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| | London Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | | UK stocks erase losses, but corporate earnings weigh on sentiment - Stocks snap winning streak but pare losses by the close
- Tate & Lyle, Rolls-Royce issue profit warnings
- Lloyds underwhelms with higher profits in 2013
- US retail sales disappoint
techMARK 2,823.82 -0.26%
FTSE 100 6,659.42 -0.23%
FTSE 250 16,029.39 -0.31%
Profit warnings from Tate & Lyle and Rolls-Royce and an underwhelming set of results from Lloyds weighed on UK markets today, which finished lower after six straight days in positive territory.
“After the gains of the last few days markets are once again focussing on the underlying weakness of company earnings and not really liking what they are seeing,” said Chief Market Analyst Michael Hewson from CMC Markets.
Worse-than-expected US retail sales data also dampened sentiment today, with economists now raising concerns over economic growth estimates in the States for the fourth quarter.
US retail sales fell by 0.4% in January, while downwards revisions were made to forecasts for December and November, which “suggest[s] notably softer growth in fourth-quarter consumption than initially estimated”, said Analyst Peter Newland from Barclays.
Nevertheless, Wall Street stocks pushed higher after the opening bell, helping the FTSE 100 to erase most of its losses by the close to finish down just 15.61 points (-0.23%) at 6,659.42. The index pulled back after hitting its best closing level since January 23rd on Wednesday, but ended well above the intraday low of 6,608.09 reached earlier this afternoon.
In other news, the Bank of England's Chief Economist Spencer Dale said that expectations for a rate hike in 2015 are "reasonable". This follows the central bank's Inflation Report yesterday, in which Governor Mark Carney completely revamped his forward guidance plan.
Tate & Lyle, Rolls-Royce, Lloyds and Rio provide a drag
Food and sweetener company Tate & Lyle was down 16% despite saying it expects full-year profits to be broadly in line with the previous year as Sucralose pricing pressures have intensified in the final quarter. The company had previously said that it expected “another year of profitable growth”.
Aerospace and defence group Rolls-Royce also dropped 14% after revealing that 2014 revenue and profit is expected to be flat due to cuts in government defence spending, implying a reduction to current consensus forecasts. Defence groups Meggitt and BAE Systems were also lower.
Banking group Lloyds fell despite swinging to a statutory profit before tax of £415m during 2013, from a loss of £606m the year before. However, the company came under fire for an 8% increase in its bonus pool, with Chief Executive António Horta-Osório having to defend his £1.7m payout.
Rio Tinto also fell after underwhelming with a 10% increase in underlying earnings in 2013 and a 15% rise in the dividend. Mining peers Glencore Xstrata and Antofagasta were also under the weather, while Randgold gained as gold and silver prices advanced.
Aberdeen was in the red after the asset manager was downgraded from 'hold' to 'underperform' by Jefferies, which said that the recent acquisition of Scottish Widows Investment Partnership will not compensate for the slowdown in the group’s main equities business.
Leading the upside was Imperial Tobacco after first-quarter underlying tobacco net revenue rose 1% to £1.56bn, helped by its key Growth Brands. Cigarettes and tobacco rival British American also finished higher.
UK oil and gas engineer AMEC was also making gains after an in-line 2013 report, in which adjusted earnings per share rose 11% despite a 3% dip in revenues. The company also announced a firm offer for Swiss rival Foster Wheeler. |
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| | FTSE 100 - Risers
Imperial Tobacco Group (IMT) 2,351.00p +5.66%
International Consolidated Airlines Group SA (CDI) (IAG) 442.00p +2.89%
British American Tobacco (BATS) 3,052.00p +1.90%
Randgold Resources Ltd. (RRS) 4,687.00p +1.49%
Rexam (REX) 515.50p +1.48%
ARM Holdings (ARM) 937.50p +1.35%
Legal & General Group (LGEN) 235.50p +1.33%
AstraZeneca (AZN) 4,055.50p +1.32%
SSE (SSE) 1,377.00p +1.25%
Whitbread (WTB) 4,083.00p +1.19%
FTSE 100 - Fallers
Tate & Lyle (TATE) 660.00p -16.08%
Rolls-Royce Holdings (RR.) 1,045.00p -13.64%
Aberdeen Asset Management (ADN) 408.20p -4.54%
Tullow Oil (TLW) 758.50p -4.29%
BAE Systems (BA.) 425.80p -3.12%
Lloyds Banking Group (LLOY) 81.32p -2.65%
Antofagasta (ANTO) 905.50p -2.37%
Meggitt (MGGT) 523.00p -1.78%
G4S (GFS) 228.70p -1.76%
William Hill (WMH) 347.20p -1.73%
FTSE 250 - Risers
African Barrick Gold (ABG) 272.90p +8.29%
IP Group (IPO) 196.50p +5.08%
Dunelm Group (DNLM) 914.00p +3.28%
Keller Group (KLR) 1,224.00p +2.86%
Riverstone Energy Limited (RSE) 930.00p +2.76%
Essentra (ESNT) 851.50p +2.65%
Euromoney Institutional Investor (ERM) 1,287.00p +2.63%
Entertainment One Limited (ETO) 334.00p +2.30%
Rank Group (RNK) 143.60p +2.28%
Britvic (BVIC) 733.50p +2.23%
FTSE 250 - Fallers
Essar Energy (ESSR) 60.00p -4.76%
Lancashire Holdings Limited (LRE) 722.00p -4.37%
Cairn Energy (CNE) 192.20p -3.71%
Ladbrokes (LAD) 145.70p -3.64%
Moneysupermarket.com Group (MONY) 172.30p -3.47%
Evraz (EVR) 83.80p -3.12%
Telecity Group (TCY) 641.00p -2.88%
Senior (SNR) 290.60p -2.81%
Home Retail Group (HOME) 187.00p -2.76%
Man Group (EMG) 82.25p -2.37% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | European stocks end mixed after US retail sales and jobs data - US jobless claims rise
- US retail sales fall
- Yellen testimony postponed due to weather
- Italy's Renzi calls for new government
FTSE 100: -0.21%
DAX: 0.60%
CAC 40: 0.17%
FTSE MIB: -0.17%
IBEX 35: 0.16%
Stoxx 600: -0.16%
European stocks were mixed as US reports showed a rise in jobless claims and fall in retail sales. Italy’s Renzi calls for new government
Italy’s centre-left party leader Matteo Renzi has called for a new government to take power amid pressure on Prime Minister Enrico Letta to step down.
In a speech to the Democratic party on Thursday, Renzi, a popular leader to take over the helm in polls, said the country needs to move into "a new phase with a new government".
His remarks effectively show he is pulling his support for Letta, who on Wednesday tried to resist a push for a leadership change when he met with Renzi to discuss the future of the government.
Elsewhere in the euro-area, the European Central Bank released its Monthly Bulletin this morning which reiterated the statements released last week at the policy meeting.
On that occasion the ECB decided to keep its interest rates unchanged and policy on hold despite mounting pressure to take greater measures to tackle inflation.
The monthly report confirmed the ECB’s expectation of a prolonged period of low inflation, to be followed by a gradual upward movement towards inflation rates below, but close to, 2% later on.
In Germany, consumer prices, calculated using a harmonised European Union method, rose 1.2% in January, matching the previous month’s increase and the consensus forecast.
BNP Paribas, Rolls-Royce
BNP Paribas declined after France’s largest bank unexpectedly reported a drop in fourth-quarter profit.
Rolls-Royce edged lower after estimating 2014 revenue and profit would remain flat, reverting an earlier profit for a rise.
Nestle tumbled after reporting saying it expects another challenging year as food companies face slowing demand in emerging markets and in Europe.
Renault was higher as the carmarker said full-year operating profit increased as it delivered cost savings.
Lloyds Banking Group dropped as the lender reported its fourth consecutive annual loss.
Commerzbank advanced as Germany’s second-largest bank posted net income that exceeded analysts’ projection.
The euro rose 0.52% to $1.3664.
Brent crude futures fell $0.249 to $108.520 per barrel, according to the ICE. |
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| | US Market Report | | US stocks retreat as retail sales disappoint - Retail sales fall 0.4 per cent, below forecasts
- Jobless claims unexpectedly rise by 8,000
- Cisco disappoints with quarterly guidance
Dow Jones: -0.23%
Nasdaq: 0.01%
S&P 500: -0.14%
US markets opened with small losses on Thursday after data showed a surprise pull-back in retail sales and an unexpected increase in jobless claims.
Meanwhile, a disappointing update from tech group Cisco Systems was also weighing on sentiment after the networking equipment maker provided gloomy guidance for the current quarter.
In other news, government offices in Washington closed today with Federal Reserve Chair Janet Yellen being forced to postpone her testimony before the Senate Banking Committee due to the icy weather that downed power lines across the east coast.
Data misses forecasts
US retail sales declined by 0.4% in January, compared with a downwardly revised 0.2% increase the month before, due to weakness in the auto, department stores and eating out categories. The consensus of analysts had expected no change.
Analyst Peter Newland said that the above factors can be partly explained by the bad weather during the month, but other movements – such as a drop in internet sales and a strong gain in building materials – “are more difficult to square with that as a catch-all explanation”.
Meanwhile, US initial jobless claims increased by 8,000 from 331,000 to 339,000 in the week ending February 8th, slightly ahead of the fall to 330,000 expected by the market.
Cisco Systems slides
Cisco Systems declined after the company forecast a drop of 6- 8% in revenue in the third quarter. This comes after an 8% decline in revenue to $11.2bn for the three months to January, while earnings fell by over a half after a charge related to faulty memory chips sold in previous years.
Comcast has agreed to buy Time Warner Cable for $45.2bn in an all-stock deal that combines the two US cable operators. Time Warner’s shares jumped after the announcement while Comcast fell, along with Charter Communications which had wanted to buy the firm.
Whole Foods Market dipped after the US organic and natural food retailer slashed its 2014 sales forecast for the second time in three months.
PepsiCo advanced after reporting a 5% increase in quarterly profit, driven by strong sales of Frito Lay chips in the Americas and cost cuts. |
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| | Brokers Tips | | Tate & Lyle, Aberdeen, AMEC Shore Capital has reiterated its ‘hold’ stance and sugar and sweeteners group Tate & Lyle following a ‘constrained’ third-quarter trading update in which it scaled back its profit guidance for the full year.
The broker said has Tate & Lyle invested in its SFI infrastructure in recent years to improve visibility and build control over it profits stream. “However, today’s statements confirms to us that despite such investment, large elements of the Bulk Ingredients and sucralose profit streams remain out of the companies control, whilst volume momentum from Speciality Food Ingredients still remains modest.”
Jefferies has cut its rating for fund manager Aberdeen from ‘hold’ to ‘underperform’, saying that the recent acquisition of Scottish Widows Investment Partnership will not compensate for the slowdown in the group’s main equities business.
“ADN’s future prospects mean its earnings deserve, in our view, a lower multiple,” said Equity Analyst Jason Streets. He lowered his target for the stock from 430p to 350p.
Canaccord Genuity has retained a ‘buy’ rating for oil engineer AMEC, showing optimism about the company’s firm offer for Swiss rival Foster Wheeler.
“The deal is highly earnings accretive for AMEC and is in our view the most important driver in the short to medium term,” said Analyst Alex Brookes. He said that while there remains a number of regulatory and shareholder approval hurdles, they should not be a problem. | | |
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