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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 fall ahead of FOMC interest rate decision London stocks dropped on Thursday as investors turned their attention to the Federal Reserve's announcement on interest rates due after the close. The market sees a less than 25% chance that the Fed will raise rates. The Federal Open Market Committee publishes its decision at 1900 BST following a two-day policy meeting.
"Today's FOMC announcement is arguably the biggest in years and despite months of data, opinions and debates, we appear no clearer on whether the Fed will actually raise interest rates or not," said Craig Erlam, senior market analyst at Oanda.
"It's been almost a decade since the Fed last raised interest rates and in that time, the markets have become hooked on record low interest rates and appear in denial about the need to raise them. Fed Chair Janet Yellen has given numerous warnings that they plan to raise rates this year and they have clearly fallen on deaf ears."
UBS analysts said they don't see a rate hike coming this month. "US data have sent mixed signals, China risks have intensified and US financial conditions have unexpectedly tightened. Given market pricing, a decision to raise rates would be a surprise," the Swiss broker's Global Macro Strategy team said in a research report sent to clients.
Thursday data
Ahead of the FOMC announcement, the initial jobless claims report came in better than forecast. According to the Labor Department, new claims declined by 11,000 to 264,000 in the week to 12 September, to reach their lowest level since mid-July. Analysts had expected jobless claims to hold steady at 275,000.
Construction on new US homes slowed down in August after a strong start to the summer, according to the Commerce Department. Housing starts fell 3% last month to 1.13m, against expectations for a decline to 1.16m.
Back on home soil, UK retail sales figures showed a less than expected rise in August. Sales climbed 3.5% year-on-year last month, missing forecasts for a 3.8% increase and marking a slowdown from the prior month's 4.1% gain.
"Sluggish growth of retail sales adds to the recent flow of economic data which point to a slowing in the UK economy," said Chris Williamson, chief market economist at Markit.
"Industrial production fell 0.4% for a second successive month in July, and business surveys such as the PMI have indicated the weakest pace of economic growth for two years in August. Put all the information together and it's pointing to the economy growing by 0.4% in the third quarter, down from 0.7% in the second quarter.
Among company stocks, engineers and oil services groups were leading the fallers.
Rotork plunged after the valve-control systems maker said its expects a fall in full-year revenue and operating profit, due to weak trading and the deferral and cancellation of projects.
Engineers Smiths Group and Weir fell to the bottom of the pile on negative read-through from Rotork. Weir was also suffering on the back of a demotion from the FTSE 100 on Friday.
Babcock was another engineer whose shares slumped, due to a downgrade by Exane BNP Paribas.
Premier Farnell tumbled after the technology product distributor reporting a 13.7% fall in interim pre-tax profits to £30.6m as it warned that slowing momentum would mean the company's second half operating profits coming in at lower than forecasts.
Antofagasta fell as the company and Codelco suspended operations at two major cooper mines in Chile.
Kier Group slumped despite reporting a jump in pre-tax profit for the year ended 30 June as revenue rose thanks to a solid performance in all its divisions.
Reckitt Benckiser gained on speculation that the company was among the beneficiaries that might become a target for a Pfizer takeover.
Market Movers
techMARK 3,066.03 -0.47%
FTSE 100 6,200.63 -0.46%
FTSE 250 17,062.89 +0.01% |
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| | FTSE 100 - Risers
Compass Group (CPG) 1,037.00p +1.87%
Associated British Foods (ABF) 3,189.00p +1.63%
GKN (GKN) 285.70p +1.42%
London Stock Exchange Group (LSE) 2,458.00p +1.36%
International Consolidated Airlines Group SA (CDI) (IAG) 604.50p +1.09%
Aberdeen Asset Management (ADN) 338.00p +1.05%
Standard Chartered (STAN) 741.70p +0.90%
TUI AG Reg Shs (DI) (TUI) 1,242.00p +0.89%
Marks & Spencer Group (MKS) 496.10p +0.71%
Whitbread (WTB) 4,682.00p +0.67%
FTSE 100 - Fallers
Smiths Group (SMIN) 1,083.00p -4.07%
Sainsbury (J) (SBRY) 225.30p -2.55%
Fresnillo (FRES) 591.50p -2.47%
Hargreaves Lansdown (HL.) 1,204.00p -2.43%
Antofagasta (ANTO) 590.00p -2.40%
Weir Group (WEIR) 1,288.00p -2.28%
Babcock International Group (BAB) 931.50p -2.26%
Rio Tinto (RIO) 2,350.50p -1.88%
HSBC Holdings (HSBA) 503.50p -1.87%
Anglo American (AAL) 737.00p -1.64%
FTSE 250 - Risers
Ocado Group (OCDO) 347.00p +8.61%
Northgate (NTG) 498.50p +7.09%
Serco Group (SRP) 110.80p +4.73%
AO World (AO.) 157.80p +3.82%
Allied Minds (ALM) 495.00p +3.77%
Brewin Dolphin Holdings (BRW) 288.20p +3.41%
Foxtons Group (FOXT) 243.40p +3.14%
SSP Group (SSPG) 300.20p +3.09%
Riverstone Energy Limited (RSE) 956.00p +2.80%
Regus (RGU) 314.40p +2.78%
FTSE 250 - Fallers
Premier Farnell (PFL) 111.90p -16.05%
Rotork (ROR) 193.60p -10.37%
Hunting (HTG) 440.50p -6.50%
Kier Group (KIE) 1,410.00p -4.47%
Interserve (IRV) 580.00p -3.65%
Zoopla Property Group (WI) (ZPLA) 209.20p -3.59%
Petrofac Ltd. (PFC) 818.50p -3.36%
Petra Diamonds Ltd.(DI) (PDL) 107.80p -2.80%
Electrocomponents (ECM) 182.50p -2.77%
Lonmin (LMI) 22.17p -2.76%
FTSE TechMARK - Risers
Oxford Biomedica (OXB) 8.70p +5.45%
Oxford Instruments (OXIG) 595.50p +4.47%
Electronic Data Processing (EDP) 65.50p +3.56%
Ricardo (RCDO) 898.00p +2.05%
NCC Group (NCC) 259.25p +1.97%
Dialight (DIA) 651.00p +1.72%
Spirent Communications (SPT) 75.75p +1.68%
SDL (SDL) 369.25p +1.23%
KCOM Group (KCOM) 91.25p +0.83%
Sepura (SEPU) 174.25p +0.72%
FTSE TechMARK - Fallers
Filtronic (FTC) 6.50p -3.70%
E2V Technologies (E2V) 233.25p -0.64%
Consort Medical (CSRT) 926.50p -0.43% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Equity markets flat ahead of Fed's day of reckoning European stocks moved in tight ranges on Thursday, with investors reluctant to make any big bets either way ahead of the eagerly-anticipated Federal Reserve rate decision.
The benchmark Stoxx Europe 600 index closed down 0.18%, while Germany's DAX was up 0.02% and France's CAC 40 rose 0.20%.
The euro rose against the main currencies, gaining 0.19% against the dollar and climbing 0.28% and 0.50% against the pound and the yen respectively.
All eyes on the Fed
Analysts are divided over whether the US central bank will hike interest rates later on Thursday, with the announcement due at 1900 BST.
If it does, it will be the first hike in nearly a decade and the Fed will be the first major central bank in the Western world to make such a move since the global financial crisis.
Deutsche Bank said futures markets imply a 30% probability that the Fed will start hiking rates on Thursday and a 60% probability of a move by the end of the year.
"We think a rate hike now would be a mistake, as inflationary pressures are low, market-implied inflation expectations have dropped to levels at which the Fed has started easing in the past and financial conditions have already tightened significantly," the bank said.
Construction output picks up
On the economic data front, output from construction companies in the Eurozone bounced back in July, led by Germany. Production was up by 1% month-on-month according to Eurostat, following a drop of 1.2% in June.
Across the Atlantic, unemployment benefit claims declined by 11,000 to 264,000 in the week to 12 September, to reach their lowest level since mid-July. Analysts had expected jobless claims to hold steady at 275,000.
Elsewhere, housing starts fell 3% last month to 1.13m, against expectations for a decline to 1.16m, while housing starts in July suffered a drastic downward revision to show a 4.1% drop to 1.16m from the prior estimate of a 0.2% gain to 1.21m.
Meanwhile, the Philly Fed manufacturing index slid from a reading of 8.3 in August to -6 in September, way below the reading of plus 6 analysts had expected.
In corporate news, Royal Dutch Shell and BG Group were in the spotlight after the Australian Competition and Consumer Commission raised concerns that a merger between the two could push up prices and reduce the supply of natural gas to consumers on the east coast of Australia.
Shares in Dutch telecoms group Altice NV gained 2.09% on news the company will buy Cablevision - one of the largest cable TV operators in the US - for $17.7bn. |
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| | US Market Report | | US open: Equity markets edge lower as FOMC decision looms US stocks edged lower early on Thursday, as investors avoided big bets on the Federal Reserve's day of reckoning.
Shortly before 1500 BST, the Dow Jones Industrial Average was down 39 points to 16,701.00 while the S&P 500 and the Nasdaq were both two points lower.
At 1900 BST, the US central bank will announce whether it will hike interest rates for the first time since 2006 or whether it has decided to sit tight for a while longer.
"Traders are clearly sitting on the fence until the Fed's announcement this evening," said IG's market analyst David Madden.
"Dealers are very cautious today, and the fear of hawkish commentary in the press conference after is keeping the buyers at bay.
"No change to the interest rate has been heavily priced in, but the dealers know deep down what the US central bank is drifting towards and that is holding them back from buying."
Unemployment claims decline
According to the Labor Department, new unemployment claims declined by 11,000 to 264,000 in the week to 12 September, to reach their lowest level since mid-July. Analysts had expected jobless claims to hold steady at 275,000.
Elsewhere, housing starts fell 3% last month to 1.13m, against expectations for a decline to 1.16m, while housing starts in July suffered a drastic downward revision to show a 4.1% drop to 1.16m from the prior estimate of a 0.2% gain to 1.21m.
Official figures showed the deficit declined to a preliminary $109.7bn, amounting to 2.5% of the country's gross domestic product (GDP), in the second three months of 2015 from an upwardly revised $118.3bn, which represented 2.7% of the GDP in the first quarter.
In company news, Cablevision Systems surged 16.1% after European cable group Altice announced it would buy the US firm in a $10bn deal.
Apple slid 0.98% after reports claimed the tech giant had secured mapping visualisation startup Mapsense for a fee of between $25m to $30m.
Elsewhere, Asian stocks remained in positive territory for the second consecutive day, although Chinese equities relinquished early gains and closed in the red.
European markets were broadly flat ahead of the Fed's decision, while oil prices were mixed. West Texas Intermediate lost 0.46% to $47.37 a barrel, while Brent shed 0.24% to $49.63 a barrel. |
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| | Broker Tips | | Broker tips: SSE, British American Tobacco, SABMiller Energy company SSE has been downgraded by Credit Suisse due to lower gas prices and recent government moves increasing the risk around renewable subsidies. Credit Suisse cut what it admitted was a "solid performer" to a 'neutral' recommendation, with its target trimmed to 1,600p from 1,700p.
Due partly to lower gas prices, the Swiss bank cut its EPS estimates by circa 6% in 2016, by roughly 9% for 2017 and around 6% in 2018.
CS said it saw just 12% total return upside, in line with the sector, and said recent government moves "have increased risk on renewable subsidies that is not reflected in SSE's share price".
The UK government decided to remove the Climate Change Levy exemption for renewable electricity generated after 1 August 2015.
While SSE generation fleet and energy supply business reduces sensitivity to gas and coal, from here on, "the key risk is rising rates", analysts said.
This is because the long-duration nature of SSE means each 50 basis points move on discount rates has a consequent near-6% of equity value.
Morgan Stanley upgraded its price target for British American Tobacco to 3,750p from 3,650p, keeping the stock at 'equalweight' as it took a look at the tobacco sector.
MS said improved 2015 results in global tobacco reinforce its confidence in long-term targets and, despite ongoing FX pressure, should support relative valuation versus US peers.
As far as British American Tobacco is concerned, the bank expects a positive message from the company at its 21-23 September investor update, highlighting the group's ongoing margin progress.
The bank said BAT has delivered arguably the most consistent growth profile in global tobacco during the past several years, with 6-9% constant-currency EBIT growth supported by its strong emerging market exposure, robust pricing realisation and consistent delivery of 50-100 basis points of annual margin expansion.
MS said it will also be looking for a heightened focus on BAT's diverse, consumer-led next generation products portfolio, which now includes Vypee-cigs and the Voke inhaler, and should incorporate heat-not-burn technologies by year-end.
Still, the bank's preferred stocks in the sector remain Philip Morris International in the US and Imperial Tobacco in Europe, both of which it rates at 'overweight'.
RBC Capital Markets upgraded SABMiller to 'sector perform' from 'underperform' and raised its price target to 3,800p from 3,100p on Wednesday's news of an approach by AB Inbev.
The Canadian bank said its new price target is derived assuming a multiple of 17 times prospective EBITDA and including a slight discount to account for the risk the deal doesn't materialise.
RBC said it had not predicted this move coming.
"We had been convinced by AB Inbev's management arguing that they were focusing on accelerating organic revenue growth -although they were careful not to preclude M&A."
It said that for all the obstacles - different cultures, incomplete ownership/control of some key businesses , potentially conflicting soft drink bottling relationships and debatable geographic attractions - AB Inbev seems to have decided that this last transformational deal is one it cannot afford to miss.
RBC said AB Inbev is the best company at acquiring a business , applying tight cost controls and extracting synergies.
"If we look at the acquisitions of Modelo and Anheuser-Busch, we estimate AB Inbev was able to extract synergies in excess of 20% of sales for the former and around 17% for the latter," it said.
In the case of SABMiller, the bank said it was already an efficient business and synergies of around 15% of sales are more realistic.
RBC retained its 'outperform' rating on AB Inbev.
At 1214 BST, SABMiller shares were up 0.3% at 3,625.50p. |
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