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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 slump as improvement in UK inflation points to rate hike London stocks slumped as data showing improvement in July's UK inflation lifted anticipation of a rate hike by the Bank of England.
The consumer price index rose 0.1% from June's 0%, beating expectations that it would remain unchanged, the Office for National Statistics revealed. Core inflation rose 1.2% in July compared to a year ago, more than the 0.9% growth predicted, and up from the prior month's 0.8% gain.
While inflation remains well below the BoE's target of 2%, policymaker Kristin Forbes has said the central should not wait until that point for a rate hike as it could hurt economic recovery.
"Monday's comments from BoE's Kristin Forbes couldn't have come at a better time, highlighting that there's a two-year lag between interest rate changes and inflation, meaning rates will need to rise well before CPI goes anywhere near 2%," said IG analyst John Mahoney.
Mahoney added that rising UK core inflation highlighted the fact that it's only a matter of time before rates in both the UK and US will rise in expectation of higher inflation.
However, Danske Bank said it sees CPI remaining low for the rest of the year and did not rule out inflation turning negative in coming months.
"We think the BoE wants to see CPI inflation stabilise/move higher before hiking and hence most MPC members are unlikely to feel comfortable with the near-term inflation outlook," analysts said, adding that it predicts a rate increase in February.
Meanwhile, Chancellor Angela Merkel is expected to on Wednesday face rebellion within her centre-right party when it votes on a third bailout package for Greece. Greece needs the €86bn package to make a debt repayment to the European Central Bank on 20 August.
In the US, a report showed housing starts rose 0.2% in July, less than the 0.5% that was predicted by analysts and marking at slowdown on the previous month's 12.3% growth.
In another drag to the market, miners continued to slide, with BHP Billiton, Anglo American and Antofagasta in the red as copper hit a six-year low on concerns China's stock market rout could destabilise its economy and hurt demand for the metal.
Glencore edged lower ahead of its half-year results on Wednesday on reports the company is reviewing its Eland platinum mine in South Africa for a possible closure due to falling prices.
Cairn Energy tumbled as it posted a wider loss after tax in the first half, reflecting a £177m impairment charge.
Engineer Wood Group fell as it reported a 19.3% decline in first half revenue and slashed its costs and workforce amid the crashing oil prices.
Persimmon dropped despite reporting a 31% rise in first-half pre-tax profit, driven by solid revenue growth.
William Hill jumped after Numis upgraded the stock to 'buy' from 'hold' and raised its price target to 480p from 400p, saying the recent share price fall has created a buying opportunity. |
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| | Market Movers
techMARK 3,182.58 +0.18%
FTSE 100 6,526.29 -0.37%
FTSE 250 17,616.94 +0.05%
FTSE 100 - Risers
Glencore (GLEN) 176.10p +3.59%
Shire Plc (SHP) 5,245.00p +1.65%
International Consolidated Airlines Group SA (CDI) (IAG) 550.00p +1.29%
easyJet (EZJ) 1,745.00p +1.16%
Inmarsat (ISAT) 1,003.00p +1.01%
Standard Life (SL.) 442.20p +1.00%
Merlin Entertainments (MERL) 401.50p +0.83%
AstraZeneca (AZN) 4,310.00p +0.75%
Wolseley (WOS) 4,332.00p +0.74%
United Utilities Group (UU.) 904.50p +0.72%
FTSE 100 - Fallers
Antofagasta (ANTO) 561.50p -2.09%
Barratt Developments (BDEV) 640.50p -1.91%
BHP Billiton (BLT) 1,112.50p -1.85%
Tesco (TSCO) 198.60p -1.78%
Anglo American (AAL) 741.90p -1.76%
Persimmon (PSN) 2,084.00p -1.74%
Fresnillo (FRES) 659.50p -1.71%
GKN (GKN) 294.90p -1.67%
Royal Dutch Shell 'B' (RDSB) 1,782.50p -1.63%
Royal Dutch Shell 'A' (RDSA) 1,764.00p -1.62%
FTSE 250 - Risers
OneSavings Bank (OSB) 328.00p +4.13%
PayPoint (PAY) 1,038.00p +3.80%
Telecom Plus (TEP) 1,145.00p +3.62%
UDG Healthcare Public Limited Company (UDG) 539.50p +3.06%
Redefine International (RDI) 55.50p +2.97%
Just Retirement Group (JRG) 186.30p +2.93%
Zoopla Property Group (WI) (ZPLA) 272.10p +2.68%
Cranswick (CWK) 1,697.00p +2.41%
Balfour Beatty (BBY) 270.00p +2.27%
Allied Minds (ALM) 465.80p +2.26%
FTSE 250 - Fallers
Lonmin (LMI) 33.01p -7.64%
Cairn Energy (CNE) 143.20p -7.25%
Evraz (EVR) 86.95p -5.59%
Fidelity China Special Situations (FCSS) 128.40p -4.46%
Templeton Emerging Markets Inv Trust (TEM) 425.40p -3.01%
Bovis Homes Group (BVS) 1,129.00p -2.92%
Tullow Oil (TLW) 211.10p -2.85%
Aggreko (AGK) 1,064.00p -2.56%
Kaz Minerals (KAZ) 146.20p -2.47%
Murray International Trust (MYI) 835.00p -2.34%
FTSE TechMARK - Risers
UCW Limited (UCW) A$0.01 +8.33%
Sepura (SEPU) 161.00p +2.71%
Torotrak (TRK) 6.25p +1.96%
KCOM Group (KCOM) 94.00p +1.90%
Dialight (DIA) 556.50p +1.18%
Consort Medical (CSRT) 952.50p +1.11%
NCC Group (NCC) 247.00p +0.82%
RM (RM.) 176.50p +0.71%
Triad Group (TRD) 36.25p +0.69%
BATM Advanced Communications Ltd. (BVC) 18.88p +0.67%
FTSE TechMARK - Fallers
Oxford Biomedica (OXB) 7.90p -3.07%
Oxford Instruments (OXIG) 893.00p -2.30%
SDL (SDL) 386.00p -2.15%
Spirent Communications (SPT) 81.00p -0.61%
Gresham Computing (GHT) 99.00p -0.50%
XP Power Ltd. (DI) (XPP) 1,685.00p -0.35%
IShares Euro Gov Bond 7-10YR UCITS ETF (IEGM) € 201.33 -0.18% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Equities struggle for direction after Chinese stocks slump European stocks struggled for direction on Tuesday, as investors remained jittery over Greece, while a downbeat session in Asia weighed on sentiment.
The benchmark Stoxx Europe 600 index was up 0.28%, France's CAC 40 shed 0.20% and Germany's DAX was 0.22% lower.
The euro fell over 0.4% against both the dollar and the yen and plunged 0.96% against the pound, while Brent crude shed 0.45% to $48.52 a barrel.
Chinese stocks tumble
Elsewhere, China's Shanghai Composite Index recorded its biggest fall in three weeks after slumping 6.15%, as investors dismissed signs of recovery in the country's housing market.
"Data showing rising house prices in China during July could hamper the ability of the People's Bank of China to cut interest rates for risk of blowing air back into a housing bubble," said CMC Markets' analyst Jasper Lawler.
"China's economy is still in a rough patch despite a number of cuts to interest rates and bank reserve ratios so anything that could prevent further cuts will weigh on the stock market."
Greece in focus
Greece was still in focus, with the German parliament due to vote on its third bailout on Wednesday.
According to press reports, leaders of Chancellor Angela Merkel's German conservatives are mostly in favour of the €86bn plan, but top party officials want the International Monetary Fund to be involved.
Meanwhile, it looks as though the Greek government will call a confidence vote after a revolt among far-left lawmakers from the ruling Syriza party.
In company news, Swiss chocolate maker Lindt & Spruengli climbed 1.11% after reporting a rise in first-half profit and confirming its full-year sales target.
Elsewhere, shares in German energy firm RWE were down 2.79% after Societe Generale cut its rating on the stock to 'sell' from 'hold'. |
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| | US Market Report | | US open: Equities slide despite better than expected housing data US stocks edged slightly lower on Tuesday, as investors remained jittery ahead of the release later this week of the minutes from the last Federal Reserve's meeting.
Just after 1500 BST, the Dow Jones Industrial Average was down 29 points to 17,516.12, while the S&P 500 and the Nasdaq fell four and 20 points respectively.
Tuesday data
Construction on new US homes grew in July at their fastest pace since the recession, figures released on Tuesday showed.
According to the Commerce Department, housing starts climbed 0.2% last month to 1.21m, the highest rate since October 2007, and above the 1.19m analysts had estimated.
Meanwhile, housing starts in June were revised upwardly from 1.17m to 1.20m.
"Stronger starts and construction boosted our estimate of residential investment and added 0.1 percentage points to our third quarter GDP tracking estimate, bringing it to 2.7%," analysts at Barclays said in a note.
"The sentiment surrounding the US futures market has changed, and the concerns over Greece and China are weighing on the market," said IG's market analyst David Madden.
"The US market finished on a high note yesterday, but the tone is very different today as the US follows it lead from the Far East and Europe."
Gold futures shed 0.45% to $1,113.40, while oil prices were mixed, with West Texas Intermediate rising 0.17% to $41.94 a barrel, while Brent lost 0.43% to $41.68 a barrel and $48.53 a barrel.
Wal-Mart slides
In company news, Home Depot rose 2.26% after the home improvement chain's second quarter results met expectations.
Luxury handbag maker Coach climbed 2.83% after analysts at Jefferies lifted their rating on the stock from 'hold' to 'buy' citing "visible green shoots in the business."
Retailer giant Wal-Mart slid 2.49% after the group's second quarter results fell short of estimates as currency headwinds weighed heavily on profit. |
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| | Broker Tips | | Broker tips: Kaz Minerals, Persimmon, Lonmin Goldman Sachs has reiterated its 'sell' recommendation on KAZ Minerals as the copper-focused miner is expected to deliver disappointing first-half results on Thursday.
Shares in KAZ fell 2.1% to 146.7p by 1140 BST on Tuesday, as Goldman kept its 12-month target at 137p.
Interim results from KAZ on 20 August are forecast to show a 52% half-on-half decline in EBITDA, mainly on the back of a 13% decrease in copper cathode output - revealed in a recent trading update - and 13% fall in copper prices, while gross cash costs have remained flat.
"We believe investors will focus on management comments regarding growth projects, especially the timing of Bozshakol commissioning given the fire reported at this asset last week."
Goldman acknowledged that KAZ offered "structurally appealing production volume growth", with volume expected to triple by 2018, with the company looking well positioned at the lower end of the global copper cash cost curve according to the bank's analysis.
However, GS has a bearish outlook for the copper price, pencilling in $4,725 per tonne in 2016, and so estimates KAZ's 2016-17 free cash flow will be insufficient to cover debt repayments under existing loan agreements.
"Hence, until we see a sustainable debt solution coupled with spotless execution on growth we stay cautious on the equity."
Other possible upside that could see the rating altered would be higher-than-expected copper, zinc and gold prices, weaker forex, and projects being ahead of schedule and with capex below budget.
Bank of America Merill Lynch has lifted its price target on Persimmon to 2,300p from 2,110p following the company's first-half results.
The bank said 2015 has been a good trading period for the company and despite high land investment, has resulted in a very strong net cash position.
"This, along with solid fundamentals and strong cash flow, gives us confidence that the 2015 and 2017 10p dividends could be revised materially upwards," it said.
It said Persimmon currently sees an attractive land market and is investing heavily in it, but lower investment could allow the company to potentially double its dividend stream if it chose to do so.
Merill said the stock remains attractive, trading on an estimated 2016 yield of 5.2%. It said that while this is a premium to the sector, it is sustainable given the quality of the cash flow.
"Persimmon's track record of being the only UK housebuilder that traded through the early 1990s UK housing recession as continuously profitable, as well as its current landbank and net cash position, make this the most defensive UK housebuilder, in our view."
Merrill maintained its 'buy' rating on the stock.
Shares in miner Lonmin were under pressure after RBC Capital Markets slashed its price target on the stock to 35p from 110p as it adjusts its model to reflect retrenchment costs in full-year 2015 and lower opex.
It said that given the challenging outlook for platinum group metals and balance sheet concerns, the market is valuing Lonmin on a short-term basis using spot prices.
Weak PGM prices present a risk to free cash flow generation despite plans to cut headcount and costs, said RBC, adding that Lonmin's debt falls due in the first half of 2016 and the company could struggle to refinance.
It said the miner's operations are labour-intensive and relatively high cost and maintaining its production profile of around 750,000 ounces of refined platinum requires an annual capital spend of around $250m at current prices, which pushes the company into negative free cash flow generation.
"Overall we see balance sheet concerns persisting until Lonmin addresses its tight liquidity position or we see a material rally in PGM prices," said the Canadian bank.
Potential catalysts for the shares include better PGM prices, debt refinancing and successful wage negotiations. |
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