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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: Fed hawks and Chinese data send Footsie lower More hawkish remarks than usual from two US rate-setters, alongside hard-to-read Chinese credit statistics took markets lower on Thursday.
The president of the US Federal reserve bank of St.Louis, James Bullard, and the Richmond Fed's Jeffrey Lacker said that the US central bank could conceivably see itself forced to raise interest rates at a faster pace than markets might be expecting.
So-called aggregate financing in Asia's largest economy, the widest measure of new credit, came in at 476.7bn yuan for October, the least in 15 months, and left analysts divided in its wake.
FTSE 100 finished down 118.52 points to 6,178.68.
Three month copper futures on the LME slid 2% to $4,838 per metric tonne. Oil futures continued their recent leg lower, giving back about 3% in late afternoon trading, following the most recent US government stockpiles data.
On a more positive note, European Central Bank president Mario Draghi began his testimony before the European parliament's economic and monetary affairs committee.
Draghi said the normalisation of inflation might take longer than had been envisaged, implying that new stimulus might yet be forthcoming. He said the ECB had always been clear that quantitative easing could run past the September 2016 deadline if its inflation target was at risk of being compromised.
His remarks weighed on the single currency, which fell promptly towards the 1.07 mark but later recovered to 1.0796, in a possible 'risk-off' move.
Fed chairwoman Janet Yellen did not comment on monetary policy in her speech.
Back in the UK, house price growth accelerated in October. The Royal Institute of Chartered Surveyors' monthly house price balance jumped to a reading of +49 from +44 in the month before compared with consensus of +45, close to August's 15-month high of +53.
Nonetheless, the chief factor behind rising prices appeared to be the lack of new build.
Bank of England chief economist Andrew Haldane said the case for raising interest rates was still some way from being decided.
FTSE 100: Rolls Royce warns, one broker fears Pearson will be next
Aerospace and engineering firm Rolls-Royce said earnings for the year will be at the low end of guidance as it downgraded its expectations for next year and warned of a possible cut to the dividend. The company reaffirmed its 2015 guidance but said profit for the year is expected to be at the lower of its £1.33bn to £1.48bn range.
Military hardware maker BAE Systems said it was is axing 371 jobs at its military aircraft unit and announced earnings per share for the year would be 38p as its export order book thinned. The company said it was slashing the jobs and slowing the production rate of its Typhoon fighter jet "to ensure production continuity at competitive costs over the medium term".
Shares in education publisher Pearson fell sharply on Thursday following comments by chief executive officer John Fallon the previous day. Speaking at the Morgan Stanley European Technology, Media and Telecom Conference in Barcelona on Wednesday, Fallon said that when considering a capital allocation, the company's first priority was to protect the dividend. Bloomberg cited Peel Hunt analyst Alex De Groote as saying that he expects Pearson to issue another profit warning in the next few weeks and then to cut the dividend.
Aviva has hired bankers to explore the possible sale of its Irish health insurance operations, Sky News reported. The broadcaster said it understood that Macquarie had been appointed to undertake the strategic review.
Luxury retailer Burberry posted a rise in first half pre-tax profit but warned the market environment remains challenging. For the six months to the end of September, adjusted pre-tax profit rose to £153m from the same period last year, while revenue was unchanged at £1.1bn. Reported pre-tax profit was up 9% to £155m. In addition, the company said that since the start of the third quarter, comparable sales, although volatile, have improved overall relative to the second quarter.
Interim pre-tax profits at SAB Miller fell to $2.3bn from $2.82bn. Revenues were also down to $9.9bn from $11.3bn. EBITA fell to $2.9bn from $3.2bn. "Continued depreciation of key operating currencies against the US dollar has had an adverse impact on our results on both a translational and transactional basis. The adverse translational foreign exchange impact on EBITA in the period was $497 million, with a further adverse transactional impact on margins," the company said.
BHP may we weighed down by a report in The Guardian that the Brazilian government might slap a fine on the Anglo-Australian outfit for the "environmental catastrophe" after a tailings dam part-owned by the firm broke.
FTSE 250: Spire, Morgan Advanced Materials and Grafton warn
Hospital group Spire Healthcare cut its full year revenue guidance as it said revenues from NHS Local contracts continued to decline in the four months to the end of October. The company said it now expects full year revenues to show growth of 3% to 3.7%, or between £882m and £888m, down from previous guidance of 4% to 6% or £890m to £907m.
IMI slumped on Thursday after the engineering company said it expects adjusted earnings for the year to be towards the lower end of the range of current market estimates amid challenging market conditions.
Shares in Morgan Advanced Materials slumped early on Thursday, after the carbon products and ceramic manufacturer warned its full year earnings will be at the low end of expectations, due to a challenging market environment.
Grafton Group has cut its operating profit outlook for the full year due to persistent tough conditions in the Belgian and UK markets. The builders' merchant and DYI specialist said ongoing weakness in its Belgium operations has forced it to cut its operating profit expectations for 2015 by between 3% and 4%, as volume and margins have suffered in the region.
Bus and train operator Firstgroup posted a 33% drop in first-half pre-tax profit as revenue fell due to the loss of certain rail franchises and a later than normal start to this school year for US students. For the six months to the end of September, adjusted pre-tax profit came in at £22.4m from £33.3m in the same period last year, on revenue of £2.44bn, down 17%. |
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| | Market Movers
FTSE 100 (UKX) 6,178.68 -1.88%
FTSE 250 (MCX) 16,869.50 -1.36%
techMARK (TASX) 3,074.00 -1.03%
FTSE 100 - Risers
BAE Systems (BA.) 455.00p 3.81%
BT Group (BT.A) 481.65p 1.30%
National Grid (NG.) 916.00p 1.01%
Direct Line Insurance Group (DLG) 403.00p 0.52%
Sage Group (SGE) 540.00p 0.28%
TUI AG Reg Shs (DI) (TUI) 1,169.00p -0.17%
ARM Holdings (ARM) 1,051.00p -0.19%
SSE (SSE) 1,441.00p -0.21%
United Utilities Group (UU.) 936.50p -0.21%
Kingfisher (KGF) 352.90p -0.25%
FTSE 100 - Fallers
Rolls-Royce Holdings (RR.) 536.50p -19.57%
Anglo American (AAL) 449.90p -8.70%
Glencore (GLEN) 95.92p -7.64%
Pearson (PSON) 774.00p -5.49%
Smiths Group (SMIN) 933.50p -5.13%
BHP Billiton (BLT) 877.30p -5.02%
Antofagasta (ANTO) 480.80p -4.89%
Royal Dutch Shell 'A' (RDSA) 1,584.50p -4.35%
Royal Dutch Shell 'B' (RDSB) 1,601.50p -4.26%
Sainsbury (J) (SBRY) 243.00p -4.07%
FTSE 250 - Risers
FirstGroup (FGP) 100.00p 2.21%
esure Group (ESUR) 250.30p 1.79%
Tullett Prebon (TLPR) 327.60p 1.46%
Betfair Group (BET) 3,450.00p 1.44%
Wizz Air Holdings (WIZZ) 1,854.00p 1.42%
Moneysupermarket.com Group (MONY) 326.60p 1.33%
Bank of Georgia Holdings (BGEO) 1,896.00p 1.28%
Clarkson (CKN) 2,255.00p 1.17%
Playtech (PTEC) 876.00p 1.04%
Lookers (LOOK) 176.80p 1.03%
FTSE 250 - Fallers
Spire Healthcare Group (SPI) 313.00p -12.93%
Morgan Advanced Materials (MGAM) 233.00p -12.80%
Halfords Group (HFD) 395.00p -8.14%
Nostrum Oil & Gas (NOG) 383.10p -7.93%
IMI (IMI) 899.00p -7.84%
Shawbrook Group (SHAW) 335.00p -7.20%
Genus (GNS) 1,402.00p -6.80%
Ophir Energy (OPHR) 95.55p -6.14%
Rotork (ROR) 175.20p -5.50%
Just Eat (JE.) 433.30p -5.31% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks tumble after Draghi hints at more QE European equities tumbled on Thursday as earnings downgrades undermined sentiment, while the euro lost ground after European Central Bank chief Mario Draghi hinted that further policy easing may be on the cards.
The benchmark Stoxx Europe 600 index closed down 1.62%, while France's CAC 40 lost 1.94% and Germany's DAX fell 1.15%.
"Inflation dynamics have somewhat weakened, mainly due to lower oil prices and the delayed effects of the stronger euro exchange rate seen earlier in the year," Draghi said to the Committee on Economic and Monetary Affairs of the European Parliament in Brussels.
"In addition, price pressures, such as from producer prices, remain very subdued."
In the aftermath of Draghi's comments, the euro tumbled to a three-month low against the pound but as of 1641 GMT the European currency gained 0.10% against its British counterpart and 0.13% and 0.04% against the yen and the dollar respectively, while Brent crude tumbled 3.03% to $44.46 a barrel.
"Mario Draghi continues to render the December ECB meeting almost meaningless, as he drops increasing hints about more QE for the Eurozone," said IG's senior market analyst Chris Beauchamp.
"While this helped to push the euro down once again, it did little for stock markets on the continent."
Eurozone industrial production slows down
On the economic data front, figures released by the European Union's statistics office, production in the Eurozone declined 0.3% in September compared with analysts' forecast for a 0.1% decline and with an upwardly revised 0.4% drop in the previous month.
On a year-on-year basis, however, production rose 1.7%, beating expectations for a 1.3% reading but slightly below the upwardly revised 2.2% gain registered in the previous month.
Meanwhile, Germany's statistical office said the consumer price index rose 0.3% year-on-year in October, in line with expectations and unchanged from the previous month, while harmonised CPI was flat versus the previous month and rose 0.2% year-on-year, in line with consensus.
In company news, German power producer RWE plunged 9.23% after it cautioned that it would only just meet its full-year net profit target.
British Airways and Iberia parent International Consolidated Airlines Group fell 3.04% as it announced plans to sell €1bn of convertible bonds to help repay a bridge facility it entered into to finance the acquisition of Aer Lingus.
On the upside, German industrial group Siemens advanced 2.85% after its fourth quarter results beat expectations, while luxury goods maker Hermes International rose after reporting an 8% increase in third quarter like-for-like sales despite a challenging environment. |
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| | US Market Report | | US open: Dow tumbles 140 points as jobless claims miss estimates US stocks slid early on Thursday, as investors analysed a report on jobless claims ahead of appearances by a number of Federal Reserve speakers.
Shortly before 1500 GMT, the Dow Jones Industrial Average was down 139 points to 17,563.99 while the S&P 500 and the Nasdaq were 14 and 23 points lower respectively.
Unemployment claims miss expectations
Initial unemployment claims were unchanged at 276,000 for the week ending on 7 November, according to the Department of Labor, compared with analysts' expectations for a reading of 270,000.
"Claims are running about 7% below last year's level, and no-one was complaining that layoffs were too high in the fall of 2014," said Ian Shepherdson chief economist at Pantheon Macroeconomics.
"With indicators of hiring still extremely strong, outside the small manufacturing sector, claims are consistent with 250,000-plus payrolls."
Still to come on the economic calendar, a reading on September job openings at 1500 GMT, while the Federal monthly budget is on tap at 1900 GMT.
Investors will also hear from a number of Fed officials, with Richmond Fed president Jeffrey Lacker appearing on a panel at the same conference at 1445 GMT, while Fed Chairwoman Janet Yellen is scheduled to deliver 'welcoming remarks' at a monetary policy in the US capital at 1430 GMT.
"Following last week's knock-out non-farm report the chances of a December rate-hike appeared to sharply increase, so investors will be desperate for any insight into the central bank's current mind-set from the often elusive Fed chair," said Spreadex's financial analyst Connor Campbell.
Fed Vice Chairman Stanley Fischer will make an appearance at the same event at 2300 GMT, while Chicago Fed president Charles Evans will give a speech on the economy and monetary policy at the National Communities Council Fall Leadership Forum in Chicago at 1515 GMT.
Finally, New York Fed president William Dudley will speak to the Economic Club of New York at 1700 GMT.
In company news, Macy's declined 0.87% after analysts at Credit Suisse cut their target on the stock from $47 to $38, while department store Kohl surged 7.32% after its sales and profit beat estimates.
Restaurant chain El Pollo Loco Holdings and fashion retailer Nordstrom will report after the market close.
Elsewhere, Asian equity markets endured a mixed day, as a batch of mixed economic data from China weighed on sentiment yet again, while European stocks posted losses across the board after dovish comments from European Central Bank president Mario Draghi.
The dollar gained 0.15% against the euro and rose 0.14% and 0.12% against the pound and the yen respectively, while gold spot fell 0.89% to $1,076.59. |
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| | Broker Tips | | Broker tips: Grafton Group, Morgan Advanced Materials, Wood Group Grafton Group issued a disappointing trading statement, but things should not be taken out of context, a top broker said on Thursday.
Indeed, the builders merchant and DIY retailer may have an ace up its sleeve when compared with rivals, as the Irish recovery will remain a key (and unique) driver of profits, Numis believed.
Even after reducing their estimates, analysts Howard Seymour, Chris Millington and Christen Hjorth expected the company to clock annual profit growth of about 15% in 2015 and 2016. The UK market backdrop was also expected to improve.
"We therefore retain our view that Grafton has the best growth profile in the general merchanting space, and would use any weakness on this trading statement to increase holdings in the shares," they said in a research note sent to clients.
The balance sheet remained strong, Numis added.
Seymour and his team upgraded their recommendation on the stock to 'buy' from 'add' and set a target of 850p.
The deeper-than-expected global slowdown forced analysts at Investec to revisit their forecasts for Morgan Advanced Materials, but they reiterated their underlying upbeat view on the company's prospects.
Despite the advanced materials manufacturer's considerable diversification, both geographically and by end-market sectors, weakening confidence in North America - a major trading region - was affecting a broad range of its markets, analyst Michael Blogg said in a research note sent to clients.
Notwithstanding that de-stocking might lie behind the weakness in markets such as consumables for the rail industry or auto components, "further adjustments are needed," he said.
Blogg said he expected consensus estimates for operating earnings on an EBITA basis to be lowered by between 5-10% as a result of the firm's cost reduction measures.
The analyst placed his target 'under review' but stuck by his recommendation to 'buy'.
Wood Group was under pressure after Exane BNP Paribas downgraded the stock to 'neutral' from 'outperform'.
The bank said it has been a big fan of Wood Group for some time.
It noted the shares have materially outperformed the European oil services peer group over the last two years, on good cost control performance and the lower risk aspects of the company's business model. | | |
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