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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 surge following elections London stocks racked up healthy gains on Friday, as investors welcomed news that Prime Minister David Cameron's Conservative Party would remain in power for a second term. The FTSE 100 closed up 2.32% at 7,046.82, with banks, utility stocks and housebuilders providing the biggest support.
Lloyds Banking Group, Royal Bank of Scotland and Barclays ended sharply higher as the threat of Labour's planned policies on the sector dissipated. Labour had threatened to break up the banks and potentially hit them with a one-off bonus tax and a higher bank levy.
Shares in utilities Centrica and SSE also ended in the black as the risk of energy price caps by Labour fell away.
Housebuilders enjoyed a solid performance, with Barratt Developments, Persimmon and Taylor Wimpey all closing up as the Tory election victory removed the threat of rent caps and the controversial Mansion Tax.
The Tories won 330 out of a possible 650 seats in Parliament - four more than the 326 required for an overall majority.
Their victory means investors have avoided the complications of a hung parliament - the outcome recent opinion polls suggested was most likely - which could have resulted in weeks of political uncertainty as either party grappled to form a coalition.
"Stocks will typically jump after a Tory election win, the reason stocks jumped so much is that a majority government is perceived to reduce uncertainty and because a majority simply wasn't expected," said Jasper Lawler, market analyst at CMC Markets. "The quick removal of uncertainty presented by a hung parliament, in effect beat expectations."
"Markets breathed a sigh of relief at the continuity of a Conservative government and the reduced threat of the Scottish National Party destabilising the union through a coalition with the Labour party," he added.
With the election results taking centre stage, the release of US nonfarm payroll figures came and went with little fuss.
Data showed employers added 223,000 jobs in April compared with a consensus forecast for an increase of 220,000, while the unemployment rate was bang in line with estimates, falling to 5.4% last month from 5.5% in March.
InterContinental Hotels Group gained as it said first-quarter revenues per available room, the key metric for the industry, were up 5.9% in comparable terms.
Shares in British engineering firm Rolls Royce also ended the day on a positive note, as the company maintained its full-year guidance for 2015, although it warned that revenue could take a £350m hit as a result of unfavourable currency rates.
BG Group said that its core earnings fell a staggering 41% in the first quarter compared to the same period a year earlier, weighed by depressed oil and gas prices.
Shares in Man Group reversed earlier gains to end lower as investors digested the company's first-quarter results, which showed a 7% increase in funds under management.
Market Movers
techMARK 3,269.17 +2.29%
FTSE 100 7,046.82 +2.32%
FTSE 250 17,935.93 +2.80% |
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| | FTSE 100 - Risers
Babcock International Group (BAB) 1,083.00p +9.39%
Centrica (CNA) 278.20p +8.08%
St James's Place (STJ) 962.50p +7.24%
Barratt Developments (BDEV) 549.50p +7.12%
Capita (CPI) 1,238.00p +6.72%
London Stock Exchange Group (LSE) 2,553.00p +6.11%
Royal Bank of Scotland Group (RBS) 352.40p +6.11%
Taylor Wimpey (TW.) 175.70p +5.84%
Lloyds Banking Group (LLOY) 86.85p +5.75%
Persimmon (PSN) 1,746.00p +5.63%
FTSE 100 - Fallers
Glencore (GLEN) 302.60p -0.25%
Randgold Resources Ltd. (RRS) 4,764.00p -0.23%
FTSE 250 - Risers
Ladbrokes (LAD) 116.10p +9.94%
Berkeley Group Holdings (The) (BKG) 2,737.00p +9.88%
Savills (SVS) 911.00p +9.36%
Laird (LRD) 389.90p +9.15%
Zoopla Property Group (WI) (ZPLA) 232.00p +7.81%
NMC Health (NMC) 817.00p +7.36%
Euromoney Institutional Investor (ERM) 1,261.00p +6.77%
TR Property Inv Trust (TRY) 314.90p +6.67%
Stagecoach Group (SGC) 398.30p +6.61%
Interserve (IRV) 616.50p +6.38%
FTSE 250 - Fallers
Just Eat (JE.) 436.70p -11.97%
Acacia Mining (ACA) 286.70p -2.15%
Lonmin (LMI) 142.00p -1.05%
Amec Foster Wheeler (AMFW) 885.50p -0.95%
TalkTalk Telecom Group (TALK) 369.60p -0.83%
Man Group (EMG) 177.70p -0.73%
Infinis Energy (INFI) 188.00p -0.53%
Evraz (EVR) 201.70p -0.30% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Market favours UK general election outcome The European market rejoiced alongside the rest of the globe at the outcome of the UK general elections, with housebuilders, banks and energy companies gaining on the Conservative's majority win. With 643 of 650 seats declared, the BBC forecasts Conservative 331, Labour 232, the Lib Dems 8, the SNP 56, Plaid Cymru 3, UKIP 1, the Greens 1 and others 19.
David Cameron's party has secured enough seats to form a government without needing to go into coalition, after Labour lost in Scotland and the Liberal Democrat vote collapsed. The result surprised pollsters and analysts which had predicted the Conservatives and Labour would be neck and neck, resulting in a hung parliament.
"I think this is the result the markets were hoping for as it offers the stability of a single party rule and is seen as the most business friendly outcome," said Craig Erlam, senior market analyst at Oanda.
"Moreover, it offers continuity in a country that grew faster than the rest of the G7 last year and is expected to record strong growth again this year, second only to the US."
The win against Labour - which had promised to introduce a mansion tax on expensive homes, to freeze energy bills and crack down on bankers' bonuses - sent stocks in those sectors higher.
US jobs
US non-farm payrolls rose 223,000 jobs in April, compared with a consensus forecast for an increase of 220,000. The unemployment rate was bang in line with estimates, falling to 5.4% last month from 5.5% in March.
"The return to more normal jobs growth in April will relieve Fed policy makers, providing tentative evidence that the Q1 economic weakness was mostly a blip," said Christian Schulz, senior economist at Berenberg.
"Falling unemployment points to a continuing erosion of slack in the economy, which warrants policy rate normalisation rather sooner than later. Weak wage growth and headline inflation rates around zero still allow the Fed some time, but today's release has kept chances for a September rate hike alive, especially if other indicators such as the ISM rebound as well."
Greece hits holidaymakers with tax
Greece has announced plans to charge tourists an 18% tax on restaurant and hotel bills in an effort to boost the economy and appease creditors.
Andreas Andreadis, head of the Confederation of Greece Tourism, told the Times: 'What are millions of Britons and Germans going to do after having made bookings and paid for package deals this summer? It'll probably scare them off. It's catastrophic."
The euro fell 0.46% to $1.1215.
In China, data showed exports and imports fell in April, fuelling hopes of further stimulus.
"Trade data from China overnight was pretty horrible with exports and imports plunging again over the year, Asian equities responded well on the prospect for further government stimulus but the data doesn't bode well for world growth," said Jasper Lawler, market analyst at CMC Markets.
Companies: Syngenta, Nokia Oyj
Syngenta AG edged higher after the agrochemicals maker rejected an offer by Monsanto Co. for 41.7bn Swiss francs as it said the deal was undervalued.
Nokia Oyj advanced after the New York Times reported that Uber Technologies Inc. has placed a bid for its maps business.
Enel SpA and Nokian Renkaat Oyj gained after both companies reported better-than-expected quarterly sales. |
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| | US Market Report | | US open: Equities gain as non-farm payrolls rise, unemployment rate falls US equities advanced at the opening bell on Friday after non-farm payrolls rose broadly in line with expectations.
Employers added 223,000 jobs in April, compared with a consensus forecast for an increase of 220,000. The unemployment rate was bang in line with estimates, falling to 5.4% last month from 5.5% in March.
"The return to more normal jobs growth in April will relieve Fed policy makers, providing tentative evidence that the Q1 economic weakness was mostly a blip," said Christian Schulz, senior economist at Berenberg.
"Falling unemployment points to a continuing erosion of slack in the economy, which warrants policy rate normalisation rather sooner than later. Weak wage growth and headline inflation rates around zero still allow the Fed some time, but today's release has kept chances for a September rate hike alive, especially if other indicators such as the ISM rebound as well."
The US 10-year Treasury yield fell seven basis points to 2.11% following the report.
At 14:00 London time US wholesale inventories data for March will be released with analysts' predicting a 0.3% increase.
In China, data showed exports and imports fell in April, fuelling hopes of further stimulus. "Trade data from China overnight was pretty horrible with exports and imports plunging again over the year, Asian equities responded well on the prospect for further government stimulus but the data doesn't bode well for world growth," said Jasper Lawler, market analyst at CMC Markets.
Among corporate stocks, AOL jumped after its first quarter results impressed investors. It reported a better-than-expected 7.2% increase in revenue amid stronger advertising.
McDonald's was a high riser after reporting April sales that beat analysts' projections , supported by a slower decline at its US business. |
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| | Broker Tips | | Broker tips: UK bank stocks, Utility stocks, Centrica Nomura upgraded UK bank stocks to overweight from underweight on Friday, pointing to their recent underperformance and the "business/banking friendly outcome" of the UK election, with the Conservative Party on track for another five years in power. "When we downgraded the UK banks sub-sector at the start of the year, we were concerned about earnings momentum, litigation risk, regulatory headwinds and political risk," said Nomura.
However, dividend expectations in the UK and Europe can gradually move higher as pressure to build capital eases, while political risk appears to have materially subsided as a result of the UK election outcome, Nomura said.
It said that while a Tory victory is not in itself banking friendly, it's better for the banks than the alternatives. "Investors can breathe a sigh of relief that the status quo on banking policy is set to be maintained."
Nomura said policymaker now have an opportunity to reverse in parts some of the more business-unfriendly policies like the UK bank levy on global operations. The main political risk looking ahead is a 'Brexit" but given that a referendum won't take place until 2017, Nomura has chosen to put the issue to one side and focus on current fundamentals.
Nomura's top pick in the sector is Lloyds, with Barclays coming a close second. It noted that a Labour victory presented the biggest tail risk to Lloyds in the form of market share caps. Labour's suggested bank reforms had included a cap on the size of banks' market share to reduce their dominance in the market. "This overhang now appears to be out of the way," said Nomura.
As far Barclays is concerned, the key catalyst in the coming months is the resolution of forex litigation.
Nomura rates Barclays and Lloyds at buy.
Utility stocks surged on Friday, with the threat of any energy price cap by the Labour party falling away as the Conservatives looked set for a surprise UK election win.
Given that opinion polls had suggested a broadly 50/50 probability of either a Conservative or Labour government, concerns regarding Labour's potential policies had been partly to blame for the underperformance of the UK utility sector, said Societe Generale on Friday. It noted that utilities have underperformed the UK market by 9% and the European sector by 7% year to date.
Perceived risk from Labour was largely focused on energy supply and as a result, Centrica and SSE are likely to benefit most from confirmation of a Conservative victory, said SocGen.
The bank's relative preference is for Centrica, which has a greater proportion of energy supply profits and trades on a lower valuation multiple than SSE. Societe Generale also highlighted the fact that SSE hasn't materially underperformed it peers. "It has underperformed the market by 6% year to date, but National Grid and Centrica are both down 10%," it noted.
Looking ahead, the French bank said that while the major hurdle of the election has passed, there is still the Competition and Markets Authority (CMA) review to overcome, most likely in mid June.
"Given UK supply margins are increasing as a result of lower wholesale and Energy Company Obligation (ECO) costs, and small supplier growth has been impacted by Big Six discounting in the fixed-term market, we still view the CMA review as a risk factor."
HSBC upgraded Centrica to hold from reduce on Friday and raised the target to 300p from 240p, pointing to diminished prospects for direct government intervention in the supply market after the Conservative election victory.
"The political risk has now reduced" said HSBC. There had been concerns that if Labour got into power they would cap energy prices.
Another factor behind the upgrade is the improvement in the company's balance sheet.
"We expect Centrica's free cash flow to improve, with a run-rate of around over £1bn (before dividends) from 2016 onwards," said HSBC. In addition, it expects net debt to come down by £983m in 2015. | | |
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