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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 bounce after US jobs data, but some analysts concerned Eurozone CPI data which stoked expectations for further monetary stimulus from the European Central Bank, alongside stronger than expected economic releases Stateside, provided support to equity markets. In particular, US consultancy ADP's tally of new private sector payrolls in December revealed a rise of 241,000. That was only slightly higher than the consensus expectation for 225,000, but nevertheless quite a solid reading.
That news seems to have steadied traders' frayed nerves. The Footsie ended the session 0.84% higher at 6,419.83 points.
However, in the background analysts remained cautious, with those at Credit Suisse telling clients on Wednesday morning that, "2015 could prove to be a turbulent year for the UK economy and markets".
"Our core view is that the economy will continue to grow rapidly, driven by continued solid corporate spending and stronger consumer spending. That should lead to continued tightening in the labour market, upward pressure on wages and, consequently, the onset of monetary policy normalisation in Q3."
The Eurozone's consumer price index (CPI) fell at a 0.2% year-on-year clip in December, worse than expectations for a decline of 0.1%. However, at the core level the CPI registered a slight acceleration, to hit a 0.8% year-on-year pace, instead of the 0.7% pace seen in the prior month.
Markets were also expectant ahead of the release of the minutes of the Federal Reserve's last policy meeting, on Wednesday evening.
ARM Holdings and Aggreko lead gains
Sainsbury's third-quarter like-for-like sales declined 1.7% despite a record-breaking Christmas week. Nevertheless, that beat City expectations for a 3.2% fall while the grocer announced a new investment via the lowering of 700 prices.
Morgan Stanley lifted its price target for microchip technology developer ARM Holdings to 900p from 830p due to the strengthening dollar and the steady uptake of higher-margin, 64-bit processors.
Some investors in Boohoo.com were likely in tears on Wednesday as the company's shares plummeted after a profit warning from the online fashion retailer. After finding that sales failed to respond to much-increased marketing spend, the AIM-listed company said growth for the second half was now expected to be lower than in the first six months of the financial year.
Temporary power provider Aggreko signed a two-year contract with Energia Argentina and extended another deal in Africa. Aggreko will deliver an extra 150MW of diesel-fuelled power in Argentina. The group has additionally agreed to extend its existing 300MW of capacity with the same customer about two more years.
After an unscheduled trading update from engineer Renishaw released late on Tuesday afternoon, broker Numis upgraded its profit forecast by 30% and said it expected consensus to follow suit.
Budget airline Easyjet saw a 3.2% increase in the number of passengers flown in December to reach 4,634,977, whilst the company's load factor improved by half a percentage point to reach 88.4%. On a rolling 12-month basis the number of passengers carried rose by 6.5% to hit 65.3m.
In 2014 homebuilder Persimmon achieved a 17% increase in legal completions to reach 13,509 new homes, for a 36% rise in the number of new homes delivered to the market over the last two years. The average selling price improved by 5% last year, to reach £190,500.
Construction outfit Galliford Try saw a solid performance over the first half of the year ending on 31 December, with unit completions rising by 12.5% and the integration of the recently acquired Miller Construction business said to be proceeding substantially ahead of plan. |
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| | Risers Aggreko (AGK) 1,488.00p +3.48% ARM Holdings (ARM) 976.00p +3.44% United Utilities Group (UU.) 928.50p +3.17% Marks & Spencer Group (MKS) 468.70p +3.15% Standard Chartered (STAN) 971.80p +2.61% BT Group (BT.A) 395.50p +2.49% Prudential (PRU) 1,472.00p +2.47% Diageo (DGE) 1,826.00p +2.47% Ashtead Group (AHT) 1,136.00p +2.43% National Grid (NG.) 916.60p +2.21% Fallers Morrison (Wm) Supermarkets (MRW) 169.60p -2.36% Sainsbury (J) (SBRY) 229.60p -2.13% easyJet (EZJ) 1,665.00p -1.01% Associated British Foods (ABF) 3,065.00p -0.74% Coca-Cola HBC AG (CDI) (CCH) 1,138.00p -0.52% SSE (SSE) 1,593.00p -0.44% 3i Group (III) 431.50p -0.39% Pearson (PSON) 1,143.00p -0.09% Randgold Resources Ltd. (RRS) 4,755.00p -0.04% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks mostly higher amid ECB stimulus hopes European stocks gained as hopes of full-blown quantitative easing were lifted after data showed the Eurozone entered deflation in December. Eurostat revealed in a flash estimate that Eurozone consumer prices fell at a 0.2% year-on-year pace in December following a 0.3% increase a month earlier, driven by a slump in energy prices. Analysts had predicted a drop of 0.1%.
The report is likely to add pressure on the European Central Bank (ECB) to introduce full-on quantitative easing at its 22 January meeting to address price instability and the fragile economy.
"These really are desperate times for the Eurozone, with the monetary bloc finally slipping into deflation. Mario Draghi can't afford to sit on his hands any longer and the introduction of a bond-buying quantitative easing programme later this month now looks increasingly likely," said Dennis de Jong, managing director at UFX.com of the ECB President.
In upbeat news for the euro-area, German unemployment fell by 27,000 to 2.841m in December, the Federal Labor Agency in Nuremberg said. Economists had predicted a decline of 5,000. The adjusted jobless rate unexpectedly edged down to 6.5% from 6.6%.
German retail sales fell 0.8% year-on-year in November after a 2.1% increase a month earlier, missing expectations for a rise of 0.6%.
Separately, Eurozone retail sector activity shrank in December with Markit's purchasing managers' index falling to 47.6 from 48.9 the previous month. A reading below 50 signals contraction.
In the US, ADP's private sector payrolls report in December revealed a rise of 241,000 on the month, a bit higher than the consensus expectation for 225,000.
The data comes ahead of Friday's all-important non-farm payrolls.
The Federal Reserve is set to publish the minutes from its 16-17 December meeting at 19:00, possibly shedding light on when the central bank plans to raise interest rates.
Meanwhile, Brent crude oil recovered slightly to $50.74 per barrel in afternoon trade after falling below the $50 mark earlier on.
Aggrekko, Sainsbury
Aggreko edged higher after saying it signed a two-year diesel fuel power contract in Argentina.
Sainsbury's snapped an earlier rise after reporting a better-than-expected fall in third quarter sales but posting a cautious outlook.
Car seats and interiors maker Grammer AG gained after saying it is expanding its production plant in Rastatt, Germany. |
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| | US Market Report | | US open: Stocks climb after positive ADP employment report, crude bounces Markets were rising on Wednesday after a better-than-expected US ADP employment report.
As of 16:03 the Dow Jones Industrial Average was putting on 1.02% to 17,481.30, the S&P 500 rose by 0.69% to hit 2,016.43 and the Nasdaq advanced 0.69% to reach 2,016.43.
The ADP's tally of new private sector payrolls in December revealed a rise of 241,000 on the month, a bit higher than the consensus expectation for 225,000.
Barclays Research said: "The frequent and significant revisions to the ADP employment report limit its usefulness in short-term forecasting; however, we view this morning's report as consistent with our outlook for private payroll gains of 240k in the employment report from the Labor Department this Friday."
Senior US economist for Capital Economics Paul Dales added: "In any case, other evidence from the business surveys and jobless claims data suggest that labour market conditions remained strong enough to warrant a 300,000 rise in payrolls last month.
"As such, we think December's Employment Report will be full of new year cheer."
Crude futures were advancing early in the day as WTI figures, opening up around 0.65% up to $48.29 a barrel, while Brent futures opened higher by about 1.103% to $51.67 a barrel.
Alpari UK market analyst Craig Erlam said: "I'll be very surprised if the $50 level holds until the end of the day, let alone in the longer term. The fact of the matter is that there is still an oil supply glut and demand isn't there. Unless one of these factors change, oil prices are going to remain very heavy.
"The decline may slow and probably will but I would not bet against both WTI and Brent breaking through $40 in the coming weeks."
Over on COMEX, gold futures were falling 0.62% to $1,211.90 per ounce while the dollar was prevailing against the pound, the yen and the euro.
The yield on a benchmark US 10-year Treasury was climbing by six basis points to 2.00%. |
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| | Broker Tips | | Broker tips: Aggreko, ARM Holdings, Sainsbury Aggreko started the year on the front foot, having achieved two contract extensions and one contract win, but the company provided precious little news regarding new contract awards, some analysts pointed out.
The firm extended a 300MW contract with Energia Argentina SA for two years on top a new contract with the same client for the provision of a further 150MW of
diesel-fueled power in the South American country.
Energia Argentina also settled its outstanding bets with the temporary power solution provider. For that reason alone, Aggreko now anticipated a "small increase in the 2014 full year trading profit", apparently when compared to consensus forecasts for fiscal year 2014.
In parallel, the firm announced a three-year extension of its 200MW contract in Ivory Coast.
As a result of all of the above, broker Investec lifted its forecast for pre-tax profits at the company to £291m from £284m previously. No changes were made to the estimates for earnings per share in fiscal year 2015 and beyond.
Nevertheless, the fact the above news related to existing contracts, together with the lack of information regarding new work, meant it remained to be seen whether Wednesday's rally in the stock would be sustained.
Alongside all of the above, Investec reiterated its 'hold' recommendation on the shares while placing its target under review.
Morgan Stanley has lifted its price target for microchip technology developer ARM Holdings due to the strengthening dollar and the steady uptake of higher-margin, 64-bit processors.
In light of recent volatility in the currency markets, the bank's analysts believe that strengthening of the dollar-sterling exchange rate has benefited ARM the most in the FTSE 100, with all its revenues in dollars and 50% of costs in pounds.
This has seen Morgan Stanley raise its 2015 expected earnings per share (EPS) from 26.5p to 29.5p, above the consensus 28.5p.
Meanwhile, analyst Francois A Meunier noted that the uptake of 64-bit ARM processors globally and the transition from the 3G to 4G mobile network in China were both progressing steadily in-line with expectations, although not faster.
A majority of volume for key client Apple is understood to have now transitioned to 64-bit, lifting ARM's royalty rate above 2% versus 1.5% previously. Android's new Lollipop operating system is now available with 64-bit, which should also help in the future.
The 4G transition in China is also expected to be helpful for ARM's product mix, Meunier added, with 4G now representing the majority of industry volume in China according to MIIT data.
Moreover, the coming results periods will benefit from easier comparisons, with the ramp of 64-bit and the better mix in China leading him to expect the royalty growth rate to improve from 2-4% in the first half of 2014 to 20% in H1 2015, and from 11% in the third quarter 2014 to 14% in Q3 2015.
"However, as comps become more difficult in H2, we expect growth to falter to about 10%. We continue to believe that the structural growth of royalties is closer to 15% than 20% based on our statistical model."
For the imminent fourth quarter results, Morgan Stanley's estimates are in line with consensus with royalties of $152m and licensing of $130m (versus consensus of $151m and $128m) and earnings per share of 6.6p equal to consensus.
Management has guided for backlog to improve compared to the previous quarter, having been down slightly sequentially in the third quarter and with ARM having maintained its guidance for backlog to beat June's level by year end.
Sainsbury on Wednesday published better than expected sales figures for the third quarter but Shore Capital has reiterated selling shares in the grocer amid fierce competition.
The grocery giant saw its like-for-like sales drop by 1.7%, which was comfortably ahead of the 3.2% fall which the consensus had been forecasting.
Commenting on the company's trading update, analyst Clive Black at Shore Capital highlighted the very strong sales growth rate (+16%) achieved by the firm's convenience division. The clothing segment, in particular, which saw sales rise by 10%, put in a "commendable" performance, Black said.
The company's online business, on the other hand, only achieved growth of approximately 6%.
"Such a performance is far from stellar and well behind admittedly less mature Waitrose.com (John Lewis Partnership) and Ocado," the broker explained in a research note e-mailed to clients.
The latter, for example, reported 14% growth to the end of November 2014.
Significantly, Shore Capital emphasised how Sainsbury is in a very difficult competitive situation, caught in the middle as it is between the market leader, Tesco, which is attempting to get its act together, while at the same time losing share to the growing premium retailers such as Marks&Spencer or Waitrose.
For all of the above reasons Shore Capital reiterated its 'sell' recommendation. | | |
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