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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 decline on interest rate confusion ahead of FOMC decision The UK equity market declined on Monday after earlier gains as investors showed nervousness ahead the Federal Reserve's interest rate decision.
The Federal Open Market Committee on Thursday announces whether it will raise rates for the first time in almost a decade following a two-day policy meeting. While some analysts see a possible 25-basis-point increase, others say pressures on global markets from concerns about the impact of China's slowdown will stop the Fed from taking action.
Connor Campbell, financial analysts at Spreadex, said there was "market-confusing mist surrounding the Fed's current position in regards to a September rate-hike".
"Tomorrow afternoon could help provide some much needed clarity, as the US releases its Empire State manufacturing index, industrial production and retail sales figures; then again it could not, with analysts expecting another muddled set of numbers," he added.
The debate on an interest rate hike by the Bank of England also continued to intensify as policymaker Martin Weale said they must rise "relatively soon".
Weale said an increase in rates would give the central bank more leeway to make cuts in the event of another financial crash.
"With wage growth remaining firm, the tightening labour market means that inflation is likely to rise above target in two to three years' time," Weale wrote in an article for The Scotland on Sunday newspaper.
"Policy needs to be set with reference to this, rather than the current rate of inflation. As a result, it seems likely to me that the Bank Rate will need to rise relatively soon."
Meanwhile, China remained in focus after worse-than-expected data on factory output offset better-than-forecast retail sales.
The National Bureau of Statistics said industrial production rose 6.1% in August compared to a year ago, falling short of analysts' expectations for a 6.5% increase and following the previous month's 6% gain.
Retail sales climbed 10.8% in August, more than the forecast for a 10.6% rise and a 10.5% jump a month ago.
China on Sunday outlined plans to restructure its state-owned enterprises, including partial privatisation. The proposal included cleaning up and integrating some state firms, Xinhua news agency reported. However the guidelines, jointly issued by the Communist Party's Central Committee and the State Council, China's cabinet, did little to soothe fears on the flagging economy.
"With investors still unsure about what is going on with respect to the Chinese economy after last week's much weaker than expected inflation data, there is still an expectation that Chinese authorities will have to take further steps to ease monetary policy further in the coming weeks, and it is this, along with a weaker Chinese currency, that is fuelling concerns that we could see China export further deflationary price pressures into the global economy in the coming months," said Michael Hewson, chief market analyst at CMC Markets.
In company news, ARM Holdings was on the front foot as Morgan Stanley predicted encouraging news may emerge about capital returns at the microchip architect's analyst day next week.
Retailers including Morrison Supermarkets, Marks & Spencer and J Sainsbury were top fallers after the British Retail Consortium reported declines in August sales at high street and shopping centres.
The Royal Bank of Scotland reversed an earlier rise following reports the lender hired Bank of America Merrill Lynch to prepare a spin-off of its Williams & Glyn-branded retail branches in the second half of 2016.
Trinity Mirror jumped after saying it was in talks to buy out the shares it does not already own in rival Local World Holdings Ltd.
Chemring Group surged as the protection solutions provider reiterated full-year expectations after reporting a sharp rise in revenue.
Shire dropped as the pharmaceutical company is reportedly mulling options to sweeten its multi-billion dollar, all-stock offer for US biotechnology group Baxalta by putting cash into shareholders' hands sooner.
A measure of mining stocks rallied, including Rio Tinto and BHP Billiton, as JP Morgan upgraded its stance on the European mining and energy sectors. JP Morgan said the risk/reward is improving as the sector is the worst performer year-to-date, down almost 30% in absolute terms. It also said the impact of the Fed's move on Thursday could end up being positive for financial markets. |
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| | Market Movers
techMARK 3,066.48 -0.28%
FTSE 100 6,098.59 -0.31%
FTSE 250 16,944.46 -0.14%
FTSE 100 - Risers
BHP Billiton (BLT) 1,074.00p +1.56%
ARM Holdings (ARM) 948.00p +1.50%
International Consolidated Airlines Group SA (CDI) (IAG) 591.50p +1.37%
Hargreaves Lansdown (HL.) 1,183.00p +1.28%
Rio Tinto (RIO) 2,409.50p +1.11%
Carnival (CCL) 3,420.00p +1.03%
RSA Insurance Group (RSA) 510.50p +0.89%
Mondi (MNDI) 1,479.00p +0.82%
Inmarsat (ISAT) 1,029.00p +0.68%
Barratt Developments (BDEV) 658.00p +0.61%
FTSE 100 - Fallers
Glencore (GLEN) 128.20p -4.19%
Morrison (Wm) Supermarkets (MRW) 158.30p -4.18%
Marks & Spencer Group (MKS) 493.50p -2.28%
Antofagasta (ANTO) 594.50p -2.14%
Capita (CPI) 1,198.00p -1.64%
Ashtead Group (AHT) 993.00p -1.59%
Sainsbury (J) (SBRY) 229.80p -1.54%
Tesco (TSCO) 178.65p -1.49%
Lloyds Banking Group (LLOY) 74.67p -1.46%
Standard Chartered (STAN) 705.70p -1.41%
FTSE 250 - Risers
Acacia Mining (ACA) 244.50p +3.43%
Evraz (EVR) 70.85p +2.98%
Betfair Group (BET) 3,114.00p +2.98%
Euromoney Institutional Investor (ERM) 1,029.00p +2.69%
Riverstone Energy Limited (RSE) 970.00p +2.65%
Investec (INVP) 530.00p +2.61%
Man Group (EMG) 164.80p +2.11%
Polar Capital Technology Trust (PCT) 558.00p +2.10%
Henderson Group (HGG) 264.40p +1.97%
Vedanta Resources (VED) 520.50p +1.86%
FTSE 250 - Fallers
Lonmin (LMI) 21.00p -6.00%
Kaz Minerals (KAZ) 153.40p -5.19%
Vectura Group (VEC) 175.10p -3.53%
Keller Group (KLR) 941.50p -3.24%
Home Retail Group (HOME) 133.10p -2.92%
Vesuvius (VSVS) 383.10p -2.79%
Bodycote (BOY) 613.00p -2.70%
AO World (AO.) 149.30p -2.42%
Synergy Health (SYR) 1,560.00p -2.38%
Hunting (HTG) 405.60p -2.27%
FTSE TechMARK - Risers
Triad Group (TRD) 36.00p +5.11%
Dialight (DIA) 638.00p +2.90%
BATM Advanced Communications Ltd. (BVC) 18.38p +0.68%
Skyepharma (SKP) 359.00p +0.56%
NCC Group (NCC) 257.00p +0.39%
FTSE TechMARK - Fallers
Oxford Instruments (OXIG) 590.00p -6.35%
Oxford Biomedica (OXB) 8.44p -2.99%
SDL (SDL) 360.50p -2.17%
Ricardo (RCDO) 880.00p -2.11%
Spirent Communications (SPT) 76.50p -1.92%
KCOM Group (KCOM) 91.50p -1.35%
Sepura (SEPU) 178.50p -1.11%
CML Microsystems (CML) 350.00p -0.71%
XP Power Ltd. (DI) (XPP) 1,575.00p -0.63%
E2V Technologies (E2V) 246.00p -0.10% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Weak Chinese data takes it toll amid BIS warning European stocks ended mostly lower on Monday as soft Chinese data over the weekend took its toll with a weak start on Wall Street adding to the selling pressure at the start of a week which could see the Federal Reserve raise interest rates for the first time in nearly a decade.
The benchmark Stoxx Europe 600 index finished 0.57% lower, while Germany's DAX managed to close the day out up by 0.08% but France's CAC 40 was down 0.67%.
Shares in China fell as weak industrial output figures overshadowed better-than-expected retail sales data for August.
On Sunday, Beijing outlined a plan to improve the competitiveness of the country's state-owned enterprises by allowing them to add private investors, but even this wasn't enough to lift the overall mood.
The main focus this week will be on the Federal Reserve, as the two-day Open Market Committee meeting culminates on Thursday with a decision on interest rates. If the Fed does hike interest rates, it would the first major central bank in the Western world to do so since the global financial crisis.
On Sunday, the Bank for International Settlements warned of the tensions that had built up along the financial faultlines between emerging and developed economies as corporates from the former built up US dollar-denominated debts on the back of Fed stimulus.
"This is a world in which interest rates have been extraordinarily low for exceptionally long and in which financial markets have worryingly come to depend on central banks' every word and deed, in turn complicating the needed policy normalisation," said Claudio Borio, head of the BIS' Monetary and Economic Department.
Banks move lower Spain's Banco de Sabadell nudged into the red following reports the bank is looking to make an €18bn bid for mortgage asset portfolios from North Rock and Bradford & Bingley.
Credit Suisse was also in the spotlight after a newspaper report that it intends to sell its US private bank.
Elsewhere, Airbus slid despite news it plans to overtake Boeing the in the US by opening its first jet production site there.
Swatch was also lower, although chief executive Nick Hayek told a newspaper he wasn't concerned by economic and market turbulence in China.
Chipmaker ARM Holdings rallied ahead of its Analyst Day on Tuesday, with traders pointing to positive read-across from an upbeat Barron's article on the outlook for Apple, for which it supplies chips.
On the macro front, figures released earlier showed industrial production in the Eurozone rose more than expected in July, driven by a sharp increase in output in three of the region's largest economies.
French output on the other hand left some analysts worried about the vigour of the euro area's second largest economy.
Front month Brent crude futures ended the session down by 3.46% to $46.53 per barrel on the ICE. |
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| | US Market Report | | US open: Stocks decline amid mixed Chinese data and FOMC-driven jitters US stocks declined early on Monday as mixed data from China and the Federal Reserve's meeting later in the week weighed on investors' minds.
Shortly after 1500 BST, the Dow Jones Industrial Average was down 77 points to 16,355.32, while the S&P 500 and the Nasdaq were five and two points lower respectively.
Chinese data drags Asian stocks lower
Asian markets were dragged lower by a decline in Chinese stocks, after data on Sunday showed the country's factory output and fixed-asset investment both missed forecast in August.
The National Bureau of Statistics said industrial production rose 6.1% in August compared to a year ago, falling short of analysts' expectations for a 6.5% increase and following the previous month's 6% gain.
Separately, retail sales climbed 10.8% in August, more than the forecast for a 10.6% rise and a 10.5% jump a month ago.
"With Chinese industrial production and retail sales rising, the numbers were relatively positive despite some missing estimates," said Joshua Mahony, market analyst at IG.
"However, given the sheer amount of measures taken by the Chinese government and PBoC, it is clear that the positive impacts have yet to be felt."
The dollar climbed 0.19 % against the euro and rose 0.33% against the pound but declined 0.57% against the yen, while gold futures climbed 0.14% to $1,104.80.
It's a soft start to the week on the economic data front with no major reports scheduled for Monday, although investors will have plenty to digest later in the week.
The Federal Reserve's two-day meeting ends on Thursday, when the US central bank will reveal whether it intends to hike interest rates or whether it plans to stay on hold.
"Muddying the waters further with respect to a rate rise has been a significant cooling in some of the rhetoric of some FOMC members in recent weeks, most notably the New York Fed's Bill Dudley who said that a September rate rise was now "less compelling"," said Michael Hewson, chief market analyst at CMC Markets.
In company news, Apple climbed 1.55% after revealing it expects first-weekend sales of its new iPhone 6S to exceed last year's debut of 10m units following "very strong" pre-orders. The iPhone 6S Plus has already sold out online as orders have exceeded in-house estimates.
Solera Holdings jumped 9.00% after the software company agreed to a $6.5bn takeover from an affiliate of Vista Equity Partners. |
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| | Broker Tips | | Broker tips: Henderson Group, AstraZeneca, IAG Exane BNP Paribas took a look at UK asset managers, noting that their shares have sold off sharply, making for an enticing entry point.
"Equity market volatility is a risk to inflows, but historically the impact has been temporary and flows into other asset classes do not suffer as much. Unless the market falls sharply, we think the outlook is strong."
Exane initiated coverage of Henderson Group at 'outperform' with a 310 price target, saying it's the bank's top pick among the UK asset managers. It said the company has the best flow prospects and margin dynamics and is the most exposed to growth areas in asset management.
It started Man Group at 'outperform' with a 190p price target, saying there's a high probability the company will make further acquisitions in the next 12-24 months. "Our analysis of previous deals shows that they have been value-accretive," it said.
Coverage of Aberdeen Asset Management was initiated at 'underperform' with a 270p price target. It said Abederdeen has concentrated exposures to three flagship desks from which it expects further material outflows - global, global emerging markets and Asia Pacific equities - which together make up 60% of group revenues.
Deutsche Bank upgraded AstraZeneca to 'buy' from 'hold' and raised its price target to 5,700p from 4,850p.
The bank said it's increasingly confident in AstraZeneca's ability to deliver a return to strong growth from a base in 2017.
Deutsche said while execution risks remain, the shares offer positive risk-reward and a level of upside optionality not available elsewhere in EU large-cap pharma sector.
It noted that AZN's shares have underperformed EU pharma by more than 10% in 2015 and are trading at a discount to peers on a 2016 price-to-earnings ratio.
Things were looking up for up for IAG shares in 2016 given improved pricing on its Transatlantic routes, the pricing behaviour within the sector in general and the stock's then current valuation, analysts at Credit Suisse said on Monday.
The company's pricing in the third quarter "inspires confidence", making underlying growth of 49% in earnings before interest and taxes in the second half of 2015 "likely", analyst Neil Glynn said in a research note sent to clients.
Glynn estimated the company's revenues would expand by 38% in 2016 if Aer Lingus was included and by 31% if not.
Underpinning his argument, he pointed out how IAG's valuation relative to that of the top ten global airlines illustrated a 20% re-rating potential, suggesting the stock should trade at a lease-adjusted EV/IC ratio of 1.8 or six times EV/EBITDAR.
On the back of the above the Swiss broker upped its target on IAG stock by 14% to 852p from 750p while reiterating its 'outperform' recommendation. |
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