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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: Mining stocks drop to push FTSE lower Mining shares slumped to push London stocks into the red on Tuesday, as commodity prices fell.
Glencore was the top faller on the FTSE 100 as Credit Suisse said weak demand from China and emerging markets would continue to drag on the sector.
Credit Suisse added that iron ore was set to do worst from current levels while copper prices were seen "hovering" around the top-end of the cost curve (220 US cents) until a deficit reappeared in the market, towards 2018. The price of copper was now seen averaging $5,673 per tonne in 2015, compared to a previous estimate of $6,126 per tonne.
Antofagasta and Anglo American also declined on downgrades from Credit Suisse.
Tuesday data
In another downside to UK markets, manufacturing output stalled in September for the first time in two years, according to the Confederation of British Industry's (CBI) industrial trends survey. The total orders sub-index fell to a reading of -7% (consensus: 0), higher than the long-run average of -15% but a decline from the -1% reading seen in August. CBI economics director Rain Newton-Smith described exports as "the missing link in the UK recovery".
"With the strong pound squeezing manufacturers' margins, even though lower commodity prices are helping to ease cost pressures," Newton-Smith said.
"Meanwhile manufacturers will have an eye on China's slowdown and its effect on neighbouring markets."
Elsewhere in the UK, the Office for National Statistics revealed public sector net borrowing, excluding public sector banks, rose by £1.4bn in August to £12.1bn compared with a year ago. The ONS said the increase in net borrowing was driven by a £1.6bn in central government borrowing, halting Osborne's plans to cut the deficit.
Meanwhile, Chancellor George Osborne said the nation and China are looking into ways of linking their stock markets.
The proposal is for Chinese and British shares to be traded in both countries. A "landmark feasibility study" will be conducted on the suggestion, Osborne announced in a speech at the Shanghai Stock Exchange.
Osborne said the nations would work together despite a slowdown in China's economy. The Shanghai index has fallen almost 40% since June.
Across the Atlantic, US house prices edged higher in July, according to the Federal Housing Finance Agency. Prices in the US rose 0.6% month-on-month in July, compared with a 0.2% increase in the previous month and with the 0.4% hike analysts had expected. The increase took the year-on-year gain to 5.8%, the report added.
Still to come, US Federal Reserve official Dennis Lockhart will speak at 2230 BST in Alabama and analysts will be looking for further clues on interest rates.
On Monday, the policymaker said the risks of the Fed waiting to raise interest rates were not significant. He believed the central bank should delay a hike until it was clear that global economic uncertainty would not hurt the US economy.
"I don't think those risks are significant," Lockhart said.
Tesco slumps
In company news, Tesco plunged as Sky News reported that the supermarket's CEO is to hold talks with advisers this week about abandoning the sale of the Dunnhumby business.
RSA Insurance Group rebounded from falls on Monday after confirming Scott Egan will begin as chief financial officer next month and amid news that Zurich Insurance has ended offer talks with the London-listed insurer.
Royal Bank of Scotland dropped on news the lender and General Electric are in talks to sell $4.5bn of Italian non-performing loans.
HSBC dipped as Goldman Sachs said the bank is bit of an underachiever when it comes to managing the 'micro' but stands to gain from a big macroeconomic tailwind as US interest rates rise.
IG Group advanced after the trading firm posted an increase in revenue in the first three months of the year, although it warned market volatility had made it harder to predict an outcome for the full year.
Polymetal International was also on the front foot after the company said it has reached an agreement to settle the Kyzyl gold project put option for a net consideration of $68m.
Kaz Minerals tumbled after Credit Suisse downgraded the stock to 'neutral' and cut its price target
Science and technology company Allied Minds slumped after US hedge fund Kerrisdale Capital outlined the reasons for its short position in the stock. |
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| | Market Movers
techMARK 2,984.62 -2.45%
FTSE 100 5,940.72 -2.75%
FTSE 250 16,543.04 -2.07%
FTSE 100 - Risers
RSA Insurance Group (RSA) 405.60p +0.57%
FTSE 100 - Fallers
Glencore (GLEN) 105.75p -11.13%
Johnson Matthey (JMAT) 2,319.00p -8.05%
Antofagasta (ANTO) 525.50p -7.07%
Anglo American (AAL) 649.00p -6.61%
GKN (GKN) 255.70p -6.10%
Shire Plc (SHP) 4,545.00p -5.21%
Carnival (CCL) 3,333.00p -4.93%
BHP Billiton (BLT) 1,023.50p -4.88%
AstraZeneca (AZN) 4,168.50p -4.81%
Tesco (TSCO) 168.35p -4.62%
FTSE 250 - Risers
IG Group Holdings (IGG) 753.50p +2.59%
Rank Group (RNK) 271.50p +1.57%
Nostrum Oil & Gas (NOG) 508.50p +1.50%
Polymetal International (POLY) 540.50p +0.93%
NMC Health (NMC) 814.50p +0.80%
Murray International Trust (MYI) 831.50p +0.73%
CLS Holdings (CLI) 1,838.00p +0.71%
Euromoney Institutional Investor (ERM) 1,041.00p +0.68%
NB Global Floating Rate Income Fund Ltd GBP (NBLS) 95.20p +0.47%
P2P Global Investments C (P2P2) 1,031.00p +0.39%
FTSE 250 - Fallers
Kaz Minerals (KAZ) 104.60p -25.13%
Allied Minds (ALM) 440.00p -14.56%
AA (AA.) 293.20p -12.03%
Premier Oil (PMO) 63.65p -11.10%
Petra Diamonds Ltd.(DI) (PDL) 91.30p -9.69%
Vedanta Resources (VED) 468.80p -8.35%
Mitchells & Butlers (MAB) 326.80p -7.00%
Vesuvius (VSVS) 339.80p -6.65%
Bodycote (BOY) 544.50p -6.60%
AO World (AO.) 152.30p -6.51%
FTSE TechMARK - Risers
NCC Group (NCC) 268.50p +1.51%
Sepura (SEPU) 174.50p +0.87%
IShares Euro Gov Bond 7-10YR UCITS ETF (IEGM) € 202.38 +0.50%
Ricardo (RCDO) 900.00p +0.17%
Torotrak (TRK) 6.25p +0.08%
FTSE TechMARK - Fallers
Oxford Instruments (OXIG) 551.00p -5.33%
SDL (SDL) 344.00p -3.10%
KCOM Group (KCOM) 88.50p -2.48%
Triad Group (TRD) 35.50p -2.07%
Oxford Biomedica (OXB) 8.83p -1.89%
Dialight (DIA) 635.00p -1.55%
Consort Medical (CSRT) 923.50p -1.34%
BATM Advanced Communications Ltd. (BVC) 18.50p -1.33%
E2V Technologies (E2V) 236.00p -1.15%
Spirent Communications (SPT) 74.75p -0.99% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks slump as auto sector's wheels come off European stocks took a sharp turn south on Tuesday, with auto stocks pacing the decline as Volkswagen's emissions scandal weighed on the broader sector.
The benchmark Stoxx Europe 600 index closed down 3.12%, while France's CAC 40 lost 3.42% and Germany's DAX slumped 3.80%.
The euro gained 0.52% against the pound but fell 0.81% and 0.42% against the yen and the dollar respectively.
VW drags auto stocks lower
The Stoxx Europe 600 autos and parts index slumped, dragged down by Volkswagen, which tumbled for the second day in a row as the German car maker said it will set aside €6.5bn to pay for the emissions crisis.
On Tuesday, it emerged that the South Korean government will investigate three of the German car maker's diesel models.
"This could well open the company up to billions of US dollar in fines and litigation, well in excess of the $18bn number being bandied about when the number of cars affected being talked about was half a million," said Michael Hewson, chief market analyst at CMC Markets.
"Outright deception never comes across very well as global banks will no doubt attest, and VW executives could well find themselves under an increasingly uncomfortable PR, and potentially criminal spot light in the coming weeks.
The stock dropped over 20% on Monday after the company told US dealers to halt sales of some of its 2015 diesel cars after regulators found that some of its vehicles gave false emissions data, disguising pollution levels.
Among individual stocks in the sector, Audi skidded 13.2%, Renault slid 7.12%, Daimler fell 7.02%, and BMW was 6.02% weaker.
"Volkswagen may be an isolated case, but knee-jerk reactions are strong today, with investors minded to sell first and ask questions later," said Chris Beauchamp, market analyst at IG.
Eurozone consumer confidence slips
On the economic data front, consumer sentiment declined from -6.9 in August to -7.1 this month, compared with analysts' expectations for a -7.0 reading.
The average level of consumer confidence in the third quarter fell to -7.1, considerably lower than its -6.3 average in the first quarter of the year and the -5.2 level recorded in the three months after that.
"The big picture is that the consumer sector will not be enough to drive a meaningful acceleration in GDP growth," said Jack Allen, European economist at Capital Economics.
"Additional policy stimulus from the ECB will be needed to support the recovery." |
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| | US Market Report | | US open: Dow plunges almost 200 points as Fed-driven volatility persists US stocks plunged early on Tuesday and looked set to wipe out the previous session's gains.
Shortly after 1500 BST, the Dow Jones Industrial Average was down 197 points, while the S&P 500 and the Nasdaq were 22 and 57 points lower respectively.
Housing data in line with expectations
According to the Federal Housing Finance Agency, prices in the US rose 0.6% month-on-month in July, compared with a 0.2% increase in the previous month and with the 0.4% hike analysts had expected.
The increase took the year-on-year gain to 5.8%, the report added.
Fed remains in focus
Investors continued to look for clues over the timing of a first interest rates hike, after the Federal Reserve's decision to sit tight sparked a fresh bout of volatility at the end of last week.
However, speaking on Monday, Richmond Fed president Jeffrey Lacker and St Louis Fed president James Bullard said the Fed had met many of its objectives and hinted the US central bank could raise rates as early as the next two months.
With the FOMC meeting and Greek elections both resolving in a positive manner for financial markets and global stability, it would make sense that we saw some form of relief rally in response," said IG's market analyst Joshua Mahony.
"However, the weakness seen since Thursday's Federal Reserve decision is highlighting a high possibility that we are due to embark on yet another major selloff in global indices."
In corporate news, healthcare stocks are likely to be in focus after Democratic presidential candidate Hillary Clinton tweeted the government needed to prevent specialty drug makers from inflating prices.
General Mills shares declined 0.55%, even though the maker of Cheerios and Hamburger Helper reported quarterly profit jumped more than expected.
Darden Restaurants lifted its outlook for the year and reported better than-expected revenues but shares fell 1.32%, while Goldman Sachs' shed 1.91% after Chief Executive Lloyd Blankfein said he had lymphoma.
CarMax Inc. slumped 6.96%, despite posting a better-than-expected 11% increase in profit for its August quarter, as sales missed estimates.
Elsewhere, Asian markets closed mostly higher, while European stocks fell, after automotive shares were dragged lower by the Volkswagen scandal.
The dollar declined 0.36% against the yen but gained 0.44% and 0.71% against the euro and the pound respectively, while gold futures slid 0.94% to $1,122.20.
Oil prices fell sharply, with West Texas Intermediate losing 2.94% to $45.62 a barrel, while Brent dropped 2.26% to $47.84 a barrel. |
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| | Broker Tips | | Broker tips: RSA, Glencore, HSBC Deutsche Bank cut its price target on RSA Insurance back to a "fundamental" 430p from 540p on news that Zurich Insurance has ended offer talks with the London-listed insurer.
The broker said it's unlikely that any of the European composites will emerge as rival bidders and certainly not at 550p, while the bank's US analysts don't believe that there is interest from US insurers.
"In our view, therefore, that leaves only the Japanese or Chinese insurers, who could be interested in building their global scale, but who wouldn't derive any synergies." DB rates the stock at 'hold'.
Until final demand from China and emerging market currencies find a bottom it will continue to be hard to set a floor for commodity prices, one of the world's largest brokers believed.
Iron ore was set to do worst from current levels while copper prices were seen "hovering" around the top-end of the cost curve (220 US cents) until a deficit reappeared in the market, towards 2018, Credit Suisse said.
Other base metals would not fare much better either, with the Swiss broker only anticipating a shallow recovery.
As regards the main stocks in the sector, Glencore shares offered the potential for a 25% re-rating given the large valuation that has opened up following recent sharp falls in the stock price, the team of analysts led by Liam Fitzpatrick said in a research note e-mailed to clients.
Nonetheless, Glencore had "suffered a complete loss of confidence from investors following the recent dividend cut and equity placing," the analysts added.
HSBC is a bit of an underachiever when it comes to managing the 'micro' but stands to gain from a big macroeconomic tailwind as US interest rates rise, Goldman Sachs said.
For that reason, the US broker believed the risk-reward profile for the lender's Hong Kong-listed shares was "favourable".
So while its earnings per share estimates for HSBC came down - to reflect negatives such as lower currency rates in emerging markets and higher EM credit costs - Goldman emphasised the positive impact a rising Fed funds rate would have.
Yet the key attraction is HSBC's strong capital position, Goldman said in a research note e-mailed to clients. -
The broker reiterated its 'buy' recommendation on the Asia-listed shares (0005.HK) and added them to its Conviction List. The London-listed shares were kept at neutral and the target trimmed 3% to 670p. |
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