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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: Supermarkets lift FTSE to end week on positive note - FTSE closes up 14.92 points at 6,855.81
- Comments from Asda, Morrison bid speculation, lift supermarkets
- Eurozone trade surplus narrows
- US consumer confidence falls
techMARK 2,745.29 -0.45%
FTSE 100 6,855.81 +0.22%
FTSE 250 15,397.92 -1.40%
Blue chips managed to end the week on a positive note, lifted by supermarkets which rose after Asda said it had managed to lower the number of customers jumping ship to discount stores.
Asda said fewer shoppers were opting for chains such as Lidl and Aldi, welcome news for the so-called 'big four' which have been battling to maintain their share of the market in recent months.
Overall, however, gains were limited, with the FTSE 100 closing up 14.92 points at 6,855.81.
"Chatter in the equity market is currently firmly focused on a rebalancing away from recent winners, the so-called momentum stocks," Spreadex's David White noted.
"Indeed, FTSE 100 winners such as EasyJet and Sports Direct have seen their share prices lose over 5% in little over a few session, with little bad news to match notable."
Over in the Eurozone, the trade surplus narrowed in March compared to a year earlier, but rose against the prior month after exports and imports fell by 0.5% and 0.6% respectively, according to the preliminary estimate by Eurostat, the European Union's official statistics office.
The trade surplus for March totalled €17.1bn, less than the €21.9bn of a year earlier but more than February's €14.2bn. A consensus among analysts had called for a milder monthly increase to €15.5bn.
Meanwhile, in the States the University of Michigan's consumer confidence reading for May registered a fall, declining to 81.8, compared to consensus expectations of 84.5.
"The fall [...] comes at the end of a week in which we also received weak retail sales and industrial production numbers," Capital Economics said.
"But we think that the underlying trend in economic activity is upwards, meaning that it shouldn't be long before confidence starts to climb again."
Ukraine unrest
US and UK diplomats earlier today warned of further sanctions in Russia if this month's Ukrainian presidential election is undermined.
"If Russia or its proxies disrupt the elections," the US and its allies "will impose sectoral economic sanctions as a result," Secretary of State John Kerry said in London yesterday after meeting his counterparts from Britain, Italy, France and Germany.
He said pro-Russian separatists "are literally sowing mayhem," seeking to "speak for everyone through the barrel of a gun".
Supermarkets lead the upside
Supermarkets were also being driven by market chatter around a potential bid for Morrison by a US-led private equity consortium. According to the Daily Mail's market report, such a bid could total around £6.4bn in cash.
Reckitt Benckiser and British American Tobacco also proved popular after investors sought stocks typically considered slightly less risky.
Meanwhile, Coca-Cola HBC slumped after it reported a drop in first quarter revenue and volumes due to the timing of Easter and foreign exchange movements. The second largest bottler of the brands of The Coca-Cola Company said volumes declined by 4% to 409.6m cases in the three months to March 28th and new sales revenue fell 7% to £1.3bn. Credit Suisse issued a 'neutral' rating for the group, saying the year was "off to a slow start".
Barratt Developments was also a significant faller following its results, which Chris Beauchamp, Market Analyst at IG, said was "an illustration of how concerned investors are that the Bank of England will step in to spoil the house-price party, even though Mark Carney has hinted that interest rates are too blunt an instrument to deal with the revived craze for house buying among the general populace".
TUI Travel shares were pushed lower by the warning from the Foreign Office about Kenya, from where British tourists are being evacuated. The organisation issued a statement which read: "There is a high threat from terrorism, including kidnapping. The main threat comes from extremists linked to al-Shabaab, a militant group that has carried out attacks in Kenya in response to Kenya's military intervention in Somalia." The group, which owns Thomson and First Choice, made the decision to repatriate all of its customers and had cancelled all flights until at least October.
On the second tier, residential property owner and manager Grainger climbed after saying it registered a net asset value (NAV) increase of 12.4% to reach 272p over the six months ending on March 31st. Grainger was also lifted by Numis, which upgraded the stock from 'add' to 'buy', with a target of 278p.
In un-listed company news, energy group E.On has been told to pay a £12m penalty after an investigation by Ofgem found it had conducted "extensive poor sales practices".
The industry regulator said the group, which is one of the 'big six' energy companies, had misled customers when selling tariffs door-to-door and on the telephone and in some cases had sold tariffs that were more expensive than the ones they were already on with a different company. |
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FTSE 100 - Risers
Sainsbury (J) (SBRY) 347.70p +4.48%
Morrison (Wm) Supermarkets (MRW) 212.90p +3.75%
Tesco (TSCO) 310.45p +2.61%
Reckitt Benckiser Group (RB.) 5,070.00p +2.22%
Standard Chartered (STAN) 1,336.00p +2.14%
AstraZeneca (AZN) 4,823.50p +2.05%
Associated British Foods (ABF) 3,004.00p +2.00%
BG Group (BG.) 1,283.50p +1.95%
Pearson (PSON) 1,170.00p +1.74%
ITV (ITV) 172.50p +1.71%
FTSE 100 - Fallers
Coca-Cola HBC AG (CDI) (CCH) 1,381.00p -4.56%
TUI Travel (TT.) 407.70p -3.80%
Barratt Developments (BDEV) 344.30p -3.77%
Schroders (SDR) 2,501.00p -3.70%
William Hill (WMH) 325.20p -3.33%
IMI (IMI) 1,536.00p -3.21%
Weir Group (WEIR) 2,515.00p -3.19%
Intertek Group (ITRK) 2,992.00p -3.17%
Melrose Industries (MRO) 275.10p -3.03%
Babcock International Group (BAB) 1,188.00p -2.94%
FTSE 250 - Risers
Bank of Georgia Holdings (BGEO) 2,490.00p +5.69%
Ted Baker (TED) 1,763.00p +4.57%
Grainger (GRI) 224.00p +4.19%
TalkTalk Telecom Group (TALK) 295.20p +3.83%
Cranswick (CWK) 1,208.00p +2.37%
Rank Group (RNK) 157.90p +2.33%
Countrywide (CWD) 552.50p +2.31%
PZ Cussons (PZC) 367.90p +2.22%
Cable & Wireless Communications (CWC) 53.75p +2.19%
Synergy Health (SYR) 1,244.00p +1.63%
FTSE 250 - Fallers
Booker Group (BOK) 143.50p -6.09%
UDG Healthcare Public Limited Company (UDG) 326.00p -5.56%
Telecom Plus (TEP) 1,417.00p -5.41%
Enterprise Inns (ETI) 133.50p -5.32%
Interserve (IRV) 648.50p -5.05%
BTG (BTG) 513.00p -5.00%
Victrex plc (VCT) 1,670.00p -4.95%
Close Brothers Group (CBG) 1,264.00p -4.89%
RPS Group (RPS) 274.80p -4.88%
Fenner (FENR) 379.90p -4.60% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks mostly higher after US, Eurozone data - US housing starts rise
- US consumer confidence falls
- European car sales slow
- ECB advised to buy bailout bonds
- US and UK threaten further Russia sanctions
FTSE 100: 0.16%
DAX: -0.28%
CAC 40: 0.28%
FTSE MIB: 1.12%
IBEX 35: 1.05%
Stoxx 600: 0.14%
Most European stocks ended higher as a report showed US housing starts rose by more than expected.
Housing starts increased to an annualised rate of 1.07m in April, a Commerce Department report showed, beating analysts' estimates of 980,000. The federal government revised the figure for March upward to 947,000.
"Altogether, today's report on US housing starts should help to assuage Federal Open Market Committee concerns that housing activity was flattening out as opposed to gradually recovering after successive adverse shocks from higher mortgage rates last year and adverse weather more recently," said Barclays Research.
"The report has lifted our second quarter GDP tracking estimate by two-tenths to 3.1%, while our first quarter GDP tracking estimate remains unchanged at -0.6%."
Another report showed consumer confidence unexpectedly declined in May. The preliminary reading of the Thomson Reuters/University of Michigan index of sentiment dropped to 81.8 this month from 84.1 in April. Economists had predicted a reading of 84.5.
"The fall in consumer confidence in May comes at the end of a week in which we also received weak retail sales and industrial production numbers," Capital Economics said.
"But we think that the underlying trend in economic activity is upwards, meaning that it shouldn't be long before confidence starts to climb again."
Earlier in the session, Eurostat revealed the Eurozone's trade surplus narrowed in March compared to a year earlier but rose over the prior month after exports and imports fell by 0.5% and 0.6% respectively.
The trade surplus for March totalled €17.1bn, less than the €21.9bn of a year earlier but more than February's €14.2bn. A consensus among analysts called for a milder monthly increase to €15.5bn.
Another report from Brussels-based European Automobile Manufacturer's Association (ACEA) showed car sales rose by 4.2% to 1.13m vehicles in April, the slowest pace in five months. Shares in Renault and Daimler fell following the report.
ECB urged to buy bailout bonds
European Central Bank (ECB) President Mario Draghi has been advised to buy bailout bonds and end his search for assets worth buying.
Guntram Wolff, director of the Bruegel institute in Brussels, proposed he tap a €490bn pool of debt issued by agencies that include the region's two bailout funds.
He told Bloomberg the debt issued by the bailout funds represents "the only 'European sovereign bonds,' if you wish; they'd be European assets which have European quality, and therefore would be of low risk".
"My feeling is that the ECB is still very shy. The easy thing will be to lower the deposit rate. We all know the effect of this is not very big."
Ukraine crisis
US and UK diplomats have warned of further sanctions in Russia if this month's Ukrainian presidential election is undermined.
"If Russia or its proxies disrupt the elections," the US and its allies "will impose sectoral economic sanctions as a result," Secretary of State John Kerry said in London yesterday after meeting his counterparts from Britain, Italy, France and Germany.
TUI, Intertek
TUI dropped as the travel company's loss before interest, taxes and amortisation widened in the second quarter.
Intertek Group declined after saying it experienced weaker-than-expected activity in the energy-infrastructure market.
Banco Espirito slumped after the Portuguese lender said that it plans to raise as much as €1.05bn in a rights offering to strengthen its capital ratios.
Bouygues SA advanced following a report that Orange SA is considering buying Bouygues Telecom. Orange also gained.
Morrison Supermarkets rallied on speculation a US led private-equity consortium may make a bid for the grocery chain, boosting other supermarket stocks including Sainsbury and Tesco.
The euro fell 0.04% to $1.3705.
Brent crude futures rose $0.782 to $109.960 per barrel, according to the ICE. |
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| | US Market Report | | US open: Stocks mixed after housing starts, consumer confidence US stocks opened mixed as reports showed housing starts rose and consumer confidence dropped.
Housing starts increased to an annualised rate of 1.07m in April, a Commerce Department report showed, beating analysts' estimates of 980,000. The federal government revised the figure for March upwards to 947,000.
"Altogether, today's report on US housing starts should help to assuage Federal Open Market Committee concerns that housing activity was flattening out as opposed to gradually recovering after successive adverse shocks from higher mortgage rates last year and adverse weather more recently," said Barclays Research.
"The report has lifted our second quarter GDP tracking estimate by two-tenths to 3.1%, while our first quarter GDP tracking estimate remains unchanged at -0.6%."
US consumer confidence, however, unexpectedly declined in May, according to the preliminary reading of the Thomson Reuters/University of Michigan. The sentiment index dropped to 81.8 this month from 84.1 in April. Economists had predicted a reading of 84.5.
"The fall in consumer confidence in May comes at the end of a week in which we also received weak retail sales and industrial production numbers," Capital Economics said.
"But we think that the underlying trend in economic activity is upwards, meaning that it shouldn't be long before confidence starts to climb again."
Small businesses boost jobs, says Yellen
Federal Reserve Chair Janet Yellen has said small businesses have accounted for more than half the job gains in the economic recovery over the past five years.
In a speech at the Chamber of Commerce last night, she said the Fed has tried to foster job creation by keeping interest rates near record lows but that "overwhelmingly, it is businesses that create jobs".
Ukraine crisis
US and UK diplomats have warned of further sanctions in Russia if this month's Ukrainian presidential election is undermined.
"If Russia or its proxies disrupt the elections," the US and its allies "will impose sectoral economic sanctions as a result," Secretary of State John Kerry said in London yesterday after meeting his counterparts from Britain, Italy,
France and Germany.
Darden Restaurants, Chesapeake Energy
Darden Restaurants slipped after agreeing to sell its Red Lobster chain for $2.1bn.
Chesapeake Energy dropped after saying it will cut half its workforce.
Verizon Communications edged higher as Warren Buffett's Berkshire Hathaway disclosed a stake.
Nordstrom gained as the luxury department-store chain reported quarterly results that exceeded estimates.
US 10-year yields rose two basis points to 2.51%.
West Texas Intermediate crude futures increased $0.773 to $109.940 per barrel, according to the ICE. |
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| | Broker Tips | | Broker tips: Coca Cola HBC, Poundland, Kentz Credit Suisse issued a 'neutral' rating for Coca-Cola HBC after the bottling company reported a fall in first quarter revenue and volumes.
The second largest bottler of the brands of The Coca-Cola Company said volume declined by 4% to 409.6 cases in the three months to March 28th and new sales revenue fell 7% to €1.3bn.
It blamed the timing of Easter and foreign exchange movements.
Despite the challenging trading conditions, the company's expectations for the full-year remained unchanged.
"The first quarter is always a small quarter and liable to sharp swings so should never be extrapolated for the year," Credit Suisse said.
"That said the group is off to a slow start with volumes down 4% (we had -2.6%) with the deleverage impacting margins and an operating loss of €27m (we had -€12m)."
Despite the 15 per cent fall in the shares since their stock market debut and the limited information out from the company since then analysts at Credit Suisse upgraded their view on Poundland to 'outperform' from 'neutral' on Friday.
To back that decision up they called attention to the quality discounter's price competitiveness and niche position, as well as its valuation relative to the sector.
In branded food/health&personal care (Food/HPC) there is a 30% price gap between the value discounters and supermarkets, the broker pointed out. That differential climbs to 50% in convenience, they added.
"[…] we don't see how they can meaningfully close the gap."
As well, Poundland's Food/HPC sales of circa £300m per year, with an average basket of £3, are irrelevant when compared to the likes of Aldi/Lidl/Iceland's sales figures, they argued. In the case of Tesco the relevant magnitude was £40bn.
The Swiss broker further estimated that sales and profits would expand at average rates of 15% and 21%, respectively, over the coming five years, with a cash conversion ratio of 100%. That put them on a forward price-to-earnings ratio of 23.
A comparison with its peer group yielded a forward price target for the stock of 400p.
Nevertheless, the company needs to deliver on "stores, rising margins and the Spanish trial, but we believe this risk is largely discounted," these analysts further pointed said.
Kentz's interim statement on Friday paints an optimistic growth picture for 2014 and beyond, according to Investec.
The engineer said it achieved higher order intake and backlogs in the year to date. Backlog at the end of April was $4.5bn, up from $2.8bn a year earlier, and order intake came to $1.8bn in the first four months, compared to £1.7bn last year.
"The key number is its $4.5bn order book, +47% since end-2013 and up a further 10% since the most recently disclosed figure at end-February," Investec said.
"We leave our forecasts unchanged but believe the recent pull-back in the share price offers an attractive entry point. Buy."
The broker issued a target of 810p and said Kentz is trading on a 2014/15 price to earnings multiple of 10.9x, a 13% discount versus Investec's sector average and a 16% discount versus its target sector.
"We see a 5% discount as achievable given Kentz's earnings growth, strong bid pipeline and financial strength. his implies a target of 810p. Key risks are commodity prices/client spending levels." | | |
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