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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: FTSE ends higher as UK inflation improves The FTSE closed higher on Tuesday as UK inflation figures improved and as a slowdown in Chinese economic growth data fuelled stimulus hopes. The UK consumer price index increased 0.2% year-on-year in December, as expected by analysts, compared to 0.1% in November, the Office for National Statistics revealed. A jump in airfares last month was offset by another slump in oil prices. Core inflation, which excludes volatile items such as fuel and food, rose 1.4% year-on-year in December, following a 1.2% increase in November. Analysts had pencilled in a 1.2% increase. “Although CPI core inflation has been trending slightly up since June 2015, we believe the Bank of England would like solid proof that core inflation is increasing,” said Danske Bank.
“Our main scenario is that the BoE will increase the Bank Rate for the first time in Q2 16, probably in May.” BoE Governor Mark Carney said in a speech in London on Tuesday that the UK economy is not strong enough to contemplate raising interest rates.
“The year has turned and, in my view, the decision proved straightforward: now is not yet the time to raise interest rates,” he said. “The world is weaker and UK growth has slowed.” The International Monetary Fund has cut its global growth forecasts for the next two years, as the slowdown in China, weaker commodity prices and strain in some large emerging market economies weigh on prospects. In its latest World Economic Outlook, the IMF said it now expects the global economy to grow 3.4% and 3.6% this year and the next, with both estimates down 0.2 percentage points from the October forecast. China’s gross domestic product rose 6.8% in the fourth quarter compared to the same period a year ago, weakening from the previous quarter’s 6.9%. Analysts had expected GDP to remain unchanged from the third quarter and the government is targeting 7% growth. “On this occasion, I think the markets may have been relieved that the numbers were not as bad as they could have been, given the challenges facing the economy during this period of transition and slowing global growth,” said Craig Erlam, senior market analyst at Oanda. “There is also the fact that there is still plenty of scope for fiscal and monetary stimulus to plug any gaps that appear in the coming years during this period of transition, which occurs at a time when the country is also trying to liberalise its markets, something that has faced many challenges already and will likely continue to do so this year.” Separately, data showed Chinese retail sales rose 11.1% year-on-year in December, missing expectations for an 11.3% increase. Industrial production climbed 5.9% in December from a year ago, below estimates for a 6% gain. In the Eurozone, inflation rose 0.2% in December, up from 0.1% in November but well below the European Central Bank’s target of just below 2%. Eurostat said an increase in prices at restaurants, cafes, tobacco and vegetables was offset by declines in fuels for transport, heating oil and gas. Among commodities, oil prices recovered from the previous session with Brent crude up 2.2% to $29.21 per barrel and West Texas Intermediate up 0.1% to $29.00 per barrel at 1630 GMT. The market seemed to shrug off a warning from the International Energy Agency that crude oil is expected to remain oversupplied until at least late this year. The IEA said in its month report that oil prices will fall further as supply exceeds demand, while Iran’s return to the market is unlikely to be balanced out by production cuts from other countries. In company news, miners were the biggest risers as investor sentiment in China improved on hopes of further stimulus and as the country’s President Xi Jinping left on Tuesday for the Middle East to try to forge deals for laying infrastructure in the region. Anglo American, Glencore and BHP Billiton rallied. AstraZeneca gained after Barclays upgraded the stock to ‘equalweight’ from ‘underweight’ and lifted the target price to 5,000p from 4,400p following a review of the pipeline and the recent Acerta Pharma and ZS Pharma deals. Rio Tinto jumped as it increased iron ore production in the fourth quarter of 2015 by 11% to 87m tonnes. BAE Systems slumped after Credit Suisse downgraded the stock to ’underperform’ from ‘neutral’, saying it was not the bank’s preferred defence name, particularly after its recent strong run. Unilever was a high riser as it said pre-tax full year profits fell 6% to €7.2bn, despite a 10% rise in turnover to €53.27bn. Ocado jumped as rumours of a bid from Amazon resurfaced was in negative territory, bouncing back down following Monday’s confirmation it agreed to sell its Homebase division to Australia's Wesfarmers. |
| | The Top Stock Picks for 2016 | | Who should you consider for the year ahead? With 2015 a notably volatile year and many a stock now trading at heavily discounted levels, we’re approaching what could be a turning point. Not only do we have a couple of potentially exciting drivers moving forward, we’ve also got some very reasonably priced stocks. That’s what makes 2016 a real year of opportunity. Download The Top Stock Picks for 2016 and discover our selection of stocks to watch in 2016. Losses can exceed deposits |
| | Market Movers FTSE 100 (UKX) 5,876.80 1.68%
FTSE 250 (MCX) 16,114.56 0.98%
techMARK (TASX) 3,088.37 1.13% FTSE 100 - Risers TUI AG Reg Shs (DI) (TUI) 1,234.00p 5.55%
Glencore (GLEN) 78.98p 5.10%
Berkeley Group Holdings (The) (BKG) 3,572.00p 4.14%
CRH (CRH) 1,823.00p 3.99%
Persimmon (PSN) 1,951.00p 3.87%
Old Mutual (OML) 157.60p 3.82%
Prudential (PRU) 1,392.50p 3.42%
Admiral Group (ADM) 1,695.00p 3.29%
Unilever (ULVR) 2,934.00p 3.20%
BHP Billiton (BLT) 627.10p 3.01% FTSE 100 - Fallers Randgold Resources Ltd. (RRS) 4,268.00p -2.38%
Tesco (TSCO) 159.10p -1.52%
Fresnillo (FRES) 661.50p -1.48%
Pearson (PSON) 684.50p -1.08%
Shire Plc (SHP) 4,223.00p -0.64%
BAE Systems (BA.) 506.00p -0.59%
Imperial Tobacco Group (IMT) 3,559.50p -0.24%
Sainsbury (J) (SBRY) 239.00p -0.21%
Worldpay Group (WI) (WPG) 302.20p 0.10%
Hammerson (HMSO) 569.00p 0.18% FTSE 250 - Risers Ocado Group (OCDO) 259.10p 6.85%
Evraz (EVR) 62.10p 5.81%
Vedanta Resources (VED) 213.90p 4.18%
PZ Cussons (PZC) 279.10p 3.85%
Just Eat (JE.) 438.20p 3.84%
Hays (HAS) 117.60p 3.70%
Man Group (EMG) 155.70p 3.39%
Moneysupermarket.com Group (MONY) 329.60p 3.12%
Intermediate Capital Group (ICP) 588.00p 2.88%
Thomas Cook Group (TCG) 108.20p 2.84% FTSE 250 - Fallers Euromoney Institutional Investor (ERM) 940.50p -6.13%
Telecom Plus (TEP) 879.00p -3.74%
CLS Holdings (CLI) 1,633.00p -3.69%
Allied Minds (ALM) 285.10p -3.36%
Just Retirement Group (JRG) 153.50p -2.85%
Poundland Group (PLND) 148.40p -2.82%
Amec Foster Wheeler (AMFW) 381.50p -2.68%
Home Retail Group (HOME) 148.80p -2.68%
Jardine Lloyd Thompson Group (JLT) 854.00p -2.40%
Marshalls (MSLH) 302.50p -2.36% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks bounce back, but Italian banks thrashed European stocks closed higher on Tuesday, taking their cue from gains in Asia as soft Chinese data prompted hopes of more stimulus from Beijing and the governor of the Bank of England struck a somewhat dovish note on the timing of the first interest rate hike.
The benchmark Stoxx Europe 600 index advanced 1.31%, while France's CAC was 1.97% firmer and Germany's DAX another 1.50%.
Italy's FTSE Mib was also in the black, but gains were more measured as banks such as Banco Popolare and Monte dei Paschi came under heavy pressure again after the European Central Bank requested data on their bad loan portfolios.
Overnight, figures showed China's economy grew 6.8% in the fourth quarter in comparison to the previous year, down from 6.9% in the third quarter - marking its slowest growth since 2009.
Full-year growth, meanwhile, fell to 6.9%, which was it lowest level since 1990 and a touch below expectations.
"While these numbers are slightly disappointing they don't point to a sharp slowdown, however it does raise the question as to what further steps to stimulate the economy policymakers will take in the coming weeks," said Michael Hewson, chief market analyst at CMC Markets.
Speaking in the afternoon, the BoE chief told an audience that "now is not yet the time to raise interest rates".
Economists at RBS took note of Carney's words, pushing back their forecast for the first rise in the Bank Rate from August 2016 to February 2017.
Oil prices rebounded from recent lows, even as the International Energy Agency warned that prices will fall further as the market remains oversupplied until at least late 2016.
West Texas Intermediate was up 1.1% at $29.27 a barrel while Brent crude was 3.7% higher at $29.95.
Iran's return to the market was unlikely to be offset by production cuts from other countries, the IEA said.
On the corporate front, Renault was on the front foot on news that the French car maker will recall more than 15,000 vehicles to bring them in line with emissions standards.
Unilever advanced as its full-year sales beat expectations, although the company warned of tough times ahead.
German online clothing retailer Zalando was a high riser after posting 30% growth in fourth quarter revenue.
In London, Prudential gained after the insurer said its solvency capital ratio was 190% at end-June, a little better than expected.
Novozymes slumped after the Danish enzyme-maker cut its longer-term sales forecasts.
Investors digested macroeconomic releases
German investor confidence came in a little better than expected, according to the latest survey from the ZEW Center For European Economic Research in Mannheim.
The index of investor and analyst expectations fell by 5.9 points to 10.2 in January, following two consecutive increases. Still, the reading was ahead of economists' expectations for 8.2.
The index for current expectations improved slightly, however, rising 4.7 points to 59.7 and beating expectations for a reading of 54.
Elsewhere, figures from Eurostat showed Eurozone inflation improved in line with expectations in December, driven by higher prices charged at restaurants and cafes. |
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| | US Market Report | | US open: Stocks rise on China stimulus hopes, oil price rebound US stocks gained in early Wednesday trade as hopes of further stimulus measures in China followed an unexpected slowdown in economic growth in the fourth quarter.
The Dow Jones Industrial Average rose 0.83%, the Nasdaq increased 0.86% and the S&P 500 climbed 0.73% at 1446 GMT.
China's gross domestic product rose 6.8% in the fourth quarter compared to the same period a year ago, weakening from the previous quarter's 6.9%. Analysts had expected GDP to remain unchanged from the third quarter, while the government is targeting 7% growth.
"On this occasion, I think the markets may have been relieved that the numbers were not as bad as they could have been, given the challenges facing the economy during this period of transition and slowing global growth," said Craig Erlam, senior market analyst at Oanda.
"There is also the fact that there is still plenty of scope for fiscal and monetary stimulus to plug any gaps that appear in the coming years during this period of transition, which occurs at a time when the country is also trying to liberalise its markets, something that has faced many challenges already and will likely continue to do so this year."
Separately data showed Chinese retail sales rose 11.1% year-on-year in December, missing expectations for an 11.3% increase. Industrial production climbed 5.9% in December from a year ago, below estimates for a 6% gain.
Meanwhile, oil prices recovered slightly with West Texas Intermediate crude up 0.3% to $29.06 per barrel and Brent crude up 1.8% to $29.09 per barrel at 1450 GMT.
A warning from the International Energy Agency that crude oil is expected to remain oversupplied until at least late this year didn't seem to bother the market. The IEA said oil prices will fall further as supply exceeds demand, while Iran's return to the market is unlikely to be balanced out by production cuts from other countries.
In company news, Morgan Stanley rallied after it revealed it swung to a profit in the fourth quarter. It followed the company's steps to restructure its struggling Fixed Income business.
Bank of America declined despite posting better-than-expected earnings for the three months to the end of December, as expenses fell.
Twitter was down 1.8% after the social media company's service went offline for more than two hours. |
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| | Broker Tips | | Broker tips: AstraZeneca, BAE Systems, Unilever Barclays upgraded AstraZeneca to 'equalweight' from 'underweight' and lifted the price target to 5,000p from 4,400p following a review of the pipeline and the recent Acerta Pharma and ZS Pharma deals.
It said the upgrade reflected "an attractive growth outlook balanced by the potential for downside risk to consensus estimates in the near term and increasing optionality moving into the 2017 'crunch year' for oncology".
After a full pipeline review and following the recently announced deals including the majority stake investment in Acerta Pharma and the acquisition of ZS Pharma, the bank lifted its 2020 revenue estimates by 20%.
It now expects the group to deliver 6% top-line and 13% bottom-line growth between 2017 and 2023.
Still, it said the promise of AZN's burgeoning pipeline must be tempered against an ever more challenging competitor and payor environment for its diabetes and respiratory franchises.
"In our view consensus remains too bullish on pipeline expectations, with a changing commercial risk environment in the US and the potential for delays to approval timelines. Our 2020E revenue and earnings per share estimates are 6% and 9% below AZN-compiled consensus, respectively."
In addition, it pointed out that AstraZeneca also needs to deal with the loss of patent protection for Nexium, Crestor and Seroquel XR, which account for around $7bn of sales.
BAE Systems was under pressure on Tuesday after Credit Suisse downgraded the stock to 'underperform' from 'neutral', saying it was not the bank's preferred defence name, particularly after its recent strong run.
CS said given the current backdrop of heightened security threats and questions on economic growth, defence stocks appear attractive in principle, which is a positive for BAE.
However, it prefers outperform-rated Thales, which it said offers more attractive prospects than BAE Systems if the latter cannot leverage its historical position in Saudi Arabia for more orders.
The bank said exposure to the US and a weakening pound are supportive to the stock, adding that the weakening sterling is also boosting its US sales and profits translated back into sterling.
However, it highlighted the stock's recent outperformance as a reason for the downgrade.
BAE Systems has been outperforming its US peers by 15% since the budget deal announcement in late October, despite benefitting less than them.
In addition, CS reckons the UK-Saudi relationship and the Saudi financial tensions are not supportive of any large order in the near future.
Credit Suisse cut BAE to 'neutral' back in October due to the deterioration of the relationship between the UK and Saudi Arabia, which accounts for about 20% of group revenues.
It said the market had been counting on the potential sale of another tranche of 48 Typhoon to lift BAE's mid-term prospects quite significantly, but this has proven slow to come.
Unilever's 'buy' rating and 3415p price target were left unchanged by Canaccord Genuity on Tuesday after the company reported better-than-expected fourth quarter results.
The consumer goods giant reported a 6% fall in full year pre-tax profit to €7.2bn, despite a 10% increase in turnover to €53.27bn, as a slowdown in markets hit growth and the company warned of tougher times ahead.
Core operating profit at the Marmite maker was up by €0.9bn at €7.9bn, while underlying sales growth was up 4.1%, with volumes up 2.1% and prices rose 1.9%.
Fourth quarter organic sales rose 4.9%, ahead of the 4% consensus forecast, driven by 8.1% growth in emerging markets, which Canaccord said alleviated concerns about economic weakening in China and Brazil.
"Unilever's fourth quarter demonstrated a continuation of the very resilient top line growth and moderate operating margin growth which it had delivered in the first nine months of 2015," according to Canaccord analysts Eddy Hargreaves and Alicia Forry.
"While core earnings per share of €1.82 for full year 2015 was no more than in-line, we expect the strong (+8.1%) organic growth in emerging markets in fourth quarter 2015, a meaningful improvement in Home Care margins, and management change in Spreads all to be taken well." | | |
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