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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 hike expectations drag Footsie lower Financials did best on Monday although by the end of trading the wider market was tracking the large losses on Wall Street - which some analysts linked to 'profit-taking' - as government bond yields edged higher after Friday´s US jobs report.
The FTSE 100 ended the day off by 58.67 points or 0.92% to 6,295.11 while the second tier index retreated 0.31%, finishing at 17,112.65.
The prospect of rising rates Stateside should not worry investors. Quite the opposite, it shows improved sentiment is sustainable, analysts at JP Morgan said.
"Citigroup´s US economic surprise index (CESI) is close to breaking above zero, for the first time this year, and historically this pointed to market gains ahead. In addition, market internals could be helped, US Banks show a positive correlation with the bond yields," JP Morgan´s Mislav Matejka explained in a research note sent to clients.
Morgan Stanley´s strategy chipped in saying: "Markets have come back a long way from recent lows. Whether the rally can continue looks increasingly tied to whether headline inflation, DM earnings growth and China data can inflect higher from a 3Q15 nadir. We think the market will welcome a December hike as long as it comes with better data."
The broker still expected a "modest growth acceleration" in global growth and forecast an increase from 3.4% year-on-year in 2016 to 3.7% in 2017.
In its twice-yearly econmic outlook, the Organisation for Economic Cooperation and Development flagged the slowdown in emerging economies and world trade as a near-term source of uncertainty.
As regards the Bank of England, Citi said on Monday that the BoE´s rate decisions tend to fall somewhere in between the US and the Eurozone.
"The UK probably faces a longer period of low-flation than the US, while the BoE faces less pressure than the US Fed to hike rates on macro-prudential grounds," the American broker said.
Whatever the case, HSBC´s head of Technical Analysis, Murray Gunn, recommended clients open 'shorts' on the pound versus the US dollar, saying the currency pair will move towards 1.40.
Acting as a backdrop, investors initially seemed to brush off news that China's exports fell 6.9% year-on-year in October while imports dropped by another 18.8%. Economists had penciled in year-on-year declines of 3.2% and 15%, respectively.
In Eurozone news, Reuters reported that four European Central Bank governing council members had said a consensus was forming around the need for a reduction in its deposit rate. One of them even argued for it to be lowered by more than the 10 basis points which had already been priced into markets.
FTSE 100: Financials higher, InterContinental and utilities drag
Aberdeen Asset Management, Standard Chartered, Barclays and HSBC were all boosted by the possibility of a US rate-rise in December following last week's US jobs data. CMC Markets' Jasper Lawler said the consumer banks and fund managers were rallying as investors expect better lending margins once rates rise.
Inmarsat also had a good start to the week after it signed its second major airline for its GX Aviation on-board internet service. The satellite communications services company announced it had signed a deal with Singapore Airlines. It follows on from its 10-year contract with Lufthansa signed last month.
The biggest loser of the day was InterContinental Hotels, after it said it is not considering a potential sale or merger of the company. It followed market speculation on Friday that it was mulling the possibility of a sale or merger, when Bloomberg had cited "people familiar with the matter" as saying that IHG was in discussions with financial advisers about whether to sell itself or merge with a competitor as the sector consolidates.
Utility groups took a major hit on the back of downgrades from a number of investment banks. Societe Generale cut its rating for United Utilities from 'buy' to 'hold', citing the recent strong share price performance and the recent rise in bond yields.
FTSE 250: Tullow Oil pops higher and then sags
Tullow Oil was the standout gainer after Copenhagen-based A.P. Moller-Maersk A/S agreed to buy half of Africa Oil Corp.'s shares in licenses in Kenya and Ethiopia, where Tullow operates some blocks. "The news for Tullow is very positive and has brought buyers back today," said Atif Latif, director of trading at Guardian Stockbrokers, adding that it gives more potential upside to Tullow's assets in the region.
Temporary power provider Aggreko also racked up healthy gains as it maintained its full-year profit expectations despite a challenging market backdrop and a fall in third quarter sales. In a trading update for 1 July to 8 November, the company said underlying revenue for the period was 7% behind last year, with reported revenue down 6%. This was partly a result of the continuing weak economic backdrop in Brazil.
On the downside, investors were hanging up on TalkTalk after HSBC downgraded the stock to 'hold' from 'buy' and slashed the price target to 260p from 430p. It said the data breach that occurred in October will have lasting consequences on the telecommunications company.
Shares in Capital & Counties Properties slid after it confirmed it was conducting a strategic review that could lead to the sale of its venues business. "Following the successful transition of shows from the former Earls Court Exhibition Centres and a major refurbishment programme, Capco confirms that it is conducting a strategic review which may or may not lead to a sale of its Venues business." |
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| | Market Movers
FTSE 100 (UKX) 6,318.03 -0.56%
FTSE 250 (MCX) 17,120.94 -0.26%
techMARK (TASX) 3,079.26 -0.60%
FTSE 100 - Risers
Barclays (BARC) 236.00p 1.55%
Aberdeen Asset Management (ADN) 352.80p 1.50%
Rio Tinto (RIO) 2,308.50p 1.16%
Travis Perkins (TPK) 1,998.00p 1.06%
Inmarsat (ISAT) 1,015.00p 1.00%
Royal Mail (RMG) 445.90p 0.88%
Prudential (PRU) 1,557.00p 0.78%
Standard Chartered (STAN) 619.30p 0.75%
Meggitt (MGGT) 386.70p 0.57%
Royal Bank of Scotland Group (RBS) 320.90p 0.50%
FTSE 100 - Fallers
Glencore (GLEN) 110.50p -4.62%
InterContinental Hotels Group (IHG) 2,655.00p -4.29%
Centrica (CNA) 217.30p -3.29%
Severn Trent (SVT) 2,125.00p -2.75%
Morrison (Wm) Supermarkets (MRW) 164.50p -2.43%
Intu Properties (INTU) 329.00p -2.37%
Hammerson (HMSO) 601.00p -2.36%
United Utilities Group (UU.) 936.00p -2.25%
BHP Billiton (BLT) 954.50p -2.10%
Whitbread (WTB) 4,678.00p -1.87%
FTSE 250 - Risers
Serco Group (SRP) 105.10p 5.79%
Hunting (HTG) 361.50p 5.00%
Aggreko (AGK) 972.50p 4.35%
Premier Oil (PMO) 77.85p 4.01%
Tullow Oil (TLW) 226.70p 3.90%
Aldermore Group (ALD) 278.60p 3.41%
Entertainment One Limited (ETO) 226.70p 2.91%
Wizz Air Holdings (WIZZ) 1,867.00p 2.41%
Jimmy Choo (CHOO) 155.60p 2.37%
Dignity (DTY) 2,508.00p 2.03%
FTSE 250 - Fallers
Supergroup (SGP) 1,590.00p -5.02%
TalkTalk Telecom Group (TALK) 215.20p -4.82%
Aveva Group (AVV) 2,005.00p -4.43%
Petra Diamonds Ltd.(DI) (PDL) 68.40p -3.93%
Drax Group (DRX) 261.30p -3.83%
Vedanta Resources (VED) 463.30p -3.01%
Rotork (ROR) 186.30p -2.82%
IP Group (IPO) 238.30p -2.69%
Daejan Holdings (DJAN) 6,020.00p -2.59%
Crest Nicholson Holdings (CRST) 509.50p -2.58% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Widespread stock decline as OECD forecast drags markets lower European stocks began the week on a downbeat after a report warned of a drastic slowdown in global trade growth this year.
The benchmark Stoxx Europe 600 index closed down 1.07%, while Germany's DAX fell 1.57% and France's CAC 40 lost 1.46%.
As of 1636 GMT, the euro was broadly flat against the pound and gained 0.38% against the dollar and 0.30% against the yen, while Brent crude declined 0.55% to $47.16 a barrel.
OECD lower global trade forecast
Due to a "deeply concerning" slowdown in trade, global GDP will grow by 2.9% this year, a report by the Organisation for Economic Co-operation and Development (OECD) said.
The figure is lower than the original 3% forecast released in September, while OECD lowered worldwide trade growth from 3.4% to 2%.
"Global trade is only expected to grow by 2% this year, which has only happened five times in the past 50 years," said IG's market analyst Joshua Mahony. "These periods all coincided with financial market downturns.
"No doubt the Chinese slowdown is disproportionately responsible for reduced global trade data, yet it highlights the impact that this one country has in world economics."
On the economic data front, Germany's trade surplus, adjusted for seasonal swings and calendar effects, narrowed to €19.4bn from €19.7bn, compared with analysts' expectations for a €20bn reading.
The narrowing was driven by a surge in imports, which grew 3.6% month-on-month in September compared with a downwardly revised 3.2% decline in the previous month and with consensus forecast for a 1% gain.
Exports rose 2.6% month-on-month, recovering from a 5.2% decline in August, the sharpest decline in almost seven years, and beating expectations for a 2% gain.
"While German trade data was better than expected, calls for more Eurozone stimulus from the European Central Bank will be weighed," said Michael Van Dulken of Accendo Markets.
Elsewhere, the forward-looking Sentix investor confidence index for November rose from 11.7 to 15.1, comfortably above analysts' expectations for a 13.1 reading, as it registered a first increase after two consecutive monthly declines.
VW again under the cosh
In company news, Volkswagen slipped 1.56% after engineers admitted they had manipulated carbon dioxide emissions data because goals set by former chief executive Martin Winterkorn were too difficult to achieve.
Renault dropped 3.51% as French Prime Minister Manuel Valls said over the weekend that the government did not want a merger between the car maker and its Japanese partner Nissan. |
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| | US Market Report | | US open: Dow declines as investors seek clues over timing of rate hike US equities slid early on Monday as investors continued to digest the ramifications of Friday's stronger-than-expected jobs report.
Shortly before 1500 GMT, the Dow Jones Industrial Average was down 133 points, or 0.74%, to 17,809.58, while the S&P 500 and the Nasdaq were 0.6% and 0.4% lower respectively.
December hike on the cards
On Friday, the non-farm payrolls report for October wasmuch stronger than expected, meaning the Federal Reserve is now a lot more likely to hike interest rates next month than it has been at any time this year.
"Investors will have plenty of time to mull over whether Friday's job numbers mean that Janet Yellen will succeed in squeezing in a rate hike in 2015," said IG's senior market analyst Chris Beauchamp.
"Market expectations and a steadily-rising US dollar certainly points to an increased chance, but with US firms still complaining about the impact of a stronger greenback and a still-shaky situation in emerging markets, the picture is not as clear-cut as last week's figures might suggest."
The economic calendar is largely quiet on Monday, with no key reports scheduled for release, although investors will be able to analyse a reading on labour market conditions for October at 1500 GMT, while Boston Fed President Eric Rosengren is due to speak at an event in Rhode Island at 1700 GMT.
In company news, Berkshire Hathaway declined 0.78% despite saying late on Friday that its third quarter profit more than doubled.
Dean Foods surged 7.02% after delivering a positive outlook, while property developer Toll Brothers gained 0.80% after better-than-expected preliminary sales.
Horizon Pharma soared 9.24% after its sales outlook exceeded forecast, while Weight Watchers rose 4.33% after analysts at Credit Suisse lifted their target price from $4 to $10.
Elsewhere, the dollar was broadly flat against the euro and lost 0.27% against the pound but gained 0.16% against the yen, while gold futures slid 0.03% to $1,089.45.
"The relatively calm reactions to Friday's strong US employment report support our view that the gradual return of US interest rates towards more normal levels is unlikely to be the seismic shock that many have been fearing, particularly those following emerging markets and commodities," said Capital Economics.
"Nonetheless, we continue to expect further upward pressure on Treasury yields and on the US dollar, at least against other major currencies, and see US equities underperforming their peers in Europe and Japan."
Earlier, the Shanghai Composite rose to its highest level since late August on the back of stimulus hopes following disappointing industry data from China that dragged the rest of Asian stocks lower, with the exception of the Nikkei.
European equities were trading slightly lower, while oil prices were mixed, as West Texas Intermediate slid 0.34% to $44.14 a barrel, while Brent rose 0.42% to $47.62 a barrel. |
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| | Broker Tips | | Broker tips: StanChart, National Grid, United Utilities StanChart´s stock looks oversold in the near-term so there is upside to be had in the shares and with the announcement of a rights issue behind us investors will soon be past the point where they are fearful of the risks of dilution a top broker said on Monday.
However, there were two more hurdles to overcome which were still some ways away. Asian economies had yet to bottom and non-performing loans to start falling, Nomura said.
If one expected a shallower cycle and an imminent inflection in the macro backdrop they could argue otherwise.
Yet Nomura´s forecasts were for the rate of growth in China´s gross domestic product to slow to 5.8% in 2016 and 5.6% in 2017. That compared to the median consensus forecast for an expansion of 6.5% in 2016 and 6.2% in 2017.
Trading on 0.7 times price-tangible book value ex-rights and with near-term downside risks to its tangible book value, the stock was "around fair value on current prices," analyst Chintan Joshi said.
The broker revised its target on the shares to 640p on an ex-rights basis (with the then current price at 614.7p and 578.8p ex-rights), which in its opinion suggested approximately 10% upside.
Joshi reiterated his 'neutral' recommendation on the shares.
Citi suggested that if National Grid sells its gas distribution business, as claimed in the weekend newspapers, it would use the cash for an acquisition or to pay a special dividend.
The broker added that the article suggested the disposal has been sanctioned by outgoing chief executive Steve Holliday, who announced last week that he will retire by the financial year end, March 2016.
"In our view, given the current full valuation of UK regulated assets, we believe a disposal of regulated network assets is a good way to monetize these valuations and should be welcomed by the market," Citi said.
However, analysts wondered if the transaction premium to regulatory asset value (RAV) live up to share price implied RAV premium.
Citi remained 'neutral' on National Grid's shares.
Societe Generale cut its rating for United Utilities from 'buy' to 'hold' despite an expectation of reassuring first half results due out on 25 November.
It said the recent strong share price performance (+14% relative to FTSE 100 since August) had driven the share price marginally above its 940p fair value and "the strong share price performance has been at odds with the recent rise in real bond yields (given 0.6x historical beta to gilt yield movements)".
However the investment bank noted that United Utilities remained its preferred UK water holding and that it still prefers UK water over UK energy in the utilities market.
Exane remined neutral on the stock, but updated the price target to 900p from 870p. | | |
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