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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: Stocks gain on ECB stimulus hopes UK stocks advanced on Thursday as European Central Bank President Mario Draghi hinted at further stimulus.
In a press conference following the ECB's decision to keep its key rates unchanged, Draghi said the central bank would "review and reconsider" its monetary policy measures at its next meeting in early March to help push inflation back towards the target of just below 2%
Draghi noted that the impact of falling oil prices meant inflation was expected to remain very low or at negative levels in coming months. He highlighted that downside risks to inflation included heightened uncertainty about the economies of emerging markets amid a slowdown in China, volatility in financial markets and commodities, and geopolitical risks.
As expected, the ECB announced it would leave its main policy rate at 0.05%, the deposit facility rate at -0.30% and the rate on the marginal lending facility at 0.30%.
Draghi defended the ECB's past policy measures as "entirely appropriate", including last month's decision to cut the deposit rate by 10 basis points and to extend the €60bn a month asset purchase programme until at least the end of March 2017.
"As the ECB has already extended running its quantitative easing programme to at least the end of March 2017, this suggests that there has to be a good chance that the ECB will step up its monthly spend on assets from the current level of €60bn," said Howard Archer, chief UK and European economist at IHS Global Insight.
Elsewhere, Japan's Nikkei index closed down 2.43%, continuing its drop after ending in a bear market on Wednesday as Bank of Japan Governor Haruhiko Kuroda said on Thursday he wasn't considering adopting a negative interest rate policy to boost the economy. Hong Kong's Hang Seng index and the Shanghai Composite were also in the red amid fears over the slowdown in China's economy.
The People's Bank of China offered 400bn yuan worth of short-term loans to commercial lenders on Thursday through its open-market operations.
"The moves have more to do with offsetting the usual spike in liquidity demand ahead of Chinese New Year than a response to capital outflows or an attempt at monetary easing," according to Capital Economics.
Meanwhile, oil prices remained under pressure on worries about an oversupplied market but recovered slightly in afternoon trade on hopes of further ECB stimulus.
At 1632 GMT, Brent crude rose 2.5% to $28.61 per barrel and West Texas Intermediate increased 2.4% to $29.07 per barrel.
The US Energy Information Administration on Thursday said that crude oil inventories increased by 3.98m barrels in the week to 15 January, ahead of the 2.2m barrels expected by analysts.
The US also saw the release of the Labor Department's weekly jobless claims data. Weekly initial jobless claims rose to 293,000 in the week to 16 January from 283,000 the previous week, missing expectations for a fall to 278,000.
The index for activity in the Philadelphia Fed's manufacturing business outlook survey rose to minus 3.5 from a revised reading of minus 10.2 in December, compared to forecasts of minus 5.
In company news, Pearson jumped despite warning that full-year profit would be below forecasts as it undergoes a new restructuring.
As metal prices rebounded, blue chip mining companies gained including Glencore, BHP Billiton and Anglo American.
ITV declined after UBS initiated of the stock at 'sell' with a price target of 230p as it began covering the European broadcasting sector.
Polymetal slumped after saying 2015 gold production fell 9% to 861,000 ounces, while silver production rose 12% to 32.1m ounces.
Royal Mail edged higher after reporting a strong Christmas period, with UK parcel volumes in December 6% better than the year before, and saying it was on track to snip UK parcel costs by at least 1% for the full year.
Compass Group declined after the company went ex-dividend with a final dividend of 19.6p per share.
Acacia Mining rose after it said gold production nudged up in 2015 and announced plans to raise guidance for this year following the ramp-up of the flagship Bulyanhulu mine.
Halfords pedalled to the front of the peloton after it said group like-for-like sales rose 0.3% in the third quarter with the company reporting that full year pre-tax profit expectations would be unchanged.
Shares in specialist clothing retailer N Brown rocketed as it posted a jump in third quarter revenue and said it was on track to meet full year expectations.
Electra Private Equity tumbled after it went ex-dividend today, paying 78p per share. |
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| | Market Movers
FTSE 100 (UKX) 5,765.70 1.62%
FTSE 250 (MCX) 15,824.88 1.18%
techMARK (TASX) 3,029.38 0.85%
FTSE 100 - Risers
Pearson (PSON) 772.00p 17.41%
Glencore (GLEN) 82.25p 15.52%
Anglo American (AAL) 248.00p 12.19%
BHP Billiton (BLT) 642.80p 10.66%
Rio Tinto (RIO) 1,667.50p 5.71%
Antofagasta (ANTO) 364.60p 5.35%
Aberdeen Asset Management (ADN) 226.00p 4.39%
BP (BP.) 342.25p 4.30%
Royal Mail (RMG) 438.70p 4.08%
Worldpay Group (WI) (WPG) 299.50p 4.07%
FTSE 100 - Fallers
Compass Group (CPG) 1,086.00p -4.23%
SSE (SSE) 1,344.00p -2.96%
BAE Systems (BA.) 478.60p -2.33%
Sports Direct International (SPD) 398.20p -1.41%
Sky (SKY) 1,012.00p -0.98%
Hikma Pharmaceuticals (HIK) 1,904.00p -0.94%
Sainsbury (J) (SBRY) 231.10p -0.77%
DCC (DCC) 4,949.00p -0.48%
Provident Financial (PFG) 2,845.00p -0.39%
Imperial Tobacco Group (IMT) 3,464.50p -0.37%
FTSE 250 - Risers
Halfords Group (HFD) 365.40p 12.43%
Brown (N.) Group (BWNG) 307.00p 9.25%
Tullow Oil (TLW) 129.00p 9.14%
Acacia Mining (ACA) 175.90p 8.71%
Amec Foster Wheeler (AMFW) 375.70p 8.62%
OneSavings Bank (OSB) 305.90p 7.71%
Ocado Group (OCDO) 281.90p 6.38%
Drax Group (DRX) 222.40p 6.36%
Evraz (EVR) 63.30p 6.30%
WH Smith (SMWH) 1,778.00p 5.83%
FTSE 250 - Fallers
Electra Private Equity (ELTA) 3,400.00p -5.05%
P2P Global Investments C (P2P2) 910.00p -4.61%
P2P Global Investments (P2P) 915.00p -4.59%
Clarkson (CKN) 1,997.00p -3.29%
PZ Cussons (PZC) 262.90p -2.77%
Just Eat (JE.) 407.70p -2.58%
Home Retail Group (HOME) 136.40p -2.57%
Nostrum Oil & Gas (NOG) 294.00p -2.46%
Jimmy Choo (CHOO) 122.00p -2.40%
IP Group (IPO) 173.50p -2.36% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks and oil futures bounce back European stocks recovered a tad of their recent losses on Thursday, bouncing back after the heavy losses inflicted during the previous session, after European Central Bank chief Mario Draghi sounded a dovish note and a top Chinese official said weakness in the Yuan was not in the country's best interests. The benchmark Stoxx Europe 600 index was up 1.61%, Germany’s DAX was 1.94% firmer and France’s CAC 40 was up by another 1.97%. Following the previous session's carnage in markets, some pundits suggested that investors might have 'thrown in the towel' on Wednesday - in what many term a 'capitulation' - which might set the stage for at least a short-term bounce. Nonetheless, and despite the positive tone, there were also many market analysts who remained sceptical. “Any rallies in equity markets this year have been very short-lived and seized upon by investors as an opportunity to exit long positions or short the market,” said Craig Erlam, senior market analyst at Oanda. “Given how gains today are dwarfed by Wednesday’s declines, I see little reason to believe this is going to be anything other than a dead cat bounce. The market looks very bearish right now and confidence has been shattered by the repeated large sell-offs.” Meanwhile, SpreadCo analyst David Morrison said: “At the time of writing, all the major indices are in positive territory. On the face of it this is quite encouraging, particularly as crude is still trading near its 2003 lows. But once again, what looks like the beginning of a recovery in equities could easily turn out to be nothing more than a dead-cat bounce.” At the press conference following the European Central Bank’s rate announcement, Mario Draghi said euro area rate-setters might revisit their policy settings when they next met, in early March. "He went further than we expected and we now believe that the new package that we predicted for June could be presented in March, including another depo rate cut and an adjustment of QE, but it will likely depend on developments between now and March," economists at Barclays said in a research note sent to clients. Speaking earlier in the day, on the sidelines of the World Economic Forum, Fang Xinghai, the vice-chairman of China's securities regulator, said there was no "basis" for China to desire a weaker currency. “Currency depreciation is not in the interest of China. It’s not good for domestic consumption," he said. In corporate news, education publisher Pearson surged to the top of the FTSE 100 despite warning over profits, as investors welcomed the company’s new restructuring programme. Elsewhere, Deutsche Bank fell sharply after saying it expects to post a 2015 net loss of around €6.7bn on the back of writedowns and litigation charges. Meanwhile, oil prices bounced back too despite weekly US oil stockpile figures showing a 4.0m barrel build, possibly due to oversold conditions in the market. As of 17:21GMT front month Brent crude futures jumped 5.81% to $29.60 per barrel and West Texas Intermediate up by another 5.4%. Economic data released Stateside was mixed, with the latest weekly unemployment claims figures coming in ahead of economists' estimates but not by a wide margin. In parallel, the closely-followed Philly Fed index appeared to point to a stabilisation in the sector. |
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| | US Market Report | | US open: Stocks bounce back US markets bounced back at the start of trading on Thursday following dovish remarks from ECB chief Mario Draghi, amid more or less neutral data on US economic activity.
The Dow Jones Industrial Average was rising by 154 points or 0.98% to 15,924, alongside gains of 0.68% and 0.84% for the Nasdaq Composite and S&P 500, respectively.
At today's press conference, following the central bank's policy decision, Draghi said that the stance of policy might be reassessed at the governing council's next meeting in early March.
Following Wednesday's market carnage, several pundits suggested stock gauges might be in for a bounce, with some saying that investors had 'thrown in the towel'.
Perhaps the best-regarded lead indicator for US manufacturing conditions, the so-called Philly Fed index pointed to a possible near-term stabilisation in activity levels, Pantheon Macroeconomics said.
Pantheon's chief economist, Ian Sheperdson, also breathed a sigh of relief that initial unemployment claims did not rise more in the latest reference week, as companies moved to shed employees taken on in the run-up to the holidays.
Initial unemployment claims for the seven days ending on 16 January rose by 10,000 to reach 293,000 (Barclays: 285,000), according to the Bureau of Labor Statistics.
Asia still under pressure
Elsewhere, the slide in Asian markets showed no signs of letting up after Bank of Japan Governor Haruhiko Kuroda said on Thursday he wasn't considering adopting a negative interest rate policy.
Instead, he signalled that any further stimulus would likely be an expansion of the asset purchase programme.
"There are pros and cons of adopting negative interest rates ... The Federal Reserve didn't adopt negative interest rates and yet, its policy succeeded in stimulating the US economy," he said.
Concerns over China's slowing economy also carried on even after the central bank made an aggressive cash injection into the country's financial system.
The People's Bank of China offered 400bn yuan worth of short-term loans to commercial lenders on Thursday through its open-market operations.
European markets were in the black as investors looked ahead to comments from European Central Bank chief Mario Draghi.
US oil stocks increased by 4.0m barrels in the latest week, according to the IEA, weighing on WTI oil futures.
The dollar was higher versus the pound by 0.21%, as euro/dollar fell 0.61% and dollar/yen bounced back by 0.33%.
In company news, shares in Travelers were up 0.72% as it announced fourth-quarter earnings fell to $866m, but operating earnings were at $2.90, above analysts' expectations.
Verizon shares were also up by 2.0% after it revealed revenue came in marginally above analysts expectations at $34.25bn. |
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| | Broker Tips | | Broker tips: Schroders, Asos, BHP Billiton Schroders current share price offers an attractive entry point for investors, having dropped said RBC Capital Markets as it upgraded the asset manager to 'outperform'.
Setting a price target of 3,100p that offers more than 25% upside, RBC said Schroders had the strongest balance sheet in the sector and ability to offer diversification that was cherished in these uncertain markets.
Shcroders has good diversification across channels, with 57% institutional exposure and the rest in intermediary and wealth management; across region, with 41% UK, 21% Europe and Middle East, 25% AsiaPacific and 13% Americas; and across products, with 41% equities, 19% fixed income, 5% alternatives, 25% multiasset and 10% wealth management.
"Schroders trades at a rare discount to the asset managers peer group on an EV/EBITDA basis
and at a slight premium on a cash-adjusted P/E basis," the bank said.
Given the asset manager's diversification and financial strength, and with the shares having fallen from above £30 at the end of December to £25 earlier this week, analysts believe the company deserves a premium valuation to the sector.
"We see Schroders' current valuation as an attractive entry point in the historical context to gain exposure to the stock."
Also, the non-voting shares (ticker: SDRC) are also attractive, on a wider-than-average 24% discount to the voters that could outweigh any liquidity concerns, versus an average discount of 21% over the last five years.
"We believe the current discount is too wide and that investors in the SDRC line could benefit from the discount tightening."
Exane painted a doom-laden picture for traditional European clothing retailers in the next few years, as Amazon stands on the cusp of becoming a top-10 clothing retailer in the US with Europe next in its sights.
With a nod to George Lucas' interstellar series, Exane entitled its note "Clothing Wars - Amazon: The force awakens" and said the consumer journey is set for another revolution as clothes shopping gravitates further online, with search and social media platforms also looking to muscle in along with the e-commerce giants.
Examining the impact on the "disruptors that risk being disrupted" as Amazon's thrust into clothing sales accelerates the structural trend towards on-line, Exane argued that "being an aggregator is no longer enough", success demands something different like a niche or identity.
That is seen in Asos and Yoox Net-A-Porter (YNAP) but less so at Zalando, but implications not limited to the online clothing retailers, with "reasons for longer-term caution for both Marks & Spencer and Next".
Built as a fashion destination, Asos offers consumers content, advice and inspiration that the likes of Amazon can't match, Exane said, affixing an 'outperform' rating on the London-listed e-retailer.
"It offers product that others can't match, most notably its crucial own-brand. It is a far broader destination than just a transactional platform. ASOS benefitted when Zalando threw marketing spend into Germany and drove consumer awareness. We expect the same to happen with Amazon."
Germany's Zalando, on the other hand, is a transactional platform, targeting the mass-market consumer with a model inspired by US etailer Zappos.
"With a new competitive threat on the horizon, we fear market share progress could prove tougher and more expensive than experienced to date, weighing on the margin profile of the group."
The shares were given an 'underperform' rating.
Like Asos, Milan-listed YNAP also looks "relatively well shielded" from disruption, the broker added, but only given a 'neutral' recommendation.
"After many attempts Amazon does not seem to be pursuing its growth in off-season as aggressively, and the Net-A-Porter offer shares many of the same characteristics as ASOS. Nonetheless, premium valuation and near-term execution risk leave risk/reward looking balanced."
However, the implications were not limited to the online clothing retailers, an acceleration of online clothing spend was set to heighten the structural pressures on multi-channel retailers, particularly those with inflexible cost-bases and an absence of self-help drivers.
M&S was favoured in the short-term due to its self-help measures and cash returns, over the structural risks, greater online exposure and lower potential for self-help at Next.
BHP Billiton will cut its dividend after being mauled by a combination of one-off costs, impairment charges and commodity prices at multi-year lows, UBS predicted on Thursday.
On the positive side of the ledger, Wednesday's half-year report showed coal, copper and petroleum production were running ahead of the company's guidance, the broker said, while iron-ore shipments were as expected in the latest quarter.
However, the energy and mining outfit announced additional restructuring charges and costs on top of further inventory write-downs and other extraordinary items for a grand total of up to $450m post-tax.
If one adds in the fourth quarter results then estimates of 2016 fiscal year earnings came down by 41% to $478m, implying a second half loss.
To boot, low commodity prices means cash flow is tight.
Therefore, even if operating cash flow "should" cover interest and capital outlays - both for growth and sustaining - "we believe a cut in the FY 16E dividend is warranted and we forecast a 50% cut to 62 centrs per share," analyst Myles Allsop said.
"BHP reiterated it is committed to protecting its strong balance sheet, which suggests reduced returns for shareholders may be required." | | |
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