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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 decline as oil prices reverse gains London stocks fell at the close on Friday after oil prices took another turn for the worse.
The UK equity market registered growth earlier in the session as concerns on China subsided and oil prices gained.
However, oil prices headed south towards the close, dragging the FTSE 100 lower. Brent crude dropped 1.9% to $33.09 per barrel and West Texas Intermediate plunged 1.15% to $32.89 per barrel.
Stateside, the US non-farm payroll s came in better than expected but wage growth remained weak.
The non-farm payrolls report showed US employers added 292,000 jobs in December, smashing estimates of 200,000.
November was revised to 252,000 from a previous estimate of 211,000. The unemployment rate held at 5% last month, as expected. However, average hourly earnings rose less than anticipated.
Average hourly earnings registered zero growth in December compared to a month ago, missing estimates for a 0.2% gain. On a year-on-year comparison, earnings grew 2.5% year-on-year in December, but was below forecasts for a 2.7% increase.
"Once again the US has produced a strong labour market report for December but once again there was one important component that was lacking, wage growth," said Craig Erlam, senior market analyst at Oanda.
"The lack of wage growth in the US has been an issue for a long time now but it has become increasingly significant over the last 12 months due to the Fed's decision to embark on a rate hiking cycle, despite inflation being well below the central banks' target rate."
The Federal Reserve last month decided to raise interest rates for the first time in nearly a decade.
Paul Ashworth, chief US economist at Capital Economics, said he believed December's non-farm payrolls "obviously support a March rate hike" but developments in inflation will determine the pace of future increases.
"With oil prices close to $30 a barrel now, this latest labour market improvement doesn't necessarily guarantee a March rate hike, although we do think that is the most likely outcome."
Closer to home, lower oil prices had a positive impact on UK trade figures. Britain's trade deficit narrowed to £3.17bn in November from a downward revised £3.50bn in October, according to the Office for National Statistics, as cheaper oil prices reduced the cost of imports.
Meanwhile, China's stock market ended higher after Thursday's losses as regulators ended the "circuit breaker rule" and the People's Bank of China set the daily yuan rate higher.
Trading in China was suspended after 30 minutes on Thursday as equites on the CSI 300 index fell 7%, triggering the "circuit breaker rule".
The new circuit breakers, which kicked in on Monday, have been criticised by analysts for exaggerating declines as investors rush to exit positions before getting locked in by the halts.
In Europe, a report showed German industrial production fell 0.3% in November compared to a month ago, missing expectations for a 0.5% increase.
Germany's trade balance surplus fell to €20.6bn in November from €22.3bn in October, although it was above the estimated €20.2bn. Exports rose 0.4% in November, compared to forecasts of 0.5% and the previous month's 1.3% decline. Imports gained 1.6% in November following a 3.2% drop a month earlier, beating projections for a 1% increase.
On the company front, Royal Dutch Shell, BP and Tullow Oil continued to slide on concerns about the sector as oil prices tumbled.
Mining stocks were also under the cosh, including Anglo American, BHP Billiton and Rio Tinto, as gold and silver prices declined.
Sports Direct International tumbled after saying it is no longer confident of meeting its adjusted underlying core earnings target for the full year due to deteriorating trading conditions on the high street and unseasonal weather over Christmas.
Tesco jumped after Barclays upgraded the stock to 'overweight' from 'equalweight', saying the recent share price underperformance has left the supermarket's valuation at attractive levels.
GlaxoSmithKline rallied after influential investor and founder of Woodford Investment Management Neil Woodford said he believed the company should be split up.
BAE Systems increased after RBC Capital Markets upgraded it from 'outperform' to 'top pick', and raising the target from 570p to 630p.
EasyJet also took off after Moody's assigned an inaugural Baa1 long-term issuer rating to the budget airline with a 'stable' outlook.
Spire Healthcare gained after the company reiterated its 2015 guidance for revenue growth. |
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| | Market Movers
FTSE 100 (UKX) 5,928.21 -0.43%
FTSE 250 (MCX) 16,763.24 -0.17%
techMARK (TASX) 3,175.93 0.74%
FTSE 100 - Risers
Tesco (TSCO) 147.05p 5.64%
BAE Systems (BA.) 521.00p 3.07%
TUI AG Reg Shs (DI) (TUI) 1,252.00p 2.79%
Rolls-Royce Holdings (RR.) 560.50p 2.66%
easyJet (EZJ) 1,710.00p 2.46%
GlaxoSmithKline (GSK) 1,377.50p 2.45%
Vodafone Group (VOD) 223.05p 2.22%
Persimmon (PSN) 1,995.00p 1.68%
Burberry Group (BRBY) 1,095.00p 1.58%
Standard Life (SL.) 364.10p 1.56%
FTSE 100 - Fallers
Sports Direct International (SPD) 433.90p -15.25%
Royal Dutch Shell 'B' (RDSB) 1,379.00p -5.68%
Royal Dutch Shell 'A' (RDSA) 1,376.50p -5.36%
Anglo American (AAL) 230.20p -4.34%
BHP Billiton (BLT) 652.10p -3.21%
Ashtead Group (AHT) 1,017.00p -2.87%
Antofagasta (ANTO) 399.10p -2.80%
Hargreaves Lansdown (HL.) 1,381.00p -2.47%
Associated British Foods (ABF) 3,037.00p -2.41%
Rio Tinto (RIO) 1,742.50p -2.35%
FTSE 250 - Risers
Vectura Group (VEC) 187.80p 5.45%
Elementis (ELM) 217.00p 4.68%
Rank Group (RNK) 296.90p 4.07%
Marston's (MARS) 164.90p 3.84%
Indivior (INDV) 182.90p 3.27%
Just Eat (JE.) 472.00p 3.17%
BBA Aviation (BBA) 179.40p 3.16%
Sophos Group (SOPH) 253.30p 3.09%
Halfords Group (HFD) 324.70p 3.08%
Auto Trader Group (AUTO) 438.70p 2.86%
FTSE 250 - Fallers
Tullow Oil (TLW) 138.90p -7.40%
Evraz (EVR) 63.00p -6.80%
Jimmy Choo (CHOO) 118.00p -6.57%
Petrofac Ltd. (PFC) 699.50p -5.66%
Wood Group (John) (WG.) 550.00p -5.25%
Vedanta Resources (VED) 227.10p -5.22%
Aggreko (AGK) 846.00p -4.19%
Debenhams (DEB) 64.90p -4.14%
Enterprise Inns (ETI) 103.50p -4.08%
Genus (GNS) 1,446.00p -4.05% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks fall back despite large US jobs gains European stocks reversed course on Friday to finish lower despite a relatively strong reading for the US jobs market in December as oil futures slipped again and worries about China continued to simmer in the background.
Softer economic data out of the Eurozone may also have put a damper on the mood.
The benchmark DJ Stoxx 600 and Germany's DAX both closed at their lowest levels of the day, down by 1.49% and 1.31%, respectively.
As of 17:05 front month Brent crude futures were also down, by 1.81% to $33.19 per barrel on the ICE. Three-month copper futures slid 1.2% to $4,493 per metric tonne on the LME.
Stocks had opened in the black after China's Shanghai Composite rose just under 2% on Thursday as investors welcomed the suspension of the controversial circuit breaker mechanism that halted share trading twice over the past week. Sentiment was also boosted after the People's Bank of China set a higher yuan fix and amid news that state-controlled funds had bought equities.
However, the gains proved short-lived as investors digested Eurozone data and reacted poorly to a much stronger than expected rise of 292,000 in US non-farm payrolls last month.
"Although there is some relief that Chinese markets haven't tanked again especially after announcing ahead of today's trading session that circuit breakers are suspended for now, not everybody is convinced that Chinese stocks have bottomed especially as the PBoC still seems to be intervening," said Markus Huber, senior analyst at Peregrine & Black.
Indeed, following today's US labour market data, Barclays told clients that "trends in private consumption growth and other components of domestic demand bear further watching, particularly if labor markets were to slow in the months ahead or if the headwinds from abroad were to intensify substantially."
In other macroeconomic news, data released by Destatis showed German industrial production fell 0.3% in November from 0.5% in October, coming in well short of economists' expectations for a 0.5% increase.
Another report published on Friday revealed that in seasonally-adjusted terms German exports rose 0.4% in November compared with a 1.3% drop in October, while imports were up 1.6% versus a 3.2% decline the previous month.
Exports were a touch below economists' expectations but imports were a little better.
This narrowed the foreign trade surplus to €19.7bn from €20.5bn.
On the year, exports increased by 7.7% from 3.2% the previous month, while imports were up 5.3% compared with 3%.
Elsewhere, figures showed French industrial production fell 0.9% in November from the previous month, which was steeper than the 0.4% drop expected by economists.
In corporate news, TNT Express and FedEx were in focus after saying they have been given unconditional approval from the European Commission for their proposed merger.
In London, BHP Billiton closed the session lower even after saying the amount of mining waste spilled as a result of a dam burst at its Samarco joint venture iron ore mine in Brazil last November was a lot less than previously thought. |
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| | US Market Report | | US open: Stocks rebound after better-than-expected non-farms US stocks rebounded after the non-farm payrolls report beat forecasts and the turbulence in Chinese equities subsided.
At 1435 GMT the Dow Jones Industrial Average rose 0.82%, the Nasdaq increased 1.08% and the S&P 500 gained 0.87%.
The non-farm payrolls report showed US employers added 292,000 jobs in December, smashing estimates of 200,000. November was revised to 252,000 from a previous estimate of 211,000.
The unemployment rate held at 5% last month, as expected.
However, average hourly earnings rose less than anticipated. Earnings grew 2.5% year-on-year in December, below forecasts for a 2.7% increase. On a month-on-month comparison, wages registered zero growth, missing estimates for a 0.2% gain.
"Once again the US has produced a strong labour market report for December but once again there was one important component that was lacking, wage growth," said Craig Erlam, senior market analyst at Oanda.
"The lack of wage growth in the US has been an issue for a long time now but it has become increasingly significant over the last 12 months due to the Fed's decision to embark on a rate hiking cycle, despite inflation being well below the central banks' target rate."
Meanwhile, Chinese stocks recovered from Thursday's losses after regulators ended the "circuit breaker rule" and the People's Bank of China set the daily yuan rate higher.
Trading in China was suspended after 30 minutes as equites on the CSI 300 index fell 7%, triggering the "circuit breaker rule".
The new circuit breakers, which kicked in on Monday, have been criticised by analysts for exaggerating declines as investors rush to exit positions before getting locked in by the halts.
"Well after just four days the experiment appeared to fail with the China Securities Regulatory Commission deciding to suspend the mechanism.....in a bid to curb volatility. It's contributing to a better, although still volatile, start for markets in China this morning, but the uneasiness among investors remains high as each day brings about a new wave questions about government policy," Deutsche Bank analysts said.
On another positive note for markets, China's central bank set the daily yuan rate at 6.5646 per dollar - firmer than the previous day's rate, ending eight days of weakening the currency.
Oil prices also recovered from the previous day's declines with Brent up 0.35% to $33.87 per barrel and West Texas Intermediate up 0.24% to $33.35 per barrel at 1441 GMT.
The dollar was up against all the major currencies, rising 0.35% against the pound, 0.66% against the euro and 0.42% against the yen. Spot gold was down 0.68% to $1,100.83.
In company news, Apple recovered following reports earlier in the week that iPhone 6S and 6S Plus production levels are being cut due to low demand.
FedEx Corp rallied after EU regulators approved its takeover of TNT Express. |
| | 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 |
| | Broker Tips | | Broker tips: Spire Healthcare, RSA, European equtities Investec recommended a 'sell' rating on Spire Healthcare and put its target under review on Friday after the company reiterated its full year guidance.
The private hospital group said in a trading update that it continues to expect 2015 revenue growth in the range of £882m to £888m, and earnings before interest, taxes, depreciation and amortisation (EBITDA) margin of around 18%.
Spire expects full year revenue for the 2016 financial year will rise by around 3% to 5% compared with 2015, assuming a revised tariff by NHS and health service regulator Monitor.
Monitor and NHS have proposed a 1.1% increase in the tariff for the 12 months beginning 1 April for all services paid for by national tariff, including those provided by the private sector.
"Whilst the proposed changes to the NHS tariff were more positive than we forecast (+1.5% versus our 4% decline) our sales estimates are broadly in line with guidance, suggesting a reweighting across the payor groups," said Investec analyst Cora McCullum.
"We anticipate 3% upgrades to the full year 2016 estimate of EBITDA for both us and consensus, but we maintain our cautious view as we believe valuation fails to fully reflect the modest growth prospects."
Nomura downgraded Direct Line to 'neutral' from 'buy' while retaining its 400p price target, switching its preference in UK non-life to RSA Insurance, which it raised to 'buy' from 'neutral' with an unchanged price target of 495p.
Nomura pointed out that DLG has been a star performer in the insurance sector over the past two years, with a total shareholder return of 40% last year, as it delivered on its strategy and faced fewer headwinds from Solvency II than its peers.
The bank stressed that it was downgrading after a strong performance, as the underlying investment case for DLG of strong total returns via special dividends is intact.
By contrast, RSA was flat in 2015 and while progress has been made on the balance sheet and underlying performance, low bond yields and FX went against the stock, serving to constrain performance.
"However, we believe from here there is scope to surprise to the upside on the balance sheet as the group discloses Solvency II numbers and a more up-to-date valuation on the pension position."
Nomura is expecting RSA to start paying special dividends next year, which leads to similar yields for both stocks - 6.8% for RSA and 6.6% for DLG.
It reckons there is upside risk to both companies' dividend estimates, so there isn't much to choose between the two in terms of yields.
"However, we believe there is likely more potential for self-help measures at RSA, helping earnings and dividends, compared with DLG, which has achieved more on efficiencies and improving the underwriting performance."
Societe Generale reiterated its positive stance on European equities for 2016 as it pointed out that fears over China are not new .
Between August and September of last year, the Eurostoxx 50 slid 18% before rebounding sharply, rising 16%.
SocGen said that once again, the market will probably force Chinese policymakers to ease more at a time when inflation and shadow banking are under control.
"Despite the recent drop in Chinese equities, our Asian equity strategist thinks that it is too early to neutralise SG's negative stance," said the bank .
It expects Eurozone equities to be supported by further earnings growth. In particular, it reckons the Eurostoxx 50 will be supported by a continued Eurozone recovery and a weak euro, and thus by better earnings momentum.
Consensus expectations are for earnings to grow by 7% this year.
The bank is 'underweight' Germany's DAX, whose heavy weighting in industrials and autos makes it highly sensitive to Chinese news flow.
It expects the DAX to continue to underperform in 2016, exacerbated by the Chinese story, due to its high valuation and political headwinds.
SocGen prefers France's CAC 40 and Italy's FTSE MIB, where growth momentum is expected to continue to improve over the next two years.
In terms of sectors, the bank is 'neutral' autos and basic resources, both of which are expected to suffer in the short-term due to China woes.
To protect portfolios from current volatility, it recommends pharmaceuticals and tobacco, both at 'overweight', saying they are high-yield defensive sectors with low exposure to China.
Finally, to protect equity portfolios amid high volatility and fears over China, SocGen recommends going long European companies with low exposure to emerging markets and short those with high exposure.
Chinese stocks tanked this week, twice triggering the market's now-suspended circuit breakers, dragging global markets down with them. | | |
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