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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 weak UK manufacturing activity persists The FTSE 100 closed in the red on Monday after a survey showed continued weakness in UK manufacturing sector activity.
According to the CBI Industrial Trends survey, UK manufacturing sector activity remained stuck in the doldrums in March with factory output falling at the fastest pace in more than six years.
A survey of total order books in March found a negative balance of -14%, with 34% of businesses revealing order books were below normal and 20% reporting they were above normal. This balance compares to the -17% in February and -15% in January.
"There are some positives for manufacturers - notably sterling's recent appreciable overall softening as well as still pretty low oil and commodity prices, which support their ability to price competitively to try and gain business," said Howard Archer," chief UK and European economist at IHS Global Insight.
"However, while the recent overall marked weakening of the pound and still low oil and commodity prices are welcome news for UK manufacturers, they will be concerned by current ongoing muted global economic activity and an uncertain outlook."
In other UK data, a report from Rightmove showed the average house price in England and Wales passed an average of £300,000 for the first time in March. Driven by increases in central, South West and North East England, the average asking price for homes rose 7.6% year-on-year to £303,190 this month from £299,287 in February.
In commodities, oil prices rebounded from lows earlier in the session with Brent crude rising 0.41% to $41.37 per barrel and West Texas Intermediate increasing 0.70% to $41.43 per barrel at 1642 GMT.
Data from driller Baker Hughes on Friday showed US energy companies last week added one oil rig to 387 following three months of cuts, which sent oil prices tumbling.
Investors were also digesting a report from the National Association of Realtors on Monday which showed US existing home sales fell 7.1% in February to 5.08m units, the lowest since November.
Meanwhile, Richmond Fed President Jeffrey Lacker said in a speech that the latest US inflation figures were stronger than expected and expressed confidence that inflation will hit the Fed's 2% target.
On the corporate front, the London Stock Exchange plunged after it completed its first daily intra-day auction at noon on Monday. It gave a two-minute pause in trading of the largest shares on the exchange to allow investors to enter, modify and delete orders without automated trading.
Sainsbury's jumped after it was given the all-clear to buy Argos-owner Home Retail for £1.4bn after the market closed last Friday.
Centamin was under the cosh after reporting a fall in full year profits due to a weaker gold price.
Synthomer rallied after announcing the $226m (£156m) acquisition of Hexion Performance Adhesives & Coatings. |
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| Market Movers
FTSE 100 (UKX) 6,184.76 -0.08%
FTSE 250 (MCX) 16,864.37 -0.22%
techMARK (TASX) 3,077.34 0.12%
FTSE 100 - Risers
Shire Plc (SHP) 3,842.00p 4.09%
Paddy Power Betfair (PPB) 9,020.00p 1.75%
Tesco (TSCO) 197.45p 1.33%
Pearson (PSON) 906.00p 1.29%
Worldpay Group (WI) (WPG) 276.90p 1.28%
Sainsbury (J) (SBRY) 276.50p 1.21%
Severn Trent (SVT) 2,163.00p 1.03%
InterContinental Hotels Group (IHG) 2,818.00p 0.75%
Reckitt Benckiser Group (RB.) 6,649.00p 0.74%
United Utilities Group (UU.) 922.00p 0.71%
FTSE 100 - Fallers
Antofagasta (ANTO) 495.50p -3.69%
London Stock Exchange Group (LSE) 2,814.00p -2.70%
TUI AG Reg Shs (DI) (TUI) 1,001.00p -2.34%
Aviva (AV.) 475.20p -2.30%
Rolls-Royce Holdings (RR.) 702.50p -1.95%
Old Mutual (OML) 192.90p -1.88%
BHP Billiton (BLT) 819.50p -1.35%
ITV (ITV) 240.90p -1.27%
GKN (GKN) 288.90p -1.26%
International Consolidated Airlines Group SA (CDI) (IAG) 558.00p -1.24%
FTSE 250 - Risers
Synthomer (SYNT) 345.20p 5.63%
McCarthy & Stone (MCS) 249.30p 5.19%
Allied Minds (ALM) 434.50p 4.62%
Vedanta Resources (VED) 322.50p 4.03%
Dechra Pharmaceuticals (DPH) 1,230.00p 3.80%
Fidelity China Special Situations (FCSS) 132.10p 3.36%
Kaz Minerals (KAZ) 185.70p 3.17%
Interserve (IRV) 460.90p 2.99%
Cable & Wireless Communications (CWC) 76.20p 2.83%
Softcat (SCT) 309.50p 2.65%
FTSE 250 - Fallers
Brown (N.) Group (BWNG) 337.90p -6.14%
Halfords Group (HFD) 400.90p -5.34%
Polypipe Group (PLP) 333.40p -4.88%
Mitie Group (MTO) 267.00p -4.06%
Thomas Cook Group (TCG) 92.50p -3.95%
Supergroup (SGP) 1,425.00p -3.91%
Centamin (DI) (CEY) 89.25p -3.57%
Drax Group (DRX) 267.10p -3.40%
Meggitt (MGGT) 404.10p -3.23%
Ocado Group (OCDO) 288.70p -2.96% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks drift lower amid mixed trading on Wall Street At the beginning of a holiday-shortened week, European stocks wavered on Monday after a mixed start to trading on Wall Street.
The benchmark DJ Stoxx Europe 600 index was down 0.26% to 340.82 by the close of trading, Germany's DAX slightly lower by 0.02% to hit 9,948.64 and France's CAC 40 was 0.78% weaker to 4,427.80.
Stocks in Asia ended mostly higher, with the Shanghai Composite the standout gainer after Chinese policy makers loosened controls on margin lending.
Meanwhile, oil prices registered a small advance despite data from driller Baker Hughes on Friday showing US energy companies last week added one oil rig to 387 following three months of cuts.
West Texas Intermediate crude oil futures finished the session higher by 0.724% to $41.44 a barrel, but Brent crude was off lows, higher by just 0.6% to $41.43.
However, the Stoxx 600 oil and gas index retreated 1.51%, while the corresponding sub-index for basic resources was down 1.30% as three-month copper futures edged higher by 0.5% to reach $5,070 per metric tonne in LME trading.
Existing home sales in the US fell by 7.1% month-on-month in February to reach an annualise rate of 5.08m (consensus: 5.31m).
Hawkish remarks from Atlanta Fed president
Earlier in the day Richmond Fed president Jeffrey Lacker said he believed upside risks to price stability had increased perhaps "not significantly" but "I think noticeably and I think materially".
"We need to take that into consideration," he added.
To take note of, after the close of trading the president of the Federal Reserve bank of Atlanta, Dennis Lockhart, left the door open to another interest rate hike possibly as soon as the US central bank´s next meeting in April.
On a more positive note, European Central Bank governing council member Erkki Liikanen on Monday said the central bank had additional capacity to boost growth and inflation, including via further rate cuts.
In corporate news, Telecom Italia was in the black after it confirmed that chief executive Marco Patuano was set to leave the company following a seven -month power struggle with French corporate raider Vincent Bollore over the company´s strategy.
Bayer was also on the front foot after Reuters cited people familiar with the matter as saying that seed producer Monsanto had approached the company to express interest in its crop science unit, including a potential acquisition worth more than $30bn.
French insurer AXA was firmer after it said chairman and chief executive Henri de Castries will step down in September after nearly 17 years at the helm. |
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| | US Market Report | | US open: Stocks slide as oil prices fall US stocks were in the red on Monday as oil prices fell and a report on existing home sales came in worse than expected.
At 1507 GMT, the Dow Jones Industrial Average dipped 0.13%, the S&P 500 slid 0.19% and the Nasdaq declined 0.10%.
A drop in oil prices was providing the biggest drag on equities after data from driller Baker Hughes showed US energy companies last week added one oil rig to 387 following three months of cuts. West Texas Intermediate crude was down 0.19% to $41.06 per barrel and Brent was down 0.12% to $41.15 per barrel at 1509 GMT.
"As ever the oil price is still the major element in any stock market movements - last week dips were furiously bought so we may see this play out once more," said Chris Beauchamp, senior market analyst at IG.
There were few drivers on Monday with the only notable economic data release in the US being existing home sales figures. The National Association of Realtors said sales fell 7.1% in February to 5.08m units, the lowest since November.
Meanwhile, investors were digesting comments from Richmond Fed President Jeffrey Lacker who said in a speech that the latest US inflation figures were stronger than expected and expressed confidence that inflation will hit the Fed's 2% target.
In corporate news, Starwood Hotels & Resorts gained after agreeing to a revised offer from Marriott International at $79.53 per share or $13.6bn, which exceeds the $13.2bn offered by a consortium led by China's Anbang Insurance Group.
Sherwin-Williams Co. was on the back foot after saying on Sunday that it has reached a deal to buy paint industry rival Valspar Corp. for around $8.9bn. Valspar shares were sharply higher, however.
Technology giant Apple was higher ahead of unveiling a 4-inch iPhone and a new iPad at its Cupertino headquarters. |
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| | Broker Tips | | Broker tips: Tullow Oil, Sainsbury's, Shire Jefferies downgraded Tullow Oil to 'underperform' from 'hold' with an unchanged price target of 166p.
The bank said it was increasingly concerned over operational issues at the Jubilee field, which is a fundamental stock risk overriding opportunity from oil shows in a new Kenya basin.
"Now trading 36% above our unchanged PT and at $22/boe 2P reserves the market is once again pricing in an unwarranted premium," it said.
"Our upgrade to 'hold' in September 2015 accepted TLW trading at $19/boe 2P & $35/boe 1P reserves, both significant premiums to M&A precedent. Six months on, we see zero industry appetite for such premiums."
Jefferies said it continues to expect banks to be supportive to Tullow debt facilities and also expects the TEN development on stream as planned during the third quarter of this year.
However, it also continues to expect lower plateau rates from that field versus expectations.
Also on Monday, Jefferies upgraded Soco International to 'buy' from 'hold' and lifted the price target to 180p from 127p.
It said Soco's dividend continues and is likely to grow with a special in the second half of the year.
It said the 2p per share dividend was already ahead of its expectations, and with a flagged special dividend in the second half, Jefferies forecasts a total payout of 6p per share for 2016.
"Soco, alone amongst peers, prioritised cash returns over M&A during 'high' oil price. In a 'low' oil price cycle, returns continue but (value accretive) M&A can return."
Sainsbury's has not entirely won over analysts despite being allowed an unchallenged path to the takeover of Argos owner Home Retail on Friday, with several remaining neutral and Goldman Sachs maintaining a 'sell' rating.
After Steinhoff International unexpectedly withdrew its rival bid on Friday afternoon, Sainsbury's announced a cash and share offer one minute after market's closed for the week.
The offer was the same as that made on 2 February, thought the value of the deal has risen to 173.2p for each HRG share thanks to the appreciation of the grocer's own share price in the interim.
For each of their shares, HRG shareholders will be entitled to receive one 0.321 new Sainsbury's shares and 55p in cash, as well as a 27.8p-per-share special dividend of HRG's cash mostly from its recent sale of Homebase.
Having crunched the numbers again, Sainsbury's also said it now expects EBITDA synergies of not less than £160m in the third full year after completion, £40m more than its previous estimate.
The supermarket group and the trustee of the Home pension scheme have reached agreements with regards to the future funding of the Home pension scheme, if the deal completes.
Under this agreement, Argos would pay an additional £40m yearly sum in deficit contributions and a £50m lump sum following completion.
The bid for HRG has not earned board approval from the target just yet albeit with Steinhoff out of the way, Shore Capital analysts said "this may prove not to be tremendously challenging for Sainsbury's to receive".
The Argos board published a release after market close stating that it "looks forward to working with Sainsbury's towards a recommendation of the offer", which would see HRG shareholders own circa 12% of Sainsbury's equity.
ShoreCap said it was "warmer than cooler" but needed firmer numbers before putting out a more definitive recommendation, based upon forecasts for the medium-term to allow us to move beyond its present 'hold' stance.
Although it did not take a view on the likelihood of the proposed deal taking place, Goldman Sachssaid its 'scenario analysis' suggested the deal would be reap an extra 18-30% earnings per share in year-three post deal at an achieved synergy range of £120-160m and depending on whether additional pension contributions are considered earnings dilutive.
Goldman retained its 12-month target of 185p on Sainsbury's stock, based on a discounted cash flow with an 8% discount rate and 1% terminal growth.
Nomura has already attributed £120m of synergies within its 280p Sainbury's target, anticipating £90m from occupancy, £60m from one-quarter of Argos rents being relocated but sales if anything gaining, £25m from central costs, and just £5m from Tu and from joint buying.
"We do not move to add the extra £40m, but note that if we did, it would add £360m - 15p per SBRY share - to our target," Nomura added.
Pharmaceuticals group Shire was the standout gainer on the FTSE 100 on Monday as Exane BNP Paribas said the stock looked too cheap.
The bank said it was selling its position in Swiss pharma company Roche and switching into Shire.
"Shire, on a forward P/E of just 12 for top line growth of 14% this year and EPS growth of 20% just looks too cheap," Exane said.
It said much of the cheapness was due to some disillusion with Shire's pursuit of Baxalta, which many investors see as diluting the company's long-term growth path and others see simply as a move to shift Shire's market capitalisation out of the M&A target zone.
"The transaction, around 2/3rds in shares, has also created a significant flow of risk-arbitrage short selling which has depressed the share price," Exane said.
Exane said that whatever management's reasoning is behind the deal, "it doesn't look such a bad long term move to us" and certainly not bad enough to justify a price/earnings to growth ratio of 0.6x.
It noted that by comparison, Roche - which has EPS growth forecast at 6% and a P/E of 17.5x - sports a PEG ratio of almost 3.
Shire announced in January that it had agreed a $32bn takeover of US-based Baxalta after a six-month pursuit.
The stock fell sharply in the wake of the deal announcement and is down around 15% year-to-date.
When Exane upgraded Shire to 'outperform' back
in January, it said the stock's valuation was compelling whether you liked the fundamentals of the deal or not.
It said in its note at the time:"We downgraded the stock following the first Baxalta bid on the basis that we were entering a prolonged period of uncertainty over price and timing. |
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