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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 and metal stocks help end week on a high Glencore led mining shares higher as investors welcomed its decision to cut 500,000 tonnes or around a third of its annual zinc production as it looks to combat declining prices.
"This is a major move by the company showing leadership in cutting output to help support commodity prices and is more meaningful to the market than the coal supply cuts it previously made," Investec said.
Gold, silver and industrial metal prices increased following the report, pushing Anglo American, Fresnillo, Antofagasta, BHP Billiton and Rio Tinto into positive territory.
The lift from miners offset a worse-than-expected report on the UK trade deficit. According to the Office for National Statistics, the deficit hit £11.1bn in August compared with forecasts for a £9.9bn figure and an upwardly revised £12.2bn in July. The UK's deficit on trade in goods and services declined from £4.5bn in July to £3.3bn in August.
Exports of goods rose by £0.8bn to £23.6bn, driven higher by a £0.6bn increase in car exports to a record. Imports declined £0.3bn to £34.7bn over the same period.
The UK's construction output fell 4.3% against the 1% increase expected, its biggest month to month fall since December 2012.
"This suggests that the impact of the slowdown in China and other emerging markets is beginning to bite, with exports to China down 16% over the three months to August compared with the previous three months," said Martin Beck, senior economic advisor to the EY ITEM Club.
"These figures suggest that net trade is likely to exert a sizeable drag on GDP growth in the third quarter. There is now some downside risk to our forecast that the preliminary estimate - due at the end of the month - will show GDP growth of 0.6%."
Meanwhile, the market continued to digest Thursday's meeting minutes from the Bank of England, the European Central Bank and the Federal Reserve.
The BoE on Thursday voted 8-1 to maintain rates at 0.50% and its asset purchase programme at £375bn, as expected by analysts, citing weak inflation, low wages, and potential risks from a slowdown in emerging markets. The meeting minutes revealed policymaker Ian McCafferty again voted for an interest rate increase of 25 basis points.
Analysts were mixed in their predictions for an interest rate rise with some saying February 2016 while others suggesting the BoE might hold off until late 2016 or early 2017.
The European Central Bank's account 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 minutes from the Fed's 16-17 September meeting showed that the central bank was close to raising interest rates but the risks of China's economic slowdown hurting US growth stopped them. Policymakers said that a rate hike "might be near" but they would need to monitor developments.
Barclays sees the next rate hike in March next year following weak jobs data.
US total wholesale inventories beat expectations in August, as they rose 0.1% month-on-month compared with a 0.3% downwardly revised decline in July and with analysts' expectations for a flat reading.
However, the prices the US paid for imported goods declined more than expected in September, data released on Friday showed. Excluding fuel, import prices fell 0.1% month-on-month compared with a 1.6% drop in the previous month and with analysts' expectations for 0.5% decline.
Vedanta Resources jumped after posting a rise in first half production across most of its commodities, as it said net debt at the end of the quarter is expected to be below $8bn and expressed confidence that it will meet its covenants as at the end of September.
Investors appeared pleased with a report that Standard Chartered's new chief executive Bill Winters is planning to cut up to a quarter of the bank's most senior staff in a bid to reduce costs. It's a move that will likely result in the loss of around 1,000 jobs.
Lloyds Banking Group climbed as the UK government cut its stake by a further 1% to just under 11%. Earlier in the week it emerged that HM Treasury will sell at least £2bn worth of shares to private retail investors in spring next year.
Sports Direct International took a big hit after Morgan Stanley downgraded the stock to 'equalweight' from 'overweight'. It kept the price target at 680p and said the risk/reward is now more balanced. |
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| | Market Movers
techMARK 3,050.66 +0.68%
FTSE 100 6,418.76 +0.69%
FTSE 250 17,082.74 +0.46%
FTSE 100 - Risers
Anglo American (AAL) 725.30p +7.06%
Glencore (GLEN) 128.80p +6.76%
Standard Chartered (STAN) 786.60p +5.06%
Ashtead Group (AHT) 1,046.00p +4.50%
Fresnillo (FRES) 734.50p +4.26%
BHP Billiton (BLT) 1,193.00p +4.19%
Babcock International Group (BAB) 984.00p +3.36%
Rio Tinto (RIO) 2,603.50p +3.31%
G4S (GFS) 259.30p +3.06%
Antofagasta (ANTO) 595.50p +3.03%
FTSE 100 - Fallers
Sports Direct International (SPD) 689.50p -6.70%
Persimmon (PSN) 1,950.00p -2.69%
TUI AG Reg Shs (DI) (TUI) 1,212.00p -2.34%
National Grid (NG.) 915.40p -2.06%
Taylor Wimpey (TW.) 192.30p -1.89%
Berkeley Group Holdings (The) (BKG) 3,262.00p -1.72%
St James's Place (STJ) 880.00p -1.68%
Barratt Developments (BDEV) 633.00p -1.63%
United Utilities Group (UU.) 963.00p -1.33%
Dixons Carphone (DC.) 433.80p -1.23%
FTSE 250 - Risers
Electrocomponents (ECM) 214.50p +13.19%
Vedanta Resources (VED) 590.50p +11.42%
Petrofac Ltd. (PFC) 942.00p +9.79%
Kaz Minerals (KAZ) 145.30p +8.59%
Allied Minds (ALM) 398.70p +6.32%
IP Group (IPO) 233.20p +5.86%
Drax Group (DRX) 286.00p +5.61%
Bodycote (BOY) 579.00p +5.27%
Tullow Oil (TLW) 257.20p +4.64%
Pace (PIC) 374.30p +4.38%
FTSE 250 - Fallers
Auto Trader Group (AUTO) 325.70p -4.46%
Savills (SVS) 879.50p -4.09%
Man Group (EMG) 150.70p -4.01%
Crest Nicholson Holdings (CRST) 533.00p -3.35%
Tullett Prebon (TLPR) 357.10p -3.33%
Betfair Group (BET) 3,112.00p -3.14%
JD Sports Fashion (JD.) 935.00p -2.91%
Moneysupermarket.com Group (MONY) 308.50p -2.90%
Close Brothers Group (CBG) 1,496.00p -2.54%
NMC Health (NMC) 812.50p -2.23%
FTSE TechMARK - Risers
Sarossa (SARS) 2.00p +4.71%
Oxford Instruments (OXIG) 660.50p +4.43%
Filtronic (FTC) 7.12p +3.64%
SDL (SDL) 378.75p +2.36%
RM (RM.) 165.00p +1.85%
Spirent Communications (SPT) 76.75p +1.32%
Sepura (SEPU) 173.25p +0.43%
E2V Technologies (E2V) 237.00p +0.32%
FTSE TechMARK - Fallers
XP Power Ltd. (DI) (XPP) 1,560.00p -5.45%
Oxford Biomedica (OXB) 7.28p -3.45%
Ricardo (RCDO) 899.50p -2.28%
KCOM Group (KCOM) 90.00p -1.37%
BATM Advanced Communications Ltd. (BVC) 19.50p -0.64%
Dialight (DIA) 670.00p -0.59%
IShares Euro Gov Bond 7-10YR UCITS ETF (IEGM) € 202.90 -0.15%
Consort Medical (CSRT) 931.00p -0.11%
NCC Group (NCC) 250.25p -0.10% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Markets extend gains as energy stocks rally European stocks rose, led higher by strength in the mining sector as investors welcomed dovish signals from the Federal Reserve.
The benchmark Stoxx Europe 600 index closed 0.33% higher, while France's CAC 40 rose 0.54% and Germany's DAX surged 1.04%.
The euro was on the front foot against the main currencies, surging over 1% against both the pound and the yen and gaining 0.74% against the pound.
Meanwhile, ahead of the weekend, Brent crude halted its rally on profit taking and declined 0.36% to $52.86 a barrel.
"For now the relationship between oil prices and indices is certainly a positive one given the impact it is having upon sector-specific firms," said IG's market analyst Joshua Mahony.
"However, higher crude prices will no doubt soon raise inflation expectations, which coupled with strong wage growth could nudge central bankers to allay fears over disinflation."
Fed could keep rate hike on hold until 2016
Minutes released on Thursday from the latest Federal Open Market Committee meeting showed the Fed almost hiked interest rates but refrained as a result of the slowdown in China and its potential impact on the US.
According to the minutes, policymakers thought it was more prudent to wait for evidence that the economy had not deteriorated and that inflation would gradually move back toward towards the 2% annual target.
"Federal Reserve minutes that displayed caution amongst board members over raising rates has prompted one of the biggest weekly gains in European shares since January," said CMC Markets' analyst Jasper Lawler.
"Investors adore these Fed minutes because they signal a strong economy and low rates."
In company news, Swiss fragrance maker Givaudan gained 4.44% after it maintained its mid-term financial targets as it posted a big jump in third-quarter underlying sales.
Steelmaker ArcelorMittal surged 5.99% after JPMorgan Cazenove raised its stance on the stock to 'overweight' from 'neutral'.
On a quiet day on the economic front in the Eurozone, investors across the Atlantic had little more to focus upon in terms of data.
US total wholesale inventories beat expectations in August, as they rose 0.1% month-on-month compared with a 0.3% downwardly revised decline in July and with analysts' expectations for a flat reading. |
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| | US Market Report | | US open: Equities edge higher as Fed hints at keeping interest rates on hold US stocks edged higher on Friday, after the minutes from the latest Federal Reserve meeting showed the US central bank might delay an interest rates hike until next year.
Shortly before 1500 BST, the Dow Jones Industrial Average was up 42 points to 17,092, while the S&P 500 and the Nasdaq were both two points higher.
Fed casts doubt over rate hike in 2015
Minutes released on Thursday from the latest Federal Open Market Committee meeting showed the central bank almost hiked interest rated but refrained as a result of the slowdown in China and its potential impact on the US.
According to the minutes, policymakers thought it was more prudent to wait for evidence that the economy had not deteriorated and that inflation would gradually move back toward towards the 2% annual target.
"The Fed have strayed off their well-worn path. The market has lost visibility on Fed's policy path but the Fed members are not less confused," said Ipek Ozkardeskaya, market analyst at London Capital Group.
"Unemployment and inflation targets were the foundation of Fed's policy and these key economic indicators are now diverging from each other.
"The improvement in unemployment has not led to any acceleration in inflation."
On the economic data front, excluding fuel, import prices fell 0.1% month-on-month compared with a 1.6% drop in the previous month and with analysts' expectations for 0.5% decline.
On a year-on-year basis, import prices tumbled 10.7%, with the slump in oil prices considered to be the main driver behind the drop.
"We think that following dollar strength and amid uncertainty about economic activity abroad, imported price pressures are likely to remain subdued in the coming months and act as a drag on consumer goods prices," analysts at Barclays said.
Earnings season kicks off on downbeat note
In company news, Alcoa declined 2.72% after the aluminium producer kicked off the earnings season late on Thursday by lowering its outlook for automotive production growth in China.
Gap plunged 7.25% after saying that total sales fell 1% last month on the back of currency headwinds.
Ascena Retail Group lost 3.10% after Golden Gate Capital revealed having a 9% stake in the company.
The content of the Fed minutes boosted Asian equity markets, which closed the session on a high after a session-long rally, while European stocks were firmly in the black as commodity-related stocks extended their gains.
Oil prices were mixed, with West Texas Intermediate climbing 0.52% to $49.69 a barrel, while Brent crude slid 0.40% to $52.84 a barrel. |
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| | Broker Tips | | Broker tips: Hays, Weir, Sports Direct HSBC downgraded Hays to 'hold' from 'buy' and cut its price target to 140p from 200p.
It said Hays' UK growth is slowing, as evidenced by the company's second-quarter trading update, and the bank's bull case was premised on accelerating growth and margin recovery.
"Until we get further evidence that such growth can pick up, we are unable to have conviction in our 'buy' case," the bank said.
HSBC said the slowdown is worse than what the labour market data implies or sector peers, raising the question that this might be a company-specific problem.
"If this is a result of the company's inability to fill vacancies as the candidate scarcity emerges, the downside to our estimates and the multiples the market is willing to pay can be meaningful," it said.
HSBC said downside risks include a focus on large accounts which may limit the company's ability to increase prices in future. In such a scenario, if the company cannot have a pull on the candidate pool, risk to profit growth can be meaningful, it said.
Upside risks, however, would be that Hays' UK slowdown is a temporary phasing effect post elections.
RBC Capital Markets cut Weir to 'underperform' from 'sector perform' and slashed its price target to 1,150p from 1,850p.
"Whilst Weir shares would respond quickly to signs of oilfield activity recovering, near term we suspect they might come under pressure," the Canadian bank said.
It said the outlook for the oil & gas division is deteriorating and current consensus forecasts are around 10% too high.
RBC noted that minerals sales/EBITA declined 8% and 11% respectively organically in the first half, with OEM sales declines offsetting the more resilient aftermarket . It added that since the first half, commodity prices have come under pressure.
The bank said the oil & gas division is working hard on its cost base, targeting £55m lower annual costs by end 2015, but only so much can be done in the face of major price and volume declines.
It now forecasts 2016 O&G sales/EBITA of £585m/£77m, down from £740m/£110m previously.
Sports Direct International was under the cosh after Morgan Stanley downgraded the stock to 'equalweight' from ''overweight', keeping the price target at 680p, saying the risk/reward is now more balanced.
It said that with 8% implied downside from the current share price, an 'equalweight' stance is more appropriate.
"We continue to like the Sports Direct story in the UK and remain open-minded on its overseas expansion. However, we no longer view the international business as a free option with the shares up nearly 20% in the last six months," it said.
The bank pointed out there has been a lack of progress on M&A within Continental Europe and said there are question marks over how well key international market Austria is progressing.
Still, the shares have risen by nearly 20% whereas consensus forecasts have been broadly flat.
MS said that on an absolute and relative basis, therefore, the stock has re-rated. |
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