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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: European and US concerns weigh on Footsie - FTSE closes down 37.60 points at 6,840.89
- Eurozone GDP misses expectations, Italy, France disappoint
- Russia says oil must be paid for
- Telecoms, airlines fall
techMARK 2,757.75 -1.26%
FTSE 100 6,840.89 -0.55%
FTSE 250 15,616.54 -2.24%
The City ended today's session on a downbeat note, weighed by the outlook for the Eurozone's economic growth, a mixed bag on the corporate earnings front, and traders looking to take profits after the 14-year high achieved by the benchmark FTSE 100 earlier in the week.
To take note of, even in the US market commentary was attributing the day's losses to that weakness in the European data. Most often US capital markets tend to show very scant interest in data out on the Continent.
The top tier index ended today's session down 37.60 points at 6,840.89.
Much of today's focus was on gross domestic product (GDP) data released in the Eurozone, with the figure for the region as a whole rising by 0.2%, less than the 0.4% analysts had expected.
The growth was primarily driven by Germany, which came in at 0.8% quarter-on-quarter, compared to 0.4% previously and expectations of 0.7%.
Meanwhile, France was flat, compared to the anticipated 0.2%, while Italy fell -0.1%, against the predicted 0.2% figure. GDP in the Netherlands plummeted by 1.4% no less.
Jasper Lawler, a Market Analyst at CMC Markets UK, said: "A distinct two tiers has opened up again in Europe with Germany in tier one and everyone else in tier two.
"GDP data is backward looking but prospects for next quarter would clearly be better if you're not coming off zero or negative growth rates for the present one."
For its part, Barclays Research said the data "disappointed", adding that the reading had pushed down its annual forecast for 2014 to 1.2% from 1.3% previously.
Explaining its decision, it continued: "We believe that today's weak outcome is another argument for further European Central Bank (ECB) easing at the June meeting. Together with subdued inflation confirmed for April, very likely downwards revision to the ECB inflation projections in updated staff forecasts due next month, and probably disappointing credit data, today's release signals that the euro area recovery remains fragile, still facing a lot of impediments.
"In our view, a cut in all official rates is the most likely action at the June meeting (small cut in the refi rate to 0.1% accompanied by a cut in the deposit rate to -0.1%), although we do not think this would be enough to weaken the euro further."
Gas should be paid for, Russia says
Over in Eastern Europe, Russia's Prime Minister, Dmitry Medvedev, today said that it was "necessary to pay for delivered energy supplies".
Speaking at a conference on energy, he added: "I hope all countries understand this, all consumers like those present and those who are not present for whatever reason at the forum, including Ukraine. Payments in general should not be linked to politics in any way."
Over in the US, stocks declined sharply as investors weighed a barrage of mixed economic data, including a pick-up in inflation, an unexpected drop in jobless claims - to their lowest since before the financial crisis began in 2007 - and a slide in industrial production due to payback from the harsh winter as output from the utilities sector slumped.
10-year Treasury yields Stateside fell sharply following that data to the 2.5% mark.
That came ahead of a report due to be released tomorrow on US economic confidence, which is expected to show an increase in the outlook for the world's biggest economy in May.
The University of Michigan's sentiment index is expected to come in at 84.5 this month, up from 84.1 in April, according to forecasts.
Mixed bag on the company front
easyJet was the lowest flyer on the FTSE 100 today, with readacross from Thomas Cook providing turbulence on the back of a fall in revenues, which contracted as disruption in Egypt continued to weigh. The concerns about the situation in Russia and its threats about oil supply are also likely to be linked.
Barratt Developments continued to slide lower on the back of the Bank of England's inflation report, in which its Governor, Mark Carney, said it would "look hard at the degree of affordability" of mortgages when deciding when to increase interest rates, which according to Westhouse Securities, resulted in "nervousness" amongst investors.
Old Mutual was lower after first-quarter gross sales growth was limited to just 12% due to adverse currency movements. Growth would have been 24% at constant currencies.
Meanwhile, 'safe haven' stock Unilever, Morrison and Tesco were making gains.
Diageo was rising on reports it is planning to scrap its regional hub structure, "with activities previously managed at regional level in Africa, Asia Pacific and Latin America, moving to our markets, to global or ceasing altogether". According to Marketing Magazine, the company said the changes will simplify the business and drive efficiencies.
"This will allow us to invest savings in growth opportunities for our brands and markets, fund future efficiency programmes and expand operating margin," it added.
On the second tier, Dixons Retail and Carphone Warehouse were both lower after revealing they have agreed on an all-share merger valuing the combined entity at £3.8bn.
Michael Hewson, Chief Market Analyst at CMC, said that "today's disappointing share price performance [indicates] that investors aren't buying it, and to be honest neither do I".
He continued: "Dixons revenues look set to remain fairly flat over the next three years at around £7.5bn, while profit estimates look optimistic, unless they pare down on costs.
"As for Carphone Warehouse they've been down this road before with US electrical retailer Best Buy in 2008 and by 2011 Best Buy was packing its bags back to the US. Maybe the timing was bad with the financial crisis, but Best Buy is a much better retailer than Dixons, and the fact they couldn't make that work doesn't bode well for this particular merger."
Notably, as a merger of equals, neither set of shareholders will receive a premium as they would do in an acquisition. |
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FTSE 100 - Risers
Morrison (Wm) Supermarkets (MRW) 205.20p +4.53%
Fresnillo (FRES) 860.50p +2.87%
Tesco (TSCO) 302.55p +2.11%
Diageo (DGE) 1,909.50p +1.68%
Sainsbury (J) (SBRY) 332.80p +1.56%
AstraZeneca (AZN) 4,726.50p +1.56%
Friends Life Group Limited (FLG) 306.30p +1.26%
HSBC Holdings (HSBA) 625.00p +1.21%
BAE Systems (BA.) 416.50p +1.14%
Unilever (ULVR) 2,687.00p +1.13%
FTSE 100 - Fallers
easyJet (EZJ) 1,550.00p -6.74%
International Consolidated Airlines Group SA (CDI) (IAG) 365.70p -5.97%
ITV (ITV) 169.60p -5.30%
Barratt Developments (BDEV) 357.80p -5.09%
Old Mutual (OML) 199.10p -4.92%
St James's Place (STJ) 748.50p -4.89%
CRH (CRH) 1,601.00p -4.82%
Lloyds Banking Group (LLOY) 73.76p -4.33%
Sports Direct International (SPD) 730.00p -4.26%
Travis Perkins (TPK) 1,669.00p -4.08%
FTSE 250 - Risers
Xaar (XAR) 784.00p +2.22%
Laird (LRD) 289.80p +2.04%
Infinis Energy (INFI) 206.00p +1.93%
Kier Group (KIE) 1,676.00p +1.82%
Vesuvius (VSVS) 451.10p +1.37%
Workspace Group (WKP) 572.00p +0.53%
Amlin (AML) 462.40p +0.41%
BlueCrest AllBlue Fund Ltd. GBP Shares (BABS) 179.00p +0.22%
Personal Assets Trust (PNL) 33,260.00p +0.18%
BlackRock World Mining Trust (BRWM) 480.50p +0.10%
FTSE 250 - Fallers
Thomas Cook Group (TCG) 156.10p -12.60%
Dixons Retail (DXNS) 45.67p -10.28%
Carphone Warehouse Group (CPW) 301.30p -8.08%
Grafton Group Units (GFTU) 558.50p -6.76%
Bwin.party Digital Entertainment (BPTY) 118.60p -6.69%
Playtech (PTEC) 602.50p -6.23%
Ocado Group (OCDO) 303.00p -6.22%
Man Group (EMG) 89.95p -5.96%
Howden Joinery Group (HWDN) 316.20p -5.56%
Victrex plc (VCT) 1,757.00p -5.03% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Traders pare risk after weak Eurozone GDP numbers - Euro-area GDP misses forecasts
- Eurozone inflation unrevised
- ECB to introduce stimulus if needed, says VP
- US inflation data out later
FTSE 100: -0.55%
DAX: -1.01%
CAC 40: -1.25%
FTSE MIB: -3.61%
IBEX 35: -2.35%
Stoxx 600: -0.90%
European stocks finished with large falls on Thursday after the latest data on euro-area growth missed forecasts, adding pressure on the bloc’s central bank to deliver stimulus measures next month.
Gross domestic product growth was 0.9% year-on-year in the first quarter, higher than the previous quarter’s 0.5% but short of analysts’ estimates of 1.1%. Significantly, the pace of expansion in France and the Netherlands sharply undershot economists’ estimates.
In parallel, the latest statistics out Stateside showed weekly unemployment claims at levels not seen since before the 2007 financial crisis, while the latest readings on inflation came in higher than forecasts.
Nevertheless, US Treasuries moved sharply to the downside, with the yield on 10-year US bonds at 2.5% no less.
A separate report confirmed Eurozone inflation rose by 0.7% in April, compared to 0.5% a month earlier. However, it remains well under the European Central Bank’s (ECB) 2% target.
ECB President Mario Draghi last week said the governing council is “comfortable with acting” at its June meeting with stimulus measures if needed to address weak inflation and a stagnant recovery.
ECB Vice President Vitor Constancio reiterated that policy makers are prepared to add more monetary easing.
"We are determined to act swiftly if required and don't rule out further monetary policy easing," he said in a speech in Berlin.
Thomas Cook slides
Thomas Cook's shares slumped as it reported a loss in earnings in the first half of the year, reflecting the disruption in Egypt. A gauge of airlines including easyJet and International Consolidated Airlines (IAG) also slipped
Deutsche Post dropped as Europe’s largest mail service reported first-quarter earnings that missed analysts’ estimates.
Dixons rallied as the UK consumer electronics retailer agreed to merge with Carphone Warehouse.
Cie. Financiere Richemont advanced after the maker of Cartier jewellery said it will raise its dividend by 40% to 1.40 francs a share as it reported is full-year results.
Hennes & Mauritz gained after the European fashion retailer reported higher sales than analysts had forecast for April.
Other asset classes steady
The euro edged higher by 0.01% to $1.3715.
The yields on 10-year German, French and Spanish sovereign debt were little changed.
Brent crude futures moved up by 0.018% to $110.20 per barrel on the ICE. |
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| | US Market Report | | US open: Stocks drop as investors digest mixed data - Inflation picks up, in line with Fed's target
- Jobless claims sink, industrial production weakens
- Wal-Mart disappoints with Q1 results
Dow Jones: -0.64%
Nasdaq: -1.16%
S&P 500: -0.82%
US stocks declined sharply on Thursday as investors weighed a barrage of mixed economic data, including a pick-up in inflation, an unexpected drop in jobless claims and a surprise slide in industrial production.
Inflation, in particular, was in keen focus today with the annual rate rising to 2%, in line with the Federal Reserve's target. Craig Erlam, Market Analyst at Alpari, said that a 2% rate could put "more pressure on the Fed to taper at a faster pace and even raise rates earlier than currently planned, especially if it continues to pick up in the coming months".
Markets were tracking declines seen in Europe after Eurozone economic growth remained unchanged at 0.2% in the first quarter of 2014, disappointing economists who had expected an acceleration to 0.4%.
The Dow Jones Industrial Average and S&P 500 were trading 0.6% and 0.8% lower, respectively, falling further the record highs reached earlier in the week. The Nasdaq, meanwhile, dropped 1.2%.
Economic data comes in mixed
Initial US weekly unemployment claims fell by 24,000 to 297,000 over the seven days ending on May 10th, hitting a post-recession low, according to the US Department of Labor. The consensus estimate had been for claims to edge higher to 320,000.
According to the Bureau of Labor Statistics, US consumer price inflation picked up to an annual rate of 2% in April, the highest level since last July. This was up from 1.5% in March but more or less in line with what was estimated by analysts. The month-on-month rate increased from 0.2% to 0.3%, as expected. Core inflation, however, came in ahead of forecasts.
US industrial production unexpectedly declined by 0.6% in April, down from an upwardly revised 0.9% gain in March; the estimate was for no change. However, analysts at Capital Economics said the fall is "not as bad as it looks as some of it was due to the unwinding of temporary weather effects".
Regional output data was also in focus today as the Empire State manufacturing index surged to 19 in May, well above 1.3 the month before and the consensus forecast of 5.0. Meanwhile, the Philly Fed index fell to 15.4 from 26.6.
Wal-Mart slides after Q1 results
Wal-Mart slumped after the world's largest retailer reported a fall in first quarter profit.
Cisco advanced as the world's largest equipment maker estimated revenue in the quarter ending July that missed analysts' expectations.
Gentiva Health Services jumped after Kindred Healthcare offer to buy the company for about $1.6bn.
The US 10-year bond yield was down four basis points at 2.50%.
West Texas Intermediate crude futures fell 0.56% to $101.80 per barrel, according to the ICE. |
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| | Broker Tips | | Broker tips: LSE, Aviva, Vodafone... Numis Securities has upgraded bourses operator London Stock Exchange from 'hold' to 'add' after the company identified more cost savings from its recent acquisition of LCH.Clearnet.
"The strategic development of the LSE continues and we believe the LSE is well placed to take advantage of the globalisation of their businesses," Numis said.
Hargreaves Lansdown Stockbrokers has hailed the recovery story at Aviva, but has said that the market is likely to maintain a cautious stance on the insurance stock after its recent rally.
"The company remains a work in progress – even though there is light at the end of the tunnel – and the general market view of the shares as a cautious buy is likely to remain intact following this update."
Vodafone's shares were under pressure on Thursday after a Goldman Sachs downgrade and a target cut from UBS.
Goldman has cut its recommendation for the stock from 'buy' to 'neutral' and reduced its target for the shares from 270p to 240p ahead of the company's fourth-quarter results due out next week. Meanwhile, UBS kept a 'buy' rating, but lowered its target from 275p to 255p.
Investec has kept a 'hold' rating on tour operator Thomas Cook, saying that near-term earnings risks are high after the company's first-half results.
The broker said that UK summer trading "gives us a cause for concern" given that a strong summer is needed from the company if it is to meet the market's profit forecasts.
Oriel Securities has reiterated a 'buy' rating for Dixons Retail, saying that the announced all-share merger with Carphone Warehouse should be seen as a positive for shareholders.
"At first glance, the benefits from the deal look positive, and accretive to earnings, raising the possibility of further shareholder returns, particularly as property losses and high coupon bonds unwind in the next three years," the broker said. | | |
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