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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 retreat as Fed rate fears outweigh ECB stimulus One day after loose monetary policy in Europe pushed UK stocks to a new record high, fears about a sooner-than-expected tightening in the States dragged markets lower on Friday after a forecast-smashing US jobs report. Mining stocks were providing a drag in London as commodity prices weakened in the aftermath of lower economic growth forecasts from China this week.
As such, the FTSE 100 fell 0.7% to 6,911.80 by the close, retreating after settling at a new all-time closing record of 6,961.14 on Thursday.
Thursday's gains were driven by the European Central Bank (ECB), which announced that its €1.1trn quantitative easing package to boost growth and lift prices would start next week. The ECB also lowered its forecasts for inflation to just 0% this year, but lifted its growth estimates for the Eurozone economy.
Markets opened on a cautious note on Friday morning, but selling picked up in afternoon trade after the Labor Department said 295,000 non-farm payrolls were added in February, beating the consensus estimate of 235,000 despite the recent severe winter weather. The unemployment rate declined to a seven-year low of 5.5% versus estimates of 5.6% and below 5.7% in January.
The news sent US stocks lower on Wall Street and sparked a rise in the dollar, with analysts saying that the strong figures have brought forward expectations for the first rate rise by the Federal Reserve. The euro-dollar weakened to below $1.09, its lowest since 2003, while the dollar index jumped 1.2%, its biggest daily gain in four months.
"The dollar has been given a new lease of life this afternoon, on expectations that a robust rate of job creation in the US provides further reason to believe a US rate hike in the middle of this year is on its way," said analyst Chris Beauchamp from IG.
Economist Paul Dales from Capital Economics said that "even if wage growth is still subdued, the Fed can't hang around before raising rates".
Mining shares weaken, Weir and Thomas Cook jump
Miners were amongst some of the biggest fallers as a further erosion of commodity prices on the back of China cutting its 2015 growth target to 7% this week, together with a firmer US dollar after the jobs report. Fresnillo, Randgold, Anglo American and Rio Tinto were all trading lower.
Shares in British engineering giant Weir Group rose on the back of market chatter that a cash-rich private equity consortium in the US is looking to table a 2,500p per share break-up offer for the group, compared with current prices at around 1,800p.
Thomas Cook jumped after the company announced a new strategic partnership with Chinese investment giant Fosun International which will see the latter take a 5% stake in the travel operator. Fosun is investing £91.8m and intends over time to increase its shareholding to around 10%.
Kingfisher slipped after Citigroup said the DIY retailer's upcoming strategy update at the end of the month is "likely to disappoint". The bank played down hopes for an announcement of a broad store closure, given management's cautious approach.
BP was in the red despite getting the green light for a $12bn Egyptian investment project, after Santander downgraded both BP and Royal Dutch Shell, both primarily on valuation but also with the view that both are likely to struggle in 2015. The bank downgraded BP to an 'underweight' and cut Shell to 'hold'.
Meanwhile, Vodafone was hit by comments from Nomura, which said that its dividend still remains "inflated" and will need to be "reset at some juncture".
Market Movers
techMARK 3,166.69 -0.56%
FTSE 100 6,911.80 -0.71%
FTSE 250 17,272.21 -0.22% |
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| | FTSE 100 - Risers
Weir Group (WEIR) 1,813.00p +4.26%
ITV (ITV) 246.50p +2.28%
Hargreaves Lansdown (HL.) 1,170.00p +1.65%
Sports Direct International (SPD) 681.50p +1.49%
London Stock Exchange Group (LSE) 2,435.00p +1.33%
Legal & General Group (LGEN) 280.60p +1.01%
BG Group (BG.) 931.10p +0.97%
Standard Chartered (STAN) 1,024.00p +0.94%
Marks & Spencer Group (MKS) 511.00p +0.89%
Prudential (PRU) 1,671.50p +0.78%
FTSE 100 - Fallers
Randgold Resources Ltd. (RRS) 4,581.00p -5.27%
Fresnillo (FRES) 698.50p -5.16%
Intu Properties (INTU) 348.00p -3.92%
Hammerson (HMSO) 667.50p -2.98%
Vodafone Group (VOD) 219.90p -2.81%
British Land Co (BLND) 839.50p -2.67%
Anglo American (AAL) 1,136.00p -2.45%
SSE (SSE) 1,517.00p -2.44%
easyJet (EZJ) 1,680.00p -2.44%
Rio Tinto (RIO) 2,917.50p -2.26%
FTSE 250 - Risers
Thomas Cook Group (TCG) 150.20p +24.54%
Tullett Prebon (TLPR) 377.00p +6.62%
DCC (DCC) 4,017.00p +4.23%
AO World (AO.) 192.30p +3.89%
Alent (ALNT) 391.60p +3.74%
Oxford Instruments (OXIG) 850.00p +3.41%
Premier Oil (PMO) 158.90p +2.85%
Zoopla Property Group (WI) (ZPLA) 175.00p +2.34%
Pets at Home Group (PETS) 240.40p +2.21%
Cairn Energy (CNE) 198.30p +2.16%
FTSE 250 - Fallers
Just Retirement Group (JRG) 160.20p -8.35%
Acacia Mining (ACA) 252.40p -7.41%
Renishaw (RSW) 2,412.00p -5.67%
RPS Group (RPS) 247.20p -4.19%
Lonmin (LMI) 130.80p -4.18%
Dairy Crest Group (DCG) 479.70p -3.42%
Centamin (DI) (CEY) 59.65p -3.32%
IP Group (IPO) 238.00p -3.25%
Fidessa Group (FDSA) 2,193.00p -2.96% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks mixed as US non-farm payrolls beat estimates European stocks were mixed as the US non-farm payrolls report smashed expectations. US non-farm payrolls rose by 295,000 in February, ahead of forecasts for an increase of 235,000, despite severe winter weather. The unemployment rate fell by two tenths of a percentage to 5.5%, from 5.7% in the prior month, compared to estimates of 5.6%. However, average hourly earnings increased by 0.1% month-on-month in February, missing projections for a 0.2% gain, after a 0.5% climb the prior month.
"All in all another strong set of labour market data that supports the case for an end to zero-interest-rates, which we expect to come in July with a first Fed rate hike by 25bp," said Christian Schuluz, analyst at Berenberg.
The euro dropped 1.52% to $1.0862 at end of trading, a new 11-year low, following the report.
Meanwhile, Eurostat confirmed that Eurozone gross domestic product (GDP) rose 3% in the fourth quarter compared to the previous three months. GDP was 0.9% higher than the year-ago period.
"The second estimate and breakdown of Eurozone GDP in Q4 confirmed that the region's recovery remained very weak at the end of last year but provided some tentative signs that it is becoming better balanced," said Capital Economics.
The European Central Bank (ECB) on Thursday raised its projection for the rate of economic expansion this year to 1.5% from 1%, saying it expects its quantitative easing programme to boost the recovery. The ECB also announced its QE programme would begin on Monday.
Separately, German industrial production rose more than expected in January, driven by an increase in construction, according to data from the Economy Ministry in Berlin. Output, adjusted for seasonal swings, gained 0.6% in January following a revised 1% climb in December. Analysts had predicted a 0.5% rise. Production grew 0.9% compared to a year earlier.
In the UK, the Bank of England/GfK's12-month inflation expectations fell to 1.9% in February from the earlier estimate of 2.5%.
Banks edge higher
Banco BPI SA gained after its board advised shareholders to reject a bid by CaixaBank SA, saying the offer is too low. Banco Comercial Portugues SA, which has said it is prepared to assess a merger with BPI, rallied.
Scor SE advanced following reports Sompo Japan Nipponkoa Holdings Inc. plans to buy a 15% stake in the French reinsurer.
Mining stocks declined, including Randgold Resources and Fresnillo, as metal prices edged lower.
PSA Peugeot Citroen jumped after Euronext NV said the French carmaker will replace Gemalto NV on the benchmark CAC 40 Index from 23 March. Gemalto's shares slid.
Bureau Veritas SA declined after Wendel SA said it is selling an 11% holding in the testing company. |
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| | US Market Report | | US open: Stocks slip as strong payrolls ramp up pressure on the Fed Upbeat news about the labour market weighed on stocks on Friday morning on Wall Street, as a forecast-smashing jobs report on headline figures brought forward expectations for the first rate rise by the Federal Reserve.
The Dow Jones Industrial Average was down 0.4% just before 10:00 in New York, the S&P 500 fell 0.3%, while the Nasdaq slipped 0.1%.
Some 295,000 non-farm payrolls were added in February, according to the Labor Department, smashing the consensus estimates of 235,000 despite the recent severe winter weather that has hit the Northeast. This was also ahead of January's reading of 239,000, though this was revised down from the preliminary 257,000 estimate.
The unemployment rate nudged lower to 5.5% versus estimates of 5.6% and below 5.7% in January, as a result of the participation rate dropping again from 62.9% to 62.8%. The jobless rate has not been this low in nearly seven years.
Digging deeper into the numbers, the change in average hourly earnings came in at 0.1%, missing expectations of 0.2%, and sliding from 0.5%. Some believe that may be enough for the Fed to hold back from raising rates until average earnings pick up in a decent manner to truly reflect the improvement in the labour market.
However, economist Paul Dales from Capital Economics, said that "even if wage growth is still subdued, the Fed can't hang around before raising rates". He said if the Fed waits until wage growth accelerates, "they will be well behind the curve".
Furthermore, reports on Friday suggested that the snow storm that has prompted record-low temperatures across the States has moved out to sea. Even with bad weather, the US labour market managed to grow strongly in February, which bodes well for March's figure
In FX markets, the US dollar surged against the euro and the British pound after the jobs report. The greenback spiked to 1.2% to change hands with the euro at 1.08 per dollar, its weakest level since 2004. Against the pound, the dollar rose to 0.8% to trade at $1.51.
Staples slips, Foot Locker gains
Retailer Staples reported lower-than-expected fourth-quarter sales, hurt by a strong dollar and weak demand for electronics, however the company did post better-than-expected profit.
Sector peer Foot Lock impressed as quarterly earnings surged 20.6% to $146m, helped by a strong sales performance over Christmas. |
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| | Broker Tips | | Broker tips: Schroders, Kingfisher, Royal Mail, Thomas Cook Surging flows into funds at Schroders support the asset manager's premium rating to the sector, according to Berenberg, which hiked its target for the stock on Friday. "Schroders is a best-in-class asset/wealth manager with strongly performing funds and global reach," Berenberg said. The broker raised its target from 2,900p to 3,340p and maintained a 'buy' recommendation for investors following "another excellent set of results".
Kingfisher's shares flapped lower on Friday despite analysts at Citigroup raising their price target from 310p to 370p, as the US bank said the DIY retailer's upcoming strategy update is "likely to disappoint".
The broker, which kept a 'neutral' recommendation, said: "While some investors may be hoping for the new chief executive to announce a broad space closure programme for B&Q at the results on 31 March, management comments at the first-half results and Kingfisher's cautious approach to date leave us unconvinced that this is imminent."
Credit Suisse has trimmed its target for Royal Mail from 380p to 370p and reiterated an 'underperform' rating, saying that risks are increasing this year for the postal delivery group.
In 2015, competition is set to rise with the UK rollout of Whistl, while political risk will grow ahead of the elections in May. Meanwhile, free cash flow yields are "deteriorating", falling from peak yields of 9.4% in the year ended March 2014 to an estimated 6.7% in the year to March 2016. This "represent[s] a fundamentally less attractive offer", Credit Suisse said.
After Thomas Cook confirmed that Fosun International, the Chinese conglomerate that recently snapped up Club Med, has invested £92m in newly issued shares for a 5% stake in the UK travel group, Shore Capital maintained its 'hold' stance but hailed the "exciting" potential.
The travel group has formed a strategic partnership to accelerate Thomas Cook's existing growth strategy through better access into China and closer co-operation with France's Club Med.
The cash proceeds of the investment will be used to be used by Thomas Cook to accelerate strategic investment and reduce leverage, with the company saying its expects the investment to be earnings accretive in 2016, which analysts at Shore Capital suggested at least £10m of additional profit. | | |
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