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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 drop ahead of ECB meeting London stocks slid on Monday despite a rally in oil prices as investors played it cautious ahead of the European Central Bank's policy decision.
The ECB is facing pressure to do more to boost the economy before its policy meeting on Thursday amid prolonged low inflation, losses at European banks and risks stemming from a slowdown in emerging markets. Economists expect the ECB will cut the deposit facility rate by 13 basis points, announce a six-month extension to the quantitative easing programme and a €10bn (£7.72bn) increase in the pace of monthly asset purchases.
"There is a chance this kind of jittery trading will continue until Mario Draghi puts the market out of its misery and reveals, for better or for worse, what 'whatever it takes' actually means this time around," said Connor Campbell, financial analyst at Spreadex.
Adding to nerves before the ECB meeting, the Bank of International Settlements (BIS) said markets were losing faith in the "healing powers" of central banks to support the global economy.
Head of the BIS monetary and economics department, Claudio Borio, said in the Swiss-based bank's latest quarterly report that central banks are running out of tools to tackle sluggish growth as interest rates are taken negative. Bario added that mounting debt, particularly in emerging markets, pointed to a "gathering storm".
According to Sentix's forward-looking survey, Eurozone investor confidence is expected to fall in March amid concerns about the global economy. The index measuring Eurozone investor confidence fell to 5.5 in March from 6.0 a month earlier. Analysts had forecast a reading of 8.3.
Another report from Destatis showed German factory orders fell 0.1% in January from a month ago, although better than the 0.3% decline that was forecast by analysts.
Meanwhile, a surge in oil prices failed to lift equities. Brent crude reached $40.15 per barrel at 1643 GMT, up 3.5% on the day and trading at its highest level since early December. West Texas Intermediate jumped 3.5% to $37.26 per barrel.
In company news, shares in Randgold Resources slid after Morgan Stanley cut its rating on the stock to 'equalweight' from 'overweight'. The bank noted Randgold's shares are up 53% year-to-date and said it was time to take profits.
Standard Chartered was under the cosh after Moody's downgraded its rating on the emerging markets-focused bank's long-term debt by one notch to Aa2. It pointed to expectations the lender's profitability would remain weak over the next two years and the challenging environment in some of the markets in which it operates.
Old Mutual jumped amid reports that it was planning a £9bn split into numerous standalone companies, which could lead to a takeover battle for some of its biggest operations. The company responded to reports by saying that "all options for the strategic review are being considered, but no decision has yet been made".
WPP advanced after buying a majority stake in the holding company of digital agency Potato through its digital services agency, AKQA.
Still to come, the US sees Federal Reserve policymakers Lael Brainard and Stanley Fischer speak at separate events after the closing bell. |
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| Market Movers
FTSE 100 (UKX) 6,178.13 -0.34%
FTSE 250 (MCX) 16,811.51 -0.71%
techMARK (TASX) 3,111.96 -0.81%
FTSE 100 - Risers
Antofagasta (ANTO) 592.50p 7.63%
Old Mutual (OML) 192.60p 7.18%
Glencore (GLEN) 170.75p 6.72%
Anglo American (AAL) 628.10p 6.10%
Rio Tinto (RIO) 2,237.00p 5.02%
BHP Billiton (BLT) 897.80p 3.46%
St James's Place (STJ) 888.00p 3.38%
ITV (ITV) 233.90p 1.39%
Standard Life (SL.) 356.70p 1.36%
Sainsbury (J) (SBRY) 270.50p 1.24%
FTSE 100 - Fallers
Randgold Resources Ltd. (RRS) 6,415.00p -3.02%
Worldpay Group (WI) (WPG) 291.90p -2.73%
RSA Insurance Group (RSA) 438.20p -2.34%
Whitbread (WTB) 3,722.00p -2.13%
Provident Financial (PFG) 3,198.00p -1.90%
InterContinental Hotels Group (IHG) 2,684.00p -1.86%
Land Securities Group (LAND) 1,041.00p -1.79%
Merlin Entertainments (MERL) 448.00p -1.78%
3i Group (III) 437.20p -1.77%
Reckitt Benckiser Group (RB.) 6,423.00p -1.77%
FTSE 250 - Risers
Evraz (EVR) 97.15p 11.54%
Polymetal International (POLY) 728.50p 3.85%
Vedanta Resources (VED) 381.20p 3.42%
Poundland Group (PLND) 173.70p 3.39%
Hastings Group Holdings (HSTG) 164.60p 3.07%
Indivior (INDV) 163.90p 3.02%
Aggreko (AGK) 1,041.00p 2.97%
CLS Holdings (CLI) 1,561.00p 2.90%
OneSavings Bank (OSB) 290.80p 2.76%
Just Retirement Group (JRG) 140.00p 2.49%
FTSE 250 - Fallers
Just Eat (JE.) 383.30p -9.62%
Mitie Group (MTO) 272.30p -7.41%
Genus (GNS) 1,447.00p -4.68%
Dunelm Group (DNLM) 953.00p -4.41%
Howden Joinery Group (HWDN) 460.30p -3.78%
DFS Furniture (DFS) 311.90p -3.50%
Berendsen (BRSN) 1,139.00p -3.23%
Debenhams (DEB) 76.25p -2.99%
Jupiter Fund Management (JUP) 407.20p -2.86% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Profit-taking in banks and oil stocks weigh on markets European stocks were weighed down by profit-taking in bank and oil sector stocks on Monday, as investors' focus began to shift to this week's European Central Bank meeting.
The benchmark DJ Stoxx Europe 600 index slipped 0.25%, while Germany's DAX and France's CAC 40 ended the day with losses of 0.46% and 0.32%, respectively.
Crude oil futures were in the black, with West Texas Intermediate gaining 4.1% to $37.46 a barrel as of 16:47GMT and Brent futures up by an identical percentage to $40.38.
Despite those advances, the Stoxx 600 sub-index of Oil&Gas stocks closed up by just 0.27% to 272.97, although the sector gauge for Basic Resource companies fared better, clocking in with an advance of 3.02% to 292.91.
The Stoxx 600 sub-index for bank stocks retreated 1.01% to 153.81 points.
Over the weekend, China outlined plans for an economic expansion of between 6.5% to 7% this year, down from last year's target of around 7%.
Nonetheless, an increase in the target for China's public spending deficit in 2016 to 3.0%, up from last year's level of 2.3%, and plans to cut overcapacity in the country's steel industry led to a so-called 'short-squeeze' in iron futures, which jumped 19% on Monday - the largest one day gain since 2009 - to ht $63.74 per tonne.
In corporate news, shares in EDF tumbled after the French energy company confirmed that chief financial officer Thomas Piquemal has quit.
Although the group did not give a reason for his exit, a media report over the weekend suggested he was leaving due to concerns over the Hinkley Point nuclear plant.
German chemicals group BASF turned around late in the day to trade higher after a poor start to the session on the heels of a report it was considering a counter bid for US rival DuPont, which has already agreed a merger with Dow Chemical.
In London, Barclays was under the cosh after Deutsche Bank cut its rating on the stock to 'hold' from 'buy', while Anglo American slid after UBS downgraded it shares to 'sell' from 'neutral'.
On the upside, Old Mutual surged after the insurer said it was considering all the options available under its strategic review amid media reports it was planning a multi-billion pound break-up.
Earlier, data from Destatis showed German manufacturing orders slipped 0.1% in January from the previous month amid lower domestic demand. Although this was not as bad as the 0.3% drop economists had been expecting, Pantheon Macroeconomics said the figures highlighted sluggish manufacturing.
The focus this week will be on the ECB rate announcement and ensuing press conference on Thursday.
Deutsche Bank said expectations are once again running high ahead of the meeting but some caution is warranted.
It said the market was pricing in a 13 basis points facility cut, a six-month extension of quantitative easing and a €10bn increase in the pace of QE. |
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| | US Market Report | | US open: Equities track declines in Europe ahead of ECB meeting US stocks tracked declines in Europe on Monday, snapping three weeks of gains despite a rebound in oil prices.
At 1430 GMT, the Dow Jones Industrial Average fell 0.24%, the S&P 500 shed 0.45% and the Nasdaq lost 0.55%.
An increase in oil prices did little to boost equities with Brent crude rising 1.14% to $39.17 per barrel and West Texas Intermediate increasing 1.18% to $36.35 per barrel at 1424 GMT.
"This afternoon will likely see US markets replicate the aimless moves witnessed in Europe so far this morning," said Chris Beauchamp, senior market analyst at IG.
"The temptation to go short after such a strong bounce remains high, especially given the close below 2000 on the S&P 500 on Friday, but beneath the surface investors still don't seem confident about the longevity of the rally. This, therefore, is perhaps the strongest argument as to why we will go higher from here."
There are no major data releases due on Monday but investors will keep a close eye on speeches from Federal Reserve vice chair Stanley Fischer and Fed governor Lael Brainard later in the day for any clues on the health of the US economy ahead of the rate decision on 16 March.
The main regional indices in Europe were on the back foot as investors booked some profits following recent gains and shifted their focus to the European Central Bank rate announcement on Thursday.
The market is pricing in a 13 basis points deposit facility cut, a six-month extension of the quantitative easing programme and a €10bn increase in the pace of monthly asset purchases.
Adding to investors' nervousness before the ECB meeting, the Bank of International Settlements (BIS) said markets were losing faith in the "healing powers" of central banks to support the global economy.
Head of the BIS monetary and economics department, Claudio Borio, said in the Swiss-based bank's latest quarterly report that central banks are running out of tools to tackle sluggish growth as interest rates are taken negative. Bario added that mounting debt, particularly in emerging markets, pointed to a "gathering storm".
"The latest turbulence has hammered home the message that central banks have been overburdened for far too long post-crisis," Borio said.
"We may not be seeing isolated bolts from the blue, but the signs of a gathering storm that has been building for a long time."
In Asia, China's National People's Congress (NPC) cut its economic targets over the weekend to between 6.5% and 7%. This was down from last year's target of around 7%.
The Nikkei 225 closed in the red but China's Shanghai Composite ended up after officials outlined plans to bolster the country's flagging growth.
On the corporate front, DuPont gained following media reports BASF is considering a counterbid for the US firm, which agreed a merger with Dow Chemical last year. |
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| | Broker Tips | | Broker tips: Barclays, LSE, Standard Chartered Deutsche Bank downgraded Barclays to 'hold' from 'buy' and cut its price target to 180p from 255p, saying the stock was more now more of an investment case for 2017-18 rather than 2016.
It said that Barclays' strategic update, whilst necessary to strengthen the capital position and simplify the group, has reset the clock.
"We think the acceleration of noncore reduction, with accompanying actions on the dividend make strategic sense, and should drive group return on tangible equity closer to core RoTE," DB said.
However, it said the reality is that following the fourth quarter results and the sale of the Africa business, both group and core earnings per share are lower than previously forecast - now 21.5p and 23.6p respectively for 2018 - while better news on capital will likely be back-loaded into 2017/18.
DB noted that Barclays now intends to pay a dividend of 3p for this year and the next, paid semi-annually from 2016 rather than quarterly.
Deutsche estimates around 8% dilution to core earnings from the sell-down of Barclays Africa.
In addition, it said a more challenging Investment Banking environment, including potentially higher impairment charges than cyclically low-2015 levels, is likely to weigh against continued growth in Barclaycard, Personal and Corporate Banking.
"This is despite Barclays IB's relative bias to Macro which should hold it in better stead versus peers, and our expectation that costs will continue to fall in the core."
The German bank said was Barclays is inexpensive at 0.6x tangible NAV, but trades at 7.7x 2018 group EPS, and has limited near-term dividend support.
Credit Suisse upped its target on London Stock Exchange to 3,350p from 2,900p to reflect the value of cost synergies accruing to LSE shareholders from the proposed merger with Deutsche Boerse on its estimates.
The bank retained its 'outperform' rating on the stock, pointing to the potential for further upside to the target in the event of a superior counterbid.
"The proposed merger between LSE and DB1 and a subsequent announcement from ICE that it is considering a counterbid for LSE serve as timely reminders of the strategic logic of exchange consolidation," it said.
CS said what makes LSE particularly appealing is that its majority-owned clearing house, LCH Clearnet, has a key role in determining the long-term winner in European futures markets.
"For this reason, the owners of Europe's two largest futures exchanges (DB1/ICE) could battle for control."
The bank said that with LSE shares trading at a 10% premium to the Deutsche Boerse merger terms, market participants have high expectations of a better counterbid.
CS reckons Deutsche Boerse can up its game by including a cash sweetener but said this would rule out a nil premium all share merger-of-equals and assumes the ratings agencies will relax a gross leverage ceiling of 1.5x which currently applies to DB1 at a group level.
The bank said that if a bidding war materialises, this may lead to a re-appraisal of strategic options for other European market infrastructure providers and further consolidation is a possibility.
"Our preferred way to play this is via ICAP which we believe is most significantly undervalued in a takeout scenario. While DB1 could become a target itself, domestic government opposition to a takeover remains a significant hurdle in our view."
Moody's downgraded its rating on Standard Chartered's long-term debt on expectations the lenders' profitability would remain weak over the next two years and the more "challenging environment" in some of the markets in which it operates.
The ratings agency said: "the group is implementing a number of initiatives to reduce its credit risk and restore its profitability, including a reduction in risky exposures and a downsizing of its operations in some of its less profitable markets.
"However, Moody's expects profitability to remain weak for at least two years, and the operating environment in some of the markets in which Standard Chartered operates has become more challenging."
StanChart's senior unsecured debt rating was lowered by one notch from Aa2 to Aa3, with a 'negative' outlook, although the ratings on the bank's short-term deposits and debt was unchanged at P-1.
Asia-focused StanChart's asset quality and profitability had deteriorated "significantly" in 2015, due to its exposure to commodities and India, Moody's explained. |
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