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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 after BoE and ECB meeting minutes UK stocks gained after the Bank of England decided to keep interest rates unchanged and the European Central Bank suggested it might consider further stimulus.
The BoE's Monetary Policy Committee voted 8-1 to maintain rates at 0.50% and its asset purchase programme at ?375bn, as expected by analysts. Policymaker Ian McCafferty again voted for an interest rate increase of 25 basis points.
In the policy meeting minutes the Bank highlighted weak inflation, low wages, potential risks from a slowdown in emerging markets as reasons for holding off on a rate rise.
"We still expect Bank of England to hike in the first quarter of 2016, probably in February, as inflation is expected to pick up in the beginning of next year," said Danske Bank Markets.
Some analysts have now pushed their expectations for a rate hike to end of 2016, including Ernst and Young. "In our view, disinflationary forces will prove to be more intense than the MPC expects, with a rate rise unlikely to happen until the latter part of 2016," said Martin Beck, senior economic advisor to the EY ITEM Club.
Howard Archer, chief UK and European economist at IHS Global Insight, said he believed analysts had "overreacted" by pushing back their expectations from 0.50% to 0.75% to late-2016 or early-2017. He sees a rate hike coming in the first half of 2016.
ECB reiterates QE stance
The ECB's minutes of its 2-3 September meeting revealed the Governing Council reiterated that it would consider extending the asset purchase programme past September 2016 if needed. The central bank said would monitor risks closely including weak commodity prices, the euro exchange rate appreciation, lower-than-expected economic growth, subdued inflation and a slowdown in emerging economies.
Still to come, the Federal Reserve's 16-17 September meeting minutes at 1900 BST will be under the microscope for hints on the first interest rate rise in nearly a decade.
Fed Chair Janet Yellen has said policymakers expected an increase at its October or December meetings this year but last Friday's weaker-than-anticipated non-farm payrolls report prompted some analysts to push back their expectations until next year.
Despite a slowing of job gains in September, Fed official John Williams said on Tuesday he still expects the central bank to begin raising rates this year. He said he believed the labour market has continued to improve and there have been no signs of a worsening global outlook. Williams will speak again later in Washington. Fed officials James Bullard and Narayana Kocherlakota were also due to speak on Thursday.
Companies
Tesco jumped after UBS on Thursday morning issued a note saying it sees scope for the supermarket to recover trading and earnings momentum over the next two to three years and reiterated its 'buy' rating. The company on Wednesday reported operating profits were down 55% in the first half of the year.
Fresnillo edged higher after HSBC reiterated its 'buy' rating and raised the company's target from 760p to 810p.
BHP Billiton also had an uptick after an upbeat note from Jefferies on the metals and mining industry. "If commodity prices stabilise as we expect, highly leveraged miners should take advantage of the opportunity to strengthen their balance sheets via asset sales and equity issuances. Miners with financial flexibility are best positioned to buy high quality assets at a very weak point in cycle."
Inmarsat slumped as the company reiterated its guidance for the year and said there's no material change in the trading environment for the group's performance.
Rolls Royce rallied after saying it will step up plans to establish an Asian manufacturing capability to help the group double production with the introduction of new Boeing Co. and Airbus Group SE jets.
Ladbrokes gained after appointing Kristof Fahy as chief marketing officer to lead all brand and marketing activity across digital and retail.
Hays was lower as the recruitment company said currency movements have had an impact on its quarterly earnings.
Glencore declined on fresh fears over the company's mounting debt and the repercussions it could have on the banking sector. Analysts at Bank of America said: "The banking industry may have significantly more exposure to Glencore than is generally appreciated in the market."
Tullow Oil advanced after reaching an agreement with the government of Gabon over its licences in the Onal Complex Fields, regaining its 7.5% stake in the Onal Complex producing fields and the Ezanga block. |
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| | Market Movers
techMARK 3,029.32 +0.45%
FTSE 100 6,379.01 +0.67%
FTSE 250 16,997.72 -0.20%
FTSE 100 - Risers
Fresnillo (FRES) 704.00p +4.14%
BHP Billiton (BLT) 1,147.00p +3.52%
Burberry Group (BRBY) 1,492.00p +2.54%
TUI AG Reg Shs (DI) (TUI) 1,244.00p +2.47%
Tesco (TSCO) 201.75p +2.41%
Whitbread (WTB) 4,771.00p +2.40%
Centrica (CNA) 241.20p +2.12%
Diageo (DGE) 1,829.00p +1.98%
Royal Mail (RMG) 460.70p +1.88%
Anglo American (AAL) 676.20p +1.76%
FTSE 100 - Fallers
Inmarsat (ISAT) 938.00p -3.89%
Glencore (GLEN) 120.45p -2.86%
Wolseley (WOS) 3,694.00p -1.49%
Marks & Spencer Group (MKS) 491.70p -1.48%
Aviva (AV.) 475.80p -1.33%
Kingfisher (KGF) 353.90p -1.28%
3i Group (III) 483.30p -1.10%
Hikma Pharmaceuticals (HIK) 2,136.00p -0.97%
Smiths Group (SMIN) 1,002.00p -0.60%
London Stock Exchange Group (LSE) 2,457.00p -0.57%
FTSE 250 - Risers
Kaz Minerals (KAZ) 132.60p +8.16%
Electrocomponents (ECM) 189.30p +5.58%
FirstGroup (FGP) 103.00p +4.89%
Evraz (EVR) 93.35p +4.30%
Stagecoach Group (SGC) 339.90p +3.91%
Ladbrokes (LAD) 107.20p +3.57%
Vedanta Resources (VED) 527.50p +3.53%
Senior (SNR) 268.80p +3.15%
Drax Group (DRX) 271.80p +2.99%
Cineworld Group (CINE) 572.00p +2.79%
FTSE 250 - Fallers
Hays (HAS) 136.90p -7.19%
IP Group (IPO) 221.80p -6.37%
Vectura Group (VEC) 166.00p -5.41%
Riverstone Energy Limited (RSE) 870.00p -4.66%
John Laing Group (JLG) 186.90p -3.66%
OneSavings Bank (OSB) 364.70p -3.65%
Daejan Holdings (DJAN) 6,025.00p -3.60%
Aldermore Group (ALD) 256.80p -3.42%
Hunting (HTG) 440.20p -3.23%
Michael Page International (MPI) 465.80p -3.10%
FTSE TechMARK - Risers
Oxford Instruments (OXIG) 637.50p +4.25%
Filtronic (FTC) 6.88p +1.85%
Ricardo (RCDO) 912.50p +1.11%
Triad Group (TRD) 31.25p +0.81%
Innovation Group (TIG) 39.50p +0.64%
Consort Medical (CSRT) 938.00p +0.16%
IShares Euro Gov Bond 7-10YR UCITS ETF (IEGM) € 203.20 +0.05%
FTSE TechMARK - Fallers
NCC Group (NCC) 250.50p -1.57%
Oxford Biomedica (OXB) 7.60p -0.65%
BATM Advanced Communications Ltd. (BVC) 19.50p -0.64%
Skyepharma (SKP) 337.75p -0.59%
Spirent Communications (SPT) 75.50p -0.33%
XP Power Ltd. (DI) (XPP) 1,635.00p -0.30%
Sepura (SEPU) 173.00p -0.29%
SDL (SDL) 370.00p -0.27% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks edge higher as ECB hints at extending QE European stocks edged higher on Thursday as investors digested another set of disappointing German data, after minutes European Central Bank's latest policy meeting revealed Brussels could extend its stimulus programme.
The benchmark Stoxx Europe 600 index closed up 0.19%, while France's CAC rose 0.18% and Germany's DAX was climbed 0.23%.
The euro was on the front foot against the main currencies, rising 0.34% against both the dollar and the yen and gaining 0.42% against the pound, while Brent crude surged 1.97% to $52.36 a barrel.
ECB could extend QE
The European Central Bank reiterated that it would consider extending its asset purchase programme if the economic outlook worsened, according to minutes of the 2-3 September policy meeting on Thursday.
During the ECB's last meeting, policymakers noted risks including lower commodity prices, the euro exchange rate appreciation, lower-than-expected economic growth, weak inflation and a slowdown in emerging economies.
"A first step could be to extend the asset purchase programme until at least a later date than September 2016, which we think could be announced as early as October, to reinforce the forward guidance," analysts at Barclays said.
"Increasing the size and scope of asset purchases would be the next step, but we think it is unlikely to be decided in October unless a bigger shock materialises in the meantime."
German data disappoints
On the economic data front, figures from Germany's Federal Statistics Office showed exports fell by the biggest amount since 2009. Seasonally-adjusted exports dropped 5.2% in August from July, while imports fell by 3.1%.
In company news, Deutsche Bank fell 2% after it said late on Wednesday that it expects to book an impairment of around €5.8bn in the third quarter for a write-down related to its corporate banking unit.
The bank also said it will take an impairment on its stake in China's Hua Xia Bank and will set money aside around €1.2bn for litigation. As a result, the lender will either reduce or suspend the dividend for 2015.
Some analysts argued that the scrapping of the dividend would allow the bank to avoid a capital increase.
Anheuser-Busch InBev shed 1.17% as it hit back at SABMiller on Thursday after the London-listed brewer rebuffed its third approach, calling on its shareholders to push the board to engage in talks.
AB InBev said it was surprised that the board of SABMiller continues to say that its proposal "still very substantially undervalues" the company, adding that this lacks credibility. |
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| | US Market Report | | US open: Stocks decline as investors brace for FOMC minutes US equities slid early on Thursday, as investors awaited the release of the minutes of the latest Federal Open Market Committee meeting.
Shortly before 1500 BST, the Dow Jones Industrial Average was down 28 points to 16,883.93, while the S&P 500 and the Nasdaq were four and 16 points lower respectively.
Asian stocks closed on a mixed note, as concerns about a slowdown in the emerging markets resurfaced, although Chinese equities bucked the trend as they rallied after a week-long holiday.
However, the gains were not as wide as analysts had expected, which added to Wall Street's jitters.
"After being off for a week that has seen a big rally elsewhere, there is some disappointment that China has not climbed more," said analysts at Deutsche Bank.
Unemployment claims hit three-month low
On the economic data front, the number of first time unemployment benefits claimants in the US fell to its lowest since July last week.
According to the Department of Labor, new claims declined by 13,000 to 263,000 in the week to 3 October, compared with analysts' expectations for a 274,000 reading.
Meanwhile, the average of new claims over the last four weeks fell by 3,000 to a seasonally adjusted 267,500, the report added.
"Despite the recent softening in payroll growth, this morning's data confirm that the separations side of US labor markets remains quite healthy," analysts at Barclays said in a note.
Investors could also receive some insights on the Federal Reserve's policy when, at 1900 BST, the US central bank releases the minutes of the meeting it held on 17 September.
"Markets have been buoyed by the idea the Fed will remain on hold for longer but there's a risk that a hawkish tone taken in the minutes could put a rate rise this year back on the table," said CMC Markets' analyst Jasper Lawler.
Earnings season kicks off
In company news, the earnings season gets unofficially underway when aluminium producer Alcoa will report quarterly earnings after the closing bell.
IT group EMC gained 2.58% after The Wall Street Journal reported that the company was in talks with technology company Dell over a possible merger.
Amazon slid 1.19% ahead of the bell after Bloomberg reported the online retail giant was considering introducing a live, online TV service.
Meanwhile, US-listed shares of Deutsche Bank could be in focus after the bank warned late on Wednesday that it will take a €5.8bn charge and could cut its dividend this year.
Elsewhere, European stocks moved in tight ranges, while oil prices edged higher. West Texas Intermediate climbed 1.61% to $48.59 a barrel, while Brent rose 1.70% to $52.22 a barrel. |
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| | Broker Tips | | Broker tips: Soco International, M&S, UK industrials Soco International was under pressure on Thursday after UBS downgraded the stock to 'sell' from 'neutral', keeping the price target at 150p.
It said that with the stock having rallied strongly over recent days it is now trading at 1.24x commercial net asset value and on an implied long-term oil price of $112 a barrel, which is well above the forward curve at $65 a barrel.
"This leaves risk-reward looking skewed to the downside," said UBS.
Still, the bank said it has been quite consistent in its view that Soco's TGT field in Vietnam is a solid asset, adding that delivery of $21 a barrel of post-tax cash flow during the first half underlines its high-margin, low cost attributes.
UBS said that while TGT is a high-quality asset, 2015 is something of a transition year with lower oil prices coinciding with relatively high capex on the new H5 fault platform.
It said free cash flow will likely be relatively low as a result, meaning next year's dividend will be lower.
Peel Hunt downgraded Marks & Spencer to 'sell' from 'hold' and cut the price target to 450p from 530p.
"Underlying trading conditions have been infinitely better this year than last but we fear that yet again M&S has failed to read the script," it said.
The brokerage explained that despite a very easy comparative, it's concerned that like-for-like sales for General Merchandise remain in negative territory. It said this was "a quite breathtaking indictment of its ranges this season".
Peel Hunt said even if the cost savings and sourcing gains come through on track, and Food stays in positive territory - neither of which is certain - that won't hold back the tide.
"An H2 LFL bounce-back is unlikely: for us the bottom line is that without General Merchandise sales growth, the shares are likely to struggle."
Peel added how bulls point to the strong cash generation as a reason to hold the shares but that will soon come under pressure if forecasts continue to fall and more still if extra capex is required to refresh the stores again.
It added that a 15x price-to-earnings ratio is not ridiculous but isn't much of a discount to the sector and with no confidence in the true level of earnings per share, it's too risky to stay with a 'hold'.
Investec took a look at the UK industrials space, upgrading IMI to 'buy' from 'hold', while cutting Spectris to 'hold' from 'buy' and both Vesuvius and Weir to 'sell' from 'hold'.
Investec said that for most companies, trading in September will have been weak, not terrible, just weaker than consensus expectations.
"This will be confirmed by the upcoming trading update season, but has been previewed by the slew of broad-based profit warnings globally and recent conversations we've had."
On IMI, it said investors still generally buy into chief executive Mark Selway's s strategy and plans even if the doubling of profit target to 2018 looks a challenge.
"We view IMI as being at the better quality end of the UK industrials universe and the operational actions being delivered will only enhance this medium-term. While short-term earnings momentum is negative (although probably not as bad as currently assumed) we see cash generation, the balance sheet and dividend yield as attractive and the valuation as undemanding."
As far as Vesuvius is concerned, the brokerage said management has continued to improve the operational performance in recent years, but multiple end market headwinds will overshadow these efforts for the time being.
"We downgrade our EPS expectations for Vesuvius more than for almost any other company we cover as trading in both divisions continues to deteriorate. We are well below consensus and comfortable being so."
Finally, it said Weir looks vulnerable to profit revisions greater than consensus expectations reflect.
"The impact of copper and gold will be felt in terms of lower volumes and pricing, particularly in FY16E, we believe."
Investec said this outturn is not factored into current guidance or consensus estimates. |
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