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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 despite lack of drivers The FTSE rallied on Wednesday, bouncing back from the previous day's falls, despite a batch of weak manufacturing data. Caixin's purchasing managers' index on Chinese factory activity fell to 47 in September from 47.3 in August, below the 50 level that separates contraction from expansion. It missed analysts' estimates for a reading of 47.5.
"Ironically, gains are despite disappointing Chinese Manufacturing PMI data overnight which only adds to pre-existing concerns about the world's No.2 economy, but suggests markets becoming increasingly accustomed to China data confirming a slower pace of economic growth," said Michael van Dulken, head of research at Accendo Markets.
On a positive note for China, Citi expects policies put in place by the country's central bank would boost the economy by year end with a positive impact on energy, industrial commodities and bulks, with the exception of iron one.
However, "the likelihood and severity of a hard landing in China remains highly uncertain for now and would pose a significant risk to the global economy," the Commodities Strategy team led by Edward L.Morse said in a research report sent to clients.
In the Eurozone, Markit's manufacturing purchasing managers' index fell to 52 in September from 52.3 in August, as expected. Services PMI dropped to 54 this month from 54.4 in August, compared to forecasts of 54.2. The Composite PMI, which combines manufacturing and services activity, fell to 53.9 in September from 54.3 the prior month, below estimates of 54.
Elsewhere in the bloc, European Central Bank president Mario Draghi said the quantitative easing programme may be extended if inflation weakens more than currently expected.
"Should some of the downward risks weaken the inflation outlook over the medium term more fundamentally than we project at present, we would not hesitate to act," Draghi said in testimony to European parliament in Brussels.
Stateside, Markit flash US Manufacturing PMI in September was unchanged from August's 22-month low of 53.0 and in line with expectations, marking one of the slowest rates of expansion in the sector for the last two years.
The Mortgage Bankers Association said its seasonally adjusted index of application activity, which covers home purchase demand and refinancing demand, surged 13.9% in the week ended 18 September.
Meanwhile, Lloyds Bank economists said they expect sterling will drop sharply versus the single currency - which is seriously undervalued - next year. The economists said the pound faces downside risks including Britain's current account deficit, uncertainty surrounding the EU referendum and more acute fiscal austerity. The pound was trading 0.82% lower against the dollar at $1.5239.
On the corporate front, airline stocks were flying higher after Morgan Stanley raised its target on International Consolidated Airlines and Easyjet.
Morgan Stanley said IAG "moves to our top 'overweight' pick in the sector" and raised the target to 1000p from 915p.
The broker raised Easjet's target to 1,980p from 1,910p and retained its 'overweight' rating.
Glencore moved higher after Tuesday's selloff, after Investec recommended traders to hold instead of sell.
Smiths Group jumped as the engineering group posted a 3% rise in full-year pre-tax profit and CEO Phil Bowman handed over his role to Andrew Reynolds Smith.
United Utilities Group climbed despite saying that revenue in the six months to 30 September is likely to remain flat and profit is expected to drop.
BBA Aviation slumped after the aerospace support and aftermarket services provider announced the acquisition of US rival Landmark Aviation. |
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| | Market Movers
techMARK 3,022.58 +1.39%
FTSE 100 6,032.24 +1.62%
FTSE 250 16,659.85 +0.79%
FTSE 100 - Risers
International Consolidated Airlines Group SA (CDI) (IAG) 594.00p +4.76%
Coca-Cola HBC AG (CDI) (CCH) 1,401.00p +4.63%
Carnival (CCL) 3,467.00p +4.02%
easyJet (EZJ) 1,759.00p +3.47%
Old Mutual (OML) 192.20p +3.28%
SABMiller (SAB) 3,567.50p +2.85%
Shire Plc (SHP) 4,670.00p +2.80%
Berkeley Group Holdings (The) (BKG) 3,408.00p +2.74%
Marks & Spencer Group (MKS) 488.40p +2.60%
Johnson Matthey (JMAT) 2,378.00p +2.59%
FTSE 100 - Fallers
Rolls-Royce Holdings (RR.) 679.50p -0.88%
Standard Chartered (STAN) 667.80p -0.77%
RSA Insurance Group (RSA) 403.70p -0.62%
FTSE 250 - Risers
Petra Diamonds Ltd.(DI) (PDL) 99.00p +8.85%
Premier Oil (PMO) 67.50p +6.13%
Enterprise Inns (ETI) 110.50p +4.15%
UBM (UBM) 499.10p +3.74%
Evraz (EVR) 65.30p +3.65%
Card Factory (CARD) 372.80p +3.56%
Euromoney Institutional Investor (ERM) 1,064.00p +3.30%
Marshalls (MSLH) 360.80p +3.29%
Victrex plc (VCT) 1,668.00p +3.15%
Pets at Home Group (PETS) 278.00p +3.15%
FTSE 250 - Fallers
Hunting (HTG) 394.10p -5.13%
Jimmy Choo (CHOO) 136.60p -4.48%
OneSavings Bank (OSB) 384.30p -4.16%
Zoopla Property Group (WI) (ZPLA) 204.80p -3.44%
Drax Group (DRX) 259.30p -2.56%
Telecom Plus (TEP) 1,069.00p -2.11%
Cranswick (CWK) 1,607.00p -1.89%
Greene King (GNK) 793.00p -1.55%
Brewin Dolphin Holdings (BRW) 285.50p -1.48%
Amec Foster Wheeler (AMFW) 719.50p -1.44%
FTSE TechMARK - Risers
Torotrak (TRK) 6.92p +10.80%
Spirent Communications (SPT) 77.50p +4.38%
Oxford Instruments (OXIG) 565.00p +2.63%
XP Power Ltd. (DI) (XPP) 1,640.00p +2.50%
KCOM Group (KCOM) 90.00p +1.41%
BATM Advanced Communications Ltd. (BVC) 19.25p +1.32%
Ricardo (RCDO) 902.00p +0.84%
Skyepharma (SKP) 347.50p +0.80%
Oxford Biomedica (OXB) 8.90p +0.68%
Consort Medical (CSRT) 924.50p +0.43%
FTSE TechMARK - Fallers
DRS Data & Research Services (DRS) 12.00p -5.88%
SDL (SDL) 334.50p -2.83%
Dialight (DIA) 620.50p -2.21%
E2V Technologies (E2V) 230.25p -2.02%
Gresham Computing (GHT) 111.00p -0.89%
IShares Euro Gov Bond 7-10YR UCITS ETF (IEGM) € 202.35 -0.01% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks in the green despite China, Volkswagen news European stocks rose, bouncing back from losses in the previous session as investors digested Eurozone and Chinese data releases. The benchmark Stoxx Europe 600 index finished the session up by 0.09%, while France's CAC 40 rose by 0.10% and Germany's DAX by another 0.44%.
Stocks had opened in the red after data showed the slowdown in China's manufacturing sector accelerated moderately in September, although some economists were wary of reading too much into the latest figures.
Caixin's preliminary Chinese manufacturing sector purchasing managers' index for September dipped to 47.0 - a six-and-a-half year low - from 47.3 in August.
The median projection from economists had been for a reading of 47.5.
Mike van Dulken, head of research at Accendo Markets said equities were in the green following Tuesday's 'risk off' session, "despite a lack major fresh drivers to explain the positive performance, bar some well-timed bargain hunting, a higher oil price and a rebound in French PMI manufacturing."
He added that the positive tone suggests markets are becoming increasingly accustomed to China data confirming a slower pace of economic growth.
"Or are we simply back to the old 'bad data is good data' (meaning more stimulus)," he said.
On the corporate front, Volkswagen shares were up for the first time this week as a panel of the car maker's senior supervisory board members met to discuss the allegations by US authorities that it rigged emissions tests for some of its diesel vehicles.
Deutsche Bank cut its 2015 and 2016 year-end targets for the DAX on Wednesday to adjust for news-flow surrounding the car maker.
Meanwhile, the European Automobile Manufacturers' Association put out a statement saying there was no evidence to suggest that this was an industry-wide problem.
German media holding company Axel Springer SE was in focus following reports that it was in advanced talks to buy Business Insider in a deal that would value the US digital publisher at around $500m.
Swiss Re edged lower after announcing that its business unit Admin Re had agreed to acquire Guardian Holdings Europe Limited, the holding company for operations trading under the name Guardian Financial Services, from Cinven for £1.6bn.
In London, diversified engineering company Smiths Group rallied after posting a 3% increase in full-year pre-tax profit, despite a decline in revenue. The company also named Andrew Reynold Smiths as its new chief executive, with current CEO Philip Bowman stepping down at the close of business on 24 September.
Brewer Diageo was on the back foot. The company said the year had started well and performance was in line with its expectations, but warned that adverse exchange rate movements will hit 2016 operating profits by £150m as demand for premium spirits is impacted in emerging markets.
Data released earlier showed factory and services output in the euro area cooled slightly more quickly than expected in September, despite quicker growth in new work and order backlogs.
Markit's Eurozone manufacturing sector purchasing managers' index fell to 52 from 52.3 in August, as expected.
However, a similar gauge for service sector activity in the euro bloc slipped to 54 from 54.4 in August, coming in below the 54.2 analysts had expected.
A composite gauge for both sectors dipped to 53.9 - a two-month low - following 54.3 in August, and versus consensus expectations for 54. |
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| | US Market Report | | US open: Stocks edge lower amid mixed worldwide data US stocks slid early on Wednesday, dragged lower by negative data out of China, as European Central Bank president Mario Draghi hinted the ECB might extend its stimulus programme. Shortly after 1500 BST, the Dow Jones Industrial Average was down 29 points, while the S&P 500 and the Nasdaq were respectively one and three points lower.
China PMI disappoints
Caixin's preliminary Chinese manufacturing sector purchasing managers' index dipped to a reading of 47.0 for September - a 78-month low - down from 47.3 in August and compared with expectations for a reading of 47.5.
"Today's weaker-than-expected PMI will add to mounting concerns over Chinese growth," said Julian Evans-Pritchard, China economist at Capital Economics.
"That said, Caixin's manufacturing PMI has not provided a particularly good reading of the health of the broader economy in recent months and so it is still too early to tell whether or not the Chinese economy has stumbled in September."
However, there was more positive news from the Eurozone, where the region's PMIs missed forecasts but indicated it remained on track to recover, pushing European stocks firmly higher.
Manufacturing growth subdued in September
The headline seasonally adjusted Markit Flash US Manufacturing Purchasing Managers' Index (PMI) in September was unchanged from August's 22-month low of 53.0, marking one of the slowest rates of expansion in the sector for the last two years.
Output rose at a slightly faster pace in September, but growth was offset by softer rates of new business and employment growth, which placed pressure on the headline reading.
"US manufacturing remained stuck in crawler gear in September, fighting an uphill battle against the stronger dollar, slumping demand in many export markets and reduced capital spending, especially in the energy sector," said Markit's chief economist Chris Williamson.
"The sluggish growth, weaker forward-looking indicators and downturn in price pressures all point to the Fed holding off with rate hikes until next year.
The Mortgage Bankers Association said its seasonally adjusted index of application activity, which covers home purchase demand and refinancing demand, surged 13.9% in the week ended 18 September.
The seasonally adjusted sub-index of refinancing applications jumped 18%, while the index of loan requests for home purchases, a key indicator of home sales, rose 9% to its highest level since June.
Investors will also hear from Atlanta Federal Reserve president Dennis Lockhart, a voting member of the FOMC, who is due to speak in Columbus, Georgia, at 1730 BST.
In company news, JC Penney climbed 0.85% after sources told the Wall Street Journal the group was looking for a new chief merchant to replace Elizabeth Sweney.
Insurance group MetLife fell 1.54%, after saying late on Tuesday it will raise its stock buyback programme to $1bn on top of the $1bn it bought back in the first three months of the year.
Disney slid 0.27% after USA Today's blog The Big Lead reported ESPN, one of the world's biggest sports network and owned by Disney, is set to cut between 200 and 300 jobs over the coming months.
Elsewhere, the dollar gained 0.60% and 0.13% against the pound and the yen respectively but fell 0.36% against the euro, while gold futures gained 0.39% to $1,129.20. |
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| | Broker Tips | | Broker tips: British American Tobacco, Greene King, Mitchells & Butlers, Glencore The medium-term outlook for British American Tobacco is "strong" but the firm is facing earnings downgrades from analysts related to movements in foreign exchange markets and price roll-backs in Australia, one large broker said to clients after the company's Investor Day.
Nonetheless, innovation is allowing the company to grow market share.
At its investor day the firm presented two new-to-world innovations, a hybrid device combining actual tobacco and e-cigarettes to improve taste and a new heat-not-burn product. Both were expected to launch in 2016.
Those product innovations were also getting to market at an accelerated pace, as shown by the introduction of its "Tubes" across 27bn sticks, representing approximately 4% of global volumes in 2014.
The firm was also beginning to mix its innovations.
Citi kept its recommendation on the shares unchanged at 'buy' with a target of 4000p.
HSBC cut its stance on Greene King and Mitchells & Butlers as it took a look at the UK pubs sector.
The bank downgraded Greene King to 'reduce' from 'hold' and cut its price target to 780p from 830p saying it was concerned about like-for-like sales growth.
"We assume 2%, which is already high versus the peer group - and are concerned that minimum wage pressures could emerge," it said.
The bank said it doesn't see huge downside, but noted that the price-to-earnings multiple is high compared with history, even once synergies from the acquisition of Spirit are factored in.
HSBC cut Mitchells & Butlers to 'hold' from 'buy' and slashed the price target to 385p from 495p.
It said that while the shares may look inexpensive on headline multiples, it is hard for the bank to see what the potential catalysts for a re-rating will be.
"The payment of a dividend - the most likely catalyst in our view - remains distant."
Tuesday's sell-off in Glencore shares left substantial implied upside in their price but recent elevated levels of volatility means investors should be wary.
For those reasons, on Wednesday broker Investec upgraded its recommendation on the shares to 'hold' from 'sell', but no more.
If commodity prices do not recover rapidly from their levels at present then the commodity trader's recent equity placing and cuts to dividends - which yielded $4.9bn - may be insufficient for "for the benefits of recovery to feed through to equity holders," analyst Marc Elliot said in a research note sent to clients. |
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