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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 drop as third quarter UK GDP slows more than forecast London stocks finished on the back foot on Tuesday after a worse-than-forecast slowdown in third quarter UK economic growth.
UK gross domestic product rose 0.5% in the third quarter compared to 0.7% in the second quarter, well below estimates for a 0.6% increase, the Office for National Statistics (ONS) revealed. On a year-on-year comparison, GDP unexpectedly eased to 2.3% from 2.4%.
The ONS said a 0.7% increase in services activity was offset by 2.2% fall in construction growth and a 0.3% drop in manufacturing production amid a slowdown in China's economy.
"The lacklustre GDP figures revealed today should come as little surprise. A relatively strong pound, coupled with a wounded Chinese economy, has dampened demand for exports," said Dennis de Jong, managing director at UFX.com.
Howard Archer, chief UK and European economist at IHS Global Insight, said the easing in GDP "reinforces our belief" that the Bank of England will hold off on raising rates until the second quarter of 2016.
US data
US durable goods orders fell slightly less than expected last month. According to the Commerce Department, orders for long-lasting goods declined 1.2% in September compared with the 1.3% decline analysts had forecast but marking their second consecutive drop. August's reading was revised downward to show a 3% drop compared with the initial figure showing a 2.3% decline.
Separately, data showed US consumers were less confident than expected in October. The index monitoring consumer sentiment declined from a downwardly revised 102.6 to 97.6 in October, compared with expectations for a 102.9 reading.
The Markit 'flash' US services purchasing managers index fell to 54.4 in October from 55.1 in September, although it remained comfortably above the 50 threshold indicating growth. Analysts had been expecting a reading of 55.5.
The US S&P/Case-Shiller Composite-20 House Price Index rose to 5.09% year-on-year in August from 4.91% a month earlier, missing estimates of 5.10%.
"Major numbers from the US this afternoon did not live up to expectations, with durable goods and consumer confidence both falling short; most investors would be inclined to agree the environment does not yet seem right for an increase in US interest rates, an idea Janet Yellen seems in no hurry to dispel," said Chris Beauchamp, senior market analyst at IG.
The Fed will announce its latest policy decision on Wednesday but many analysts expect the central bank to keep interest rates unchanged. The focus will be on the press release for any hints on the timing of the first rate hike in nearly a decade.
Companies
Mining stocks were under pressure, including BHP Billiton, Glencore, Antofagasta and Rio Tinto, as reports that a People's Bank of China adviser hinted at further monetary policy easing added to concerns about the health of the nation.
Also weighing on the sector was the prospect of continued declines in copper and iron ore prices as a result of rapid decline in China's domestic steel use in conjunction with increasing production from Australia.
Analysts at Exane BNP Paribas said "the outlook for steel and steelmaking raw materials looks even more dreadful as there is no evidence of production cuts commensurate with the excess capacity".
BP snapped an earlier rally as the group announced further cuts in capital expenditure and costs after reporting a sharp fall in third quarter underlying replacement cost profit due to plunging oil prices. BP said it was preparing for $60 per barrel until 2017.
Evraz slid as it continued to challenge a rescue plan of its South African steel maker, Evraz Highveld Steel and Vanadium.
Nostrum Oil and Gas fell after lowering its full-year production guidance due to unexpected repair work on a pipeline overrunning and reported a fall in production during the first nine months of 2015 that also will see revenue almost halve.
Going the other way, Shire gained after Credit Suisse cut its price target and forecasts for 2016 earnings.
St. James Place jumped after posting a 17% rise in third-quarter net inflows to a record £1.48bn, taking funds under management to ?54.5bn.
DS Smith was higher after saying trading for the half year ending 31 October has been in line with its expectations.
Chemring Group plunged after the defence contractor warned shareholders its profit outlook for the full-year could be dented by a potential revenue delay.
Pearson dipped after Credit Suisse downgraded the education company to 'neutral' from 'outperform' and cut the price target to 970p from 1,455p.
TalkTalk rose after the company said there was little chance customers' money could be taken after its computer systems were hacked. News that a 15 year-old boy has also been arrested in connection with the incident cheered investors. |
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| | Market Movers
FTSE 100 (UKX) 6,370.68 -0.72%
FTSE 250 (MCX) 17,053.74 -0.73%
techMARK (TASX) 3,096.31 -0.32%
FTSE 100 - Risers
Shire Plc (SHP) 4,927.00p 6.90%
Associated British Foods (ABF) 3,430.00p 1.03%
St James's Place (STJ) 939.00p 0.91%
Legal & General Group (LGEN) 259.00p 0.90%
International Consolidated Airlines Group SA (CDI) (IAG) 612.00p 0.66%
Carnival (CCL) 3,583.00p 0.45%
easyJet (EZJ) 1,782.00p 0.39%
London Stock Exchange Group (LSE) 2,539.00p 0.36%
Hikma Pharmaceuticals (HIK) 2,040.00p 0.29%
BT Group (BT.A) 452.85p 0.22%
FTSE 100 - Fallers
Anglo American (AAL) 557.70p -5.62%
Pearson (PSON) 868.00p -4.09%
Antofagasta (ANTO) 544.50p -4.05%
Glencore (GLEN) 112.05p -3.36%
BHP Billiton (BLT) 1,093.00p -3.36%
Meggitt (MGGT) 461.70p -3.00%
BAE Systems (BA.) 441.30p -2.75%
Tesco (TSCO) 185.65p -2.57%
Kingfisher (KGF) 349.60p -2.43%
Smiths Group (SMIN) 965.50p -2.43%
FTSE 250 - Risers
TalkTalk Telecom Group (TALK) 255.10p 13.23%
AO World (AO.) 164.00p 4.99%
Dignity (DTY) 2,359.00p 4.24%
OneSavings Bank (OSB) 369.90p 2.44%
UDG Healthcare Public Limited Company (UDG) 471.10p 2.35%
Jardine Lloyd Thompson Group (JLT) 965.00p 2.06%
Ted Baker (TED) 3,000.00p 1.97%
Smith (DS) (SMDS) 392.40p 1.71%
Just Retirement Group (JRG) 164.10p 1.55%
Wizz Air Holdings (WIZZ) 1,895.00p 1.12%
FTSE 250 - Fallers
Evraz (EVR) 78.95p -10.59%
Hunting (HTG) 357.50p -7.07%
Petra Diamonds Ltd.(DI) (PDL) 80.45p -6.72%
Premier Oil (PMO) 67.80p -6.09%
Nostrum Oil & Gas (NOG) 450.00p -6.07%
Vedanta Resources (VED) 470.20p -5.66%
Weir Group (WEIR) 1,030.00p -5.59%
Home Retail Group (HOME) 108.90p -5.30%
Drax Group (DRX) 265.60p -5.04%
Amec Foster Wheeler (AMFW) 704.00p -4.99% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Markets firmly in the red amid pre-FOMC jitters European stocks declined on Tuesday, as investors erred on the side of caution ahead of Wednesday's rate announcement by the Federal Reserve, while a raft of mixed economic reports from the US did little to lift the mood.
The benchmark Stoxx Europe 600 index closed down 1.06%, while Germany's DAX fell 1.01% and France's CAC was 1.02% weaker.
As of 1637 GMT, the euro was down 0.15% and 0.68% against the dollar and the yen respectively and gained 0.13% against the pound, while Brent crude fell 1.69% to $46.75 a barrel.
Mixed US data weighs on European stocks
On a relatively quiet day on the data front in the Eurozone, investors analysed a host of reports from across the Atlantic, as they highly-anticipated Federal Open Market Committee got underway on Tuesday.
According to the US Commerce Department, orders for long-lasting goods declined 1.2% in September compared with the 1.3% decline analysts had forecast but marking their second consecutive drop. August's reading was revised downward to show a 3% drop compared with the initial figure showing a 2.3% decline.
There was downbeat news on the consumer confidence front as well, as the index monitoring consumer sentiment declined from a downwardly revised 102.6 to 97.6 in October, compared with expectations for a 102.9 reading.
"Normally such dismal data would have been a big boost to the Dow, due to their rate-hike delaying capabilities," said Spreadex's financial analyst Connor Campbell.
"However, since it was already beyond unlikely that the Fed would choose to pull the lift-off trigger this month anyway, today's economic bad news carried more weight than it traditionally has done for much of the year."
Meanwhile, the European Central Bank's chief economist, Peter Praet, said there would be "no taboos" with regard to discussions about additional monetary loosening to push up inflation in the euro bloc.
In an interview with Agence France Presse, Praet said: "The governing council has given a very strong message: it is ready to draw the consequences of its assessment of the monetary policy stance.
Earnings in focus
In company news, shares in chemicals group BASF fell 4.78% after it cut its full-year earnings guidance on the back of weak sales in China, Brazil and other emerging markets.
Novartis slid 1.55% after the Swiss drug maker posted a 42% drop in third-quarter profit from the same period last year.
BG Group and Eni were under pressure following a report that Kazakhstan's government is considering a penalty on a joint venture between the two that operates the nation's second-biggest producing oil and gas field as the state looks for extra revenue to boost its finances. |
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| | US Market Report | | US open: Equity markets move in tight ranges amid raft of mixed economic data and earnings reports US stocks struggled for direction early on Tuesday, as investors digested a raft of economic reports and awaited quarterly earnings from Apple and Twitter.
Shortly after 1400 GMT, the Dow Jones Industrial Average was down 22 points to 17,601.17, while the S&P 500 and the Nasdaq were four points down and two points higher respectively.
Mixed economic data
On the economic data front, according to the Commerce Department, orders for long-lasting goods declined 1.2% in September compared with the 1.3% decline analysts had forecast but marking their second consecutive drop.
August's reading was revised downward to show a 3% drop compared with the initial figure showing a 2.3% decline.
"The details of the report suggest that equipment investment expanded only modestly in the third quarter and could be even softer in the fourth quarter," said Steve Murphy, US economist at Capital Economics.
"The strong dollar, weak global demand, and the contraction in the energy and manufacturing sectors are all weighing on demand for capital goods."
There was downbeat use on the consumer confidence front as well, as the index monitoring consumer sentiment declined from a downwardly revised 102.6 to 97.6 in October, compared with expectations for a 102.9 reading.
Elsewhere, the S&P/Case-Shiller 20-City Home Price Index was in line with expectations in August, showing house prices rose 0.1% month-on-month and 5.1% year-on-year.
Meanwhile, the Markit 'flash' US services purchasing managers index fell to 54.4 in October from 55.1 in September, although it remained comfortably above the 50 threshold indicating growth.
Earnings in focus
Among the companies that reported quarterly earnings before the opening bell, Alibaba surged 6.23% after the Chinese e-commerce giant posted better-than-expected quarterly revenue.
Biopharmaceutical giant Pfizer rose 3.22% after its results beat Wall Street's estimates and the firm raised its full-year outlook, even though revenue and earnings both declined on the back of some adverse currency movement.
Going the other way, tobacco group Reynolds American tumbled 3.37% despite posting better-than-expected quarterly revenue, while profit was in line with estimates.
Ford Motor fell 4.72% after the car-maker's quarterly operating profit increased, although operating earnings slightly missed expectations, while JetBlue Airways slumped 7.48% even though its third quarter revenue rose in line with consensus.
Printing technology provider Lexmark declined 5.15% after swinging to a loss and cutting its full-year outlook, while media company Comcast slid 2.51% after its quarterly earnings left investors disappointed.
After the closing bell, investors will turn their attention to Twitter and Apple, with both companies set to publish their quarterly results.
"Few doubt Apple's earnings power but there is a concern that iPhone 6s sales won't live up to sky-high expectations," said CMC Markets' analyst Jasper Lawler.
"If the number of iPhone units sees a year-over-year decline, it might be taken as a sign that the global smartphone super cycle has peaked.
"Any comments regarding the tech giant's expectations for the critical holiday quarter may even eclipse the results themselves."
All eyes on the Fed
The Federal Open Market Committee kicks off its two-day meeting on Tuesday, with market participants looking to Wednesday's statement as they look for clues over the timing of a first interest rates hike.
However, analysts warned investors should not expect too much indication from the Fed, which is unlikely to give much away, one way or the other.
"While the US central bank is probably not going to raise rates in December, be assured we're unlikely to get any form of confirmation either way this week," said Michael Van Dulken, head of research at Accendo Markets.
Elsewhere, Asian stocks closed on a mixed note, while their European counterparts were pulled back slightly and oil prices fell. West Texas Intermediate lost 2.37% to $42.96 a barrel, while Brent slid 1.65% to $46.77 a barrel. |
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| | Broker Tips | | Broker tips: Entertainment One, Pearson, Imagination Technologies Peel Hunt downgraded Entertainment One to 'hold' from 'buy' and cut the price target to 260p from 340p, as the rights issue is digested by shareholders.
The brokerage noted that Entertainment One has increased its exposure to Peppa Pig at a cost of 140m through the purchase of ABD and has raised 193.6m by way of a rights issue.
"On balance, we are of the view that a sale of the existing stake in Peppa Pig would have been strategically better, a route the company should still consider. The overfunding will dilute earnings and the EPS growth rate reduces," it said.
Peel said the value of Peppa Pig to a broad-based brand owner will peak soon, maybe even as soon as now.
"We hope that Entertainment One will look to realise that value for the benefit of shareholders in the near future," it said.
The purchase of ABD may facilitate that sale although raising cash through equity dilutes the benefit of this deal, the brokerage said.
Peel added that the Marwyn sale, alongside the overfunded rights issue, will take some time for the market to absorb.
"This indigestion prompts the 'hold' recommendation."
Credit Suisse downgraded Pearson to 'neutral' from 'outperform' and slashed the price target to 970p from 1,455p following the company's third-quarter trading update last week.
It said the update showed weak underlying revenue and the general message was one of a strong competitive performance more than offset by industry-wide struggles.
"Whilst we continue to see the potential for longer-term upside for the group as it makes the digital migration, we believe these results demonstrate that it is no longer possible to have any meaningful conviction in the group's short-medium term trading and as such we no longer believe its assets deserve a premium to its more stable professional publishing peers."
The bank cut its 2015 and 2016 adjusted earnings per share estimates by 6.3% and 14.3%, respectively, as it takes more conservative assumptions for the group given the lack of clarity.
This takes CS's 2015 forecast adjusted EPS to 70p, in-line with company guidance for "around the bottom end" of the group's 70-75p range.
Imagination Technologies will have to think quick if it wants to avoid the multiple headwinds bearing down on it, one of the City's top brokers said on Wednesday.
The company, which designs microprocessors and then licenses the resulting technology patents, will see profit margins drop and licencing revenues fall, with its high debt levels compounding matters, broker Liberum said.
Its operating margins are likely to shrink by 4% in the first six months of 2016, having grown by 27% in the same period of 2012, pressured by R&D growing quicker than revenues, now at 73% of sales.
"The company's strategy is too skewed towards long-term investment, which could put the group at risk near-term," the analyst went on to explain.
Lambe downgraded his recommendation to 'hold' from 'buy' and his price target to 250p from 275p. |
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