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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 conference sends FTSE sliding more than 100 points lower London's blue chips ended Thursday's session more than 100 points lower, as the European Central Bank (ECB) conference disappointed traders. The FTSE 100 closed 111.13 points below the opening bell, at 6,446.39.
The ECB decided to keep key rates unchanged and unveiled further details of its asset-backed security (ABS) and covered bonds programmes that launch in mid-October.
The central bank decided to maintain the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility at 0.05%, 0.30% and -0.20% respectively.
ABS and buying of covered bonds will last at least two years and will aim to address low inflation and weak economic growth in the euro-area. Asset purchases will start in the fourth quarter 2014, beginning with covered bonds in second-half of October.
The monetary authority will buy debt of countries with ratings below BBB-, provided these countries are under a rescue programme, such as Cyprus and Greece.
"Together with the targeted longer-term refinancing operations, the purchase programmes will further enhance the transmission of monetary policy," the ECB explained in a statement.
Capital Economics took Draghi's words as a strong hint that a deterioration in the inflation outlook in the coming months would result in the ECB "taking bolder, unconventional policy action", that would leave the door "wide open" for full-blown quantitative easing by the end of the year.
Construction PMI hits eight-month high thanks to housebuilding
The UK construction sector activity has hit a new eight-month high, thanks to the housebuilding sector, according to Markit's purchasing managers' index (PMI) reading for September.
Beating analyst expectations of a 63.5 reading, PMI climbed to 64.2, up 0.2 points from August. A reading above 50 signals growth.
Markit attributed the upturn to house building, but noted that once again construction firms reported rapid growth of commercial activity and civil engineering, indicating an increased level of investment in office space, industrial units, retail space and infrastructure.
Hargreaves rises after Numis upgrade
Hargreaves Lansdown was one of just a small handful of stocks to rise on Thursday, driven higher by Numis which upgraded its rating on the stock to 'buy'.
Readacross from its US peer United Rentals sent shares in Ashtead into the red.
Sainsbury continued its path lower following a disappointing update the previous session.
Its rival, Morrison Supermarkets, unveiled plans for a price-match scheme where it will compare prices with discount chains Aldi and Lidl as well as its larger rivals.
BAE Systems also fell after Investec downgraded the stock from 'hold' to 'sell' with a target of 430p.
Construction and facilities management group Carillion climbed after saying earnings and cash generation both remained in line with expectations for the full year after a robust third quarter.
Domino's Pizza Group served up yet another tasty set of numbers, driven by a strong UK performance thanks to improved economic conditions, continued emphasis on meal deal promotions and more customers ordering online. For the 12 weeks ended 28 September, UK like-for-like (LFL) sales rose 12.9%, while system sales jumped 17.6% from £140.9m to £165.7m. |
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| | Market Movers
techMARK 2,743.23 -1.62%
FTSE 100 6,446.39 -1.69%
FTSE 250 15,005.19 -1.35%
FTSE 100 - Risers
Hargreaves Lansdown (HL.) 933.00p +0.43%
Fresnillo (FRES) 749.50p +0.33%
Randgold Resources Ltd. (RRS) 4,155.00p +0.02%
FTSE 100 - Fallers
Ashtead Group (AHT) 977.00p -4.59%
Sainsbury (J) (SBRY) 224.80p -3.93%
BG Group (BG.) 1,053.50p -3.61%
Weir Group (WEIR) 2,343.00p -3.58%
InterContinental Hotels Group (IHG) 2,251.00p -3.56%
Mondi (MNDI) 976.50p -3.51%
Babcock International Group (BAB) 1,047.00p -3.50%
Tullow Oil (TLW) 609.50p -3.41%
Pearson (PSON) 1,204.00p -2.98%
Carnival (CCL) 2,343.00p -2.98%
FTSE 250 - Risers
African Barrick Gold (ABG) 220.90p +5.64%
Croda International (CRDA) 2,073.00p +4.17%
Debenhams (DEB) 60.00p +3.81%
Greencore Group (GNC) 236.00p +2.79%
Alent (ALNT) 329.00p +2.49%
SIG (SHI) 165.00p +2.42%
Fidessa Group (FDSA) 2,281.00p +1.88%
IP Group (IPO) 204.10p +1.80%
Carillion (CLLN) 309.10p +1.58%
3i Infrastructure (3IN) 141.70p +1.21%
FTSE 250 - Fallers
Kazakhmys (KAZ) 244.10p -6.15%
Centamin (DI) (CEY) 57.90p -5.08%
Hochschild Mining (HOC) 123.60p -5.07%
Mitchells & Butlers (MAB) 349.00p -5.06%
Domino Printing Sciences (DNO) 581.50p -4.83%
Premier Oil (PMO) 309.80p -4.59%
EnQuest (ENQ) 102.90p -4.55%
Vedanta Resources (VED) 932.50p -4.31%
Electrocomponents (ECM) 210.50p -4.23%
Man Group (EMG) 113.30p -4.15% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks in the red as ECB releases details of ABS Euro-area stocks slid as the European Central Bank (ECB) decided to keep key rates unchanged and unveiled further details of its asset-purchase programmes.
The central bank decided to maintain the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility at 0.05%, 0.30% and -0.20% respectively.
The ECB said its asset-backed securities (ABS) programme and buying of covered bonds will last at least two years in an effort to address low inflation and weak economic growth in the euro-area. Asset purchases will start in fourth quarter 2014, beginning with covered bonds in second-half of October.
Berenberg senior economist Christian Schulz believes the ECB remained somewhat cagey on the details surrounding the new measures.
"The ECB put flesh to the bones of the asset purchase programmes pre-announced at the September meeting. However, it did not deliver a single big number and did not go beyond the September announcements. That may come as a disappointment to some observers. In particular, the language on purchases of sovereign bonds did not change."
At a press conference following the decision ECB President Mario Draghi was questioned on the possibility of full-on quantitative easing to which he responded: "We did a lot of things since June. We lowered interest rates, went negative on the deposit facility, launched a third covered bond programme, launched TLTROs so let's see."
The euro rose by as much as 0.6%, the most since May 8, to $1.2692.
Alasdair Cavalla, economist at Cebr said: "Cebr's remains that full quantitative easing is necessary (although probably not sufficient) to raise the growth rate," Cavalla said. "But we expect that the ECB will delay for some months before introducing such a policy."
In the US, attention turned to the Labor Department's report on initial jobless claims which came in at 287,000 in the week ended 27 September, following a revised 295,000 a week earlier. Economists had pencilled in 297,000 claims. The report comes a day ahead of the all-important monthly non-farm payrolls.
Xaar, Rocket
Print-head maker Xaar plunged after warning on profits for the current and next full year as a further slowdown in Chinese tile production activity has hit demand for its products.
Rocket Internet declined as the German firm completed the biggest initial public offering in the nation since 2007.
Hargreaves Lansdown rallied, driven higher by Numis which upgraded its rating on the stock to 'buy'.
Hochtief gained as the German builder said it will repurchase as much as 10% of its share capital. |
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| | US Market Report | | US open: Markets unchanged amid positive unemployment data Markets opened largely unchanged on Thursday as investors were disappointed by the European Central Bank's (ECB) stimulus programme, although US unemployment data delivered positive news, as it exceeded expectations. At a press conference in Italy on Thursday, ECB President Mario Draghi announced that the bank will buy assets for the next two years at least, in a bid to boost economic growth and inflation in the Eurozone. The ECB is expected to commence buying bonds in October, while it plans to purchase asset-backed securities within the final quarter of 2014.
Data released on Thursday showed an unexpected fall in the number of applications for unemployment benefits, an indication, according to analysts, that the job market is continuing to progress. Jobless claims fell to 287,000 in the week ended 27 September, 8,000 down from a revised 295,000 in the previous period and 10,000 units below the estimate.
According to data published by the Labor Department, initial jobless claims have been below the 300,000 for three consecutive weeks and five of the last seven, while the average of new claims in September fell to 294,750, just marginally above an eight-year low.
Meanwhile, layoffs in September fell to their lowest level since 2000 and factory orders are expected to drop 9.5% in August, after a 10.5% rise in July.
In corporate news, Tesla Motors rose following the news that the electric-car maker will introduce a new product next week, while Twitter rose after JP Morgan raised its recommendation on the shares of the social media network.
DirecTV registered a slight gain after announcing it had reached an agreement to continue airing National Football League matches on Sundays.
Esperion Therapeutics soared before the bell, after announcing late on Wednesday night that a mid-stage clinical trial showed its ETC-1002 treatment offered a significant help in reducing bad cholesterol, while Bank of America rose slightly after announcing that chief executive Brian Moynihan will succeed Charles Holliday Jr as chairman.
Constellation Brands fell over 3%, as the owner of Modelo and Corona brands reported second-quarter sales of $1.61bn which fell below analyst expectations. The beverage maker added it intends to buy a warehouse, glass plant, land and rail infrastructure in Mexico from Anheuser-Busch InBev NV for $300m.
West Texas Intermediate crude futures fell more than one percentage point, while gold rose slightly and was trading at $1,216 an ounce. |
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| | Broker tips: | | In a note released on Thursday Credit Suisse revisited its recent upgrade on TUI Travel, providing an updated valuation analysis of the merger benefits, which they now estimate to be worth an unchanged 63p per share on their base case, underpinning their target of 489p. That, in turn, implies 26% potential upside.
However, “our bull case adds a further 55p per share (versus 38p previously) and implies 40% potential upside,” they add.
Regarding their base case, they go on to explain that it incorporates the following elements: 1) corporate and inbound services cost savings of Eu65m; 2) cash tax savings of Eu35m from utilising brought forward Germany losses; 3) Eu30m from optimising hotel occupancies; 4) valuing the B2B online accommodation business (which we expect to be spun off) at 9x EBIT; and 5) net of Eu121m of one-off restructuring costs (based on company guidance).
On the basis of all of the above they reiterated their outperform rating and 489p target.
Credit Suisse retained a negative stance on BSkyB (Sky) due to risks from the upcoming English Premier League auction and the political debate over UK retransmission fees, but was more optimistic on Sky Deutschland, which the UK arm is expected to acquire this month.
A new price target from the broker of 630p on the enlarged ‘Sky Europe’ is almost a third below the current share price.
The TV rights for the 2016-2018 seasons will be auctioned early next year, with CS foreseeing "few good outcomes" for Sky, which is expected to compete with BT on the same aim of acquiring the majority of packs.
“We think the only bullish outcomes for Sky would be: Sky and BT both decide against bidding aggressively; or Sky lodges a ‘blockbuster’ bid to buy six out of seven packs, in an effort to force BT out of the wholesale content market,” wrote analyst Omar Sheikh.
“We see neither as likely and continue to model a 60% increase in Sky's [Premier League] costs for five packs.”
The debate over retransmission fees has grown louder in recent weeks, after UK broadcasters stepped up lobbying for the introduction of a "retransmission consent" payment regime from pay-TV distributors like Sky to free-to-air broadcasters like ITV, which Sheikh calculates could result in a total payment of over £400m per year over the next decade.
“Sky will of course fiercely resist this, and the outcome will depend in large part on the government's desire to skew regulation in broadcasters' favour,” he added.
New CS forecasts put Sky shares trading at 16.8 times 2015 earnings per share, which Sheikh feels “looks high” in the context of the auction risks and the relatively modest 10% annual growth in earnings before interest, tax, depreciation and amortisation (EBITDA) and 9% in earnings per share from 2015-17.
On Sky Deutschland, the analyst has rebased to a more conservative set of forecasts but said he expects the pace of subscriber growth to continue to at least meet market expectations.
“As the sole provider of premium pay TV in one of the most under-penetrated markets in Europe, Sky Deutschland is one of the few secular growth stocks in European Media.”
At BSkyB's shareholder vote on the acquisition of 21st Century Fox's controlling interest in Sky Deutschland, which is due on 6 October, Sheikh expects the transaction to be approved, and for investor attention to then turn to the possibility of a control premium eventually being paid for Sky Deutschland minorities.
“We think this is possible, but unlikely to be on the agenda until after the outcome of the UK's FAPL auction is known.”
A new 630p target puts the enlarged group on 8.5 times 2015 enterprise value over EBITDA, in line with historical averages. | | |
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