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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 fall after Draghi comments, supermarkets drop - Draghi says Eurozone recovery ‘weak and modest’
- BoE, ECB keep rates on hold
- Morrison and Tesco disappoint with Christmas sales
techMARK 2,774.65 -0.25%
FTSE 100 6,691.34 -0.45%
FTSE 250 15,948.97 -0.33%
After a brief stint in positive territory, UK stocks sunk into the red on Thursday markets digested comments from European Central Bank President Mario Draghi.
Sentiment was also dampened by a mixed performance from retailers over the key Christmas period, while caution was setting in ahead of the all-important December jobs report in the US on Friday. Labour-market data continues to be in focus after the Federal Reserve moved to taper its stimulus programme last month in the face of an improved economy.
The FTSE 100 finished 30.44 points lower at 6,691.34, falling 0.45% on the day.
Central banks were in focus today with the Bank of England and ECB both voting to leave interest rates unchanged, as widely expected. However, the following press conference with Draghi garnered the most attention given the surprise dip in inflation to 0.8% revealed earlier this week.
Risks still remain, says Draghi
ECB President Mario Draghi warned today that risks still remain to the Eurozone recovery, including political, economic and financial. He said that the recovery was taking place but is “weak and modest”, meaning that the ECB will need to maintain an accommodative stance “as long as needed”.
He said that the ECB expects a prolonged period of low inflation before prices begin to gradually rise close to its target of 2%. A drop in inflation to a four-year low of 0.7% in October prompted the ECB to cut rates in November.
However, as Market Analyst David Madden from IG explained: “Equities drift[ed] lower as Mario Draghi fail[ed] to convince the market that he can save the Eurozone from sinking into the abyss.”
Draghi attempted to reassure that the situation in the Eurozone was very different from Japanese deflationary environment in the 1990s.
Madden said: “On the surface all seems well in the region, but simply mentioning the Japanese crisis of the 1990’s seems to have sent stocks sliding. Mr Draghi tried to reassure the market he has a few cards up his sleeve, but actions speak louder than words.”
Retailers in focus
Morrison was a heavy faller after admitting that its sales performance over Christmas was "disappointing" as it warned investors that full-year profits would come likely come in at the bottom end of forecasts. Like-for-like (LFL) sales were down 5.6% over the six weeks to January 5th.
Supermarket peer Tesco also failed to impress with a worse-than-expected 2.4% slip in LFL sales over the festive period. Rival Sainsbury, which said yesterday that LFL sales were flat over the festive season, was also lower.
Even fashion retailer Ted Baker edged lower despite reporting a 18.3% jump in sales over Christmas as it said it was on track to hit full-year targets.
On the other hand, Marks & Spencer's third-quarter sales broadly missed analysts' estimates today, but shares managed to push higher, helped by comments from Investec which upgraded its rating from 'hold' to 'buy'. The broker said that the business should now become cash generative with the current year being the last year of elevated capital expenditure. "We believe the changing business model is not reflected in current valuation," it said.
Tullow Oil and CRH were also leading the risers in afternoon trade after broker upgrades.
RSA declined after saying that a review by PricewaterhouseCooper found that "inappropriate collaboration" among a number of senior executives in Ireland "undermined control effectiveness over claims". The company also said that it had suffered further weather losses over Christmas that will impact 2013 results.
High Street bookies William Hill and Ladbrokes were among the worst performers after Barclays Capital cut its ratings on the stocks to 'equal weight' and 'underweight', respectively. ARM Holdings was also hit by a downgrade by Deutsche Bank to 'hold'.
The share price of communications technology group Spirent Communications sank sharply after the company confirmed that 2013 revenues would be much lower than the previous year due to slower demand in the US. |
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| | FTSE 100 - Risers
Marks & Spencer Group (MKS) 460.90p +3.60%
Tullow Oil (TLW) 845.00p +3.05%
CRH (CRH) 1,625.00p +2.39%
Lloyds Banking Group (LLOY) 85.26p +1.74%
British Land Co (BLND) 633.00p +1.44%
ITV (ITV) 199.30p +1.32%
BT Group (BT.A) 384.00p +1.29%
Associated British Foods (ABF) 2,550.00p +1.27%
easyJet (EZJ) 1,646.00p +1.23%
Whitbread (WTB) 3,884.00p +1.20%
FTSE 100 - Fallers
Morrison (Wm) Supermarkets (MRW) 234.50p -7.75%
William Hill (WMH) 371.10p -7.18%
ARM Holdings (ARM) 997.50p -6.51%
Aberdeen Asset Management (ADN) 449.60p -5.01%
Randgold Resources Ltd. (RRS) 3,608.00p -3.45%
Rolls-Royce Holdings (RR.) 1,248.00p -2.95%
Anglo American (AAL) 1,226.50p -2.85%
RSA Insurance Group (RSA) 97.95p -2.73%
Fresnillo (FRES) 674.50p -2.53%
Sainsbury (J) (SBRY) 351.40p -2.39%
FTSE 250 - Risers
Laird (LRD) 317.10p +12.13%
Restaurant Group (RTN) 629.00p +5.71%
Perform Group (PER) 235.70p +5.22%
FirstGroup (FGP) 134.90p +3.37%
Pace (PIC) 352.10p +3.04%
Merlin Entertainments (MERL) 377.50p +3.00%
Thomas Cook Group (TCG) 176.70p +2.91%
PayPoint (PAY) 1,048.00p +2.75%
Hansteen Holdings (HSTN) 113.40p +2.62%
Drax Group (DRX) 817.50p +2.57%
FTSE 250 - Fallers
Spirent Communications (SPT) 85.90p -13.54%
Ladbrokes (LAD) 164.10p -8.68%
Polymetal International (POLY) 528.00p -7.69%
Centamin (DI) (CEY) 44.40p -4.50%
CSR (CSR) 632.50p -4.31%
African Barrick Gold (ABG) 190.00p -4.19%
Imagination Technologies Group (IMG) 161.90p -4.14%
Oxford Instruments (OXIG) 1,748.00p -3.64%
Ted Baker (TED) 2,230.00p -3.04%
Tullett Prebon (TLPR) 365.30p -2.97% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks mixed after ECB policy announcement - ECB and BoE keep policy on hold
- Eurozone economic confidence improves
- US initial jobless claims fall
FTSE 100: -0.46%
DAX: -0.80%
CAC 40: -0.87%
FTSE MIB: 0.21%
IBEX 35: -0.29%
Stoxx 600: -0.44%
European stocks were mixed after European Central Bank (ECB) President Mario Draghi strengthened his pledge to keep interest rates low for an “extended period of time”.
Draghi’s comments came at a press conference after the ECB announced it will hold the benchmark interest rate at 0.25%.
He also said the ECB expects a prolonged period of low inflation before prices begin to gradually rise “later on”.
A sharp fall in inflation prompted the ECB to cut interest rates to 0.25% from 0.5% late last year.
Draghi said high unemployment, currently at 12.1%, would continue to weigh on recovery but inflation would slowly edge closer towards the central bank’s target of close to and under 2%.
The Bank of England also announced its policy decision today, holding interest rates at 0.50% and asset purchases at £375bn.
The BoE has vowed to keep interest rates at their record low at least until the unemployment rate drops to 7%.
With unemployment falling to 7.4% in the three months to October, some believe the Bank's Monetary Policy Committee is likely to raise the rate soon. The proportion of economists expecting a rise this year has jumped from close to 20% in December to nearly 50% this month, according to Reuters.
Eurozone economic confidence rises
The European Commission’s index of executive and consumer sentiment jumped to 100 in December from 98.4 in November, surprising analysts who expected a reading of 99.1. It marked the highest reading since July 2011.
In the US, the Labor Department revealed initial weekly claims for unemployment benefits dropped by 15,000 to 330,000 from an upwardly revised 345,000 in the month before. Economists had pencilled in a figure of around 335,000.
The report comes ahead of the highly anticipated US non-farm payrolls and jobless rate tomorrow as the Federal Reserve’s next policy meeting looms.
The market is watching labour market data closely to weigh whether the Fed will announce a further tapering this month after announcing in December that it would begin scaling back monthly bond purchases by $10bn to $75bn.
Arkema, Tesco
Arkema tumbled after the French chemical company cut its full-year earnings forecast to around €900m from a previous estimate of €920m.
Tesco declined after reporting a fall in like-for-like Christmas sales that missed expectations.
Rival supermarket Morrison also retreated after saying underlying operating profit for the year will be at the lower end of a cited range of £783m to £853m after a challenging Christmas.
Standard Chartered was lower after announcing Chief Financial Officer Richard Meddings and Steve Bertamini, Head of Consumer banking, will step down.
Waertsilae was up after Rolls-Royce said that it has ended initial talks to buy the Finnish maker of engines for tankers, cruise ships and navy vessels.
TGS Nopec Geophysical Co. rallied after the Norway surveyor of underwater oil and gas fields raised its annual revenue projection to around $882m from an earlier forecast of between $810m to $870m.
AstraZeneca gained after the Food and Drug Administration approved dapagliflozin, a treatment for Type 2 diabetes.
Genel Energy bounced as HSBC upgraded its rating on the shares to ‘overweight’ from ‘neutral’.
The euro rose 0.13% to $1.3593.
Brent crude futures jumped $0.047 to 107.200 per barrel, according to the ICE. |
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| | US Market Report | | US open: Stocks flat as investors await jobs report - Jobless claims drop as eyes turn to jobs report
- Macy's jumps, Bed Bath & Beyond drops
- Ford lifts quarterly dividend
Dow Jones: -0.09%
Nasdaq: 0.02%
S&P 500: 0.06%
US markets opened more or less flat on Thursday morning despite data showing that weekly jobless claims declined to their lowest in a month.
However, gains were only modest as investors showed caution ahead of the December jobs report tomorrow which will factor into the Federal Reserve's policy decision this month on whether or not to continue with its stimulus withdrawal.
Minutes from latest meeting - released after the close last night – which showed that US policymakers viewed the effectiveness of quantitative easing as lessening over time.
The US Labour Department revealed today that initial weekly claims for unemployment benefits dropped by 15,000 to 330,000 from an upwardly revised 345,000 in the month before.
Claims declined by more than expected with economists having pencilled in a figure of around 335,000. However, analysts warned that data could have been distorted by the holidays, which should be kept in mind ahead of Friday’s monthly labour-market figures.
“Claims have been volatile in the past few months, averaging 327k in November and then 360k in December, but we expect them to continue to grind lower in the coming months as the labour market continues to improve,” said analyst Cooper Howes from Barclays.
Figures from ADP out yesterday showed that the American economy added significantly more jobs than expected in December, indicating upside risk to the official US employment report.
The consensus of analysts expect a 195,000 increase in non-farm payrolls in December when the Bureau of Labor Statistics releases the data tomorrow, down slightly from the 203,000 gain the month before. The unemployment rate is estimated to remain at 7%.
Retailers in focus
The share price of department store Macy’s after the company announced jobs cuts and store closures that aim to save $100m per annum. The retailer also forecast a profit for the full year that smashed analysts’ expectations.
In contrast, houseware chain Bed Bath & Beyond plummeted after weaker-than-expected third-quarter earnings and guidance for the full year.
JC Penney was bouncing back after heavy falls the day before. Broker Piper Jaffray upped its view on the shares to ‘overweight’.
Ford was in focus today after raising its quarterly dividend by 25% as it attempts to reassure investors following its warning of weaker profits in 2014.
Drug distributor McKesson gained strongly on reports that it has increased its offer to acquire European peer Celesio.
Front-month West Texas crude futures were up 0.48% to the $92.77 a barrel on the NYMEX in morning trade.
10-year US Treasury yields were one basis point lower at 2.98%. |
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| | Broker Tips | | Numis Securities has scaled back its profit forecasts for Marks & Spencer after the High Street retailer missed expectations in its third quarter. The broker maintained a 'hold' rating and 450p target for the stock.
Investec also reduced its forecasts for M&S after the results, but upgraded its rating from 'hold' to 'buy', saying that the business should now become cash generative given that the current year is the last year of elevated capital expenditure.
Panmure Gordon has trimmed its target for Morrison and reiterated its 'sell' rating after a "very disappointing Christmas" by the UK grocer.
The analysts said: "This has been a tough trading period for all retailers, but the weakness of these results clearly reveals a fundamental weakness in Morrison’s business model – extending to more we believe than just a lack of exposure to convenience and online, although clearly this is the main issue."
Deutsche Bank has lowered its recommendation for chip designer ARM Holdings from 'buy' to 'hold', saying that consensus forecasts for 2014 look too high. It cut its target for the stock from 1,130p to 1,070p.
The bank still believes that ARM remains "one of the best secular growth stories in the sector". However, after a strong finish to 2013 it said that the share price is now ignoring "several risks".
Analysts at Jefferies have cut their rating for communications technology group Spirent Communications from 'buy' to 'hold' and slashed their target from 150p to 103p.
The broker said that it is "testing times" for Spirent with 2014 likely to be a "year of slow improvement". | | |
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