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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 fall after mixed services data The FTSE 100 closed lower on Wednesday as investors weighed mixed services data and a report showing US crude oil inventories rose more than expected last week.
Markit's purchasing managers' index on UK services climbed to 55.6 in January from 55.5 in December, beating forecasts of 55.4. A reading above 50 signals an expansion in sector activity while a level below that suggests a contraction.
However, Markit's chief economist Chris Williamson warned that order book backlogs were "already falling at the fastest rate for almost three years and companies have scaled back their hiring in response to growing uncertainty about the economic outlook at home and abroad".
Elsewhere, the Caixin PMI reading of China's services rose to 52.4 in January from 50.2 the previous month.
Markit's final reading on Eurozone services PMI was unchanged from a previous estimate at 53.6 in January, as expected, but down from December's 54.2.
In other Eurozone data, retail sales increased 0.3% in December from the previous month, according to Eurostat. The figure was in line with economists' expectations and marked the first increase in fourth months. On the year, sales rose 1.4%, in line with 2014 but just a touch below estimates for a 1.5% gain.
In the US, Markit's final reading of the services PMI was revised to 53.2 in January from a previous estimate of 53.7, down from 54.3 in December.
ISM's US non-manufacturing composite also fell short of estimates. The index dropped to 53.5 in January from 55.8 in December, compared to forecasts of 55.2.
Meanwhile, private payrolls figures from ADP showed US employers added 205,000 jobs in January, beating forecasts of 195,000 and following 267,000 in December. The report comes ahead of the non-farm payrolls on Friday, which the Federal Reserve will be closely monitoring as it decides when to next raise interest rates.
"While we place limited weight on the ADP jobs numbers, this morning's release is supportive of our outlook for 225,000 in non-farm payroll gains in Friday's official employment report," said Barclays Research analysts.
Less positive, US crude oil inventories rose more than expected in the week ended 29 January, official data revealed on Wednesday, adding to concerns about the global supply glut. The Energy Information Administration (EIA) said commercial crude oil inventories increased 7.8m barrels to 502.7m barrels last week, compared to analysts' estimates for a rise of 4.0m barrels.
Oil prices rose as Russian Foreign Minister Sergei Lavrov on Wednesday said if the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members agree to meet to discuss ways to address the supply glut "then we will meet".
Brent crude was up 4.8% to $34.38 per barrel and West Texas Intermediate was up 4.8% to $34.38 per barrel at 1635 GMT.
On the company front, Standard Chartered plunged after Citi lowered its target on the shares of Asia-focused and commodity-exposed lender. The broker described the lender's valuation at 0.5 times estimated 2016 price-to-tangible book value as "low" in the context of global banks.
Vodafone fell a day after the telco confirmed that it is in discussions with Liberty Global about the possible creation of a joint venture in the Netherlands that would incorporate both companies' local operating businesses.
Banks were under pressure including Royal Bank of Scotland, Barclays and HSBC as UBS warned that another year of fundamental headwinds such as oil and central bank policy will likely weigh on earnings expectations for global banks in 2016.
Insurance giant Prudential rebounded from the previous day's declines after Barclays reiterated an 'overweight' rating for the stock, saying that it believes concerns over China's new tighter regulations on buying insurance overseas were "misplaced". "We believe that this change, even if extended to all transactions above $5,000, is unlikely to materially impact Hong Kong sales," Barclays said.
GlaxoSmithKline jumped after the pharmaceutical company posted full year results showing revenues increasing 6% and core earnings per share down 15%, slightly ahead of guidance, and reiterated its confidence that earnings growth would return in 2016 at double-digit levels. |
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| | Market Movers
FTSE 100 (UKX) 5,838.71 -1.41%
FTSE 250 (MCX) 15,985.33 -1.93%
techMARK (TASX) 3,085.99 -1.82%
FTSE 100 - Risers
Anglo American (AAL) 275.80p 9.38%
Rio Tinto (RIO) 1,685.00p 4.17%
Glencore (GLEN) 86.30p 3.79%
Antofagasta (ANTO) 375.60p 2.76%
Prudential (PRU) 1,238.50p 1.72%
BHP Billiton (BLT) 643.20p 1.71%
Hikma Pharmaceuticals (HIK) 2,128.00p 1.58%
Randgold Resources Ltd. (RRS) 5,105.00p 0.89%
ARM Holdings (ARM) 986.50p 0.56%
Royal Dutch Shell 'A' (RDSA) 1,441.50p 0.56%
FTSE 100 - Fallers
Aberdeen Asset Management (ADN) 224.00p -4.68%
Barclays (BARC) 165.85p -4.55%
Shire Plc (SHP) 3,723.00p -4.17%
Standard Chartered (STAN) 414.80p -4.14%
Vodafone Group (VOD) 212.90p -3.90%
HSBC Holdings (HSBA) 449.45p -3.88%
Rolls-Royce Holdings (RR.) 513.00p -3.48%
International Consolidated Airlines Group SA (CDI) (IAG) 523.50p -3.23%
Royal Bank of Scotland Group (RBS) 232.90p -3.20%
Old Mutual (OML) 152.50p -3.17%
FTSE 250 - Risers
Northgate (NTG) 331.00p 2.48%
DFS Furniture (DFS) 322.00p 2.22%
Ibstock (IBST) 214.00p 1.90%
Evraz (EVR) 57.20p 1.87%
Greencore Group (GNC) 385.00p 1.77%
Tullow Oil (TLW) 161.20p 1.77%
Crest Nicholson Holdings (CRST) 589.00p 1.46%
B&M European Value Retail S.A. (DI) (BME) 288.70p 1.01%
Shaftesbury (SHB) 852.50p 1.01%
Daejan Holdings (DJAN) 6,075.00p 0.83%
FTSE 250 - Fallers
Circassia Pharmaceuticals (CIR) 272.00p -7.36%
Allied Minds (ALM) 301.50p -7.23%
Scottish Mortgage Inv Trust (SMT) 231.00p -7.00%
Keller Group (KLR) 752.50p -6.70%
Brewin Dolphin Holdings (BRW) 264.60p -6.20%
Pendragon (PDG) 36.90p -6.13%
Homeserve (HSV) 379.00p -5.72%
Serco Group (SRP) 77.10p -5.69%
Interserve (IRV) 441.90p -5.54%
Just Eat (JE.) 344.20p -5.44% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks end lower despite oil price slide European stocks fell sharply on Wednesday, taking their cue from downbeat sessions in the US and Asia ahead of Friday´s US jobs report for the month of January and despite sharp gains in crude oil futures.
The benchmark Stoxx Europe 600 index was down by 1.54%, Germany's DAX was 1.53% weaker and France's CAC 40 was off 1.33%.
"Even much better than expected Chinese Services PMI data released overnight failed to provide markets with much needed optimism," said Markus Huber, senior analyst at Peregrine & Black.
"Whilst overall sentiment remains negative, many major indices are approaching again the lows of 2016 and 2015 and therefore major support levels. So far markets are still stuck in a wide consolidation pattern, however much lower prices might be needed in order for sentiment to turn and bargain hunters to be tempted back into the markets."
Data released earlier showed activity in China's services sector expanded at a faster pace last month.
The Caixin China services purchasing managers' index rose to 52.4 in January from 50.2 in the previous month, marking the highest level in six months.
However, a similar index linked to the US services sector, and compiled by the ISM, slipped from 53.7 for the month of January to 53.2 - its lowest since October 2013.
Meanwhile, oil prices recovered from Tuesday's heavy losses, extending earlier gains after Russia suggested it was open to talking with OPEC about output cuts. Russian foreign minister Sergei Lavrov said if there is consensus among OPEC and non-OPEC members to meet, "then we will meet".
By the close of trading, West Texas Intermediate crude oil futures were up 5.4% at $34.59 while Brent crude were 5.6% higher to $31.67.
In corporate news, stock in AstraZeneca nudged lower despite winning European regulatory approval to market its Tagrisso-branded tablets for the treatment of adult patients with certain forms of lung cancer.
Shares in Finnish utility company Fortum tumbled after it reported a bigger-than-expected decline in fourth-quarter earnings.
KPN was also in the red after the Dutch telecom group's fourth quarter numbers missed expectations.
On the upside, luxury group LVMH rallied after its 2015 profit and revenue exceeded analysts' expectations.
Syngenta advanced after the Swiss agrichemical company agreed to be snapped up by ChemChina in a $43bn deal.
Prudential was the standout gainer in London following heavy losses in the previous session, as Barclays said its Hong Kong sales were unlikely to take a material hit if China's currency regulator tightens restrictions on its citizens buying insurance products from overseas.
On the macroeconomic front, Markit's final composite purchasing managers' index came in at 53.6, up a touch from the 'flash' estimate of 53.5 but weaker than December's reading of 54.3.
The final Eurozone services business activity index was in line with the flash estimate at 53.6 but down from December's 54.2.
Meanwhile, data from Eurostat showed retail sales in the Eurozone rose 0.3% in December.
The figure was in line with economists' expectations and marked the first increase in fourth months.
On the year, sales rose 1.4%, in line with 2014 but just a touch below estimates for a 1.5% gain.
Still to come on the macroeconomic calendar, investors will eye the release of the US ADP employment report at 1315 GMT as it's widely considered a pre-cursor to Friday's non-farms.
"Although recent employment figures, looking just at the number of jobs, have been quite strong, the fourth quarter was a slow one in terms of US growth," Rabobank said. |
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| | US Market Report | | US open: Stocks drop on disappointing services data US stocks were declined on Wednesday as a better-than-expected private payrolls report was offset by disappointing services data.
The Dow Jones Industrial Average fell 0.60%, the Nasdaq dipped 1.35% and the S&P 500 slumped 1.00% at 1528 GMT.
ADP's labour market report showed US employers added 205,000 jobs in January, beating forecasts of 195,000 and following 267,000 in December. The report comes ahead of the non-farm payrolls on Friday, which the Federal Reserve will be closely monitoring as it decides when to next raise interest rates.
"While we place limited weight on the ADP jobs numbers, this morning's release is supportive of our outlook for 225,000 in non-farm payroll gains in Friday's official employment report," said Barclays Research analysts.
Markit's final reading of the US services purchasing managers' index was revised to 53.2 in January from a previous estimate of 53.7, down from 54.3 in December. A reading above 50 signals expansion while a level below that indicates a contraction in sector activity growth.
ISM's non-manufacturing composite also fell short of estimates. The index dropped to 53.5 in January from 55.8 in December, compared to forecasts of 55.2.
Meanwhile, oil prices were on the rise ahead of US supply data, with West Texas Intermediate up 2.1% to $30.54 per barrel and Brent crude up 2.5% to $33.57 per barrel at 1515 GMT.
Official weekly supply data will be released by the Energy Information Administration at 1530 GMT, with analyst predicting an increase of 3.5 million barrels.
The American Petroleum Institute said late Tuesday that the US crude stockpiles rose 3.8 million barrels last week, less than gains in the previous week.
On the company front, shares in Syngenta gained after the Swiss pesticide and seed firm agreed to a $43bn takeover by China National Chemical Corp.
Yahoo declined on news that the company plans to take drastic measures to shore up cash including a 15% cut of its workforce and a $1bn asset disposal programme. |
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| | Broker Tips | | Broker tips: Prudential, TalkTalk, Foxtons Barclays and UBS have played down reports that Prudential would be hit by a clampdown on Hong Kong sales of insurance products from mainland China, which sent the shares tumbling 8% on Tuesday.
A report from Bloomberg said China's foreign exchange regulator was tightening restrictions on purchases of insurance products overseas to stem money outflows from China, limiting overseas transactions on UnionPay debit and credit cards to $5,000 per transaction.
Prudential's mainland China sales are mostly regular premium and therefore are unlikely to be materially caught by this change, UBS said. Barclays said they believe "the concerns are misplaced", with 96% of sales to mainland Chinese residents in Hong Kong expected to be well below the cap and Hong Kong representing only 10% of Asian and 3% of group earnings.
"Furthermore, even in the worst case scenario, where insurance products sales in HK to mainland Chinese residents are completely banned, we anticipate Asia new business sales to recover by 2018."
More importantly, the change is unlikely to have a material impact on Prudential's Asian or group earnings, according to a recent presentation from the company that showed that the drivers of earnings from Hong Kong emerge over time as bonuses are paid on its with profits fund, and even if sales were zero, earnings would still grow over the next 10 years.
"We estimate that in the worst case scenario where Hong Kong Chinese mainland sales declined to zero, our 2016 operating profit from Hong Kong would be flat at worst, reducing our group earnings estimate would decline by £50m or 1%."
Exane BNP Paribas has upgraded TalkTalk from 'neutral' to 'outperform' on the company's weak share price, however Goldman Sachs downgraded the company from 'buy' to 'neutral'.
The FTSE 250 telecoms provider's value plunged late in 2015 after a serious cyber-attack saw the company suspend sales to new customers for a short time and see significant damage to its brand value.
It said yesterday that the cyber-attack had a trading impact of £15m, and created exceptional costs of £40m-£45m, as well as estimating that 95,000 customers left due to the attack.
Exane BNP Paribas on Wednesday said the spin and lack of confidence in guidance made the investment bank cautious initially.
"However, with the stock below 250p it offers a far more compelling risk/reward."
The bank said while the hack had an impact on third quarter results, the fourth quarter is looking to have stabilised.
"Our proprietary survey of 500 UK consumers shows that TalkTalk customers value price over anything else.
"They believe that TalkTalk offers by far the cheapest price with a quality of service that is comparable to the big brands."
While Exane BNP Paribas cut its short - term forecasts, they have been compensated by a more positive view in the medium term.
"We conclude that while TalkTalk remains an opaque situation (more so since the cyber-attack) the risk reward in the shares is compelling."
It increased its target from 260p to 315p.
However not everyone was as optimistic, with Goldman Sachs downgrading the company and removing it from its Pan-Europe Buy List.
It said it believed there is an increased structural uncertainty on TalkTalk's ability to grow long-term earnings, only partly due to the recent cyber-attack.
"We continue to forecast top-line growth compounding efficiency gains, but our less positive view on price rises in UK triple-play and Talk's potentially weaker price position lead to lower long-term revenue growth forecasts (1%-3% from 2%-4% 2016-20E)."
Goldman Sachs said the company's valuation is less compelling on its lower estimates, and it dropped its price target from 312p to 271p.
Shares in Foxtons gained as Canaccord Genuity reiterated its 'buy' rating after the UK real estate group reported a solid year of revenue growth.
A trading update from the group, which dropped out of the FTSE 250 in December, revealed that revenue rose 4% to £150 on a 4% increase in volumes and 32% sales growth from mortgage broker Alexander Hall. It came despite an 11% decline in property transactions in its London heartland in 2015.
The final and further special dividend will total 6.23p per share, bringing the full year dividend to 11.0p per share, an increase of 13.4% on 2014.
Foxtons added that the sales pipeline for 2016 was "encouraging".
Canaccord said that while the outlook was positive, the future of the residential property market was uncertain with the prospects of an increase in interest rates and higher stamp duty for buy-to-let investors in April.
"We are mindful that house price growth, according to the Land Registry, in London remains high (annual change of 12.4% over the last twelve months) but that a shortage of properties available for sale will curtail the activities of agents," said analyst James Ash.
"However, as Foxtons expands to the outer regions with higher transaction numbers, we believe it should continue to outperform its central London peers." | | |
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