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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: Risk aversion moves up a notch, traders skittish - US ISM manufacturing index surprises sharply on the downside, weather cited
- Footsie finds supoort at 200-day moving average
- Lloyds dives on PPI bill update, dividend plans
- Chinese data just in line
Market Movers
techMARK 2,766.78 -0.29%
FTSE 100 6,460.48 -0.77%
FTSE 250 15,552.68 -0.78%
The FTSE 100 followed the other main global equity benchmarks into the red on Monday as some of the most widely followed gauges of risk aversion, such as the Japanese yen [versus the US dollar] and gold futures, betrayed just how skittish investors can be at times.
Curiously, the top flight index actually outperformed its European peers despite the fact that its components are heavily exposed to the outlook for emerging markets. Nonethless, that may in part be due to the fact that the Footsie began the day atop an important level of technical support – its 200-day moving average.
The most intense bout of selling, just before the close of trading, was set off by a surprisingly negative reading on US manufacturing, courtesy of the ISM institute. A good deal of the weakness in that report seemed attributable to unfavourable weather, but traders seemed in no mood to wait around for answers.
Acting as a backdrop, overnight the Japanese Nikkei-225 entered so-called 'correction' territory. That followed Friday´s weak close on international markets, which saw several of the biggest global benckmarks for stocks end January in the red, for the first time in many years. February does not seem to have gotten off to a much better start either.
That came as much market commentary was concentrating on the fact the retail investors are 'dumping' their shares as opposed to institutional investors who, presumably, are sitting tight.
The FTSE 100 finished 45 points lower (-0.69%) at 6,465.66.
In its latest edition The Economist sided with the optimists when it came to worries about China and the recent ructions in emerging markets. However, the magazine admitted that there was a certain danger - and tendency - for fears about emerging markets to be 'self-fulfilling'.
On the positive side of things, it pointed out how the majority of those countries now have floating exchange rates, high levels of international reserves and current account deficits which, for the most part, were below 5% of Gross Domestic Product. Those economies should therefore be better positioned to cope with a normalisation in interest rates Stateside.
Similarly, the latest edition of the FT Weekend pointed out in an editorial that the risk of 'contagion' from emerging markets to developed ones was limited. That was particularly unlikely to occur through international trade linkages, it said, as exports to emerging markets by the West still represented only a tiny portion of overseas sales.
The risk of financial contagion, however, was more severe. Even so, the exposure of banks in high-income countries to emerging markets – while relatively high – was not overly concentrated. Despite that, the risk of 'panics' could not be completely dismissed, the newspaper indicated.
Acting as a backdrop, a raft of data and central bank meetings were expected throghout the coming week, culminating in Friday´s jobs report Stateside.
Gold miners and 'defensive' issues lead gains
On the company front, Randgold Resources was a strong riser after it said it hit targets for 2013, boosted gold production to a new record level and expects output to rise over the next five years. Production for the quarter and year to December rose 20% and 15% respectively, ahead of some analysts´ forecasts. Cash costs, a widely tracked metric, fell by 5% versus the previous quarter. Further helping the share price was the advance in gold futures.
Shares in Lloyds were at the bottom of the pile after the group revealed its payment protection insurance (PPI) bill had soared by a further £1.8bn to nearly £10bn, and despite predicting its full-year underlying profits would be almost double that predicted by analysts. Some analysts were irked by the lender's announcement that it will seek approval to commence dividend payments at a 'modest' level.
Acting as a backdrop, banks were the worst performing sector out on the DJ Stoxx 600 today after the European Central Bank published further details on its upcoming stress tests.
Reckitt Benckiser Group rose strongly after Sanford C. Bernstein reiterated its 'outperform' rating on the shares.
Weir Group was another top performer as investors ignored the target reduction (2,500p to 2,335p) from broker Jefferies and instead focused on its comments that the oil and gas group could experience a favourable shift in sentiment if "the on-going concerns towards the Minerals division [were] to dissipate".
Shares in Vodafone were amongst the day´s worst performers as well, with a fair bit of market commentary concentrating on the fact that Thursday´s trading update would show a company which is having to deal with a big fall in overseas revenues because of the problems afflicting emerging markets. Three of those makets happened to be where the telecoms operator has a heavy presence: India, South Africa, Turkey. Other stocks with exposure to emerging markets, such as Aberdeen Asset Management and Burberry also fared poorly.
BBA Aviation climbed after saying it sold APPH, a full-service landing gear and hydraulic sub-systems supplier, and announced it was considering a cash return to shareholders. The business, which had formed part of BBA's Aftermarket Services division, was sold for $128m, the $120.6m proceeds of which would be use to reduce the group's debt level. |
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| | FTSE 100 - Risers
Randgold Resources Ltd. (RRS) 4,463.00p +6.44%
Reckitt Benckiser Group (RB.) 4,666.00p +2.26%
Severn Trent (SVT) 1,764.00p +2.14%
SSE (SSE) 1,333.00p +1.99%
Fresnillo (FRES) 782.00p +1.62%
Petrofac Ltd. (PFC) 1,173.00p +1.56%
William Hill (WMH) 337.50p +1.53%
Rexam (REX) 499.80p +1.38%
Weir Group (WEIR) 2,121.00p +1.29%
Travis Perkins (TPK) 1,761.00p +1.27%
FTSE 100 - Fallers
Lloyds Banking Group (LLOY) 79.92p -4.06%
Aberdeen Asset Management (ADN) 375.60p -3.89%
IMI (IMI) 1,455.00p -2.81%
Burberry Group (BRBY) 1,408.00p -2.76%
Anglo American (AAL) 1,397.50p -2.68%
Barclays (BARC) 265.40p -2.61%
Hargreaves Lansdown (HL.) 1,449.00p -2.49%
Glencore Xstrata (GLEN) 314.70p -2.42%
Melrose Industries (MRO) 302.60p -2.17%
Babcock International Group (BAB) 1,360.00p -2.16%
FTSE 250 - Risers
African Barrick Gold (ABG) 232.50p +5.78%
Centamin (DI) (CEY) 46.20p +4.76%
Hansteen Holdings (HSTN) 108.40p +2.26%
Derwent London (DLN) 2,545.00p +2.21%
CSR (CSR) 674.00p +1.89%
EnQuest (ENQ) 131.80p +1.78%
Paragon Group Of Companies (PAG) 357.20p +1.74%
Ferrexpo (FXPO) 154.30p +1.51%
Rightmove (RMV) 2,568.00p +1.42%
BBA Aviation (BBA) 312.20p +1.17%
FTSE 250 - Fallers
Kenmare Resources (KMR) 16.75p -4.29%
Tullett Prebon (TLPR) 318.80p -3.98%
Supergroup (SGP) 1,488.00p -3.56%
Jupiter Fund Management (JUP) 362.30p -3.08%
Balfour Beatty (BBY) 283.00p -3.02%
Rotork (ROR) 2,389.00p -2.97%
Perform Group (PER) 240.20p -2.95%
Inchcape (INCH) 568.00p -2.91%
Close Brothers Group (CBG) 1,288.00p -2.87%
Evraz (EVR) 83.00p -2.81% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Banks lead stocks lower on ECB stress test - Banking stocks fall on ECB stress test
- Investors weigh mixed manufacturing data
- Analysts speculate on UK interest rate rise
FTSE 100: -0.69%
DAX: -1.29%
CAC 40: -1.39%
FTSE MIB: -2.63%
IBEX 35: -1.96%
Stoxx 600: -1.34%
Banks led European stocks lower after the bloc's central bank collected its first set of data for its review of lenders.
The European Central Bank (ECB) is reviewing the Eurozone's largest banks to see if they can withstand a sharp economic downturn.
Banks will have to show a ratio of 8% in core Tier 1 capital relative to their risk-adjusted assets in the baseline scenario, and 5.5% in the adverse scenario.
"Preparations for the stress test are well under way and we are confident that, in close coordination with the European Banking Authority, the outcome will be transparent and credible, boosting the European banking sector," Vítor Constâncio, Vice President of the European Central Bank, said in a statement Monday.
European banks were among the worst performers on the Stoxx 600, down 2.67% at 16:50, following the news.
Manufacturing data
The Eurozone manufacturing purchasing managers' index (PMI) rose to 54 in January from 53.9 the prior month, beating analysts' predictions of 53.9 and the 50 level that signals expansion. Growth was driven by Germany, which offset a fall in emerging markets.
Chinese manufacturing activity eased in January, fuelling concerns of slowdown in the world's second largest economy. The PMI dropped to 50.5 in January from 51 a month earlier, in line with market expectations.
Manufacturing also eased in the UK with the PMI falling to 56.7 last month from 57.2 in December, missing the 57.3 consensus forecast.
In the US, the Institute for Supply Management's manufacturing sector survey for the month of January came in at 51.3, following a reading of 57 a month before (consensus: 56).
BoE may lift interest rates
BoE Governor Mark Carney is expected to raise interest rates before the European Central Bank (ECB) and the US Federal Reserve, Bloomberg reported citing economists at Citigroup and Nomura.
The analysts said the strongest growth since 2007 will prompt the UK's central bank to lift its record low benchmark rate of 0.5% as early as this year.
Morgan Stanley sees the BoE lifting rates in the second quarter of 2015 and the Fed increasing in 2016.
Sandvik, Colruyt
Sandvik AB, the world's biggest maker of metal-cutting tools, edged lower after reporting a 72% fall in operating profit of 590m kroner in the final three months of 2013.
Colruyt SA tumbled after the Belgian discount food retailer said it will report a smaller profit for the current financial year, due to slower sales growth and a loss in market share.
Randgold Resources rallied after saying gold production increased 15% in 2013, and costs fell 3% to $715 per ounce.
Lloyds Banking Group slumped after saying it set aside £1.8bn in the fourth quarter to cover the cost of compensating customers for mis-sold payment protection insurance.
Ryanair advanced after the airline said price weakness has eased and bookings in the first quarter of 2015 are already significantly higher than a year ago.
Travel retailer Dufry AG slipped as Citigroup recommended selling the shares.
The euro rose 0.32% to $1.3529.
Brent crude futures dropped $0.824 to $105.530 per barrel, according to the ICE. |
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| | US Market Report | | US open: Weak ISM and auto sales hit stocks - US manufacturing gauge drops sharply, weather played a hand
- S&P 500 below support at 1,775
- Weak January sales at Ford, Toyota and GM
Dow Jones Industrials: -0.82%
Nasdaq Composite: -1.02%
S&P 500: -0.86%
The main US equity benchmarks were slipping lower in late morning trading Stateside after the release of weaker-than-expected data on activity levels in manufacturing and after poor monthly sales reports from the country´s largest car manufacturers.
Weather was cited by the ISM Institute as an important factor behind the weakness seen in the manufacturing data. Analysts seemed to concur with that assesment although Capital Economics, for one, was not completely certain about the magnitude of any such effect.
The Institute for Supply Management's index measuring activity within the manufacturing sector fell to a reading of 51.3 last month from 56.5 in December (consensus: 56), led by a sharp pull back in a gauge for new orders. A reading above 50 in the headline index or any of the subindices signals an expansion.
Construction spending rose by 0.1% over the month in December versus forecasts for a flat reading. The previou´s month´s print was revised lower, to show a reading of 0.8% instead of the preliminary estimate of 1.0%.
The reports came after the Federal Reserve last week said that it would trim monthly bond purchases for a second time by $10bn to $65bn, due to an improving economy.
Acting as a backdrop, markets were expected to be closely watching the release of Friday's US jobs report to see whether the Fed made the right decision in tapering stimulus.
Weak automobile sales reported
Sales of automobiles dropped by 12% at General Motors during the month of January, far more than analyst had penciled in.
Over at rivals Ford and Toyota they dropped by 7.5% and 7.2% respectively.
Telecoms company Sprint declined following a report that its Chief Executive and the head of its parent company SoftBank Corp will meet US regulators. SoftBank is in talks to resolve hurdles surrounding a potential deal combining T-Mobile US with Sprint.
Herbalife advanced after the vitamin maker said it will offer $1bn in convertible senior notes and use some of the money to repurchase common shares.
Food distributor Sysco reported second quarter net earnings per share (EPS) of 40 cents on sales of $11.2bn, coming in below estimates for EPS of 40 cents and revenues of $11.35bn.
S&P 500 - Risers
Pfizer Inc. (PFE) $31.65 +4.10%
Carmax Inc. (KMX) $46.49 +3.06%
Micron Technology Inc. (MU) $23.53 +2.13%
Time Warner Cable Inc. (TWC) $135.47 +1.65%
Mosaic Company (MOS) $45.20 +1.21%
Edison International (EIX) $48.73 +1.18%
Southern Co. (SO) $41.71 +1.14%
Pepco Holdings Inc. (POM) $19.62 +0.98%
Sempra Energy (SRE) $93.54 +0.90%
O'Reilly Automotive Inc. (ORLY) $132.07 +0.83%
S&P 500 - Fallers
ONEOK Inc. (OKE) $59.25 -13.49%
Leucadia National Corp. (LUK) $26.29 -3.81%
Blackrock Inc. (BLK) $290.44 -3.34%
United States Steel Corp. (X) $25.25 -3.29%
Genuine Parts Co. (GPC) $79.59 -3.23%
Amazon.Com Inc. (AMZN) $347.58 -3.10%
First Solar Inc. (FSLR) $49.03 -3.05%
Janus Capital Group Inc. (JNS) $10.65 -3.05%
Verizon Communications Inc. (VZ) $46.58 -2.99%
TripAdvisor Inc. (TRIP) $74.92 -2.94%
Dow Jones I.A - Risers
Pfizer Inc. (PFE) $31.65 +4.10%
Dow Jones I.A - Fallers
Verizon Communications Inc. (VZ) $46.58 -2.99%
AT&T Inc. (T) $32.40 -2.76%
Walt Disney Co. (DIS) $71.29 -1.82%
Microsoft Corp. (MSFT) $37.18 -1.74%
General Electric Co. (GE) $24.75 -1.51%
Nike Inc. (NKE) $71.82 -1.41%
Caterpillar Inc. (CAT) $92.62 -1.37%
Wal-Mart Stores Inc. (WMT) $73.69 -1.33%
International Business Machines Corp. (IBM) $174.40 -1.29%
Intel Corp. (INTC) $24.24 -1.20%
Nasdaq 100 - Risers
Micron Technology Inc. (MU) $23.53 +2.13%
Tesla Motors Inc (TSLA) $183.05 +0.90%
O'Reilly Automotive Inc. (ORLY) $132.07 +0.83%
Charter Communications Inc. (CHTR) $138.04 +0.76%
Apple Inc. (AAPL) $504.06 +0.69%
NetApp Inc. (NTAP) $42.56 +0.52%
Whole Foods Market Inc. (WFM) $52.53 +0.52%
Sba Communications Corp. (SBAC) $93.08 +0.36%
Celgene Corp. (CELG) $152.47 +0.36%
Facebook Inc. (FB) $62.78 +0.34%
Nasdaq 100 - Fallers
Amazon.Com Inc. (AMZN) $347.58 -3.10%
TripAdvisor Inc. (TRIP) $74.92 -2.94%
Wynn Resorts Ltd. (WYNN) $211.70 -2.63%
Nxp Semiconductors Nv (NXPI) $47.10 -2.59%
Mattel Inc. (MAT) $36.87 -2.56%
Broadcom Corp. (BRCM) $29.02 -2.49%
Akamai Technologies Inc. (AKAM) $46.50 -2.47%
Adobe Systems Inc. (ADBE) $57.73 -2.47%
Garmin Ltd. (GRMN) $43.99 -2.35%
Henry Schein Inc. (HSIC) $112.32 -2.24% |
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| | Broker Tips | | Broker tips: Lloyds, Rio Tinto, MITIE Lloyds Banking Group is expected to report a 'small' statutory loss after tax after setting aside a provision to cover the cost of compensating customers for mis-sold payment protection insurance (PPI).
The lender has put aside £1.8bn in the fourth quarter for PPI and a further provision of £130m relating to the sale of interest rate hedging products to certain small and medium-sized businesses.
As a result the group predicts a 'small' statutory profit before tax for the year, and a pro-forma fully loaded common equity tier 1 ratio of 10.3%, in line with guidance.
The lender forecasts 2013 underlying profit of £6.2bn, missing Jefferies forecast of £6.4bn but beating the consensus of £5.8bn.
Lloyds also said it expects talks with the UK regulator to restart its dividend payments at a "modest level" will begin in the second half of 2014.
Jefferies said: "The timing of dividend payouts is consistent with our long-held views regarding repatriation of capital for LLOY. The 'modest level' is disappointing to us as we had factored in a 40% pay-out in 2015, which looks optimistic in light of today's announcement. We would not expect a 50% pay-out until 2018 at best."
The broker recommended a 'hold' rating and price target of 69p.
Rio Tinto´s drive to significantly lower its levels of capital expenditure will yield strong positive free cash flows (FCF). That means there is 'up-side' to consensus expectations for an eight per cent dividend increase (Credit Suisse: 15%) and holds out the prospect of a steadily growing and 'dependable' dividend pay-out, thanks to the outfit's now leaner balance sheet, analyst J.Gurry at Credit Suisse said on Monday.
Hence his decision to reiterate his 'outperform' recommendation on the stock, alongside a target of 4,000p, and add it to their 'Focus List'.
Particularly noteworthy, the analyst goes on to explain that his forecasts for the company´s free cash flow remain true "even under almost all commodity price scenarios".
The company is due to publish its full-year results on February 13th.
Rio Tinto´s net present value (NPV)-based target offers near 30% potential upside, while its single digit earnings multiples are currently over-compensating for the expected fall in the price of iron ore, Gurry said.
The firm´s shares were trading at nine times earnings per share (EPS) and five times earnings before interest taxes, depreciation and amortisation (EBITDA).
As a cross-check, he explained that based on 2015 guidance for iron-ore production at its Pilbara mine of 330mt, and a $90/t price for iron ore, then the company´s earnings per share would be at $5.70. That would equate to a share price of 4,100p and a still strong balance sheet ($13bn net debt), strong FCF ($19bn+ EBITDA and $8bn in capex guidance for 2015).
Investec recommended buying shares in MITIE after the strategic outsourcing specialist reported organic growth in the third quarter, driven by a mix of new and expanded contracts.
In its interim statement on Monday, MITIE said it was 'well-positioned' to deliver good organic growth and strong margins in its facilities management and healthcare segments.
Levels of bid activity at its facilities management division saw an uplift during the third quarter in both the public and private sectors.
However, it had experienced some delays in the start of new contracts in its property management arm, the company said in an interim trading statement (IMS) for the third quarter of its fiscal year.
"The Facilities Management division continues to be the engine for growth, albeit the progress being made in Healthcare bodes well for the anticipated growth prospects in this sector," Investec said.
"The re-positioning of the business towards higher margin and higher growth markets continues at pace and this gives us increasing confidence behind our current estimates."
The broker added that the company was well place as it noted the progress in re-positioning the business and a mix contracts and growth opportunities in Healthcare.
Investec retained its underlying forecasts and said it was becoming "increasingly positive on the risk/reward profile and therefore lifting our DCF-based target to 360p". | | |
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