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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: ECB underwhelms, change in the air at BoE - ECB becomes first major central bank to take deposite rate negative
- Balance of votes on MPC may soon shift, Barclays Resaerch says
- Asos plummets
- Smith & Nephew jumps on continued M&A speculation
techMARK 2,824.79 +0.08%
FTSE 100 6,813.49 -0.08%
FTSE 250 15,995.49 +0.06%
UK equities underperformed their continental European counterparts slightly on Thursday, despite an historic reduction in the European Central Bank's (ECB) deposit rate into negative territory – the first ever for a major central bank.
Despite the announcement of several new measures to goad lending in the single currency area market participants were not overly impressed, harbouring doubts about the effectiveness of the new measures. The monetary authority seemed to still be treading cautiously, although it did leave the door wide open to further more assertive measures, including asset purchases.
Even so, analysts at Capital Economics had this to say: "The ECB unveiled an array of policies to boost bank lending and counter deflationary risks today. But there are uncertainties over how effective these policies will be. And while it is good news that the Bank is preparing a programme of asset purchases, the likely size and timing remains unclear at best."
More specifically, some analysts expressed dissatisfaction with the amount of the new targeted liquidity measure for lenders, which will make €400bn in fresh funds available to European lenders.
Change is in the air at Bank of England
In parallel, the Bank of England's Monetary Policy Committee decided to keep Bank Rate steady at 0.5% and the amount of assets purchased under its asset purchase programme unchanged at £375bn. Nevertheless, change is in the air according to analysts at Barclays Research, who wrote to clients saying that: "However, we expect the balance of votes on the Bank Rate decision to change soon, as some MPC members have already started to display more hawkish views."
Acting as a backdrop, overnight the HSBC Chinese services sector purchasing managers' index for the month of May fell back to a reading of 50.7 from 51.4 for the month before.
ASOS plummets on profit warning
Shares in online fashion retailer ASOS plummeted as much as 40% after the company cut its margin guidance for the full year and blamed a strong pound for a slowdown in growth in the third quarter. The company said that because of a higher mix of UK and European sales, which have lower retail margins, together with increased promotions, its operating margin for the current financial year would be 4.5%, down from its previous forecast of 6.5%.
The surprise trading statement saw shares in fellow retailers Next, Sports Direct, N Brown, SuperGroup and Primark owner Associated British Foods lower, while boohoo.com, the online fashion group which floated in March, was down around 10%.
Johnson Matthey, which makes catalytic converters for cars, reported higher sales and profits and hiked its dividend, but the share price fell as it warned that changes in a deal with a supplier and currency volatility would hit growth in 2014/15.
Leading the upside during much of the day was Smith & Nephew which jumped around 5% as M&A speculation continues to surround the medical devices manufacturer. US group Medtronic has become the latest party rumoured to be interested in the UK firm and is reportedly in the early stages of preparing an offer.
The numbers of passengers flying with budget airline easyJet rose 7.9% in May compared to the same month last year, helping the stock higher in morning trade.
Meanwhile, insurance stocks were putting in a decent performance with Admiral, Friends Life, Aviva and Old Mutual among the best performers.
UK residential property developer Bellway rose after saying that demand for new homes remained robust, buoyed by growing consumer confidence and a strong supply of mortgages. Sector peer Persimmon, however, was a heavy faller today. |
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| | FTSE 100 - Risers
Meggitt (MGGT) 517.00p +4.63%
Smith & Nephew (SN.) 1,088.00p +2.26%
Ashtead Group (AHT) 918.50p +2.06%
United Utilities Group (UU.) 881.50p +1.56%
CRH (CRH) 1,682.00p +1.51%
Old Mutual (OML) 202.00p +1.41%
Aberdeen Asset Management (ADN) 445.80p +1.39%
BG Group (BG.) 1,240.00p +1.39%
Friends Life Group Limited (FLG) 318.20p +1.34%
Admiral Group (ADM) 1,489.00p +1.15%
FTSE 100 - Fallers
Persimmon (PSN) 1,260.00p -5.41%
Royal Mail (RMG) 498.60p -3.09%
Burberry Group (BRBY) 1,493.00p -2.67%
ARM Holdings (ARM) 893.00p -2.40%
Rexam (REX) 533.00p -1.84%
Imperial Tobacco Group (IMT) 2,641.00p -1.53%
Petrofac Ltd. (PFC) 1,233.00p -1.44%
TUI Travel (TT.) 404.40p -1.32%
Weir Group (WEIR) 2,595.00p -1.29%
Barclays (BARC) 239.75p -1.28%
FTSE 250 - Risers
Imagination Technologies Group (IMG) 251.00p +6.63%
Rathbone Brothers (RAT) 2,168.00p +4.73%
AL Noor Hospitals Group (ANH) 1,044.00p +3.78%
Inmarsat (ISAT) 736.50p +2.51%
Bellway (BWY) 1,439.00p +2.42%
Ted Baker (TED) 2,029.00p +2.42%
Dechra Pharmaceuticals (DPH) 706.00p +2.02%
UDG Healthcare Public Limited Company (UDG) 358.90p +1.96%
Petra Diamonds Ltd.(DI) (PDL) 167.00p +1.89%
Evraz (EVR) 98.00p +1.87%
FTSE 250 - Fallers
Bank of Georgia Holdings (BGEO) 2,359.00p -3.87%
Xaar (XAR) 790.50p -3.30%
Brown (N.) Group (BWNG) 454.00p -3.24%
Redrow (RDW) 259.20p -2.85%
Tullett Prebon (TLPR) 279.30p -2.82%
IP Group (IPO) 178.50p -2.78%
RPS Group (RPS) 288.10p -2.34%
Micro Focus International (MCRO) 820.50p -2.21%
Debenhams (DEB) 72.90p -2.15%
Cairn Energy (CNE) 200.40p -2.10% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks mostly higher after historic ECB announcement - ECB announces rate cuts
- German factory orders and Eurozone retail sales rise
- BoE keeps policy unchanged
- US jobless claims rise
FTSE 100: -0.08%
DAX: 0.21%
CAC 40: 1.06%
FTSE MIB: 1.52%
IBEX 35: 1.12%
Stoxx 600: 0.42%
Stocks in the euro-area were mostly higher after the European Central Bank (ECB) announced a lowering of the deposit rate into negative territory for the first time in the history of any major central bank.
The decision to cut the deposit rate by 10 basis points to -0.10% was expected by analysts and comes amid concerns over weak inflation, which at 0.5% remains well below the ECB's target of just under 2%.
The ECB also decided to slash interest rates by 10 basis points to 0.15%, slightly less than the 15 basis point drop that was forecast.
The changes will come into effect on June 11th.
The ECB avoided full-blown quantitative easing but President Mario Draghi said the central bank was "not necessarily finished yet" and would consider unconventional measures if needed in future.
In an initial reaction the euro/dollar moved lower towards $1.35 but as of 16:35 was trading 0.13% higher at $1.3616.
"Whether or not the measures have staying power with the euro are an entirely different story: President Draghi indicated that rates were at the lower bound," said Christopher Vecchio, Currency Analyst at DailyFX.
"For all intents and purposes, Draghi carried a big stick, but did not necessarily pack the punch required to keep the euro in a persistent subdued state."
Ahead of the meeting, a report from Eurostat showed Eurozone retail sales rose by 2.4% year-on-year in April following a 1% increase in March, marking the strongest annual growth in seven years. It beat market forecasts for a 1.2% gain.
German factory orders rose by 6.3% in April after a 1.5% increase in March, ahead of expectations for a 4.6% advance.
BoE keeps policy unchanged
The Bank of England (BoE) decided to keep interest rates at the record low of 0.5% and asset purchases at £375bn, as expected.
However, analysts said that the prospect of an early rate rise has increased in recent weeks amid a string of resilient economic data including rampant UK house prices.
Chris Williamson, Markit's Chief Economist, said that there's "no doubt that the economy is firing on all cylinders" and the unanimous backing that policymakers have given BoE Governor Mark Carney in recent months could soon start to wane.
US jobs
US initial weekly unemployment claims increased by 8,000 in the week ended May 31st, to reach 312,000, according to the US Department of Labor today.
The previous week was revised higher to show 304,000 claims, versus the initial estimate of 300,000.
It comes ahead of the Labor Department's private payrolls report, on Friday, which may reveal private payrolls, which exclude government agencies, increased by 210,000 in May after a rise of 273,000 a month earlier, according to forecasts.
Federal Reserve policymakers are monitoring the labour market closely to determine whether to continue tapering bond purchases and the timing of the first interest rate increase since 2006.
Deutsche Bank slides
Deutsche Bank declined after offering shareholders a discount of more than 20% to buy new stock.
Deutsche Telekom gained following reports that Sprint Corp. is close to clinching a deal on the price, capital structure and termination fee of an acquisition for T-Mobile US.
Smith & Nephew jumped as Medtronic Inc. was said to be considering a takeover of the UK company.
Volvo dropped as UBS recommended selling shares in the carmaker.
Asos slumped as the online fashion retailer forecast that earnings before interest and taxes will be about 4.5% of sales for the year through August, compared with a previous margin estimate of 6.5%.
Bellway edged higher as the UK homebuilder said demand for new homes remains robust and it is on track to achieve its annual volume target.
Brent crude futures rose $0.074 to $108.480 per barrel, according to the ICE. |
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| | US Market Report | | US open: Stocks little changed after jobs data, ECB rate cuts US stocks were little changed as a report showed jobless claims rose less than expected and after the European Central Bank (ECB) announced rate cuts.
Initial US weekly unemployment claims increased by 8,000 in the week ended May 31st, to reach 312,000, according to the US Department of Labor.
The previous week was revised higher to show 304,000 claims, versus the 300,000 from the preliminary estimate.
It comes ahead of the Labor Department's private payrolls report, on Friday, which may reveal private payrolls, which exclude government agencies, increased by 210,000 in May after a rise of 273,000 a month earlier, according to forecasts.
Federal Reserve policymakers are monitoring the labour market closely to determine whether to continue tapering bond purchases and the timing of the first interest rate increase since 2006.
The Fed said in its Beige Book business survey yesterday that the economy expanded at a modest to moderate pace last month as the labour market improved.
In the Eurozone, the ECB cut interest rates and lowered the deposit rate into negative territory for the first time in the history of any major central bank.
The central bank reduced interest rates by 10 basis points to 0.15%, less than the 15 basis point cut that was expected by analysts. The deposit rate was lowered from 0% to -0.10%, as predicted.
"There's been a lot of speculation recently about whether Mario Draghi would bring the bazooka to today's meeting," Alpari UK analyst Craig Erlam said on the ECB President's announcement.
"As it turns out, he rolled up in a tank dressed like Rambo armed with everything from guns to grenade launchers. I don't think anyone could have anticipated what was coming today, as Draghi and the ECB opted against choosing between the selection of monetary tools available and instead went for them all."
Twitter, Ciena
Twitter jumped after Pacific Crest Securities started coverage of the company by suggesting investors buy the shares.
Ciena Corp. advanced as the provider of fibre-optic networking gear for carriers such as AT&T Inc. reported second-quarter revenue and profit that exceeded analyst forecasts.
Sprint Corp. declined after reports that it is nearing a price agreement for a potential acquisition of T-Mobile US.
The US 10-year yield fell one basis point to 2.59%.
West Texas Intermediate crude futures dropped $0.904 to $101.720 per barrel, according to the ICE. |
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| | Broker Tips | | Broker tips: Smith & Nephew, BSkyB, ASOS, Supermarkets Analysts at Credit Suisse said on Thursday that there is a "potential bidding war on the horizon" for medical devices group Smith & Nephew as US peer Medtronic became the latest company rumoured to be interested in the UK group.
Satellite broadcaster BSkyB may rein back spending on English Premier League football TV rights as it focuses on European expansion, according to broker Bernstein.
Bernstein said it was upgrading BSkyB to 'market-perform' from 'under-perform' and increasing its target to £8.50 from £7, which the broker said reflected a prudent valuation in line with historic averages.
Analysts at Oriel Securities said they expect to cut their forecasts for ASOS significantly after a profit warning from the online fashion retailer.
Speaking in a note before the open, Oriel said: "The shares will get hurt [...]. They have fallen a long way but the quantum of the warning will mean serious pain this morning. The read across to other online retailers will be poor, but we fear that there may be something ASOS-specific going on here."
Broker Nomura has scrutinised recent retail data on the UK supermarkets and concluded that the slowdown was suffered by all of the Big Four grocers and that a bounce is likely later this year, with Morrison and Tesco set to benefit most.
"Looking at the UK Big Four altogether highlights for us that the slowdown the individual operators have suffered in recent months is actually generic, as inflation has come down, which is itself largely a function of the 'price investment' going in now we think," the broker said. It believes that a price 'spiral' can be avoided and that the Big Four will see improving like-for-like sales trends. | | |
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