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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 rally after Osborne unveils UK Budget 2016 The FTSE 100 closed higher on Wednesday as traders examined the UK Budget 2016 and UK jobs data.
Among the measures Chancellor George Osborne announced in his Budget included cutting corporation tax to 17% by 2020 from 20% and raising the individual tax free personal earnings allowance to £11,500.
Housebuilding stocks rallied, including Taylor Wimpey and Barratt Developments, after Osborne announced plans to lower stamp duty, and revealed savings held in the new lifetime ISA could be used towards a deposit on a mortgage.
Oil stocks, such as BP, Cairn Energy and Royal Dutch Shell, also benefitted from the government's plans to abolish petroleum revenue tax.
Shares in pub operators Marston's and JD Wetherspoon rose on plans to freeze duties on beer, cider, whisky and other spirits.
Osborne also said Britain is on course to achieve a surplus of £10.4bn by 2019-20. The Office for Budget Responsibility (OBR) expects debt to be 82.6% of gross domestic product (GDP) in 2016/17, followed by 81.3% in 2017/18.
The OBR also downgraded its forecast of UK economic growth in 2015 from 2.4% to 2.2%
It revised GDP downwards for this and following years - from 2.4% to 2% in 2016, from 2.5% to 2.2% in 2017, from 2.4% to 2.1% in 2018 and from 2.3% to 2.1% in both 2019 and 2020.
"From the FTSE's perspective George Osborne's 8th annual budget was, when everything is weighed up, a positive one, rising around 0.7% as the afternoon went on," said Connor Campbell, financial analyst at Spreadex.
UK jobs
The unemployment rate in the UK was steady at 5.1% in January, in line with economists' expectations, according to data from the Office for National Statistics.
Unemployment fell to 1.68m between November and January, which was 28,000 fewer than the previous quarter and down 171,000 from the same period a year earlier.
The ONS said there were 31.42m million in work, up 478,000 from a year ago.
Average weekly earnings rose 2.1% including bonuses between November and January compared with the same period a year earlier. Excluding bonuses, earnings were up 2.2%, also in line with expectations.
ONS statistician Nick Palme said: "Once again the latest quarterly figures show continuing high employment levels but no significant pick-up in earnings growth."
The Bank of England is taking the health of the labour market into consideration as it determines the timing of an interest rate hike. The central bank meets on Thursday to announce its latest policy decision but is expected to keep interest rates unchanged.
The Federal Reserve is also expected to stand pat on rates when it announces its policy decision at 1800 GMT amid a slowdown in the global economy.
US inflation
The US consumer price index increased 1.0% in February from a year ago, beating forecasts for a 0.9% increase but down from January's 1.4% year-on-year gain, Labor Department data showed. On the month, CPI fell 0.2% in February as expected, compared to 0% month-on-month in January.
Excluding volatile items including food and energy, CPI rose to 2.3% year-on-year in February from 2.2% in January, surprising analysts who had expected no change. Month-on-month core CPI held at 0.3%, more than the 0.2% that was forecast.
"In short, it is now blindingly obvious that inflation is trending higher, and we can have no faith that the upward trend will stop anytime soon," according to Pantheon Macroeconomics.
"We think it very likely that the Fed's 2% target for core PCE inflation will now be reached in the fall of this year, some two years earlier than their December forecasts."
Meanwhile, Fed data revealed US industrial production fell 0.5% in February, dragged lower by utilities and mining, compared with a 0.8% rise in January. Economists had been expecting a 0.3% decline.
US housing starts rose a little more than expected in February, the Commerce Department said. Housing starts were up 5.2% to an annual pace of 1.18m, surpassing economists' expectations for an increase to 1.15m. January's starts were revised up to 1.12m from 1.099m.
Oil prices rally
Oil prices rose after Qatari oil minister Mohammed Bin Saleh Al-Sada said that producers from and outside the Organization of the Petroleum Exporting Countries will meet on 17 April in Qatar to discuss a proposal to freeze output to address the supply glut.
The Energy Information Administration data also revealed an increase in crude stockpiles of 1.3 million barrels in the US last week, below the expected 3.4 million build.
Brent crude increased 3.6% to $40.20 per barrel and West Texas Intermediate jumped 4.1% to $37.91 per barrel at 1641 GMT.
Companies
Shares in wealth manager St James's Place surged after Osborne set out measures in the Budget to boost home ownership and retirement savings among Britons.
Tour operator TUI slumped after Citigroup downgraded its stock to 'sell' from 'neutral'.
Shares in Shire were also pressured downwards, as investors who had recently shunned Valeant Pharmaceuticals began to turn away from other makers of high-priced specialty drugs.
Hikma Pharmaceuticals, on the other hand, was a high riser reversing earlier declines after reporting a 3% drop in full year revenue and a 4% fall in core operating profit due to currency headwinds.
Tullow Oil gained as it said its Cheptuket-1 well in Northern Kenya has encountered good oil shows. |
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| Market Movers
FTSE 100 (UKX) 6,177.44 0.61%
FTSE 250 (MCX) 16,751.13 0.70%
techMARK (TASX) 3,094.93 0.22%
FTSE 100 - Risers
Hikma Pharmaceuticals (HIK) 1,822.00p 5.87%
St James's Place (STJ) 934.50p 3.83%
Taylor Wimpey (TW.) 187.40p 3.31%
Royal Dutch Shell 'B' (RDSB) 1,711.00p 3.04%
Royal Dutch Shell 'A' (RDSA) 1,707.00p 2.99%
Barratt Developments (BDEV) 571.50p 2.97%
Legal & General Group (LGEN) 234.80p 2.94%
Berkeley Group Holdings (The) (BKG) 3,151.00p 2.64%
BP (BP.) 350.85p 2.59%
Glencore (GLEN) 144.30p 2.45%
FTSE 100 - Fallers
TUI AG Reg Shs (DI) (TUI) 989.50p -5.40%
Antofagasta (ANTO) 496.60p -3.29%
Shire Plc (SHP) 3,655.00p -2.97%
Smiths Group (SMIN) 1,050.00p -2.51%
Worldpay Group (WI) (WPG) 282.30p -2.45%
Standard Chartered (STAN) 456.55p -1.61%
Provident Financial (PFG) 2,946.00p -1.50%
Aberdeen Asset Management (ADN) 276.70p -1.46%
Randgold Resources Ltd. (RRS) 6,165.00p -1.36%
London Stock Exchange Group (LSE) 2,870.00p -1.24%
FTSE 250 - Risers
Tullow Oil (TLW) 206.80p 7.65%
Cairn Energy (CNE) 204.50p 6.79%
Allied Minds (ALM) 374.90p 6.20%
Ladbrokes (LAD) 121.70p 5.92%
Pets at Home Group (PETS) 284.60p 5.84%
Ted Baker (TED) 2,950.00p 4.80%
Crest Nicholson Holdings (CRST) 551.00p 4.06%
Ocado Group (OCDO) 281.10p 3.96%
William Hill (WMH) 379.60p 3.94%
NMC Health (NMC) 987.50p 3.78%
FTSE 250 - Fallers
Thomas Cook Group (TCG) 95.15p -6.35%
Moneysupermarket.com Group (MONY) 328.00p -4.54%
Evraz (EVR) 80.75p -4.49%
St. Modwen Properties (SMP) 314.20p -2.90%
P2P Global Investments C (P2P2) 914.50p -2.61%
Barr (A.G.) (BAG) 540.50p -2.44%
Restaurant Group (RTN) 383.70p -2.37%
CLS Holdings (CLI) 1,541.00p -2.22%
Homeserve (HSV) 419.40p -2.21% |
| | Award-winning ISA investing with The Share Centre | | We’re proud to have won ‘Self-select ISA provider of the year’ at the 2015 ADVFN Awards, due to our outstanding customer service, fixed account fees and dealing commission from £7.50 per deal.
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks edge lower ahead of Fed meeting European stocks wavered on Wednesday as caution set in ahead of the Federal Reserve's latest policy announcement.
The benchmark DJ Stoxx Europe 600 managed to eke out gains of 0.04% to end at 341.00, France's CAC 40 drifted 0.22% lower to end the day at 4,463.00 and Germany's DAX was 0.50% firmer at 9,983.41.
At the same time, oil prices recovered, supported by data from the US Energy Information Administration on Wednesday showing crude stockpiles rose 1.3m barrels last week, which was much less than expected.
Sentiment was also boosted after the Qatari oil ministry said members of the Organization of the Petroleum Exporting Countries will meet oil producers in April to discuss an output cap.
West Texas Intermediate was up 3.8% at $37.78 a barrel and Brent crude was up 2.68% to $39.83.
With the Fed widely expected to stand pat on interest rates - the target range for the federal funds rate is expected to remain on hold at 0.25% to 0.50% - investors will be paying close attention to what chairwoman Janet Yellen has to say in the press conference.
One of the key areas to watch for will be any mention of the balance of risks to the economic outlook. Back in January, the FOMC dropped language from the previous statement that said risks to the outlook for economic activity and the labour market were balanced.
"Many economists expect the central bank will reintroduce their assessment on Wednesday and note that risks are again 'nearly balanced' as they did in October," said Atif Latif, director of trading at Guardian Stockbrokers.
"Another change in the January statement was a reference to global economic and financial developments. Although the FOMC did not associate whether this was a positive or a negative to the balance of risks, this was seen as a dovish move by the FOMC. Since then however, financial conditions have eased notably and the outlook for the global economy has stabilised. It is therefore possible that this language is dropped which many believe would signal a more positive outlook," said Latif.
According to Bloomberg, the consensus expectation was now for just two more interest rate hikes from the Fed in 2016.
In the UK, meanwhile, Chancellor George Osborne announced he would cut the corporation tax to 17% by 2020 from 20% and raise the individual tax free personal earnings allowance to £11,500.
The Federal Open Market Committee rate announcement was due after the European close at 1800 GMT.
In corporate news, London Stock Exchange and Deutsche Boerse were both on the front foot after agreeing the terms of a merger.
Belgian chemical company Solvay rose after saying it will divest its stake in a joint venture with Ineos earlier than planned.
Brenntag racked up solid gains after the German chemical distribution firm posted better-than-expected 2015 profit.
On the downside, German industrial group Bilfinger slumped after saying it will not pay a dividend for 2015 and posting a wider loss.
Zodiac Aerospace was also under the cosh after it said profit this year was likely to be flat.
Tour operators Thomas Cook and TUI were in the red after Citigroup downgraded its ratings on the stocks. |
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| | US Market Report | | US open: Stocks rise ahead of FOMC interest rate announcement US stocks edged higher on Thursday as oil prices rebounded and US inflation slowed less than expected ahead of the Federal Reserve's policy announcement.
At 1536 GMT, the Dow Industrial Average rose 0.12%, the S&P 500 grew 0.13% and the Nasdaq was up 0.24%.
Oil prices rose after Qatari oil minister Mohammed Bin Saleh Al-Sada said that producers from and outside the Organization of the Petroleum Exporting Countries will meet on 17 April in Qatar to discuss a proposal to freeze output to address the supply glut.
The Energy Information Administration revealed an increase in crude stockpiles of 1.3 million barrels in the US last week, below the expected 3.4 million build.
West Texas Intermediate jumped 3.9% to $37.74 per barrel and Brent crude increased 3.2% to $40.05 per barrel at 1536 GMT.
Meanwhile, the US consumer price index increased 1.0% in February from a year ago, beating forecasts for a 0.9% increase, down from January's 1.4% year-on-year gain. On the month, CPI fell 0.2% in February as expected, compared to 0% month-on-month in January.
Excluding volatile items including food and energy, CPI rose to 2.3% year-on-year in February from 2.2% in January, surprising analysts who had expected no change. Month-on-month core CPI held at 0.3%, more than the 0.2% that was forecast.
"In short, it is now blindingly obvious that inflation is trending higher, and we can have no faith that the upward trend will stop anytime soon," according to Pantheon Macroeconomics.
"We think it very likely that the Fed's 2% target for core PCE inflation will now be reached in the fall of this year, some two years earlier than their December forecasts."
The Fed will announce its latest policy decision at 1800 GMT and is expected stand pat on interest rates amid concerns about a global economic slowdown.
Ahead of the announcement, Fed data revealed US industrial production fell 0.5% in February, dragged lower by utilities and mining, compared with a 0.8% rise in January. Economists had been expecting a 0.3% decline.
US housing starts rose a little more than expected in February, the Commerce Department said. Housing starts were up 5.2% to an annual pace of 1.18m, surpassing economists' expectations for an increase to 1.15m. January's starts were revised up to 1.12m from 1.099m.
In company news, Peabody Energy tanked after saying it may not have enough liquidity to continue operating.
Chipotle Mexican Grill was also in the red after it forecast a first quarter net loss.
On the upside, software firm Oracle Corp rose after its third-quarter results beat analysts' expectations. |
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| | Broker Tips | | Broker tips: Sainsbury's, Thomas Cook, WANdisco Nomura has cut its price target on Sainsbury's ahead of Friday's bid deadline for Argos owner Home Retail, after an uneventful trading update.
With the grocer's shares having risen to 280p, Nomura calculated that around 50p of that was from the value-creating potential of the Argos deal, assuming the 175p acquisition price that the February cash-and-shares offer now represents.
Although 175p made sense when Sainsbury was the only bidder, the gatecrashing of the bid by Steinhoff International means the FSTE 100 supermarket group must either give away some of that 50p by enhancing its offer, or walk away from the deal entirely and give away all of it. Ahead of the 18 March offer deadline, and after an
Nomura has adjusted its short-term model to take two scenarios into account.
The new 250p target assumes a 50% chance that Sainsbury's bid sweetens to 200p, including a £900m rights issue so it can match the Steinhoff's all-cash offer, knocking the shares back to 265p, and a 50% chance that Sainsbury is outbid by Steinhoff, sending them down to 230p.
"We do not claim that the rally in Sainsbury shares has been driven entirely by Argos; indeed, there is a chance the market reacts positively if Sainsbury withdraws from the race, at first.
"But we think we know that our fundamental valuation will end up below 280p in either scenario," analysts wrote.
Sainsbury's fundamentals remain solid for Nomura, having been the most resilient of the Big four grocers through recent years but it sees limited scope for Sainsbury to relatively surprise on its margin growth in the medium-term.
The fourth quarter trading update on Tuesday omitted any comment on full year margins, which analysts interpret as meaning "major surprises versus consensus should not be expected on 4 May".
Tour operators Thomas Cook and TUI were under the cosh after Citigroup downgraded both to 'sell' from 'neutral', although the bank expects solid second-quarter statements from them.
The bank cut its forecasts on Thomas Cook amid ongoing earnings risk given an expected significant European airline capacity increase which could put pressure on prices.
It also pointed to a tightening supply/demand balance for hotels which could put pressure on costs.
Citi cut its price target on Thomas Cook to 80p from 120p as it lowered full year 2016/17 earnings per share estimates by 5% and 2% to reflect the weaker-than-expected trading highlighted in the first quarter statement.
Citi's 2016 EPS forecasts are around 5% below consensus.
"Unlike its main peer Thomas Cook does not have a significant hotel and cruise business. This means that as the supply/demand balance for accommodation tightens it does not have a ready source of in house capacity nor a corresponding benefit from higher hotel/cruise profits to offset the cost pressures that the tour operator may see," Citi said.
The bank slashed its price target for TUI to 885p from 1,250p.
"Although TUI guides to at least 10% per annum underlying EBITA growth we think that this likely falls to around 6% pa after allowing for FX and the likely disposal of the fast growing Hotelbeds business," Citi said.
It said management appears confident of a good performance this year, despite strong growth in European airline capacity and higher hotel costs as consumers move away from North Africa/Turkey, but risks remain.
Citi said the implied multiple on the tour operating business of 7x EV/EBIT does not take account of these risks.
"Unless tour operators announce further capacity reductions (possibly with upcoming results), we think both companies could test trough multiples again, pointing to further downside."
WANdisco's 'buy' rating and target at 245p were left unchanged by Investec after the software developer reported a narrower loss in 2015.
Losses before interest, tax, depreciation and amortisation (EBTIDA) were narrowed to $16m from $17.9m
Revenues were down very slightly to $11m from $11.2m, with a loss before tax trimmed to $31m from $39.4m.
The AIM-listed group's cash burn of $34.6m saw the $26m cash call in January last year dwindle to a year-end bank balance of $2.6m.
Since then, though the company said it has slashed annual run-rate costs as of this month to roughly $25m, it revealed it has made the first drawings on its $10m revolving bank facility in recent weeks.
The company continued to strike a confident tone, having more than doubled its customer base from 10 to 26 and enjoying improved sales bookings in its application lifecycle management (ALM) business towards the end of the year.
"Full year revenue, EBITDA loss and net cash are all in line versus our estimates revised at the trading update stage," said Investec analyst Roger Phillips.
"The incremental news in the statement is positive, in that run-rate costs have been reduced to around $25m as at the end of March. For full year 2016 estimates, we leave revenue unchanged, but upgrade EBITDA loss (now $10m loss versus $13.6m before). Net debt improves to $8.1m ($9.0m), with the group's $10m debt facility being utilised as of the first quarter 2016."
Investec sees the company's public cloud migration as potentially a major driver.
The group is now layering hyperscale public cloud providers such as Amazon Web Services, IBM, Microsoft and Google. |
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