:00 (19:00 London time)
- Housing starts rise at fastest pace since 2008
- Ford drops on profit outlook
- Apple slips on iPhone production fears
Dow Jones: 0.35%
Nasdaq: -0.12%
S&P 500: 0.15%
US markets opened mixed on Wednesday as a decent performance by housebuilders was outweighed by uncertainty caused by the upcoming Federal Reserve policy decision.
The Dow Jones Industrial Average and S&P 500 were both trading slightly higher in early trading, while the tech-heavy Nasdaq was being dragged lower by a heavy drop by gadget giant Apple.
The Fed, which wraps up its two-day policy meeting later on, is in focus today given rising speculation that it could announce a scaling back of its monthly $85bn bond buying programme.
The recent raft of upbeat data pointing to a recovery in the world’s biggest economy has fuelled speculation that the Fed will begin tapering this month.
Expectations, however, remain finely balanced with some saying that below-par inflation will prevent the Fed from making a move this month. Consumer price index figures released during Tuesday’s session showed that the rate of core inflation held steady during November as it continues to undershoot the Fed's target.
Meanwhile, according to analysts at ShareCast, there are worries in some corners over the effects that tapering might have on markets in general, and emerging markets in particular. “Fed Chairman Ben Bernanke and his colleagues will surely be weighing that risk when making their deliberations,” they said.
The Federal Open Market Committee will release its policy statement and forecasts for economic growth, inflation and unemployment at 14:00 (19:00 London time) in Washington. Bernanke will speak shortly afterwards.
Elsewhere in the US, a report on housing starts rose more than expected to a seasonally adjusted annual rate of 1.09m in November from 889,000 the previous month. This 22.7% gain was the fastest pace recorded since early 2008, beating the 950,000 housing starts expected by analysts.
US mortgage applications fell by 5.5% in the week to December 13th, compared to an increase of 1% the prior week, according to data from the Mortgage Bankers’ Association.
Ford drops on US outlook
Auto major Ford was a heavy faller in morning trade after saying that profits will fall in 2014 due to the cost of bringing 23 new vehicle models to market – it’s busiest year for new vehicle launches in history. The company said it would earn $7-8bn next year, down from an expected $8.5bn in 2013.
Tech group Apple was also registering losses after reported supplier Jabil disappointed investors with its first-quarter earnings and second-quarter guidance. Citigroup said that Jabil’s guidance for a drop in sales from its diversified manufacturing services division could suggest a fall in iPhone production.
Lennar advanced as the US homebuilder reported a rise in net income in the three months through November that beat analysts’ expectations. Sector peers DR Horton and PulteGroup were also higher.
Halozyme gained as the biopharmaceutical company named Helen Torley as its Chief Executive and President to replace Gregory I. Frost.
VeriFone Systems declined as the maker of credit-card terminals said it expected adjusted per-share earnings of $1.35-$1.40 this year, compared with a forecast of $1.56. |
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| | Broker Tips | | UBS has downgraded its ratings for both Marks & Spencer and ASOS from 'buy' to 'neutral', highlighting higher levels of promotional spend across the industry as of late.
"The clothing retailers look to have pressed the panic button this year as subdued real disposable income, weak footfall and warmer October weather have held back full-price sales," the bank said. UBS said its preferred exposure is in the electricals/hardlines markets with Home Retail and Dixons both rated 'buy' likely to have both benefitted from sales of tablets, televisions and small domestic appliances over the Christmas period.
Daniel Stewart & Co has cut its target for bwin . party Digital Entertainment but reinstated its 'buy' stance, saying that the online gambling firm is positioned for growth after a tough year. The broker, which has had the stock under review for some time, reduced its target from 173p to 146p.
Nevertheless, it said that the firm has "come through the worst of it" and that 2014 should lay the foundations for a return to growth, helped by new product launches and growth from exposure to the newly regulated online market in New Jersey.
Westhouse Securities has maintained its 'add' rating and 209p target for price-comparison website Moneysupermarket.com after the Competition Commission's report into the private motor insurance market. The CC said it is considering prohibiting 'most favoured nation' clauses which make sure that individual insurers' premiums are not offered more cheaply elsewhere, something which it says reduces competition.
"We believe this is good news for MONY, which is the only independent amongst major UK PC players and does not have MFN clauses in its contracts with motor insurers," said analyst Roddy Davidson. | | |
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