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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: FTSE ends lower after FOMC interest rates, 'fat finger' error The FTSE ended Friday lower as the market continued to digest the Federal Reserve's decision to keep interest rates unchanged and as the London Stock Exchange investigated a "fat finger" trade. The Federal Open Market Committee announced it would keep rates at 0.25% overnight amid concerns over the impact of China's economic slowdown on the global market.
"Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term," the Fed said in a statement.
Fed Chair Janet Yellen said in light of heightened uncertainty abroad the Fed decided to wait for a rate hike. An interest rate hike in future will depend on a wide range of economic and financial indicators, she added.
However, Richmond Fed president Jeffrey Lacker voted in favour of raising the key rate by 0.25 percentage point.
"In reality the decision to hold rates shouldn't really have been in doubt given the tepid wage growth and declining inflation, yet the fact that we only got one dissenter in the form of Jeffrey Lacker, President of the Richmond Fed suggests that there was probably a certain degree of unanimity," said Michael Hewson, chief market analyst at CMC Markets.
Chris Williamson, chief economist at Markit, said the Fed's decision may be seen by many as appropriate in the wake of slowing growth in China but "this is likely to be merely a temporary forestalling of the inevitable".
The expectation is now that the Fed will hold off until 2016, with traders putting a 52% chance of a rate hike in January, according to CME FedWatch. The FOMC is scheduled to meet 26-27 January.
Japan's finance minister Taro Aso said the Fed's decision reflected lobbying by emerging economies. Aso said the US central bank should raise interest rates slowly in the future to avoid the risk of sparking capital flight.
"A lot of countries would face depreciation of their own currencies if the U.S. raises rates rapidly just because of improvements in its own economy, which would cause a reversal of capital back to the US," he said.
In other US news, the Conference Board's leading economic indicators edged slightly higher in August to 0.1% from a -0.2% reading in the previous month, but short of forecast calling for a 0.2% increase.
"The US LEI suggests economic growth will remain moderate into the New Year, with little reason to expect growth to pick up substantially," said Ataman Ozyildirim, director of business cycles and growth research at The Conference Board.
Closer to home, losses on London's top-flight index in afternoon trade were being described by some media outfits to a 'fat finger' error or an issue in an automated trading system. The London Stock Exchange said it was investigating the error but that no trades had been cancelled.
The Wall Street Journal reported that one senior London-based trader said the move could be related to the expiry of a large number of stock futures and options on Friday.
Shares in nine of the biggest companies including BP, Vodafone Group, HSBC Bank, Rio Tinto Group, BT Group, BHP Billiton, National Grid, Diageo and British American Tobacco were suspended, a LSE spokeswoman said. The companies have all since resumed trading.
Meanwhile, Citi said the UK economy will grow more slowly in 2015 and 2016 than previously expected, which means the Monetary Policy Committee is likely to tighten interest rates by less. On the back of "softer data and surveys in the third quarter", together with worries over growth in emerging markets, the broker's Michael Saunders lowered his forecast for the rate of growth in gross domestic product next year and the following to 2.6% and 2.5%, from 2.8% and 3% previously.
Looking ahead, all eyes now turn to Sunday's Greek elections, with polls showing the two main parties are neck and neck. The Syriza and New Democracy party are both expected to be unlikely to secure the 38% vote share needed for a majority, meaning a coalition is likely.
In corporate news, Glencore slumped after the Investment Association and the National Association of Pension Funds criticised the commodities group for not considering all the company's shareholders equally when it issued $2.5bn worth of new shares to cut net debt.
Oil service provider Weir Group slid as oil prices declined.
Miners Randgold Resource and Fresnillo were top risers as the price of gold and silver rose.
Petra Diamonds declined after saying full-year revenues dropped 10% to $425m on the back of lower diamond prices, as expected.
Market Movers
techMARK 3,059.84 -0.01%
FTSE 100 6,104.11 -1.34%
FTSE 250 16,950.73 -0.54% |
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| | FTSE 100 - Risers
Randgold Resources Ltd. (RRS) 3,863.00p +3.59%
Fresnillo (FRES) 610.00p +3.39%
AstraZeneca (AZN) 4,370.00p +2.33%
Sainsbury (J) (SBRY) 228.30p +1.47%
Sky (SKY) 1,023.00p +0.89%
British Land Company (BLND) 812.50p +0.87%
Land Securities Group (LAND) 1,237.00p +0.73%
United Utilities Group (UU.) 883.00p +0.40%
Vodafone Group (VOD) 216.75p +0.25%
National Grid (NG.) 851.20p +0.07%
FTSE 100 - Fallers
Glencore (GLEN) 126.00p -4.65%
GKN (GKN) 273.80p -3.93%
Royal Dutch Shell 'A' (RDSA) 1,582.00p -3.80%
BP (BP.) 333.45p -3.54%
Royal Dutch Shell 'B' (RDSB) 1,599.00p -3.41%
Weir Group (WEIR) 1,245.00p -3.04%
BG Group (BG.) 985.40p -2.92%
Prudential (PRU) 1,369.00p -2.80%
Barclays (BARC) 253.25p -2.76%
Standard Life (SL.) 399.90p -2.65%
FTSE 250 - Risers
UDG Healthcare Public Limited Company (UDG) 540.50p +9.63%
AO World (AO.) 169.90p +9.47%
Allied Minds (ALM) 535.00p +7.24%
PayPoint (PAY) 1,091.00p +6.34%
Centamin (DI) (CEY) 66.00p +5.68%
OneSavings Bank (OSB) 393.00p +5.08%
Riverstone Energy Limited (RSE) 977.00p +5.05%
IP Group (IPO) 259.10p +3.31%
Acacia Mining (ACA) 250.00p +2.71%
Petra Diamonds Ltd.(DI) (PDL) 111.00p +2.68%
FTSE 250 - Fallers
Premier Oil (PMO) 78.10p -6.97%
Premier Farnell (PFL) 105.80p -5.54%
Kaz Minerals (KAZ) 150.70p -5.34%
Tullow Oil (TLW) 199.80p -5.31%
Enterprise Inns (ETI) 109.50p -4.20%
Lonmin (LMI) 21.12p -4.13%
Northgate (NTG) 479.70p -4.06%
Evraz (EVR) 68.75p -4.05%
Elementis (ELM) 218.20p -3.58%
Man Group (EMG) 159.00p -3.58%
FTSE TechMARK - Risers
Oxford Instruments (OXIG) 641.50p +8.36%
Oxford Biomedica (OXB) 9.25p +6.81%
Ricardo (RCDO) 900.00p +1.35%
E2V Technologies (E2V) 237.25p +1.28%
IShares Euro Gov Bond 7-10YR UCITS ETF (IEGM) € 201.76 +0.94%
Consort Medical (CSRT) 931.00p +0.76%
Spirent Communications (SPT) 75.75p +0.33%
Promethean World (PRW) 39.62p +0.32%
Skyepharma (SKP) 347.00p +0.22%
Torotrak (TRK) 6.25p +0.08%
FTSE TechMARK - Fallers
SDL (SDL) 354.75p -3.60%
BATM Advanced Communications Ltd. (BVC) 18.50p -1.99%
Dialight (DIA) 640.00p -1.69%
KCOM Group (KCOM) 89.75p -1.10%
Gresham Computing (GHT) 114.00p -0.87%
NCC Group (NCC) 256.50p -0.77%
Innovation Group (TIG) 39.75p -0.62%
RM (RM.) 170.00p -0.44% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Equity markets in the red amid fears for world growth European stocks closed firmly in the red on Friday, as the Federal Reserve's downbeat assessment and decision to stand pat on rates fanned concern over global growth. The benchmark Stoxx Europe 600 index closed 1.78% lower or down by 6.44 points at 354.77, while France's CAC 40 surrendered 2.56% to finish at 4,535.85 and Germany's DAX another 3.06% to 9,916.16.
Janet Yellen's caution on global growth was a boon for investors in sovereign bons. Gilts flew higher, sending their yields lower by 13 basis points to 1.83%. Those on similarly dated Italian bonds dropped by 10 basis points to 1.81%.
The euro gave back a tad of the previous session's sharp gains against the Greenback.
Fed stays put
Fed chair Janet Yellen said on Thursday that the slowdown in China and recent market volatility played a part in the decision to keep rates on hold, although she also pointed out that the central bank had not turned "significantly less confident".
"We still anticipate that rising wage and price inflation next year will eventually force the Fed to tighten policy much more aggressively," said Capital Economics' chief US economist Paul Ashworth.
"The longer the Fed delays now the higher interest rates will eventually have to go. But the way things are going, more of that tightening is going to be back-loaded into the second half of next year."
In addition, Yellen said a rate hike next month was still a possibility.
The policy statement highlighted "solid job gains and declining unemployment" and reiterated that "economic activity will expand at a moderate pace".
However, analysts warned that more volatility was expected in the short-term future, as markets will struggle for direction.
"Now that the anchor of the September FOMC meeting has been and gone, it is likely that that markets will struggle for any kind of firm direction going forwards, especially since next week doesn't bring with it too much to provide any definitive guidance," said Spreadex's financial analyst Connor Campbell.
Greek elections ahead
On the economic data front, figures released earlier showed the Eurozone current account surplus declined in July.
According to the European Central Bank, the current account balance, a gauge of an economy's international financial position, recorded a €22.6bn surplus in July compared with a €24.9bn surplus in June.
In the 12 months to July the surplus amounted to 2.6% of the Eurozone gross domestic product, compared with 1.8% a year earlier. Across the Atlantic, the US Conference Board's leading economic indicators edged slightly higher in August, data released on Friday showed.
Not to be missed, when investors return from theirs weekend they will be asked to digest the result of the Greek general elections on 20 Sunday. A grand coalition with the left-wing Syriza party holding a majority, but alongside more moderate partners, is viewed as the most likely outcome by analysts - and as a positive force for 'stability'.
The index climbed 0.1% in August from a -0.2% reading in the previous month, but short of forecast calling for a 0.2% increase.
In company news, shares in German utility RWE dropped 7.45% after the company ruled out selling a stake to a Middle East investor.
UniCredit was on the back foot following media report that the Italian bank is planning to cut about 1,500 jobs at its German subsidiary. |
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| | US Market Report | | US open: Dow plunges over 280 points amid fears of economic slowdown US stocks turned sharply lower early on Friday, after the Federal Reserve opted against hiking interest rates amid fear of a global economic slowdown.
Shortly before 1500 BST, the Dow Jones Industrial Average was down 282 points to 16,393.04, while the S&P 500 and the Nasdaq were 22 and 54 points lower respectively.
Fed sits tight
On Thursday night, the US central bank opted to leave interest rates unchanged, although it did not rule out the chance of tightening its fiscal policy later this year. "Despite the majority of analysts now erring on the side of no rate-hike in 2015, investors appeared to be worried by just how negative the Fed was on Thursday," said Spreadex's financial analyst Connor Campbell.
"Therefore instead of the expected index-boost that should have accompanied the central bank's decision, investors are instead fretting about the state of the global economy."
Concerns over a global slowdown and China-driven volatility in the Asian markets influenced the highly-anticipated decision, said Fed chairwoman Janet Yellen. "We still anticipate that rising wage and price inflation next year will eventually force the Fed to tighten policy much more aggressively," said Capital Economics' chief US economist Paul Ashworth.
"The longer the Fed delays now the higher interest rates will eventually have to go. But the way things are going, more of that tightening is going to be back-loaded into the second half of this year."
With the US central bank's day of reckoning now in the past, investors will have very little to analyse in terms of economic data on Friday.
Leading indicators for August, on tap at 1500 BST, are the highlight of the session.
Elsewhere, Asian stock markets closed on a mixed note, after the Fed's decision to keep interest rates unchanged sparked a bout of volatility, while European stocks were firmly in the red.
Gold was the standout winner following the Fed's announcement, gaining 1.92% to $1,138.50, while the dollar declined against the main currencies. The greenback lost 0.54% and 0.39% against the yen and the pound respectively but was broadly flat against the euro.
Oil prices fell, with West Texas Intermediate slumping 3.39% to $45.36 a barrel, while Brent shed 1.74% to $48.24 a barrel.
In company news, Apple slid 0.85% after winning a patent ruling in a case against Samsung, with a federal appeals court ruling the iPad manufacturer was to be granted an injunction barring its rival from using specific phone features that violated Apple's patents. |
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| | Broker Tips | | Broker tips: Rotork, McBride
Rotork was in the red again on Friday, having fallen sharply the day before on the back of a profit warning, as analysts at Nomura and RBC Capital Markets downgraded their ratings on the stock.
Nomura cut Rotork to ‘reduce’ from ‘neutral’ and slashed the price target to 180p from 215p, saying the profit warning has resulted in a 5% cut to the bank’s full year 2015 revenue estimates and an 11% cut to its forecasts for earnings before interest, tax and amortisation, and earnings per share.
It said management commentary around delays to deliveries, slower decision-making and lack of conversion from quoting activity to orders makes it nervous for the development of revenue in 2016/17.
“The business model remains strong and returns remain above-sector average, but the revenue profile over the coming couple of years looks bleak indeed.”
Meanwhile, RBC cut its stance on the stock to ‘underperform’ from ‘sector perform’ and dropped the price target to 160p from 210p, saying the post-warning multiple doesn’t reflect risks.
“The 11% share price fall following yesterday's profit warning does not sufficiently reflect our 15/20% cut to 2015/2016 forecasts,” the Canadian bank said.
It said that with end markets volatile enough for management to revise down its second-half estimates by 20% six weeks after seeming to reassure, it does not see the implied re-rating as justified.
Investec said McBride has been a "leading private label supplier in revenue terms, but its history has been besieged by disappointments at the profit level as it has failed to turn its size into any real competitive advantage".
However, the broker issued the company a 'buy' rating saying the new management team could turn things around.
"If ambitious targets are delivered this could create meaningful value for shareholders."
"The previous management initiated actions to take this back to 5%, but the new team (which came together in February 2015) are more ambitious (but also realistic) in aiming to take margins to 7.5%, which they feel is the level required to ensure a sustainable future." |
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