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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: Stocks modestly higher after dovish BoE - BoE strikes dovish tone as wages fall
- Ukraine crisis, Asian data in focus
- Ex-dividend stocks limit upside
- G4s leads gains
techMARK 2,738.64 +0.38%
FTSE 100 6,656.68 +0.37%
FTSE 250 15,527.48 +0.40%
UK equities ended the session modestly higher after the overall dovish tone to the Bank of England's (BoE) Inflation Report gave UK stocks a lift on Wednesday, as investors shrugged off geopolitics and weak data from Asia to instead push back their expectations for the first rate hike.
"Today's Report comes across as a solid signal that the majority of BoE rate setters are planning to wait until next year before hiking rates, which poses a risk to our forecast of a November hike," said Rob Wood, chief UK economist at Berenberg.
After a slow start, the FTSE 100 was up 0.4% at 6,662 by midday, though ex-dividend stocks were limiting upside on the index.
Economic figures released on Wednesday morning showed that while the UK unemployment rate declined from 6.5% to 6.4% in the three months to July as expected, average weekly earnings slipped at an annual rate of 0.2% - below forecasts.and the first fall in five years.
As for the Inflation Report, BoE Governor Mark Carney lifted his forecast for economic growth this year and the next by one percentage point to 3.5% and 2.9%, respectively. However, the BoE simultaneously halved its estimate for pay, saying that average salaries will rise just 1.25% this year.
"The economy is returning to a semblance of normality, but whether normality in terms of real wages returns will depend on improvements in productivity," Carney said. He reiterated that whenever rates begin to increase, they would rise only gradually.
The Ukraine crisis was continuing to act as an uncertain backdrop for trading on Wednesday with 280 trucks allegedly carrying humanitarian aid on their way from Russia to the border. However, Ukraine has said that it would not allow the convoy to pass until it can determine what is inside the vehicles.
Asian data weakens
In China, industrial production, retail sales, money supply growth, fixed asset investment and new loans figures all came in worse than expected overnight. Loan growth in particular plunged from 1.08trn yuan to 385bn yuan in July, its lowest level since 2008 and well below the 780bn yuan forecast.
Japanese gross domestic product (GDP) declined at an annualised rate of 6.8% in the second quarter of 2014, a sharp turnaround from the revised 6.1% growth at the start of the year as a result of a hike in sales taxes. While this was not as bad as the 7% fall in GDP expected, it was Japan's worst contraction since 2011.
Ex-div stocks weigh, banks rise
A long list of blue chip stocks were lower on Wednesday after going ex-dividend, meaning that investors no longer qualify for their latest payouts. These included AstraZeneca, BG Group, GKN, IMI, Meggitt, Pearson, Rio Tinto, Schroders, Standard Chartered, Royal Dutch Shell, Fresnillo, Ashtead, BT Group and Diageo. According to Reuters, these stocks took up to 21.26 points off the index.
Banking stocks were among the best performers with RBS, Barclays and Lloyds making gains. The latter was in focus after it was reported that Chancellor George Osborne will rule out a pre-election sale of Lloyds Banking shares to the general public, according to Sky News.
Car insurance specialist Admiral dropped after underwhelming with a 2% rise in adjusted profits before tax to £184.9bn in the first half as growth in the UK was partly offset by weakness abroad. The company also announced it has promoted Geraint Jones, who has held a number of senior finance positions, to chief financial officer.
Mining and trading giant Glencore fell after a mixed production report for the first half of 2014 with output of some commodities improving while others declined. However, production of copper and coal - the company's biggest contributors to profit - both increased over the year.
G4S led gains after winning £1.2bn of contracts in the first half and increasing profits. G4S, which faced strong criticism for failing to provide enough security guards at the 2012 Olympics and allegations of overcharging on a UK government prisoner tagging contract, said new contract wins had risen 26%. |
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FTSE 100 - Risers
G4S (GFS) 273.50p +5.27%
Coca-Cola HBC AG (CDI) (CCH) 1,328.00p +3.11%
Barratt Developments (BDEV) 350.80p +2.81%
Prudential (PRU) 1,404.00p +2.59%
easyJet (EZJ) 1,290.00p +2.54%
Land Securities Group (LAND) 1,066.00p +2.11%
Morrison (Wm) Supermarkets (MRW) 169.00p +2.11%
Vodafone Group (VOD) 197.20p +1.91%
Royal Bank of Scotland Group (RBS) 348.40p +1.87%
Johnson Matthey (JMAT) 3,014.00p +1.82%
FTSE 100 - Fallers
Admiral Group (ADM) 1,371.00p -5.45%
Rio Tinto (RIO) 3,423.50p -2.60%
Glencore (GLEN) 365.50p -2.53%
BT Group (BT.A) 368.60p -1.63%
Antofagasta (ANTO) 809.00p -1.52%
IMI (IMI) 1,346.00p -1.46%
Pearson (PSON) 1,105.00p -1.43%
Diageo (DGE) 1,717.00p -1.24%
GKN (GKN) 337.80p -1.14%
BG Group (BG.) 1,145.00p -0.95%
FTSE 250 - Risers
Just Eat (JE.) 262.00p +9.17%
COLT Group SA (COLT) 141.70p +4.19%
Thomas Cook Group (TCG) 123.00p +3.62%
Fenner (FENR) 360.50p +3.59%
Fidessa Group (FDSA) 2,295.00p +3.19%
Savills (SVS) 618.00p +3.00%
Evraz (EVR) 103.00p +2.90%
JD Sports Fashion (JD.) 405.00p +2.82%
Fidelity China Special Situations (FCSS) 116.00p +2.65%
Redrow (RDW) 247.10p +2.45%
FTSE 250 - Fallers
Perform Group (PER) 215.00p -5.70%
Direct Line Insurance Group (DLG) 281.10p -5.16%
Serco Group (SRP) 314.30p -4.90%
EnQuest (ENQ) 118.80p -4.73%
Oxford Instruments (OXIG) 1,200.00p -3.77%
AO World (AO.) 206.30p -3.55%
CSR (CSR) 512.50p -3.12%
Ocado Group (OCDO) 335.70p -2.61%
Greene King (GNK) 789.50p -2.47%
Countrywide (CWD) 501.50p -2.43% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks gain after BoE Inflation Report - BoE upgrades growth forecast
- UK jobless rate falls but wages remain weak
- German inflation unrevised
- US retail sales flat
FTSE 100: 0.37%
DAX: 1.43%
CAC 40: 0.78%
FTSE MIB: 0.62%
IBEX 35: 0.61%
Stoxx 600: 0.39%
European stocks climbed after the Bank of England (BoE) upgraded its economic growth forecast in its Inflation Report on Wednesday.
The BoE's forecast for the UK economy is that it will grow 3.5% this year, compared to an earlier estimate of 3.4%. In 2015 the Bank expects growth of 3%, up from the previous 2.9% projection.
The Bank, however, warned that wages remain weak. Figures released ahead of the Inflation Report showed that while the UK unemployment rate declined from 6.5% to 6.4% in the three months to July, as expected, average weekly earnings slipped at an annual rate of 0.2% - below forecasts. That was the first fall in five years.
Chris Williamson from Markit said the jobs data "adds to the sense that any first rate rise will be delayed until early next year".
The Bank's estimates assume that interest rates will rise from the record low of 0.5% by 25 basis points in the first quarter of next year and reach 2% by the end of 2016, he said.
"While it seems likely that calls to raise interest rates will start to gather strength in coming months, a majority vote for a rate rise still looks some way off.
"February therefore still looks the most likely month for the Bank to dip its toe into the water as far as tightening policy towards more normal levels is concerned, though November remains a possibility if the wage data picks up in coming months (please also see comments from prior email highlighted below into uncertainty about policy decision)."
German inflation
German consumer prices rose 0.8% year-on-year in July after a 1% increase in June, Germany's statistics office confirmed on Wednesday.
Alpari UK analyst James Hughes said the German economy has been "struggling on all fronts" with weak figures on gross domestic product, inflation, trade and industrial production.
"This of course could pose a huge threat to the Eurozone and gives the European Central Bank huge problems," he said.
"The overall problem for Mario Draghi is that without a strong Germany, we do not have a strong Eurozone, and the fear is that all the measures thrown at dragging the economy out of the mire could well be about to fail due to the failing of the single currency's largest economy."
Eurozone industrial production fell 0.3% in June on the month, following a 1.1% decline. Economists had pencilled in a 0.4% rise.
In the US, retail sales were unchanged in July, following a 0.2% rise in June, missing the consensus forecast for a 0.2% increase, as sales fell at auto dealers and department stores.
"Although July's US retail sales figures suggest that spending in the third quarter got off to a slow start, this doesn't necessarily means that third-quarter gross domestic product growth will be weak," said Capital Economics.
EON, Swiss Life
EON jumped after the German utility said higher production at its North Sea fields boosted first-half earnings which came in better than forecast.
Swiss Life Holding gained after Switzerland's biggest life insurer said it will buy German real estate asset manager Corpus Sireo and reported an increase in first-half earnings.
Meda AB declined after the Swedish drugmaker posted second-quarter earnings that fell short of analysts' projections.
Gagfah SA advanced after the German property company raised its 2014 earnings estimate for a second time.
The euro fell 0.05% to $1.3362.
Brent crude futures rose 0.27% to $103.30 per barrel, according to the ICE. |
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| | US Market Report | | US open: Stocks gain despite weak retail sales figures US stocks rallied despite a report on retail sales in the world's biggest economy coming in flat.
US retail sales were unchanged in July, following a 0.2% rise in June, missing the consensus forecast for a 0.2% increase, as sales fell at auto dealers and department stores.
"Although July's US retail sales figures suggest that spending in the third quarter got off to a slow start, this doesn't necessarily means that third-quarter gross domestic product growth will be weak," said Capital Economics.
The research firm said the weakness could be merely a payback from the strength in sales in previous months and improvements in income and easier access to credit should support spending over the rest of the year.
Another report showed mortgage applications for the week to 8 August fell 2.7% following a 1.6% rise the previous week.
Meanwhile, geopolitical tensions continued as Israel prepared for fresh battles in Gaza and Ukraine said it would block humanitarian aid from Russia. Kurdish forces continued to fight militants in northern Iraq as Prime Minister Nouri al-Maliki tried to hold onto power.
In corporate news, department store chain Macy's retreated after the company disappointed with its second-quarter results and lowered its sales guidance for 2014. The company now expects same-store sales to grow by 1.5-2% this year, down from a previous forecast of 2.5-3%.
Agricultural machinery maker Deere & Co slumped after saying that equipment sales would fall by 6% this fiscal year, below the previous 4% guidance. The company said it would scale back production with grain prices being weighed down by record crops.
The 10-year yield fell two basis points to 2.43%.
West Texas Intermediate futures dropped 0.02% to $97.35 per barrel, according to the ICE. |
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| | Broker Tips | | Broker tips: G4S, Ladbrokes, Catlin, CSR Security group G4S delivered a "satisfactory set of interims" despite a slight easing of organic growth in the second quarter, according to Investec,
The broker repeated a 'buy' rating and 280p target for the stock, saying that it "remains our preferred turnaround play".
Morgan Stanley has slashed its target for Ladbrokes by a sixth after a "very weak" first half from the bookmaker, though it took a more upbeat stance, voicing greater confidence in its turnaround.
The investment bank kept an 'equal-weight' rating on the stock, but has cut its target for the shares from 150p to 125p.
Credit Suisse has lowered its recommendation for property and casualty insurer Catlin from 'neutral' to 'underperform', highlighting weaker earnings and an uncertain capital return.
The target for the shares has been trimmed from 515p to 480p.
There is a "cost conundrum" at CSR, according to Jefferies, which downgraded its recommendation for the wireless technology company from 'buy' to 'hold'. The broker slashed its target for the shares from 679p to 569p.
Jefferies reckons that CSR may need to "reassess" the targeting of its research and development (R&D). "Despite enjoying superior gross margins to most peers, operating margins are below average. We believe R&D investment (R&D/sales percentage) is the main culprit here." | | |
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