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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 rise after UK jobs, BoE testimony, US inflation Stocks in London advanced after the UK jobs report came in better-than-expected and the Bank of England governor remained vague on interest rates in a written testimony. The Office for National Statistics said average weekly earnings rose 2.9% in the three months to July, compared to the consensus forecast for a 2.5% increase and the previous quarter's 2.6% gain. It marked the fastest rate of growth in more than six years.
The report also showed employers added 42,000 jobs in the May-July period, smashing estimates for a 18,000 rise and marking an improvement on the prior 63,000 dip. The jobless rate unexpectedly fell to 5.5% from 5.6%.
"The long-awaited upturn in pay, which has been the missing element of the UK's economic recovery, looks to be finally upon us, reviving the prospect of a rate hike by the end of the year," said Chris Williamson, chief economist at Markit.
BoE governor Mark Carney reiterated his belief that the timing of a rate hike in the UK would become clearer around the turn of the year.
"The prospect of sustained momentum in the UK economy and the gradual firming of underlying inflationary pressure will likely put the decision as to when to start the process of gradual monetary policy normalisation into sharper relief around the turn of this year," he said in a testimony to the Treasury Select Committee on the August Inflation Report,
Carney said the impact of China's slowdown on UK growth was likely to be "modest". Ian McCafferty, who was the only Monetary Policy Committee member to vote in favour of a rate hike last week, said the effect on markets was limited. However Martin Weale, known to be one of the MPC's more hawkish members, said China is a risk.
US core inflation dips
The US consumer price index held at 0.2% year-on-year growth in August, in line with expectations. Excluding volatile components including fuel and food, the CPI rose 1.8%, in line with the previous month but worse than the 1.9% that was predicted.
Month-on-month the CPI fell 0.1% in August, as estimated, compared to a 0.1% gain in July. Taking away energy and food, it increased 0.1%, as predicted and the same as July.
"Fed chair Janet Yellen won't be overly concerned, viewing this as a temporary measure, but if consistent inflation doesn't return then uncertainty will continue to surround her interest rate decision." Dennis de Jong, managing director at UFX.com.
The report comes ahead of the Federal Reserve's decision on interest rates on Thursday with the market pencilling in a 25% chance of hike. China slowdown concerns have caused many analysts to push back expectations for a rate increase.
Meanwhile, forecasts for global growth this year have been trimmed by the Organisation for Economic Co-operation and Development (OECD) due to the further worsening of the outlook for many emerging market economies. The OECD cut its global growth forecast for 2015 to 3.0% from the 3.1% it predicted in June, though both the US and Euro-zone were revised upwards.
Adding to global pressures, Standard and Poor's downgraded Japan's sovereign debt to A+/A-1 from AA-/A-1+, albeit with a 'stable' outlook. The ratings agency said policies put in place by Japanese authorities to stoke economic growth are unlikely to reverse the deteriorating trend of the past three to four years sufficiently to keep its ratings intact.
SABMiller tops FTSE
SABMiller frothed higher after it responded to recent press speculation by confirming that Anheuser-Busch InBev has informed the company that it intends to make an offer.
Reckitt Benckiser got a boost after Exane BNP Paribas upgraded the stock to 'outperform' from 'underperform' and lifted its price target to 6,600p from 5,800p. -
Aberdeen Asset Management shares were up after news on Tuesday the company had bought London-based specialist investment manager Advance Emerging Capital for an undisclosed sum.
Mondi slid after the paper and packaging group was downgraded to 'sell' by Goldman Sachs after a strong run in the shares and "stretched" growth expectations.
Glencore gained after the miner said it had raised £1.6bn by placing new shares with institutions and senior management at a small discount in order to pay off some of its debts.
Aviva fell after it emerged this week that 700 Royal Automobile Club workers have been paid the wrong pension for years because of a calculation error caused by the insurer.
Market Movers
techMARK 3,080.39 +0.28%
FTSE 100 6,229.21 +1.49%
FTSE 250 17,061.97 +0.59% |
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| | FTSE 100 - Risers
SABMiller (SAB) 3,614.00p +19.89%
Glencore (GLEN) 134.70p +5.19%
Aberdeen Asset Management (ADN) 334.50p +4.43%
Randgold Resources Ltd. (RRS) 3,770.00p +3.97%
Hargreaves Lansdown (HL.) 1,234.00p +3.87%
BHP Billiton (BLT) 1,123.50p +3.60%
Fresnillo (FRES) 606.50p +3.15%
British American Tobacco (BATS) 3,575.00p +2.95%
Reckitt Benckiser Group (RB.) 5,855.00p +2.92%
Smiths Group (SMIN) 1,129.00p +2.54%
FTSE 100 - Fallers
Mondi (MNDI) 1,409.00p -4.67%
Inmarsat (ISAT) 1,001.00p -1.96%
London Stock Exchange Group (LSE) 2,425.00p -1.86%
Aviva (AV.) 469.10p -1.10%
ARM Holdings (ARM) 973.50p -0.71%
Rolls-Royce Holdings (RR.) 720.00p -0.41%
Royal Bank of Scotland Group (RBS) 327.70p -0.36%
BAE Systems (BA.) 451.80p -0.35%
Direct Line Insurance Group (DLG) 364.10p -0.30%
Intertek Group (ITRK) 2,507.00p -0.28%
FTSE 250 - Risers
Hunting (HTG) 471.10p +7.53%
Entertainment One Limited (ETO) 285.70p +6.17%
Tullow Oil (TLW) 209.30p +4.13%
Ladbrokes (LAD) 99.50p +3.92%
Wood Group (John) (WG.) 617.50p +3.78%
Vedanta Resources (VED) 550.50p +3.77%
Fidelity China Special Situations (FCSS) 119.70p +3.64%
Domino's Pizza Group (DOM) 883.00p +3.46%
Petrofac Ltd. (PFC) 847.00p +3.36%
JD Sports Fashion (JD.) 923.00p +3.30%
FTSE 250 - Fallers
Fisher (James) & Sons (FSJ) 1,000.00p -5.75%
Galliford Try (GFRD) 1,708.00p -5.16%
Northgate (NTG) 465.50p -4.51%
Riverstone Energy Limited (RSE) 930.00p -2.62%
LondonMetric Property (LMP) 160.50p -2.61%
Just Retirement Group (JRG) 183.30p -2.55%
Kier Group (KIE) 1,476.00p -2.19%
Diploma (DPLM) 636.00p -1.85%
SSP Group (SSPG) 291.20p -1.79%
Barr (A.G.) (BAG) 563.00p -1.75%
FTSE TechMARK - Risers
Oxford Instruments (OXIG) 570.00p +4.30%
Torotrak (TRK) 6.33p +3.35%
SDL (SDL) 364.75p +1.67%
BATM Advanced Communications Ltd. (BVC) 19.00p +1.33%
Dialight (DIA) 640.00p +0.23%
FTSE TechMARK - Fallers
Electronic Data Processing (EDP) 63.25p -3.44%
Oxford Biomedica (OXB) 8.25p -2.94%
Sepura (SEPU) 173.00p -2.26%
Consort Medical (CSRT) 930.50p -2.10%
Spirent Communications (SPT) 74.50p -1.97%
E2V Technologies (E2V) 234.75p -1.57%
NCC Group (NCC) 254.25p -1.45%
KCOM Group (KCOM) 90.50p -1.09%
XP Power Ltd. (DI) (XPP) 1,575.00p -0.79%
Ricardo (RCDO) 880.00p -0.73% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Equities rally on M&A as FOMC meeting gets underway European stocks rose, as a two-day Federal Reserve policy meeting which could see the central bank lift interest rates for the first time in nearly a decade got underway in the US. The benchmark Stoxx Europe 600 index closed up 1.53%, while Germany's DAX gained 0.38% and France's CAC 40 rose 1.67%.
The euro climbed 0.26% and 0.37% against the dollar and the yen respectively, but slumped 0.84% against the pound.
Market participants remain split over whether the Fed will hike rates, with some believing that mixed US economic reports and recent volatility in global financial markets will prevent the bank from making a move in September.
"The US interest rate decision remains finely balanced, with employment data and inflation figures weighing in on different sides of the scales," said Laith Khalaf, senior analyst at Hargreaves Lansdown.
"The outcome of tomorrow's meeting has a greater symbolic than material significance, because it could signal the beginning of the end for ultra-low interest rates, though the actual size of any rise will in fact be minimal."
Inflation subdued on both sides of the Atlantic
On the economic data front, figures released by Eurostat showed Eurozone inflation remained subdued in August.
Consumer prices rose 0.1% year-on-year compared with 0.2% growth in the previous month and in line with the preliminary reading. On a month-on-month basis, consumer prices were flat compared with the 0.6% drop registered in July and in line with analysts' expectations.
Across the Atlantic, according to the Labor Department, the CPI declined 0.1% month-on-month in September, in line with expectations but down from the 0.1% gain registered in the previous month.
On a year-on-year basis, CPI grew 0.2% last month, maintaining the same rate of growth recorded in August and matching analysts' estimates.
"US prices declined for the first time in seven months, which prompted some selling of the US dollar, but even for this important data point the reaction was muted," said IG's senior market analyst Chris Beauchamp.
"After all, if Janet Yellen and her team are going to press the button tomorrow, then one CPI reading is unlikely to change their minds."
Meanwhile, the National Association of Home Builders' housing market index rose to 62 in September from 61 in August, reaching its highest level since October 2005 and slightly beating expectations calling for an unchanged reading.
In company news, SABMiller and Anheuser-Busch InBev jumped 23.34% and 6.41% respectively after confirming the latter intends to make an offer for the London-listed brewer. |
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| | US Market Report | | US open: Stocks edge higher as FOMC meeting gets underway US stocks edged higher early on Wednesday, as investors awaited the start of the Federal Reserve's highly anticipated two-day rate setting meeting. Shortly after 1500 BST, the Dow Jones Industrial Average was up 22 points to 16,624.88, while the S&P 500 and the Nasdaq were three and four points higher respectively.
Just over half of analysts polled by Bloomberg expect the Fed to raise interest rates, although the futures market sees nearer a one-in-three chance.
Currency markets are reflecting a 28% chance that they will start raising rates in September, IG's market analyst Alastair McCaig noted. "Much more likely will be a start date later in the year or early 2016, but the FOMC will be conscious the currency markets' patience could easily turn to frustration should they continue to tease traders."
CPI declines for the first time in 2015
On the economic data front, according to the Labor Department, the CPI declined 0.1% month-on-month in September, in line with expectations but down from the 0.1% gain registered in the previous month.
On a year-on-year basis, CPI grew 0.2% last month, maintaining the same rate of growth recorded in August and matching analysts' estimates.
"Our view remains that the deflationary pressure from low energy prices and a strong dollar will begin to fade early next year," said Steve Murphy, US economist at Capital Economics.
"Together with the fact that the economy is already very close to full employment, this suggests that both wages and core inflation will surprise on the upside next year."
The Mortgage Bankers Association (MBA) said its seasonally adjusted index of application activity, which covers home purchase demand and refinancing demand, declined 7% in the week ended 11 September.
The index of loan requests for home purchases, a key indicator of home sales, fell 4% from the previous week.
Elsewhere, Asian stocks were firmly in the black, driven higher by a late surge in Chinese markets, while European equities gained ground.
The dollar was broadly flat against the euro and gained 0.16% against the yen, although it lost 0.71% against the pound.
Gold futures rose 0.90% to $1,112.50, while oil prices climbed steadily. West Texas Intermediate rose 2.49% to $45.74 a barrel, while Brent gained 2.61% to $49.04 a barrel.
SABMiller surges on takeover speculation
In company news, beer giant Anheuser-Busch InBev N.V jumped 6.95% after revealing it plans to submit a takeover offer for rival SABMiller.
As a result, SABMiller shares were over 20% higher in London. |
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| | Broker Tips | | Broker tips: Mondi, Lonmin, Reckitt Benckiser Mondi, the paper and packaging group, has been downgraded to 'sell' by Goldman Sachs after a strong run in the shares and "stretched" growth expectations. Goldman said it saw 12% downside to shares in the FTSE 100 group, which was spun-off from miner Anglo American in July 2007, after a 41% price rise since the start of the 2015.
The US bank said it believed growth expectations were stretched, given Mondi's high exposure to kraftliner packaging and near-50% sales exposure to emerging markets.
On publication, Mondi trades at 8.9 times 2016 expected EV/EBITDA on 3% expected EBITDA growth in 2016, versus Goldman's packaging average of 12% and 7.4 times expected EV/EBITDA.
A new target of 1,300p was set, down from the previous 1,380p.
Last month Mondi reported first half profits up 30% to €490m, following a boost in sales, with the London- and Johannesburg-listed company enjoying said like for like sales volumes were up across almost all European and international markets.
UBS upgraded Lonmin to 'neutral' from 'sell', saying the risk/reward is now balanced, with the shares down 84% in the past three months.
However, UBS, which cut its price target on the stock to 25p from 45p, said the outlook is still very uncertain.
It sees material upside from medium-term platinum group metals price increases and a renegotiation of debt, but material downside in the case of an equity issuance or business rescue.
The Swiss bank said that with around $470m of debt facilities expiring in the second half of next year, Lonmin is facing a period of tight liquidity and being forced to re-evaluate its capital structure in an attempt to fix this.
UBS detailed three potential options.
The first involves the successful renegotiation of the terms of debt without the need for an equity issuance. This would be the most positive equity outcome, said the bank, adding that this was unlikely given Lonmin is cash negative at spot prices.
The second is an equity issuance, which UBS said seems the most likely option.
Finally, it said if an equity issuance isn't possible, entering business rescue, which is similar to Chapter 11 bankruptcy, would be a last resort.
Reckitt Benckiser got a boost after Exane BNP Paribas upgraded the stock to 'outperform' from 'underperform' and lifted its price target to 6,600p from 5,800p.
The bank said its 'underperform' rating had been based on the belief that Reckitt would struggle to execute material near-term M&A given a dearth of suitable available opportunities.
With it now over two years since the last meaningful acquisition, Exane claimed a "hollow victory".
However, the bank said it materially underestimated the strength of organic growth in the health business. It said that alongside SCA, Reckitt is now the fastest-growing EU health and personal care major and this looks set to continue in the near term.
Exane said it sees increasing scope for mid-term M&A, more specifically for Pfizer.
The bank said Reckitt is effectively a company of two parts: a consumer health business and a conventional HPC business. While the former has always been viewed as a good business, given both recent organic trading and the digitisation driven change that is impacting mainstream HPC, Exane now reckons it is arguably one of the best businesses within HPC. |
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