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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 hold on to gains despite poor US jobs data - US jobs report misses forecasts by a mile
- Fed now in focus on stimulus speculation
- Tullow gains on Statoil rumours
- Mining stocks track metals higher
techMARK 2,801.83 +0.98%
FTSE 100 6,739.94 +0.73%
FTSE 250 16,191.73 +1.52%
UK markets remained resilient on Friday afternoon by managing to finish with decent gains despite a shockingly poor US jobs report dampening stocks on Wall Street.
Tullow Oil rose strongly today on speculation that it could be a takeover target, while stocks in the heavyweight mining sector put in a strong performance as metal prices advanced.
The FTSE 100 ended the day up 48.6 points at 6,739.94, but did come off its intraday high of 6,769 after the US data.
US jobs shock
Non-farm payrolls increased at their lowest monthly rate since 2008 in December, rising by just 74,000. This was significantly lower than the 241,000 gain in November and well below analysts' forecasts, with poor weather conditions largely to blame.
The unemployment rate unexpectedly declined from 7% to 6.7%, but the fall was attributed mainly to a drop in the participation rate to its lowest level in over three decades.
"Both non-farms and unemployment figures seem too far off estimates to be an accurate gauge of the US labour market, but traders don't know which one to write off. Investors are beginning to wonder whether the Federal Reserve began reducing its stimulus package a little on the early side," said David Madden, Market Analyst at IG.
Poor data from the UK seemed to slip under the radar this morning with investors shrugging off the news that UK construction output and industrial production missed forecasts in November.
According to the Office for National Statistics, construction output growth eased to 2.2% year-on-year from 5.1% the month before, missing the forecast for a pick-up to 7.5%. Meanwhile, industrial production rose by 2.8%, up from 2.6% previously but below the 3% increase expected.
Tullow jumps, miners broadly higher
Bid speculation surrounding Tullow gave the oil stock a lift today after rumours did the rounds yesterday that Norwegian group Statoil is considering an offer for the firm. Tullow had a strong day yesterday after an upgrade from HSBC to 'buy'.
Mining stocks were in demand this afternoon as metals rose across the board on a weaker dollar: gold prices were up 1.2%; silver was 2% higher; while copper gained 1.1%. Glencore Xstrata, Rio Tinto, BHP Billiton and Anglo American were among the best performers in the sector.
Glencore Xstrata was also boosted by Barclays which raised its rating on the stock to 'overweight', saying that it was among its top picks in the industry.
House builder Persimmon was a high riser after Goldman Sachs kept a 'buy' rating, with analysts saying they were "increasing our estimates and price target for Persimmon following its strong fiscal year trading update [on Wednesday]".
However, chip designer ARM Holdings was one of the heaviest fallers after Goldman decided to take the company off its 'conviction buy' list. The stock fell sharply yesterday after being hit by a Deutsche Bank downgrade.
Banks were also out of favour with domestic lenders Lloyds, RBS and Barclays finishing in the red.
On the FTSE 250, digital media group Perform surged as investors welcomed the resignation of Chief Financial Officer David Surtees following a profit warning by the company last month. |
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| FTSE 100 - Risers
Tullow Oil (TLW) 875.00p +3.55%
IMI (IMI) 1,569.00p +2.68%
Capita (CPI) 1,048.00p +2.54%
Royal Dutch Shell 'A' (RDSA) 2,183.00p +1.77%
Coca-Cola HBC AG (CDI) (CCH) 1,800.00p +1.75%
Burberry Group (BRBY) 1,445.00p +1.69%
Persimmon (PSN) 1,294.00p +1.57%
Glencore Xstrata (GLEN) 314.35p +1.52%
Royal Dutch Shell 'B' (RDSB) 2,298.00p +1.48%
Sports Direct International (SPD) 753.00p +1.48%
FTSE 100 - Fallers
Fresnillo (FRES) 663.00p -1.71%
ARM Holdings (ARM) 980.50p -1.70%
Lloyds Banking Group (LLOY) 84.18p -1.27%
BP (BP.) 489.65p -1.14%
Whitbread (WTB) 3,858.00p -0.67%
Tesco (TSCO) 322.20p -0.66%
Rolls-Royce Holdings (RR.) 1,240.00p -0.64%
Aberdeen Asset Management (ADN) 447.40p -0.49%
International Consolidated Airlines Group SA (CDI) (IAG) 426.70p -0.44%
Shire Plc (SHP) 2,895.00p -0.41%
FTSE 250 - Risers
Homeserve (HSV) 273.90p +5.75%
Perform Group (PER) 245.00p +3.95%
Cobham (COB) 288.70p +3.11%
Hays (HAS) 132.90p +2.15%
Enterprise Inns (ETI) 161.50p +2.15%
Imagination Technologies Group (IMG) 165.20p +2.04%
Thomas Cook Group (TCG) 180.10p +1.92%
Aveva Group (AVV) 2,287.00p +1.92%
TalkTalk Telecom Group (TALK) 317.90p +1.86%
Centamin (DI) (CEY) 45.16p +1.71%
FTSE 250 - Fallers
Spectris (SXS) 2,407.00p -2.15%
Oxford Instruments (OXIG) 1,714.00p -1.95%
Man Group (EMG) 84.60p -1.74%
Serco Group (SRP) 495.40p -1.51%
Dechra Pharmaceuticals (DPH) 717.00p -1.38%
Partnership Assurance Group (PA.) 303.00p -1.30%
Evraz (EVR) 102.10p -1.26%
NMC Health (NMC) 443.80p -1.16%
Bank of Georgia Holdings (BGEO) 2,498.00p -1.11% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks mixed as investors weigh US jobs data - US adds fewer jobs, unemployment rate falls
- French industrial output grows
- UK construction output falls
- UK industrial and manufacturing output flat
FTSE 100: 0.22%
DAX: 0.20%
CAC 40: 0.26%
FTSE MIB: -0.71%
IBEX 35: 0.22%
Stoxx 600: -0.05%
European stocks were little changed as investors digested data that showed the US unemployment rate fell unexpectedly in December while employers added fewer jobs.
US non-farm payrolls increased by just 74,000 in December, according to the Bureau of Labor Statistics, significantly lower than the 241,000 gain in November, with poor weather conditions largely to blame.
It surprised analysts who had expected a reading closer to 193,000.
The unemployment rate declined to 6.7% last month from 7% in November, compared to the consensus forecasts for it to remain unchanged.
The data is likely to cause uncertainty on whether the Federal Reserve will announce a further scaling back of monetary stimulus after its policy meeting at the end of the month.
Last month the Fed said it would begin tapering monthly bond purchases by $10bn to $75bn and would gradually introduce more cuts provided economic data pointed to continued recovery.
MB Capital's Bullus said: "All bets are now off on the Fed's tapering plans. Many are now questioning whether it began to turn off the QE [quantitative easing] taps too soon. If Janet Yellen was hoping to have any kind of honeymoon period when she takes over the top job, she can forget it."
French industrial production
French industrial production expanded 1.3% in November, beating the 0.4% forecast, a report showed today.
UK construction output fell by 4% in November on a month-on-month basis, according to data from the Office for National Statistics (ONS), missing consensus for a 0.8% rise. In October output increased 2%.
Separately the ONS also revealed that British manufacturing and industrial output fell short of forecasts in November with both industries coming in flat on the month.
Economists had expected an increase of 0.4% for both sectors. In October the two industries achieved a 0.2% rise in output.
Deutsche Lufthansa
Deutsche Lufthansa gained after Europe's second-biggest airline said it expects costs per passenger to drop by 2% this year.
Red Electrica Corp. advanced after Morgan Stanley raised its rating on the Spanish power-grid operator to 'equal weight' from 'underweight'.
Metro rallied following reports Franz Haniel & Cie. which owns 30% of the German retailer, may ask Metro to sell its Real, Kaufhof or Media-Saturn units.
Swatch advanced after the biggest maker of Swiss watches reported 2013 gross sales that beat expectations.
SES SA and Eutelsat Communications slumped as JP Morgan Chase & Co. downgraded the stocks to 'neutral' from 'overweight'.
Brenntag declined after UBS lowered its recommendation on the shares to 'neutral' from 'buy'.
The euro rose 0.38% to $1.3660.
Brent crude futures gained $0.047 to $106.440 per barrel. |
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| | US Market Report | | US open: Stocks edge lower on Fed uncertainty after jobs data - NFPs rise by just 74,000 due to weather
- Focus now on Fed ahead of policy meeting
- Alcoa disappoints as Q4 earnings season begins
Dow Jones: -0.28%
Nasdaq: -0.17%
S&P 500: -0.17%
The lowest increase in monthly non-farm payrolls since 2008 prompted a cautious start on Wall Street on Friday, as investors attempted to work out what impact the data would have on the future of Federal Reserve stimulus.
The three major equity benchmarks in New York edged lower in early trade, with the Dow Jones Industrial Average falling 0.3% and the Nasdaq and S&P 500 down 0.2%.
"After the gasps came headscratching. If ever there was a curveball, this was it," said Marcus Bullus, Trading Director at MB Capital. "These limp numbers are as puzzling as they are surprising - and they caught the markets with their guard down."
Jobs report shock
US non-farm payrolls increased by just 74,000 in December, according to the Bureau of Labor Statistics, significantly lower than the 241,000 gain in November, with poor weather conditions largely to blame. While the previous two months' gains were revised higher by a combined 38,000, December's data came as a real shock to analysts who had expected a reading closer to 193,000.
In fact, market chatter ahead of the figures had suggested that last month's data may have come in ahead of expectations. The focus has now turned to the Fed ahead of its policy meeting later this month, following December's decision to scale back its quantitative easing programme.
The unemployment rate unexpectedly declined from 7% to 6.7%, but the participation rate fell from 63% to 62.8%. This was the lowest level of participation in over three decades and is a cause for concern among economists as people continue to leave the labour force.
MB Capital's Bullus said: "All bets are now off on the Fed's tapering plans. Many are now questioning whether it began to turn off the QE [quantitative easing] taps too soon. If Janet Yellen was hoping to have any kind of honeymoon period when she takes over the top job, she can forget it."
Alcoa kicks off earnings season poorly
Results from aluminium producer Alcoa - regarded as the unofficial beginning to the new quarterly earnings season – failed to impress investors after the closing bell last night, with the stock falling sharply this morning after profits missed analysts' estimates.
Fashion retailer Gap gained after the group said it expects full-year profits to reach the upper end of its guidance, while Abercrombie & Fitch rallied after raising its annual earnings prediction. Jewellery firm Tiffany & Co also rose after holiday sales rose.
In contrast, retail peer Sears sunk sharply as investors reacted to a significant fall in same-store sales over Christmas and worse-than-estimated guidance.
The US 10-year Treasury yield was down nine basis points at 2.88% in morning trade.
West Texas Intermediate crude futures for February delivery were up 1.03%, or 94 cents, at $92.60 per barrel. |
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| | Broker Tips | | Broker tips: Miners, Outsourcers, M&S, Cineworld 2014 could initially be 'another difficult period' for the UK mining sector, according to analysts at Barclays, who maintained their 'negative' view on the industry on Friday.
In a research note to clients, the bank said that "key issues" of 2013 - negative earnings growth, minimal free cash-flow (FCF) generation, slowing demand in China and surging supply - will likely remain in place this year.
Outsourcing group Capita was performing well on Friday morning after UBS raised its recommendation for the stock, while sector peer Serco was hit by a ratings downgrade by the same Swiss bank.
UBS said that Capita has good earnings prospects with strong results in 2013 underpinning estimates this year, as it lifted its stance from 'neutral' to 'buy'. "Our upgrade is partly a switch from 'value' to 'quality' in the outsourcing sector as we simultaneously downgrade Serco to 'neutral' [from 'buy'] following its share-price recovery," the bank said.
Marks & Spencer's share price was extending gains on Friday morning after Citigroup maintained its 'buy' rating for the stock on the back of a confident outlook.
Despite the retailer missing forecasts in the third quarter, the bank remains bullish: "The combination of our stronger 2014 and 2015 UK economic growth forecasts, and M&S management initiatives (especially on GM availability) has markedly improved the credibility of double-digit FY15 and FY16 M&S earnings per share growth forecasts. We argue that this should underpin the group's current undemanding valuation metrics."
Panmure Gordon has maintained it 'sell' rating for cinema operator Cineworld after the company's proposed offer for Poland-listed, Dutch-headquartered Cinema City International (CCI).
"At first glance we struggle to see the logic for the acquisition given management's insistence on the substantial growth opportunities available in the UK and the group's failure to complete its proposed acquisition in Spain," Panmure said. | | |
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