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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: FTSE ends higher, Capita and Whitbread lead - ONS confirms Q4 UK growth of 0.7 per cent
- Yellen points to softer spending
- US jobless claims come in above expectations
techMARK 2,902.16 +0.09%
FTSE 100 6,810.27 +0.16%
FTSE 250 16,523.02 +0.31%
After a jam-packed day, the FTSE finished slightly higher, helped by confirmation of UK quarterly growth figures as well as strong results out from Capita and Whitbread.
The FTSE 100 finished 11.12 points higher at 6,810.27.
It was confirmed by the Office for National Statistics (ONS) today that the UK economy grew at a 0.7% rate in the final three months of 2013, as had been previously estimated. This was in part driven by a 2.4% increase in investment compared to the third quarter.
For the year as a whole, however, the ONS cut its estimate overall growth by 0.1% to 0.8%.
Fed Chair Yellen acknowledges softer spending, but weather impact unclear
Federal Reserve Chairwoman Janet Yellen tweaked her prepared testimony to the Senate compared to the one given two weeks ago to the House. The meeting had been delayed from February 5th due to winter storms.
This time Yellen pointed out that a number of released since then have pointed to softer spending that may partly reflect adverse weather conditions.
"Part of that softness may reflect adverse weather conditions, but at this point it's difficult to discern exactly how much," she said.
Also in the US, jobless claims increased by 14,000 to 348,000 in the week ended February 22nd, from 334,000 in the prior period, a Labor Department report showed. Economists had expected 335,000 claims.
The Federal Reserve is closely monitoring the labour market to gauge the health of the world's biggest economy ahead of its next policy meeting.
"A third consecutive month of weak payroll growth in February would raise speculation that the Fed will pause the tapering of its asset purchases," Capital Economics said. "But because any weakness this month was probably due to the unusually bad weather, we believe the Fed will stick to its current tapering plans."
Meanwhile, a report showed durable goods orders fell less than expected in January, down 1% compared to a fall of 5.3% in December. Analysts predicted a decrease of 1.7%.
Data from Europe comes in mixed
It was also a busy session in Europe, where Eurozone confidence indicators improved during February and beat consensus, although the gauge tracking consumers' sentiment showed these were more downbeat than in the first month of 2014, according to the European Commission.
The economic sentiment indicator marked a marginal increase of 0.2 points to 101.2, clocking in slightly above expectations of 100.9.
In Germany, the number of people unemployed fell by 14,000 compared to expectations of 10,000, while jobless claims declined by 28,000, according to the Federal Statistics Office. The jobless rate held steady at 6.8% as expected.
The turbulent situation in Ukraine has continued today, with reports that dozens of armed men have seized government buildings in Simferopol, the capital of Crimea.
Capital Economics noted that "it's difficult to gauge the immediate impact of recent developments in Ukraine on the economy", but said "historical evidence from similar instances of unrest and political transition suggests that GDP growth rates can weaken by between 4-8% points in the following year".
Capita leads as RBS sinks
Outsourcing specialist Capita led the upside after it said it had won £588m-worth of new contracts so far in 2014, as it lifted pre-tax profits by 14% to £215m for the 2013 full-year. Revenues rose 15% to £3.85bn and operating profits increased to £516m from £312m in 2012.
Whitbread also rose strongly after revealing it is on track to report full-year results at the top end of expectations. In the 50 weeks to February 13th, the hotels and restaurants chain saw its like-for-like sales climb 4.0%, driven by its Costa and Premier Inn chains, where they rose 5.8% and 4.7%, respectively.
Rolls-Royce was rising strongly after it yesterday unveiled designs for the next generation of its fuel-efficient plane engines, returning faith to investors following a surprise profit warning issued two weeks earlier.
Reed Elsevier was also higher after saying it expected to deliver another year of growth in 2014 and posted an in-line increase in earnings of 7% for last year.
Meanwhile, Royal Bank of Scotland (RBS) fell sharply after reporting its biggest annual loss since the height of the 2008 financial crisis as the lender underwent a major restructuring and paid fines. The state-backed bank reported an operating loss before tax of £8.24bn for the year through December 2013, up from a loss of £5.27bn in 2012, missing analysts' estimates of £6.7bn.
Advertising giant WPP fell after revealing that a stronger pound in the second half of the year in key markets lowered reported margins by 0.2 percentage points, causing the company to miss its margin target. |
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| | FTSE 100 - Risers
Capita (CPI) 1,158.00p +6.73%
Whitbread (WTB) 4,397.00p +4.92%
Rolls-Royce Holdings (RR.) 992.50p +3.22%
easyJet (EZJ) 1,721.00p +2.44%
Persimmon (PSN) 1,462.00p +1.88%
Travis Perkins (TPK) 1,959.00p +1.71%
Tesco (TSCO) 331.25p +1.61%
Reed Elsevier (REL) 923.50p +1.60%
Petrofac Ltd. (PFC) 1,371.00p +1.56%
Rio Tinto (RIO) 3,459.00p +1.51%
FTSE 100 - Fallers
Royal Bank of Scotland Group (RBS) 326.60p -7.74%
RSA Insurance Group (RSA) 98.10p -4.01%
WPP (WPP) 1,285.00p -3.46%
Smiths Group (SMIN) 1,346.00p -1.75%
Rexam (REX) 495.20p -1.75%
Coca-Cola HBC AG (CDI) (CCH) 1,499.00p -1.64%
ITV (ITV) 199.20p -1.14%
Intertek Group (ITRK) 2,945.00p -1.07%
BG Group (BG.) 1,088.50p -1.05%
Admiral Group (ADM) 1,433.00p -1.04%
FTSE 250 - Risers
Kazakhmys (KAZ) 310.00p +38.76%
Man Group (EMG) 96.10p +14.27%
Jupiter Fund Management (JUP) 434.00p +7.96%
CSR (CSR) 765.00p +6.77%
Bodycote (BOY) 741.00p +6.47%
African Barrick Gold (ABG) 291.90p +4.96%
RPS Group (RPS) 331.30p +4.78%
Carphone Warehouse Group (CPW) 346.60p +4.59%
Barratt Developments (BDEV) 427.80p +3.89%
Home Retail Group (HOME) 191.90p +3.23%
FTSE 250 - Fallers
Ocado Group (OCDO) 571.50p -7.37%
Synthomer (SYNT) 259.70p -4.66%
International Personal Finance (IPF) 531.50p -4.66%
IP Group (IPO) 215.60p -4.14%
Imagination Technologies Group (IMG) 181.20p -3.46%
Rank Group (RNK) 136.60p -2.78%
Micro Focus International (MCRO) 778.00p -2.75%
Daejan Holdings (DJAN) 4,894.00p -2.61%
Ted Baker (TED) 2,150.00p -2.54%
Evraz (EVR) 71.05p -2.47% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks little changed as traders digest mixed data - Eurozone consumer confidence falls
- German inflation drops more than forecast
- German unemployment declines
- US jobless claims rise
- Yellen delivers testimony to Senate
FTSE 100: 0.16%
DAX: -0.76%
CAC 40: -0.01%
FTSE MIB: -0.38%
IBEX 35% -0.59%
Stoxx 600: -0.15%
European stocks were little changed following a day of mixed economic releases in the Eurozone and the US.
Eurozone consumer confidence fell in line with expectations in February, a report showed this morning. The index for consumer sentiment dropped to -12.7 from -11.7 in January.
On a brighter note, economic confidence rose to 101.2 in February, the highest reading since July 2011, from a revised 101 in January. Economists had predicted a reading of 100.7.
In Germany, the number of people unemployed fell 14,000 compared to forecasts of 10,000, while jobless claims declined by 28,000, according to the Federal Statistics Office. The jobless rate held steady at 6.8% as expected.
Germany's European Union-harmonised annual inflation decelerated more than expected to 1% year-on-year in February from 1.2% the previous month, preliminary from the Federal Statistics Office showed today. It was anticipated by analysts to slow to 1.1%.
The drop inflation in Europe's biggest economy is likely to pile pressure on the European Central Bank (ECB) to shake up its policy.
ECB President Mario Draghi, who was due to speak in Frankfurt late today, has indicated that the central bank is considering enacting greater measures to tackle low inflation and high unemployment.
The inflation figures for February will be released tomorrow along with the unemployment rate.
Consumer prices in February are forecast by the consensus to have risen by 0.8% in February, in line with the prior month, and well below the ECB's 2% target. Barclays Research and Credit Suisse, on the other hand, see it coming in at 0.6%.
The unemployment rate is expected to have held at 12%.
US jobs, Yellen testimony
US jobless claims increased by 14,000 to 348,000 in the week ended February 22nd, from 334,000 in the prior period, a Labor Department report showed today. Economists had expected 335,000 claims.
The Federal Reserve is closely monitoring the labour market to gauge the health of the world's biggest economy ahead of its next policy meeting. Fed Chair Yellen has indicated that the Fed is likely to continue reducing monthly asset purchases at each meeting until ending it all together later this year.
Yellen delivered her testimony on policy and the economy to Senate this afternoon. She confessed that some economic had been weaker since she spoke to the House of Representatives on February 11th, but that it was difficult to say how much of that was due to weather.
"In the weeks and months ahead, my colleagues and I will be attentive to signals that indicate whether the recovery is progressing in line with our earlier expectations," she said.
In other US news, a report showed durable goods orders fell less than expected in January. Orders dropped 1% compared to a fall of 5.3% in December. Analysts predicted a decrease of 1.7%.
Ukraine tensions flare
On another negative note for markets, Interfax news agency reported that Russia had put its fighter jets on combat alert as part of military exercises near its Ukrainian border as tensions escalated.
The European Union had helped broker a peace deal ending weeks of deadly violence in Kiev, but the pact collapsed over the weekend and led to the ousting of Russian-backed president Viktor Yanukovych.
Yanukovich told Russian media today he considers himself the legitimate leader of the eastern-European nation.
Following several days of hiding, Yanukovich said it had become "obvious" that citizens in the southeast of Ukraine and Crimea – which have an ethnic Russian majority – would not accept anarchy and lawlessness.
WPP, Man Group
WPP slumped as the advertising giant increased its share buyback programme to counter a hit from volatile emerging market exchange rates as it reported its 2013 results. Numis said shares could come under pressure from the impact to reported margins and slightly lower margin guidance.
Man Group advanced as the hedge-fund announced a $115m stock buyback.
Royal Bank of Scotland's shares declined after the state-backed lender widened its 2013 pre-tax loss to £8.24bn from £5.27bn a year earlier, missing analysts' estimates of £6.7bn. It marked the bank's biggest loss since the height of the 2008 financial crisis.
Water utility Veolia Environnement gained as Chairman Antoine Frerot forecast that revenue, operating income and net income would increase in 2014.
Allianz dropped as Europe's largest insurer posted fourth quarter earnings that fell short of market forecasts and said operating profit may decline this year amid low interest rates.
Royal Ahold advanced as the Dutch owner of Stop & Shop and Giant stores said fourth-quarter underlying operational income fell less than forecast, driven by sales in the Netherlands.
The euro rose 0.19% to $1.3713.
Brent crude fell $0.717 to $108.740 per barrel, according to from the ICE. |
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| | US Market Report | | US open: Stocks fell as jobless claims rise more than forecast US stocks declined as more Americans than forecast filed applications for unemployment benefits last week.
Jobless claims increased by 14,000 to 348,000 in the week ended February 22nd, from 334,000 in the prior period, a Labor Department report showed today. Economists had expected 335,000 claims.
The Federal Reserve is closely monitoring the labour market to gauge the health of the world's biggest economy ahead of its next policy meeting. Fed Chair Yellen has indicated that the Fed is likely to continue reducing monthly asset purchases at each meeting until ending it all together later this year.
"A third consecutive month of weak payroll growth in February would raise speculation that the Fed will pause the tapering of its asset purchases," Capital Economics said. "But because any weakness this month was probably due to the unusually bad weather, we believe the Fed will stick to its current tapering plans."
Yellen was due to deliver her testimony on policy and the economy to Senate this afternoon, potentially offering further clues as to the Fed's next move. The meeting had been delayed from February 5th due to winter storms.
In other US news, a report showed durable goods orders fell less than expected in January. Orders dropped 1% compared to a fall of 5.3% in December. Analysts predicted a decrease of 1.7%.
J.C. Penney, GM
J.C. Penney advanced after saying same-store sales will increase by a mid-single digit percentage and gross margin will "significantly" improve this year.
General Motors declined as US regulators said they are investigating why the automaker took years to recall 1.6m small cars over an ignition-switch defect.
Inovio Pharmaceuticals Inc. dropped as the drug researcher and developer said it will sell additional common stock.
Best Buy gained after the US retailer reported a better-than-expected quarterly profit on Thursday and announced more aggressive cost cuts this year. |
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| | Broker Tips | | Broker tips: British American Tobacco, Capita, RSA British American Tobacco delivered fiscal year 2013 results which were basically in line with consensus estimates, although the company faces several headwinds.
The company did, however, manage to raise its adjusted operating margins by 100 basis points to 38.1% despite 3% volume attrition and macroeconomic weakness in Asia, analysts at Canaccord Genuity wrote to clients on Thursday.
However, costs were expected to come under pressure with the European Union's Tobacco Product Directive requiring numerous packaging changes.
More fundamentally, the broker was now more convinced that the firm, and its peers, should be valued using a higher 'beta' - a measure of a stock's riskiness relative to the market based on past correlations - given the advent of electronic cigarettes.
It was impossible to predict what impact they will have although they are certain that it will lead to pressure on margins, Canaccord said.
Furthermore, they believe that the buy-out of Reynolds American would not meet some investors' expectations for earnings enhancement. That was because Reynolds' key brands overseas were in fact the property of Japan Tobacco and the regulatory environment in the US remained difficult.
On the basis of all of the above, they decided maintain their 'sell' recommendation on the shares while at the same time reducing their target to 2,900p from 3,000p.
Outsourcing outfit Capita released "impressive" full year results, Investec said.
The broker highlighted the company's strong rate of organic growth and its "very impressive" win rate. In fact, at 2 out of 3 the company managed its highest ever rate for the former.
That is quite important given Investec's difficulty in trying to determine where the next major catalyst would come from and what with the shares trading on a price-to-earnings multiple of 18 times' its estimated fiscal year 2014 profits.
Nonetheless, the analysts wrote that "it is also difficult not to be impressed with the quality of earnings".
Other positive aspects of the firm's full-year financials included the strong cash performance, with free cash flow generation rising to £312m.
Also, the company's dividend was increased by 13%, which was slightly ahead of their estimates.
"We continue to like the story, this is a best in class operator but the valuation tempers our enthusiasm. We reiterate our 'hold' but lift our multiples-based target to 1,100p," Investec concluded.
Following Thursday's final full-year results from insurer RSA analysts at Numis moved to lower their recommendation on the shares to 'reduce' from 'neutral'.
Particularly important, the company announced its intention to launch a £775m rights issue. That implied a stronger capital base was in process, but the resulting dilution meant that there were now "downside" share price risks.
On a more positive note, the broker pointed out that the outfit had already moved to bolster its capital position by £500m via increased reinsurance purchase, the sale and leaseback of the Swedish HQ and sale of the equities portfolio. A further capital inflow of £300m was targeted from selected business disposals. Hence, the required capital had been reduced.
As well, the rights issue would likely increase net trading assets per share (NTAps) but in their opinion the revised return on net trading assets (RONTA) guidance, of between 12% and 15%, was insufficient to support the current share price.
"We continue to see downside risk and move to a 'reduce' rating [with a price target of 85p] of given recent share price strength," Numis said. | | |
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