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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: Poor China data leads London lower London stocks closed in the red on Tuesday, after gloomy data from China and a decline in oil prices drove commodity linked equities lower.
The FTSE 100 closed down 0.97% to 6,122.33 points, and the FTSE 250 shed 1.04% to 16,656.27.
The mining sector was among the worst-hit on Tuesday, thanks to its exposure from major metals-buyer China. Data from the country showed exports fell 25.4% year-on-year in February, much wider than the median expectation of 15%.
Imports also fell by 13.8%, which suggested an ongoing slowdown in domestic demand in the People's Republic.
"[This is the] kind of ugly reminder of China's spluttering economy investors certainly don't need at the moment, something that likely makes it even harder for [ECB president] Mario Draghi to provide the markets with something to cheer about on Thursday," said Spreadex financial analyst Connor Campbell.
Platinum producer Anglo American slumped 15.24% to 532.4p, Antofagasta was down 10.13% to 532.5p, and iron ore giant BHP Billiton lost 8.57% in London to 820.9p.
Oil prices pulled back during the day, with Brent crude last down 1.85% to $40.07 and West Texas Intermediate down 2.46% to $36.99 per barrel.
That led to BP shares losing 3.39% to 353.15p, and Royal Dutch Shell shedding 1.19% to 1,654p in London.
On the upside, luxury brand Burberry rose 6.27% to 1,457p after the Financial Times reported that an unknown investor had built up a near 5% stake in the company.
The company had requested help from its financial advisers over concern at the potential for a takeover bid, the FT said.
Earlier in the day, Bank of England governor Mark Carney told the Treasury select committee that while there was a financial risk to Britain staying in the EU, leaving was a larger one. He stressed that the central bank was not making any formal recommendation on the Brexit debate.
In company news, payments processor Worldpay, which listed on the London Stock Exchange last year, was under the cosh despite saying it swung to a pre-tax profit of £19.1m in 2015 compared with a £47.1m loss the previous year. Credit Suisse said the results were solid and in line with consensus expectations but may struggle to match investor expectations going into the numbers.
Supermarket retailer Tesco rose as data from Kantar Worldpanel showed sales fell 0.8% in the 12 weeks to 28 February, which was a marked improvement from the 1.6% drop revealed a month earlier.
Fixed line telephone and broadband provider TalkTalk was also on the up, as CEO Dido Harding admitted that the security threat to the company was underestimated before a cyber attack last November. That attack cost the company 95,000 customers and more than £60m, with its share price more than halving from its 2015 peak by the end of last year.
Vedanta Resources was falling after Moody's downgraded the stock's corporate family rating to B2 from Ba2. It also downgraded the company's senior unsecured rating to Caa1 from B1, and said the outlook on all ratings was negative.
The pound was weaker against the greenback late in the day, and was last worth $1.4212. |
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| Market Movers
FTSE 100 (UKX) 6,122.33 -0.97%
FTSE 250 (MCX) 16,656.27 -1.04%
techMARK (TASX) 3,099.80 -0.50%
FTSE 100 - Risers
Burberry Group (BRBY) 1,463.00p 6.71%
Tesco (TSCO) 195.45p 1.90%
GlaxoSmithKline (GSK) 1,398.00p 1.67%
Inmarsat (ISAT) 943.00p 1.62%
Next (NXT) 6,655.00p 1.53%
CRH (CRH) 1,921.00p 1.05%
Capita (CPI) 1,029.00p 0.98%
National Grid (NG.) 949.70p 0.98%
AstraZeneca (AZN) 4,052.50p 0.90%
Unilever (ULVR) 3,108.00p 0.68%
FTSE 100 - Fallers
Glencore (GLEN) 139.90p -18.07%
Anglo American (AAL) 533.30p -15.09%
Antofagasta (ANTO) 531.50p -10.30%
Rio Tinto (RIO) 2,021.00p -9.66%
BHP Billiton (BLT) 821.70p -8.48%
Worldpay Group (WI) (WPG) 276.00p -5.45%
Ashtead Group (AHT) 859.00p -4.13%
Fresnillo (FRES) 916.00p -3.73%
BP (BP.) 353.35p -3.34%
Berkeley Group Holdings (The) (BKG) 2,938.00p -2.97%
FTSE 250 - Risers
TalkTalk Telecom Group (TALK) 249.60p 4.79%
CLS Holdings (CLI) 1,604.00p 2.75%
John Laing Group (JLG) 219.00p 2.62%
Rank Group (RNK) 252.90p 2.55%
Mediclinic International (MDC) 929.00p 2.48%
NMC Health (NMC) 906.50p 2.31%
DFS Furniture (DFS) 314.20p 2.15%
Debenhams (DEB) 77.80p 2.03%
Jimmy Choo (CHOO) 133.90p 1.59%
John Laing Infrastructure Fund Ltd (JLIF) 118.00p 1.55%
FTSE 250 - Fallers
Vedanta Resources (VED) 329.10p -13.67%
Tullow Oil (TLW) 205.60p -7.64%
Amec Foster Wheeler (AMFW) 460.60p -6.63%
Close Brothers Group (CBG) 1,294.00p -6.50%
BBA Aviation (BBA) 194.80p -5.02%
Allied Minds (ALM) 350.00p -5.02%
Acacia Mining (ACA) 274.40p -4.99%
Wood Group (John) (WG.) 636.00p -4.14%
Millennium & Copthorne Hotels (MLC) 415.90p -3.82% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Analysts, IMF call for bold action European stocks fell on Tuesday, with basic resources suffering the brunt of the losses following disappointing data from China and as investors chose to focus on the negatives on Tuesday. The benchmark DJ Stoxx Europe 600 index finished down by 1.01%, Germany’s DAX was off by another 0.88% and France’s CAC slid 0.86%. Speaking in Washington DC, IMF deputy managing director David Lipton warned global authorities against the risks of inaction and called for structural reforms and fiscal stimulus from those countries whoch could afford it. He quoted Winston Churchill's famous maxim, “I never worry about action, but only inaction.” "This is one of those moments where action — concerted action — is needed," Lipton said. Nomura downbeat on China Shares in basic resource companies – which are highly dependent on Chinese demand – dropped sharply after data showed China’s trade performance last month was much worse than economists had been expecting, with exports and imports down more than forecast. The DJ Stoxx 600 sector gauge plummeted 9.18% to 266.15 points. Chinese exports fell 25.4% from the previous year to $126.1bn, compared with January’s 11.2% contraction. Imports, meanwhile, were down 13.8% to $93.5bn, compared with an 18.8% drop the previous month. Most economists put the fall in exports down to negative-base effects, telling clients they expected an improvement over coming quarters. Analysts at Nomura, on the other hand, stuck to their negative view. "Overall, today's trade data, together with high-frequency data and leading indicators, suggest that growth momentum weakened further in January-February," they said. "We maintain our forecast of real GDP growth slowing to 5.8 percent in 2016 from 6.9 percent in 2015." Oil prices also retreated after Kuwait said it would only agree to freeze output if all major producers take part. West Texas Intermediate crude oil futures fell 2.91% to $36.83 a barrel. The Stoxx 600 sub-index for oil and gas on the other hand surrendered 2.5% to finish the dat at 266.67. Goldman Sachs said in a research note that the commodity rout was not over. “In the current supply-driven market, demand hasn’t really changed, it takes lower prices to push and keep supply below demand to create a deficit. As a result, higher prices are much harder to sustain in a supply-driven market since supply is primed to return with higher prices,” the bank said. ECB must move decisively Acting as a backdrop, speaking on Bloomberg TV the FT's Wolfgang Munchau repeated a call for the European Central Bank to announce on Thursday it would purchase bad loans from banks and to push for M&A in the sector. Those two moves would then pave the way for cuts in the ECB's deposit rate. On the corporate front, Casino was in the red after US research firm Muddy Waters put out another scathing note on the French supermarket retailer. Payment processor Worldpay, which listed on the London Stock Exchange last year, was under the cosh despite saying it swung to a pre-tax profit of £19.1m in 2015 compared with a £47.1m loss the previous year. On the upside, shares in advertising agency WPP edged lower after it put out a brief update in response to demand from investors and analysts saying like-for-like revenue and net sales growth were both “well over 3%” in February. Luxury goods brand Burberry was a high riser following a press report it was seeking help to fight off a takeover bid. On the data front, Eurostat revealed the Eurozone economy grew in line with analysts’ expectations in the fourth quarter. Gross domestic product was confirmed at 0.3% quarter-on-quarter growth in the last three months of 2015, unchanged from the previous estimate. Compared with the same quarter a year earlier, seasonally adjusted GDP increased 1.6% in the euro-area, up slightly from an earlier estimate of 1.5% year-on-year growth. Analysts had expected no change. Data released earlier by the Economy Ministry showed German industrial production rose the most in more than six years in January, underpinned by strong domestic demand. Adjusted for seasonal swings, industrial production rose 3.3% from the previous month following a 0.3% drop in December, beating economists’ expectations of a 0.5% increase. On the year, industrial production was up 2.2%, also beating forecasts. |
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| | US Market Report | | US open: Stocks decline as Chinese data disappoints US stocks were in the red after worse-than-expected Chinese trade data.
At 1430 GMT, the Dow Jones Industrial Average fell 0.48%, the S&P 500 shed 0.55% and the Nasdaq lost 0.60%.
Chinese exports plunged 25.4% in February from a year earlier, marking the biggest slump in more than five years and compared to analysts' expectations for a 14.5% drop.
Imports decreased 13.8% year-on-year, more than forecasts for a 12% slide.
China's trade surplus narrowed in February to $32.59bn from $63.29bn in January, below estimates for a $51.25bn surplus.
"Chinese trade data showed February exports plunged 25.4% which has spooked markets already concerned about slowing global growth rather than adding to hopes of more stimulus from Beijing (too much work to do for policy makers?)," said Mike van Dulken and Augustin Eden at Accendo Markets.
"However, the Lunar New Year holiday may have interfered with the data."
Oil prices turned positive, offering US equities some relief.
West Texas Intermediate crude rose 0.02% to $37.91 per barrel and Brent increased 0.46% to $41.03 per barrel at 1425 GMT.
However, Goldman Sachs said the recent surge in commodity prices was not sustainable and the rout was not over.
"In the current supply-driven market, demand hasn't really changed, it takes lower prices to push and keep supply below demand to create a deficit. As a result, higher prices are much harder to sustain in a supply-driven market since supply is primed to return with higher prices," the bank said.
A report on US crude oil inventories from the Department of Energy will be in focus amid concerns about the supply glut.
In corporate news, Shake Shack shares tumbled after the burger chain reiterated its expectations of slower sales growth this year.
On the upside, though, retailer Urban Outfitters surged after its fourth quarter results beat analysts' expectations. |
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| | Broker Tips | | Broker tips: Fastjet, Meggitt, Admiral Liberum downgraded African budget airline Fastjet to 'hold' from 'buy' and slashed the price target to 45p from 90p following a "disappointing" trading update, which has led the brokerage to cut its 2016 and 2017 forecasts.
Liberum now expects a $20m loss in 2016, compared with a $1.4m profit previously. Breakeven is now pushed back to next year, with the brokerage's estimates assuming a return to the previous expansion plan one year later than before.
It said the outlook for Fastjet remains uncertain and management has flagged the possibility of a fundraising to provide additional balance sheet headroom.
"We consider the long-term opportunity in African aviation to remain intact, and the low cost model has become dominant in all other major markets. For now, this is outweighed by the short-term uncertainty."
Liberum pointed out that the roll-out of Fastjet's route network has not gone completely according to plan, with certain international routes and new bases delayed.
In addition, trading conditions have been tougher than expected, with headwinds from the hiatus in government activity that followed the Tanzanian elections and currency devaluations.
Nevertheless, "Fastjet is still positioned to be the leading Pan-African operation with a focussed low cost model that has proven highly successful on every other continent in the world," Liberum said.
Meggitt's shares dipped on Tuesday after Investec cut its rating to 'add' from 'buy'.
Investec said it changed its rating on the aerospace engineer's stock "given recent share price appreciation".
The broker raised its target to 440p from 420p, saying that management's actions to address an evolving aftermarket and a conservative resetting of expectations have helped restore confidence.
The recently created Customer Service and Support (CSS) organisation "should help address the challenges to the aftermarket business model from increased use of second hand spares by airlines and lessors", Investec said.
Investec raised its 2016 earnings per share forecast by 4% to reflect updated profit and cash guidance.
"The Civil aero aftermarket is the largest single driver of profit growth," said Investec analysts Rami Myerson and Chris Dyett.
"We assume civil aftermarket grows by 3% on an organic basis in 2016 and accelerates to 5% in 2017, as CSS drives faster aftermarket growth."
In February's 2015 full year results, Meggitt said the outlook for our civil markets was encouraging, with growth in the production of large jets. The group expects organic revenue growth in 2016 of low single digit percentage points, in line with the guidance given in December.
The acquisitions of EDAC and the composites businesses of Cobham in the fourth quarter are expected to boost revenue.
Nomura upgraded Admiral to 'buy' from 'neutral' and lifted the price target to 2,325p from 1,630p as it took a look at UK non-life insurers.
The Japanese bank's two key reasons for upgrading the stock are exposure to rising UK motor rates and the potential to pay out excess capital return above guidance.
The new target, meanwhile, incorporates a better earnings outlook, a lower cost of equity and a terminal growth rate of 2.5%.
Nomura kept RSA Insurance at 'buy' and lifted the price target to 510p from 495p, saying the group could over-deliver on restructuring, which could lead to earnings per share upgrades of 20% in 2018.
The bank maintained its 'neutral' stance and 400p price target on Direct Line Group.
It said that while DLG provides the highest yield, there is more upside to the base case for Admiral on special dividends, while Admiral is also relatively more exposed to UK motor.
Meanwhile, RSA offers more upside potential on restructuring than DLG.
On Admiral, it said: "The stock de-rated in the wake of reserve strengthening due to bodily injury claims in 2011 (which ultimately proved to be too conservative) and then additional regulatory headwinds and UK motor rate declines. |
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