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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: Car insurers lead markets higher after choppy session - UK retail sales smash forecasts for December
- US economic data and earnings come in mixed
- Car insurers gain as decline in premiums eases
- Shell issues massive profit warning
techMARK 2,851.01 +0.26%
FTSE 100 6,829.30 +0.20%
FTSE 250 16,187.09 -0.14%
UK markets ended a choppy session with small gains on Friday, pushing the benchmark FTSE 100 to a fresh eight-month high after UK retail sales smashed analysts' expectations and car insurers rose strongly.
However, upside was capped by a profit warning from heavyweight constituent Shell and a weak start on Wall Street after a batch of mixed economic data and corporate earnings.
That kept the Footsie trading within a narrow range during today's session; nevertheless, the index still finished 13.88 points higher at 6,829.30 – its best closing level since May 22nd 2013.
UK retail sales volumes grew at a whopping 2.6% month-on-month pace in December, according to the Office for National Statistics (ONS), up from a revised 0.1% increase in November and well ahead of the 0.3% growth expected by analysts.
On a year-on-year basis, growth accelerated to 5.3%, up from 1.8% and ahead of the 2.5% forecast. This was the fastest annual growth in sales since October 2004.
However, economic data from further afield failed to impress today, with US building permits, housing starts and consumer confidence data showing a decline on the previous month.
US markets, meanwhile, opened broadly lower this afternoon after blue chips Intel and UPS disappointed investors with gloomy guidance and General Electric underwhelmed with its quarterly results. Morgan Stanley, however, gained strongly after topping estimates with it fourth-quarter profits.
Car insurers rise; Shell issues profit warning
Motor insurance stocks were among the strongest risers in London after data showed that the recent decline in car insurance premiums had begun to decelerate towards the end of last year, sparking hopes that price competition in the sector between rival insurers may be on the wane. Admiral was a standout performer by the close, while esure and Direct Line were also making solid gains.
In contrast, Shell was a heavy faller after saying that fourth-quarter earnings excluding one-offs are expected to be just $2.9bn, down from $4.5bn in the third quarter, $7.3bn in the fourth quarter the year before and well below the $4bn expected by analysts. The company said that Upstream earnings were hit by higher exploration expenses and lower volumes in the fourth quarter, as well as the weakening of the Australian dollar.
RBS was also lower after Investec downgraded the stock from 'hold' to 'sell'. Analyst Ian Gordon recommended investors to "Never own RBS into the numbers!" ahead of its full-year results next month.
Fund manager Aberdeen was extending losses after yesterday reporting a fall in assets under management in its first quarter. Numis kept a 'hold' rating for the stock, saying that the shares are "mostly up with events".
High Street bookie William Hill underwhelmed with a 6% increase in fourth-quarter revenue in retail and online. The company said it was a "strong end to the year". Ladbrokes also finished lower.
Mining stocks put in a decent performance today, with Glencore Xstrata and Antofagasta among the top gainers as metal prices advanced across the board. Rio Tinto, meanwhile, was benefitting after UBS named it "our most preferred stock" on the back of its volume growth, cost cutting and cash-flow. |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks finish higher after mixed US and UK data - US confidence falls
- US building permits and housing starts drop
- Industrial and manufacturing output rises in US
- UK retail sales jump
FTSE 100: 0.20%
DAX: 0.25%
CAC 40: 0.20%
FTSE MIB: 0.47%
IBEX 35: 0.01%
Stoxx 600: 0.51%
European stocks ended the week on a high note as investors weighed a batch of mixed US data.
The preliminary reading of the University of Michigan consumer confidence index unexpectedly fell from 82.5 to 80.4 in January, surprising analysts who had expected a rise to 83.5.
"Despite record high stock markets and gradually improving labour market conditions, the University of Michigan's measure of consumer confidence dropped back to 80.4 in January, from 82.5," Capital Economics said.
"Nevertheless, the headline index only reversed a small part of December's sharp rise, we aren't too concerned about the fall, particularly as the unseasonably severe winter weather, aka the polar vortex, may have played a role."
US building permits dropped by 3% in December to 986,000, coming in below the 1.014m prediction.
US housing starts declined 9.8% over the month in December to reach an annualised rate of 999,000, according to the US Department of Commerce. It marked a significantly pull-back from the revised 23.1% gain in November but still came in ahead of the consensus forecast of 990,000.
Meanwhile,industrial production increased by 0.3% in December, as expected. Manufacturing output expanded by 0.4%, ahead of the 0.3% rise predicted.
The data comes as the Federal Reserve's policy meeting at the end of the month looms. In December the central bank began unwinding monthly bond purchases by $10bn to $75bn and said it would gradually introduce further tapering provided economic reports pointed to continued recovery in the US.
UK retail sales rise more than forecast
UK retail sales grew 6.1% year-on-year in December, compared to a 2.1% rise the previous month. Economists had pencilled in an increase of 3.2%.
They rose at a month-on-month pace of 2.8% (consensus: 0.3%) from November's 0.2% gain.
"We believe that today's surprising growth has been partially supported by easing price pressure," said Barclays Research.
"However, we highlight that UK households will continue to face headwinds from low real income growth, credit constraints and the need to repair their balance sheets. As a result, although we look for the recovery in consumer demand to be sustained, we expect it to be moderate by historical standards."
Mining stocks rally
A gauge of mining companies, including Rio Tinto and Glencore Xstrata, rose as the price of metals edged higher.
PSA Peugeot Citroen climbed following reports the board will meet on January 19th to decide whether to accept investments of €500m apiece from Dongfeng Motor Corp. and the French government.
DS Smith advanced as Berenberg Bank rated the packaging company's stock for the first time, with a 'buy' rating.
Pandora was up after increasing its forecasts for 2013 sales and profit-margin for the second time in three months.
Accor gained after the European hotel operator said that profit probably reached the upper end of its forecast in 2013.
Royal Dutch Shell declined after the oil producer warned that fourth-quarter profits will be "significantly lower" than recent levels due to tough market conditions in downstream, higher exploration expenses and lower upstream volumes.
Ocado Group slumped as Deutsche Bank began coverage of the shares with a 'sell' rating.
Essilor International tumbled after lowering its forecast sales growth for 2013.
The euro fell 0.43% to $1.3562.
Brent crude futures climbed $0.983 to $106.800 per barrel, according to the ICE. |
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| | US Market Report | | US open: Markets mixed after barrage of economic data and earnings - UPS, Intel, GE fall heavily
- Morgan Stanley beats forecasts
- Housing starts beat forecasts, but permits miss
- Consumer confidence declines
Dow Jones: 0.15%
Nasdaq: -0.21%
S&P 500: -0.16%
Markets were lacking direction on Friday morning as investors digested mixed economic data from the housing market and a surprise decline in consumer confidence.
It was also a busy day for corporate earnings; Intel and UPS were both providing a drag after disappointing investors with guidance, General Electric slumped after missing forecasts, while Morgan Stanley jumped after beating expectations.
The Dow Jones Industrial Average rose 0.15% early on; the Nasdaq was down 0.21%, while the S&P 500 was trading 0.16% lower.
Housing data comes in mixed; consumer sentiment weakens
US housing starts fell 9.8% over the month in December to reach an annualised rate of 999,000, according to the US Department of Commerce. This was a significantly pull-back from the revised 23.1% gain in November but still came in ahead of the consensus forecast of 990,000.
Putting last month's fall into context, Property Economist Paul Diggle from Capital Economics said: "It only reversed half of November's (upwardly revised) increase; starts are still up on this time last year and they are more than double their low point from 2009."
However, data today also showed that building permits – more closely-watched by analysts given that they are a forward-looking indicator of housing activity – dropped by a worse-than-expected 3% during December to 986,000, coming in below the 1.014m prediction.
The preliminary reading of the University of Michigan consumer confidence index unexpectedly fell from 82.5 to 80.4 in January, surprising analysts who had expected a rise to 83.5.
Meanwhile, industrial production increased by 0.3% in December, as expected. Manufacturing output expanded by 0.4%, ahead of the 0.3% rise predicted.
Intel, UPS and GE fall; Morgan Stanley gains
Microprocessor group Intel was a heavy faller early on after saying after the bell last night that no revenue growth is expected in 2014, with the struggling PC market affecting demand. Fourth-quarter profit, however, rose to $2.6bn from $2.5bn the year before on sales that rose to $13.83bn from $13.48bn.
Delivery firm UPS was in the red after lowering its guidance for 2013 due to a shorter-than-expected holiday shopping season. Despite an "unprecedented" surge in last-minute orders, the company said that a shorter peak season for deliveries and poor weather dampened results.
Conglomerate General Electric also declined despite a broadly in-line fourth-quarter with income rising 4.8%.
Banking group Morgan Stanley gained strongly after topping estimates despite a 70% drop in fourth-quarter profits due to weak fixed-income trading results, legal costs and expenses. Investors were also reacting to its updated strategic plan, in which is reiterated its target for return on equity to exceed 10%. |
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| | Broker Tips | | Broker tips: Aberdeen, Rio Tinto, Next Numis Securities has maintained its 'hold' rating for Aberdeen Asset Management after Thursday's first-quarter statement, saying that the shares are "mostly up with events".
Trading at 14 times earnings, the broker said that the stock "is not as cheap as it was in the past" despite the company's earnings growth prospects being lower.
UBS has kept a 'buy' rating for mining giant Rio Tinto, saying that the stock remains its top pick in the sector on the back of its volume growth, cost cutting and cash-flow.
"Rio Tinto continues to be our most preferred stock; its strong production report gives us confidence in our 15% iron ore volume growth forecast next year, which together with continued focus on cost cutting should facilitate significant earnings growth," UBS said.
Credit Suisse has hiked its target for Next from 5,500p to 6,500p on the back of the retailer's strong brand momentum, but kept a 'neutral' stance on concerns over long-term forecasts for the company.
"Next Brand earnings before interest and tax (EBIT) margins are near 20%, which is frequently a watershed in retail, and, given the relatively low sales growth, we believe the valuation discounts these margins into maturity, driven by positive brand like-for-like sales and a benign gross margin environment, coupled with 21% tax rates, the lowest in 20 years." | | |
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