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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: Footsie undecided as markets move to price-in December Fed hike Volatility on Wall Street in the aftermath of Friday´s jobs report rippled across the Atlantic, leading to sharp intra-day swings in the top flight index - albeit within a tight range - as the US dollar strengthened and commodities took a hit.
The Footsie ended the day with marginal losses, off by 11.07 points to 6,353.83 points with a sharp rise in US Treasury debt yields knocking the pound 0.96% lower against the Greenback.
On the back of the data brokers Barclays and BNP Paribas brought their rate hike calls for the Fed forward to December 2015.
The US jobs market whirred back into life in October, generating 271,000 new non-farm payrolls. The reversal of a seasonal quirk in the data on wages led to a sharp 0.4% gain in average hourly earnings.
"The Fed's hawks will now argue that they have hard evidence in the most widely-watched (but least reliable, not that it matters right now) data that the tightness of the labor market is pushing wage gains higher. Barring a disaster in November, rates are going to rise in December," Ian Sheperdson, chief economist at Pantheon Macroeconomics, said in a research note e-mailed to clients.
In parallel to the above action, Gilts reeled as traders moved to price in a much higher likelihood of a rate hike by the US Federal Reserve in December.
The yield on the benchmark 10-year Gilt closed seven basis points higher at 2.03%.
Friday´s jobs data left Fed funds futures markets pricing in an approximately 70% chance of a rate hike at the 15-16 December Federal Open Market Committee meeting.
"The October Employment Report is strong from virtually every angle, confirming further improvement in labor markets and solid economic growth in 2015Q4, and it provides vital support for a Fed rate increase in December.
"The very cautious Fed has been looking for economic support to raise rates. This report provides such support.
"Moreover, the markets' response to the strong employment report of pricing in a December rate hike reduces any chance that a Fed move will "surprise" markets, another factor the Fed will consider. Finally," said Mickey D.Levy, chief economist, Americas and Asia, at Berenberg Capital Markets.
FTSE 100 miners. US dollar strength knocks miners lower
BHP Billiton was hit by the tragic news of multiple deaths from a joint venture mine in Brazil. The major bursting of a tailings dam at a mine 50% owned by BHP in the Minais Gerais region is thought to have left at least 17 people dead and almost 50 missing in the resulting mudslides.
Sector-mate Glencore lost most of its share price gains from earlier in the week. Analysts remained cautious on the company despite its encouraging move to reduce its debt profile and impressive silver streaming deal.
Randgold, Anglo American and Fresnillo were also major fallers as the US dollar strengthened and commodity prices retreated.
Jefferies sent National Grid shares down as it downgraded them to 'hold' from 'buy'. It said that following the strong share price performance in recent months the shares were now at fair value.
Leading the risers, Intercontinental Hotels booked in some solid gains as rumours grew that the company was mulling the possibility of a sale or merger. Bloomberg cited people familiar with the matter as saying that IHG is in discussions with financial advisers about whether to sell itself or merge with a competitor as the sector consolidates.
In a note upgrading its outlook on European equities, UBS sounded an upbeat note about prospects for 2016 and 2017. The Swiss bank's analysts upgraded the construction sector to 'overweight' and said it should benefit from a pick-up in economic growth and is the second-most operationally geared sector, noting a particular preference for Irish building products supplier CRH.
IAG soared off its own upgrade, nudging its guidance higher for long-term profit margin, earnings and return-on-invested-capital guidance, also making several boardroom changes at British Airways. The airline group confirmed it was now targeting a return on invested capital in real terms of 15%, compared to 12% previously, and said it believed it can deliver an operating profit margin of 12% to 15% - previously the target compared to 10% to 14%.
FTSE 250: Tullet shares leap
Tullett Prebon and ICAP were the biggest risers on the back of confirmation that Tullett Prebon is in discussions regarding the possible acquisition of its rival's global broking business.
Thomas Cook Group rebounded after falls on Thursday when the Government announced a halt on all flights between the UK and Sharm al-Sheikh.
Weakness in Synthomer´s paper business and an uncertain latex outlook weighed on the group´s shares despite the chemical group posting third quarter results that showed strong progress across most operations.
Amec Foster Wheeler also prevented the market from rising higher, after UBS and Citigroup downgraded the stock from buy to neutral. It came after having suffered heavy losses in the previous session when the oil and gas engineering services company said it was cutting its dividend by half amid tough market conditions. |
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| | Market Movers
FTSE 100 (UKX) 6,353.83 -0.17%
FTSE 250 (MCX) 17,165.92 0.29%
techMARK (TASX) 3,097.70 0.26%
FTSE 100 - Risers
InterContinental Hotels Group (IHG) 2,774.00p 6.20%
International Consolidated Airlines Group SA (CDI) (IAG) 602.00p 3.70%
CRH (CRH) 1,861.00p 3.62%
Inmarsat (ISAT) 1,005.00p 3.24%
Royal Bank of Scotland Group (RBS) 319.30p 2.34%
GKN (GKN) 297.20p 2.24%
HSBC Holdings (HSBA) 527.80p 2.11%
Barclays (BARC) 232.40p 1.86%
ARM Holdings (ARM) 1,064.00p 1.62%
BAE Systems (BA.) 445.00p 1.62%
FTSE 100 - Fallers
BHP Billiton (BLT) 975.00p -5.71%
Glencore (GLEN) 115.85p -4.65%
Randgold Resources Ltd. (RRS) 3,971.00p -3.64%
National Grid (NG.) 894.20p -3.57%
Fresnillo (FRES) 707.00p -2.75%
SSE (SSE) 1,492.00p -2.74%
Pearson (PSON) 827.50p -2.36%
Standard Chartered (STAN) 614.70p -1.96%
United Utilities Group (UU.) 957.50p -1.90%
Hikma Pharmaceuticals (HIK) 2,011.00p -1.81%
FTSE 250 - Risers
Tullett Prebon (TLPR) 358.70p 9.09%
ICAP (IAP) 474.50p 6.97%
Aldermore Group (ALD) 269.40p 4.50%
Euromoney Institutional Investor (ERM) 967.50p 3.92%
Jardine Lloyd Thompson Group (JLT) 881.50p 3.89%
Dignity (DTY) 2,458.00p 3.89%
esure Group (ESUR) 263.50p 3.57%
Supergroup (SGP) 1,674.00p 3.40%
Hays (HAS) 144.30p 3.00%
Elementis (ELM) 241.90p 2.94%
FTSE 250 - Fallers
Kaz Minerals (KAZ) 100.30p -12.33%
Amec Foster Wheeler (AMFW) 524.50p -8.62%
Premier Oil (PMO) 74.85p -6.44%
Petra Diamonds Ltd.(DI) (PDL) 70.75p -5.94%
Synthomer (SYNT) 317.10p -5.91%
Drax Group (DRX) 271.70p -4.70%
Acacia Mining (ACA) 170.60p -3.89%
Morgan Advanced Materials (MGAM) 270.30p -3.43%
Ophir Energy (OPHR) 98.65p -3.34% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Equities advance despite disappointing data as US jobs report provides boost European stocks ended the week on an upbeat note despite some disappointing German data, as a strong US job report meant the Federal Reserve is likely to hike interest rates next month.
The benchmark Stoxx Europe 600 index closed up 0.31%, while France's CAC 40 climbed 0.08% and Germany's DAX gained 0.92%.
As of 1636 GMT, the euro lost 1.27% and 0.30% against the dollar and the pound respectively and was flat against the yen, while Brent crude slid 1.03% to $47.49 a barrel.
NFP report boosts dollar
The dollar surged after the US Bureau of Labor Statistics said 271,000 jobs were added last month, shortening the odds for the US Federal Reserve to hike interest rates next month.
The increase was the biggest monthly gain of the year and was well ahead of analysts' expectations for an 180,000 gain, while the unemployment rate fell to a seven-year low of 5% from 5.1% in the previous month.
"With Yellen stating that a December rate rise was a 'live possibility' and Dennis Lockhart this morning trumpeting the strength of the US economy, today's figures were a succinct way to tell the markets to get ready for a likely end of year lift-off," said Spreadex's financial analyst Connor Campbell.
While US equities were on the back foot following the release of the NFP report, European indices moved firmly in positive territory and analysts expect the trend to continue, as the European Central Bank looks to implement fresh stimulus measures.
"Given the rising US dollar and the ECB's push for more QE, it looks like Eurozone stocks may well continue to offer attractions for investors in the final quarter of the year," said IG's senior market analyst Chris Beauchamp.
The macroeconomic picture in the Eurozone was not as bright as figures released by Destatis showed German industrial output fell by 1.1% month-on-month on a seasonally-adjusted basis in September.
This marked the sharpest drop in over a year and fell well short of expectations for a 0.5% increase.
BHP tumbles after dam burst
In corporate news, German insurer Allianz slid 1.54% after reporting a bigger-than-expected 15% drop in third-quarter net profit.
BHP Billiton slumped 5.71% after a dam burst at an iron ore mine in Brazil part-owned by the company, leaving at least 15 people dead and almost 50 missing.
Compagnie Financiere Richemont tumbled 5.66 after the Cartier owner posted first-half profit and sales that fell short of analysts' expectations, while French drug maker Sanofi plunged 6.84% after it warned that it may not see any profit growth for two years. |
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| | US Market Report | | US open: Dow heads higher as dollar surges following NFP report US stocks rose early on Friday after a report on non-farm payrolls showed the country added a lot more jobs than expected in October.
Shortly before 1500 GMT, the Dow Jones Industrial was 42 points up to 17,905.90, while the S&P 500 and the Nasdaq were broadly flat.
Non-farm payrolls soar past expectations
According to the Bureau of Labor Statistics, 271,000 jobs were added last month, the biggest monthly gain of the year, compared with analysts' expectations for a 180,000 figure, while the unemployment rate fell to a seven-year low of 5% from 5.1% in the previous month.
"Regardless of the exact timing of the first rate hike, we still believe that the big story next year will be an unexpectedly strong pick-up in wage growth and price inflation, which will force the Fed into a much more aggressive policy tightening cycle than the Fed's projections currently suggest," said Paul Ashworth, chief US economist at Capital Economics.
Meanwhile, the average hourly wage paid to US employees rose 0.4% last month, registering the biggest yearly increase since mid-2009.
The average American worker earned $25.20 an hour in October, a 9% month-on-month increase.
On a year-on-year basis, hourly wages rose 2.5% in October, compared with an upwardly revised 2.3% gain in September and analysts' expectations for a 2.3% reading.
With non-farm payrolls surging past expectations, analysts believe the Fed is now firmly odds on to raise interest rates next month.
"The conclusion to take from the NFP on Friday is that the probability of a US rate hike in December has inflated considerably," said FXTM research analyst Lukman Otunuga.
"Dollar strength may resonate throughout the global currency markets and positive economic data release from the States fuel the bullish sentiments market participants already have towards the dollar."
Mixed earnings
In company news, Nvida surged 12.3% after its quarterly results beat expectations late on Thursday, while TripAdvisor plunged 9.51% after its quarterly profit fell short of estimates.
Walt Disney climbed 2.48%, despite reporting lower-than-expected revenue, while Kraft Heinz shed 3.25% after its quarterly profit missed forecasts, although the food and beverage giant lifted its dividend.
ZS Pharma jumped 40.8% after AstraZeneca revealed it had agreed to pay $2.7bn for the biotech group, while DuPont edged 1.59% higher after saying it was in separate talks with Dow Chemical and Syngenta over a potential combination of agricultural units.
Dow and Syngenta were 1.20% and 4.35% higher respectively.
Elsewhere, European stocks declined, while Asian equity markets closed mostly higher, as Chinese stocks rallied.
The dollar surged 1% against both the pound and the yen and gained 0.31% against the euro, while gold futures plunged 1.53% to $1,087.04. |
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| | Broker Tips | | Broker tips: National Grid, Betfair, Imperial Tobacco Jefferies downgraded National Grid to 'hold' from 'buy' but lifted the price target to 950p from 900p.
It said that following the strong share price performance in recent months the shares are now at fair value.
Still, it continues to believe National Grid will outperform against its current regulation in the UK and offer a secure and growing dividend to investors.
It pointed out that National Grid's policy is to deliver dividend per share in line with RPI inflation.
"But with RPI expected to be only around 1.0% this year, can National Grid be more generous? We conclude that above RPI dividend growth is perfectly feasible while maintaining their current financial metrics."
Broker Numis has upgraded Betfair and Paddy Power to a 'buy' rating as the two bookmakers close in on a merger.
Despite their high valuation, the pair have a history of outperforming market expectations and the broker believes their share prices will rise as investors to revisit the merger case as documentation is published.
Lifting its target to to 4,000p for Betfair and €135 for Paddy Power, Numis also foresees a relatively low-risk integration and "rich mix of revenue synergy opportunities" and the new Paddy Power Betfair, nicknamed 'Betty', ascends to the FTSE 100 index.
"We acknowledge that there are uncertainties, but we would invest ahead of this newsflow," the broker said, reversing its 'reduce' recommendation on Betfair and 'hold' on its Irish peer.
Betty will, analysts forecast, gain economies of scale from total revenues of £1.2bn and online revenues of over £1bn, investing in innovation and harvesting the rewards across the enlarged customer base.
Other benefits will come from geographical diversity, being online leader or thereabout in the UK, Australia and US, while the two complementary brands have limited overlap of only around 3% in terms of regular UK bettors.
Credit Suisse upgraded its price target on Imperial Tobacco to 3,800p from 3,500p on the back of better-than-expected cash flow.
It said the company's full year 2015 results provide further tangible evidence that its cost optimisation programme is delivering to the bottom line.
The bank said tighter control of working capital and net capex has meant Imperial has been able to absorb the cash costs of the cost optimisation programme (£300m so far) and still grow free cash flow faster than profits.
It added that free cash flow has been further boosted by this year's US acquisition. | | |
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