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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: Oil prices rebound and stimulus hopes in Europe, Japan lift stocks London stocks jumped on Friday, bolstered by a recovery in oil prices and speculation of further stimulus measures in Europe and Japan.
Oil prices rebounded, with Brent crude surging 6.1% to $31.16 per barrel and West Texas Intermediate increasing 5.8% to $31.36 per barrel at 1623 GMT.
"While it's too early to suggest oil prices have bottomed - and personally I think we're going to see them closer to $20 before that happens barring a fundamental change - oil is very oversold and now appears to have entered into a correction period," said Craig Erlam, senior market analyst at Oanda.
"Given how fierce the sell-off has been until now, it will be interesting to see just how far these rallies are allowed to run before sellers see value once again."
In a note to clients on Friday, Moody's lowered its 2016 price estimate for both Brent and WTI crude to $33 per barrel amid an oversupplied market. For Brent, that marked a $10 per barrel reduction from the rating agency's previous estimate, and for WTI, a $7 per barrel reduction.
European Central Bank President Mario Draghi on Thursday said that amid recent falls in oil prices Eurozone inflation would remain very low or negative in coming months. For this reason, he said the monetary authority would reconsider its monetary policy at its early March meeting when macroeconomic projections became available.
In economic data on Friday, investors shrugged off disappointing UK retail sales figures. Sales fell 1% in December from a month ago, more than the 0.1% drop that was expected by analysts. In comparison to a year ago, retail sales volumes rose 2.6% last month, missing forecasts of 3.5% growth.
"UK retail sales figures for December always had the potential to be a banana skin for Chancellor George Osborne, and he will be disappointed to see sales slide at such a critical time for the sector," said Dennis de Jong, managing director at UFX.com.
In the Eurozone, Markit's flash reading on the manufacturing purchasing mangers' index fell to 53.5 in January from 54.3 in December. A reading above 50 signals expansion in the sector, while a level below that indicates a contraction.
Elsewhere, Japan's Nikkei led Asian stocks higher after Prime Minister Shinzo Abe's aide on Thursday said that "conditions for additional easing have fallen into place". The Bank of Japan meets on 28-29 January when it is expected to increase asset purchases.
Meanwhile, billionaire investor George Soros warned at the World Economic Forum in Davos that China was already undergoing a 'hard landing' and that the US Federal Reserve would not raise interest rates again this year.
Across the pond, data showed US jumped 14.7% to a record annual rate of 5.46m units, beating forecasts for 5.20m units.
Markit's flash manufacturing PMI increased to 52.7 from December's 51.2, beating economists' expectations for a reading of 51.1.
The Conference Board's leading economic index slipped 0.2% in December to 123.7 following a 0.5% rise the two previous months, led by a decline in housing permits and weak new orders in manufacturing. It was a touch softer than economists' expectations for a 0.1% drop.
Among corporate stocks, oil producers were the standout gainers, driven by the improvement in crude prices. Royal Dutch Shell, BG Group and Tullow Oil were among the risers.
Chile-based copper miner Antofagasta was firmly in the black after Citigroup resumed coverage on the stock after a restriction period, upgrading it to 'buy' from 'sell', having been a seller since 2012.
Education publisher Pearson was under pressure following bumper gains in the previous session, which saw the stock end up just over 11% as investors welcomed its new restructuring plan.
Home Retail was given a boost as Exane BNP Paribas raised the stock to 'neutral' from 'underperform'' and lifted the price target to 150p from 80p, given the likelihood of a bid from Sainsbury's, but with a lack of visibility over the price.
Marks & Spencer, on the other hand, declined after Exane BNP Paribas downgraded the stock to 'neutral' from 'outperform' and cut the price target to 465p from 580p. |
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| | Market Movers
FTSE 100 (UKX) 5,911.24 2.38%
FTSE 250 (MCX) 16,133.22 1.89%
techMARK (TASX) 3,107.30 2.49%
FTSE 100 - Risers
Sports Direct International (SPD) 422.70p 6.26%
Royal Dutch Shell 'A' (RDSA) 1,388.50p 5.47%
Royal Dutch Shell 'B' (RDSB) 1,390.50p 5.46%
BG Group (BG.) 980.20p 5.09%
Dixons Carphone (DC.) 465.90p 4.84%
BT Group (BT.A) 487.65p 4.72%
Hikma Pharmaceuticals (HIK) 1,991.00p 4.62%
Inmarsat (ISAT) 1,076.00p 3.86%
Wolseley (WOS) 3,493.00p 3.83%
Sky (SKY) 1,050.00p 3.75%
FTSE 100 - Fallers
Anglo American (AAL) 226.70p -8.59%
Glencore (GLEN) 78.11p -5.03%
Pearson (PSON) 760.00p -1.55%
Rio Tinto (RIO) 1,653.50p -1.11%
Royal Bank of Scotland Group (RBS) 262.80p 0.11%
Prudential (PRU) 1,325.00p 0.30%
Carnival (CCL) 3,632.00p 0.36%
Coca-Cola HBC AG (CDI) (CCH) 1,371.00p 0.37%
Berkeley Group Holdings (The) (BKG) 3,465.00p 0.41%
Marks & Spencer Group (MKS) 419.30p 0.43%
FTSE 250 - Risers
Tullow Oil (TLW) 147.80p 14.40%
Virgin Money Holdings (UK) (VM.) 309.00p 9.19%
Renishaw (RSW) 1,733.00p 8.31%
Circassia Pharmaceuticals (CIR) 301.40p 6.88%
Ophir Energy (OPHR) 84.25p 6.58%
Marshalls (MSLH) 305.00p 6.27%
Spectris (SXS) 1,624.00p 6.21%
Amec Foster Wheeler (AMFW) 399.00p 6.20%
Petrofac Ltd. (PFC) 739.00p 5.87%
Mitchells & Butlers (MAB) 286.20p 5.76%
FTSE 250 - Fallers
Moneysupermarket.com Group (MONY) 320.00p -2.17%
Go-Ahead Group (GOG) 2,424.00p -2.10%
Ocado Group (OCDO) 276.80p -1.81%
Dignity (DTY) 2,227.00p -1.76%
Evraz (EVR) 61.70p -1.59%
Poundland Group (PLND) 148.50p -1.33%
Computacenter (CCC) 810.50p -1.28%
John Laing Group (JLG) 203.10p -1.26%
Jimmy Choo (CHOO) 124.20p -1.11%
OneSavings Bank (OSB) 302.60p -1.08% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Strong gains for stocks European stocks racked up very solid gains on Friday as investors continued to take heart from signs the European Central Bank may implement further stimulus measures, with energy issues in the lead as oil prices rallied.
The benchmark DJ Stoxx Europe 600 index ran up 3.0%, France's CAC was 3.1% higher and Germany's DAX by another 1.99%.
A wave of buying swept through Asian markets overnight, with Japan's Nikkei 225 closing up nearly 5.9%, China's Shanghai Composite 1.3% higher and Hong Kong's Hang Seng up 2.9%.
To take note of, the Financial Times reported on rumours in markets that sovereign wealth funds had been active sellers of Japanese stocks - in particular - recently.
Nonetheless, the positive tone was attributed to Draghi's dovish words on Thursday and comments from Japanese Prime Minister Shinzo Abe's aide, who said "conditions for additional easing have fallen into place."
Speaking from the World Economic Forum in Davos, Switzerland Bank of England chief Mark Carney sounded a confident note.
In an interview with The Wall Street Journal, the BoE chief said prospects for the economies of Europe and the US had not changed fundamentally because of the volatility rocking financial markets of late.
The Stoxx 600 oil and gas index surged 5.26% as oil prices rose above $30 a barrel, while the sub-index for basic resources advanced 0.74%.
Prompt month West Texas Intermediate futures gained 6.4% to $31.56 a barrel and Brent crude was up 6.9% at $31.44.
On Friday morning, the chairman of Saudi Aramco described the recent fall in oil prices as "irrational".
Meanwhile, on the data front, flash French, German and Eurozone manufacturing and services Purchasing Managers' Indexes for January all fell short of expectations. However, as investors entertained the possibility of further ECB stimulus, the soft figures failed to put a damper on things.
Euro/dollar dipped 0.52% to end the day at 1.0812.
In corporate news, Philips slid after the Dutch electronics company said the $3.3bn deal to sell its components business to a consortium of Asian buyers broke down. |
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| | US Market Report | | US open: Oil price rebound and stimulus hopes boost stocks US stocks gained on Friday as oil prices recovered and speculation of further stimulus in Japan and in Europe gave global equity markets a boost.
The Dow Jones Industrial Average rose 1.27%, the Nasdaq increased 1.85% and S&P 500 climbed 1.55% at 1435 GMT.
Oil prices bounced back above the $30 per barrel level on Friday following declines earlier in the week. West Texas Intermediate jumped 4.7% to $31.01 per barrel and Brent crude surged 5.8% to $31.06 per barrel at 1415 GMT.
"While it's too early to suggest oil prices have bottomed - and personally I think we're going to see them closer to $20 before that happens barring a fundamental change - oil is very oversold and now appears to have entered into a correction period," said Craig Erlam, senior market analyst at Oanda.
"Given how fierce the sell-off has been until now, it will be interesting to see just how far these rallies are allowed to run before sellers see value once again."
In a note to clients on Friday, Moody's lowered its 2016 price estimate for both Brent and WTI crude to $33 per barrel amid an oversupplied market. For Brent, that marked a $10 per barrel reduction from the rating agency's previous estimate, and for WTI, a $7 per barrel reduction.
European Central Bank President Mario Draghi on Thursday said that amid recent falls in oil prices inflation would remain very low or negative in coming months. For this reason, he said the monetary authority would reconsider its monetary policy at its early March meeting when macroeconomic projections became available.
Hopes of further stimulus in Japan were raised after Prime Minister Shinzo Abe's aide on Thursday said that "conditions for additional easing have fallen into place". The Bank of Japan meets on 28-29 January when it is expected to increase asset purchases. The remarks sent Japan's Nikkei up 5.88% at the close, with other Asian stocks following suit.
Meanwhile, billionaire investor George Soros warned at the World Economic Forum in Davos that China was already undergoing a 'hard landing' and that the US Federal Reserve would not raise interest rates again this year.
In the US, Markit's purchasing managers' index on manufacturing activity is due at 1445 GMT while a report on existing home sales will be published at 1500 GMT.
On the company front, shares in Boeing rose despite news that the plane maker will cut production of its 747-8 jumbo jet in half and take a charge of $569 (£397m) in its fourth quarter. The company said demand and global passenger traffic remained strong.
Oilfield services group Schlumberger jumped after announcing it slashed 10,000 jobs in the last three months amid a slump in oil prices.
Alaska Air Group was given a boost from Deutsche Bank which upgraded the stock to 'buy' from 'neutral'.
General Electric declined after reporting far weaker than expected quarterly sales of $33.8bn (consensus: $35.96bn).
SunTrust Banks climbed after saying earnings per share improved to 91 cents in its latest quarter, well up on the 72 cents achieved a year earlier. |
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| | Broker Tips | | Broker tips: BHP Billiton, Pearson, Antofagasta BHP Billiton may need to raise between $5bn and $10bn to keep hold of its solid A credit rating , Liberum analyst Richard Knights said.
"Slashing capital expenditure and even cutting its dividend to zero are not sufficient for BHP to realistically retain a 'solid A' credit rating, if spot commodity prices and currencies persist," Knights argued.
"Given the company continues to be married to the idea of a 'solid A' rating throughout the cycle, a rights issue looks likely."
He added that the threat of a capital call is likely to weigh on the shares, but its resolution, along with self-help measures of tighter capital spend and a dividend cut, would close the value gap to Rio Tinto.
"Further capex cuts and more capital would put BHP in a strong position versus its peer group from both a valuation and balance sheet perspective," Knights said.
In December, Moody's placed BHP Billiton's credit rating under review for a potential downgrade, pointing to the steep decline and persistent weakness in commodity prices.
Meanwhile, last week, BHP Billiton said it expects to book a $7.2bn impairment charge on the value of its onshore US assets in its half-year results on the back of sliding oil prices.
In addition, it said it would cut the number of operated rigs in its onshore US business to five from seven in the March quarter.
"Oil and gas markets have been significantly weaker than the industry expected. We responded quickly by dramatically cutting our operating and capital costs, and reducing the number of operated rigs in the onshore US business from 26 a year ago to five by the end of the current quarter," the company said.
Earlier this week, the miner announced that it will cut iron ore production by 10m tonnes due to the dam disaster at Brazil's Samarco.
Liberum rates BHP at 'sell' with a 550p price target.
Investec recommended an 'add' rating for Pearson on Friday and lifted its target to 791 from 748p, hailing the education publisher's restructuring programme.
Pearson on Thursday said it would hold its division for 2015 as profits were likely to miss market expectations as it overhauls its business following the disposal of its media assets including the FT Group and a stake in The Economist Group.
It now expects adjusted operating profit of approximately £720m and earnings per share of between 69p and 70p for 2015. This is below forecasts and down from the group's previous guidance of around the bottom end of 70p to 75p.
Pearson said it would carry out a £320m restructuring this year, which it expects to generate annualised savings of around £350m, with approximately £250m of savings in 2016 and a further £100m of savings in 2017.
"The new restructuring plan shows Pearson can still do self-help, though the orientation to efficiency and costs is less attractive than a new incremental growth programme independent of cyclical and regulatory pressures," said Investec analyst Steve Liechti.
"While we did not expect a 17% 'pop' yesterday, from a trading perspective, Pearson now has a quiet seasonal quarter to deliver efficiencies and give a better view of prospects at full year before we go into the more important second half trading period. Shares could outperform over this period."
Shares fell 2.85% to 750p at 1042 GMT.
Citigroup resumed coverage on Antofagasta after a restriction period, upgrading the stock to 'buy' from 'sell', having been a seller since 2012.
The bank noted the stock has lost around 75% of its value over the past three years and is relatively unique within the mining sector on account of its strong balance sheet, ability to self-fund at spot prices, and pure exposure to a structurally deficit commodity.
"We see ANTO as a 'trough cycle survivor' which should appeal to investors despite the risk of a further copper price decline," it said.
Citi said its commodity analysts forecast a trough copper price in the second quarter of 2016, averaging $4,300/t, while the financial markets appear to be positioned for under $4,000/t.
"In that event, ANTO's stock price is likely to follow the same direction along with copper exposed equities, but we feel comfortable in the company's ability to weather any further downturn, supported by a very strong balance sheet. Therefore we are prepared to risk proving slightly early in our buy call."
Citigroup cut its price target to 440p from 600p | | |
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