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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 rebound on doubts over Fed interest rate hike London stocks reversed earlier declines on Tuesday to end higher after disappointing US data backed arguments against the Federal Reserve raising interest rates this week.
US retail sales rose 0.2% in August, falling short of analysts' expectations of 0.3% and marking a slowdown from the previous month's 0.6% growth, the Commerce Department revealed.
The Empire State manufacturing index for September rose slightly to -14.7 from -14.9 in August, which was the lowest level on record since 2009 and well below the -0.15 reading analysts had expected.
US industrial production fell 0.4% in August, more than the 0.2% drop that was predicted, from an upwardly revised 0.9% the previous month. Manufacturing output declined 0.5% month-on-month in August from a 0.9% gain in July, compared to forecasts for a 0.3% drop.
The reports come ahead of Thursday's Fed decision on interest rates with the consensus forecast mixed on an increase. While the US economy has gained momentum, recent volatility in global stocks and concerns on China's slowdown have placed doubts on an rate hike this month.
"Worse than expected US retail sales (even if there was an upward revision for last month), a huge miss in the Empire State manufacturing index (which remained near its six-year low despite analysts expecting a vast improvement) and a dismal industrial production figure was just the September rate hike-denying data the markets were after," said Connor Campbell, SpreadEx financial analyst.
UK inflation
The UK consumer price index dropped to 0% year-on-year in August, as anticipated by analysts, from 0.1% in July, the Office for National Statistics revealed. Core inflation, which excludes food and energy, fell to 1% from 1.2%.
The Bank of England, which is targeting inflation of 2%, expects inflation to remain around zero throughout autumn before increasing slowly.
"Last month's jump from 0.8% to 1.2% had prompted suggestions that underlying inflationary pressures could be building, but today's drop could provide the Bank with some breathing space to leave interest rates on hold for longer in the face of global concerns," said Ben Brettell, senior economist at Hargreaves Lansdown.
"On balance I believe the Bank will wait until at least next spring before acting."
Separately, the ONS revealed that UK house price growth slowed, with a 5.2% increase in the year to July 2015, down from 5.7% the month before. The ONS said it was the lowest rate of change since September 2013 but stressed that the pace of house price growth remained strong by historical standards.
In Germany, economic sentiment dropped sharply in September. The ZEW Centre for European Economic Research in Mannheim said its index tracking economic confidence in the Eurozone's largest economy slumped from 25.0 to 12.1 in September, falling short of analysts' expectations for an 18.3 reading.
The Eurozone's surplus improved in July in seasonally adjusted terms to €22.4bn (consensus: €21.3bn) from €21.9bn, even as exports slipped to €172bn from €173.2bn, according to Eurostat.
BoJ keeps policy unchanged
The Bank of Japan decided to hold on policy following its two-day meeting, as expected. The central bank also warned that slowing demand in emerging markets was hurting Japan's exports and outputs. "With the next sales tax hike due the following April, BoJ Governor Haruhiko Kuroda isn't leaving himself much margin for error," said Craig Erlam, senior market analyst at Oanda.
"I still think we'll see an increase in asset purchases in the coming months though as the current package just isn't achieving its target, or even close to doing so."
Elsewhere in Asia, Barclays cut its forecast on China's growth next year to 6% from 6.6% after reports on Sunday showed factory output rose less than expected and investment in the first eight months rose at the slowest pace since 2000.
Companies
Weir Group gained apparently due to Blackrock calling a bottom in the shares, which are at a five-year low, increasing its holding above 5% via a contract for difference.
ARM Holdings jumped as the chipmaker said investments in the company are likely to add about $40m in revenues in 2016, rising to $200m in 2020.
Prudential rallied as it announced a pair of reassuring senior appointments to its board, with Lord Turner of Ecchinswell, who is currently chairman of the Institute for New Economic Thinking, and insurance veteran David Law both taking non-executive directorships with immediate effect.
Experian edged up after HSBC upgraded the consumer credit checking agency to 'buy'.
Glencore slid after saying the company operating the Katanga mining project in the Democratic Republic of Congo will suspend production at the site for 18 months. Katanga Mining confirmed the suspension, adding it will continue to carry out the $880m investment into processing plant upgrades at the project, in which Glencore owns a 74% stake.
Kingfisher dropped as it posted a 2.3% fall in pre-tax profits as like-for-like sales grew 2% at constant currencies.
Vodafone declined after reports that Liberty Global could walk away from a possible asset swap or merger after making little progress. Some analysts went to far as to call for CEO Vittorio Colao to step down. |
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| | Market Movers
techMARK 3,076.60 +0.47%
FTSE 100 6,149.19 +1.06%
FTSE 250 16,975.23 +0.29%
FTSE 100 - Risers
Weir Group (WEIR) 1,300.00p +5.01%
ARM Holdings (ARM) 984.00p +3.80%
SABMiller (SAB) 3,022.50p +3.03%
Coca-Cola HBC AG (CDI) (CCH) 1,380.00p +2.83%
Anglo American (AAL) 736.80p +2.78%
Aviva (AV.) 475.00p +2.77%
Standard Chartered (STAN) 722.80p +2.77%
Aberdeen Asset Management (ADN) 321.00p +2.75%
Prudential (PRU) 1,422.50p +2.74%
Burberry Group (BRBY) 1,409.00p +2.55%
FTSE 100 - Fallers
Kingfisher (KGF) 352.40p -2.19%
Vodafone Group (VOD) 218.80p -1.11%
Merlin Entertainments (MERL) 378.80p -0.92%
TUI AG Reg Shs (DI) (TUI) 1,205.00p -0.82%
InterContinental Hotels Group (IHG) 2,375.00p -0.71%
Taylor Wimpey (TW.) 199.30p -0.70%
Tesco (TSCO) 177.35p -0.62%
Next (NXT) 7,600.00p -0.59%
Inmarsat (ISAT) 1,023.00p -0.58%
Persimmon (PSN) 2,088.00p -0.57%
FTSE 250 - Risers
Hunting (HTG) 438.10p +8.57%
Lonmin (LMI) 22.80p +8.57%
Tullow Oil (TLW) 202.00p +4.77%
Centamin (DI) (CEY) 59.50p +4.39%
Petrofac Ltd. (PFC) 821.00p +3.79%
Ashmore Group (ASHM) 262.10p +3.11%
Tate & Lyle (TATE) 548.50p +2.91%
Amec Foster Wheeler (AMFW) 771.00p +2.87%
Rank Group (RNK) 268.60p +2.64%
esure Group (ESUR) 249.10p +2.59%
FTSE 250 - Fallers
Booker Group (BOK) 173.80p -3.50%
Fisher (James) & Sons (FSJ) 1,065.00p -2.92%
Lookers (LOOK) 175.70p -2.82%
Stagecoach Group (SGC) 344.90p -2.79%
Premier Farnell (PFL) 133.30p -2.70%
Millennium & Copthorne Hotels (MLC) 532.00p -2.39%
Greencore Group (GNC) 293.00p -2.01%
Poundland Group (PLND) 321.50p -1.92%
St. Modwen Properties (SMP) 442.60p -1.80%
LondonMetric Property (LMP) 164.50p -1.79%
FTSE TechMARK - Risers
DRS Data & Research Services (DRS) 12.75p +6.25%
BATM Advanced Communications Ltd. (BVC) 18.75p +2.04%
XP Power Ltd. (DI) (XPP) 1,600.00p +1.59%
CML Microsystems (CML) 352.50p +0.71%
Dialight (DIA) 639.00p +0.63%
Oxford Biomedica (OXB) 8.50p +0.59%
Ricardo (RCDO) 886.50p +0.17%
SDL (SDL) 360.25p +0.07%
FTSE TechMARK - Fallers
Oxford Instruments (OXIG) 549.00p -6.95%
Skyepharma (SKP) 345.00p -4.17%
E2V Technologies (E2V) 238.00p -2.86%
Promethean World (PRW) 38.75p -1.59%
Sepura (SEPU) 176.50p -1.12%
Spirent Communications (SPT) 76.00p -0.98%
Gresham Computing (GHT) 115.50p -0.86%
KCOM Group (KCOM) 91.00p -0.82%
Consort Medical (CSRT) 954.00p -0.68%
IShares Euro Gov Bond 7-10YR UCITS ETF (IEGM) € 200.18 -0.41% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks clinch late gains after day of mixed data European stocks mustered a late rally, edging higher for the day after a relatively buoyant open on Wall Street but investors remained cautious ahead of the Federal Reserve's rate announcement later in the week.
The benchmark Stoxx Europe 600 index climbed 0.80%, while Germany's DAX rose 0.56% and France's CAC 40 closed 1.14% higher.
The euro declined 0.33% and 0.50% against the dollar and the yen respectively but gained 0.11% against the pound, while Brent crude gained 0.11% to $46.42 a barrel.
Mixed data on both sides of the Atlantic
On the economic data front, the ZEW Centre for European Economic Research in Mannheim said its index tracking economic confidence in the Eurozone's largest economy slumped from 25.0 to 12.1 in September, falling short of analysts' expectations for an 18.3 reading.
The sub-index monitoring economic sentiment in the Eurozone also suffered a sharp drop, declining from 47.6 in August to 33.3 in September.
Elsewhere, data showed the Eurozone trade surplus improved in July even as German exports outside the European Union ground to a halt and French exports declined sharply.
In seasonally-adjusted terms, the surplus edged higher to €22.4bn from €21.9bn and compared with consensus expectations of €21.3bn, even as exports slipped to €172bn from €173.2bn, according to Eurostat.
Meanwhile, employment in the Eurozone grew for a sixth consecutive quarter over the three months ending in June, rising by 0.3% quarter-on-quarter in comparison to the 0.2% pace seen in the first quarter of the year, according to Eurostat. |
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| | US Market Report | | US open: Equities edge higher as FOMC decision looms large US equity markets edged higher early on Tuesday as investors analysed a raft of economic data, looking for clues ahead of the imminent Federal Reserve meeting.
Shortly before 1500 BST, the Dow Jones Industrial Average was up 39 points to 16,410.05, while the S&P 500 and the Nasdaq gained three and six points respectively.
The Federal Open Market Committee kicks off its two-day meeting on Wednesday and, while analysts remained divided over the outcome, it could result in the first hike in interest rates for almost a decade.
"We expect the hiking cycle to be even slower than the Fed currently anticipates, at least in its early phase -which may take several years- with subdued wage pressures," said Philip Marey, senior US strategist at Rabobank.
"In fact, the fragility of the US economic recovery may even lead to temporary reversals of rate hikes down the road as any major shock can slow down this economy to a standstill or worse."
Empire State Index remains in the red
US retail sales rose less than expected, as the Federal Reserve looks for signs of economic improvement ahead of its interest rate decision this week.
The Commerce Department said sales increased 0.2% in August, compared to analysts' expectations for a 0.3% rise and the previous month's 0.6% gain.
"The August retail sales report suggests that the bout of late-month financial turmoil, which impacted consumer confidence a little, did not have any meaningful adverse impact on consumption," said Steve Murphy, US economist at Capital Economics.
Elsewhere, business conditions in the New York region remained weak in September, the New York Federal Reserve said on Tuesday.
The Empire State manufacturing index for September rose slightly to -14.7 from -14.9 in August, which was the lowest level on record since 2009.
September's reading fell well short of the -0.15 reading analysts had expected.
"Given the relatively small size of the manufacturing base in New York state, we place limited weight on this morning's release," analysts at Barclays said on Tuesday.
"We look to Thursday's release of the Philadelphia Fed manufacturing index, often a better indicator of national trends, for further indication of the state of the US manufacturing sector at the end of the third quarter."
Asian stocks declined, with China's Shanghai Composite Index losing 3.52% as volatility returned to the region.
The dollar was broadly flat against the euro, rose 0.21% against the pound and declined 0.41% against the yen, while gold futures declined 0.09% to $1,106.70.
Oil prices staged a steady rebound after declining on Monday, with West Texas Intermediate gaining 0.47% to $44.21 a barrel, while Brent crude rose 0.36% to $46.54 a barrel.
In company news, snack and breakfast foods giant Kellogg shed 0.09% after saying it would buy a 50% stake in African distribution company Multipro for $450m. |
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| | Broker Tips | | Broker tips: BP, BG Group, Experian, European banks The risk/reward trade-off in 'big oil' has improved despite the unsustainably low price of oil, analysts at Liberum said on Friday.
Indeed, unless M&A opportunities appear or the intensity of investments falls fast, then the best thing these companies can do is to return the bulk of profits to shareholders.
So while funding their dividend policies through organic growth in free-cash-flow is "challenging", string balance sheets, asset sales and scrip dividends will continue to plug the gap until oil prices recover.
The cancellation of the scrip dividend will be worth watching as a possible signal that the path to sustainable cash flow is clear.
On the basis of the above, the broker upped its recommendation on BG Group and BP to 'buy' from 'hold'. The targets for each were improved to 1,165p and 405p, respectively.
In the case of BG Group the broker added it was convinced the Shell bid would go through, offering low-risk upside potential of 17%.
Shares of Experian were offering an "attractive" valuation after falling afoul of investors' concerns surrounding Brazil, analysts at Deutsche Bank said.
Since May the stock has de-rated from about 20 times' 12-month forward earnings to 17 at present, Deutsche Bank analysts explained to clients in a research report.
In parallel, 12 month earnings per share of Experian in US dollar terms had risen by 20% while the European markets' earnings per share on the same basis was down by 25%.
"This relative earnings strength in one of the most innovative companies we cover is not represented in relative valuations similar to those seen during the global financial crisis", the analysts said.
The broker maintained its 'buy' recommendation on the firm's shares.
On a similar note, HSBC on Tuesday lifted its target for Experian higher to 1,290p from 1,150p, emphasising the growth momentum in its US business, on-going disposals and limited downside risks from Brazil and its Consumer division.
European Banks face a daunting regulatory environment that will leave the sector with an average capital shortfall of 60 basis points at the end of 2018, broker Exane BNP Paribas estimated, meaning their dividend payouts were still at risk.
Nonetheless, that was expected to be the situation after approximately 230 basis points of cumulative cash dividends being paid out over that time horizon. Hence, "there is capacity to absorb this impact through lower distributions," the analysts said in a research note sent to clients.
Also on the negative side of the ledger, the full range for the impact - estimated at 190 basis points - on banks was between 150 and 290 basis points.
As well, a surplus in one bank wouldn't help another in deficit, so individual banks might be impacted by significantly more.
"In aggregate we estimate a capital shortfall at end-2018 of €77bn for the banks that are short (60% of our coverage universe), and they have €167bn capacity to address this through lower cash dividends over 15-18E," Exane explained. |
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