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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 jump on gains in big pharma and rally in oil prices London stocks advanced on Wednesday as oil prices regained strength and investors awaited the Federal Reserve's meeting minutes, which were due out later in the day.
Oil prices rose, lifted by a 'bullish' report on the state of weekly US stockpiles of commercial crude.
Hopes that global producers will agree to freeze output at a meeting on 17 April also helped things along. Kuwait, a major player within the Organization of the Petroleum Exporting Countries (Opec), expressed confidence that members and non-members of the bloc will move ahead with the proposal to curb production.
By the close of the trading session, Brent crude oil futures had climbed 4.87% to $39.81 per barrel and West Texas Intermediate was up 4.9% to $37.74 per barrel.
According to the US Energy Information Administration inventories of commercial crude oil dropped by 4.9m barrels over the week ending on 1 April.
Three-month copper futures finished the session 0.4% up on the day at $4,787.50 per metric tonne on the LME.
Gains in the commodity space saw the FTSE 100 end at 6,161.63, up by 70.40 points or 1.16% on the day. The FTSE 250 was up by a more modest 0.84% to 16,866.11.
To take note of, according to Bloomberg FTSE 350 companies were trading at 15.5 forward earnings, 7.0% more than Stoxx Europe 600 index members - the largest premium since 2007. Nevertheless, cable had fallen by nearly 4% year-to-date.
Acting as a backdrop, markets were looking ahead to minutes of the Federal Reserve's March policy meeting for more details behind the central bank's decision to keep interest rates unchanged.
Fed Chair Janet Yellen last Tuesday urged caution on raising interest rates amid concerns about global economic slowdown and low inflation.
Yellen's dovish remarks prompted many analysts to rule out a rate hike in April, however more hawkish comments from other policymakers has caused confusion.
"The decision at the last meeting to revise its forecasts for hikes this year from four to two was welcomed by the markets but now seems we're back in a position where the markets aren't even convinced we'll see a single rate hike this year," said Craig Erlam, senior market analyst at Oanda.
"Such is the conflicting comments coming from the different Fed officials on the economy and the outlook for interest rates that it's difficult to see where a consensus on a rate hike is going to come from."
To take note of, the US dollar fell below the 110.0 mark against the yen, closing off by 0.57% to 109.71. Meanhile, the pound hit an intra-day low on Wednesday at 0.81049 according to data from FXCM.
Elsewhere, German industrial production rose 1.3% year-on-year in February, beating expectations for a 0.4% increase, the Economy Ministry revealed.
Closer to home, UK car sales in March reached levels not seen since 1999, with 5.3% growth in the new car market. The Society of Motor Manufacturers and Traders said that almost 519,000 cars were registered last month, though growth in private car registrations slowed.
Big pharma shines bright as US competition authorities begin to act
Shares in pharmaceuticals companies Shire, AstraZeneca and GlaxoSmithKline rallied as analysts at Bank of America-Merrill Lynch said that the termination of Pfizer's agreement to buy Allergan might turn the London-listed firms into bid targets. A raft of US merger deals were facing incerased scrutiny from anti-trust regulators Stateside. Of possible interest, a recent piece from The Economist highlighted how a lack of effective anti-trust regulation in the US might have contributed to record corporate profits, due to the lack of sufficient competition among firms.
In company news, Glencore slumped as it confirmed it has agreed to sell 40% of its agriculture commodities business to the Canada Pension Plan Investment Board (CPPIB) for $2.5bn (£1.8bn) cash, potentially followed by a further sale of 20% more in the long-term.
EasyJet's shares descended after reporting its load factor decreased in March as hundreds of flights were cancelled due to industrial action. In parallel, a large rally in crude oil futures clipped the wings of rival IAG.
Analysts Elodie Rall, Rajesh Patki, Emily Biddulph and David Min upgraded their recommendation on shares of US-facing CRH from 'neutral' to 'overweight' and lifted their target from €26.0 to €29.0.
Cuts to capital expenditure budgets in the Oil&Gas space had only just begun and were beginning to filter through from the 'Upstream' segment into Mid and Downstream activities, Morgan Stanley said.
The team of analysts led by Robert J.Davies downgraded its recommendation on shares of Rotork to 'underweight' and cut its target to 155p while cautioning clients that shares in capital goods manufacturers were now more exposed to downside risks.
Tullow Oil gained after saying that it has successfully explored and appraised the Wisting South & Wisting West appraisal well in the Barents Sea, offshore Norway. |
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| Market Movers
FTSE 100 (UKX) 6,161.63 1.16%
FTSE 250 (MCX) 16,866.11 0.84%
techMARK (TASX) 3,143.78 1.50%
FTSE 100 - Risers
Shire Plc (SHP) 4,258.00p 5.16%
AstraZeneca (AZN) 4,127.50p 4.47%
Prudential (PRU) 1,310.50p 3.35%
Next (NXT) 5,410.00p 3.05%
GlaxoSmithKline (GSK) 1,461.50p 3.00%
Marks & Spencer Group (MKS) 420.40p 2.84%
United Utilities Group (UU.) 929.50p 2.54%
CRH (CRH) 1,980.00p 2.06%
Tesco (TSCO) 191.45p 2.03%
Barclays (BARC) 149.40p 2.01%
FTSE 100 - Fallers
easyJet (EZJ) 1,476.00p -3.02%
International Consolidated Airlines Group SA (CDI) (IAG) 535.00p -2.55%
Glencore (GLEN) 140.10p -1.23%
Whitbread (WTB) 3,809.00p -0.94%
Royal Bank of Scotland Group (RBS) 209.00p -0.76%
Capita (CPI) 1,031.00p -0.67%
Anglo American (AAL) 522.50p -0.61%
Inmarsat (ISAT) 983.00p -0.61%
Johnson Matthey (JMAT) 2,672.00p -0.30%
TUI AG Reg Shs (DI) (TUI) 1,045.00p -0.29%
FTSE 250 - Risers
Domino's Pizza Group (DOM) 1,069.00p 5.31%
Jimmy Choo (CHOO) 129.70p 5.02%
AA (AA.) 258.60p 3.49%
Zoopla Property Group (WI) (ZPLA) 260.40p 3.37%
Card Factory (CARD) 354.90p 3.32%
Sophos Group (SOPH) 214.30p 3.08%
Essentra (ESNT) 828.50p 3.05%
B&M European Value Retail S.A. (DI) (BME) 270.00p 3.02%
Moneysupermarket.com Group (MONY) 328.00p 3.02%
TR Property Inv Trust (TRY) 302.00p 3.00%
FTSE 250 - Fallers
Telecom Plus (TEP) 829.50p -6.06%
Rotork (ROR) 165.70p -4.27%
Morgan Advanced Materials (MGAM) 213.20p -1.94%
Vesuvius (VSVS) 313.60p -1.79%
Drax Group (DRX) 281.20p -1.71%
Genus (GNS) 1,520.00p -1.56%
Aldermore Group (ALD) 206.80p -1.48%
Allied Minds (ALM) 425.00p -1.41%
Brewin Dolphin Holdings (BRW) 265.70p -1.41% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Markets close higher ahead of Fed minutes European stocks ended the day in the black on Wednesday, having traded choppily throughout the day, as investors rode higher oil prices and encouraging data releases from China and Germany ahead of the Federal Reserve meeting minutes due in the evening.
At close, the benchmark Stoxx 600 index was up 0.74%, Germany's DAX was up 0.64% and France's CAC 40 was 0.81% higher.
Oil prices were also higher after the Kuwaiti governor for the Organization of Petroleum Exporting Countries, Nawal Al-Fuzaia, said he was confident both OPEC and non-OPEC members will go along with plans to cut crude output at the upcoming meeting in Qatar.
West Texas Intermediate was last up 4.45% to $37.56 a barrel and Brent crude was 3.96% higher at $39.43.
Sentiment was given a lift earlier in the day by news that China's service sector strengthened in March. The Caixin services purchasing managers' index rose to 52.2 in March from 51.2 the previous month, beating expectations for a reading of 51.4.
German data was also cheerier than expected, with figures from Destatis showing industrial production fell 0.5% in February following a revised 2.3% growth the month before, which was much better than the 1.8% drop economists had been expecting.
On the year, production rose 1.3%, which was down from a revised 1.8% in January but better than the 0.4% expected.
European indices seemed to recover from shakiness seen earlier in afternoon trading, with investors shifting their attention to the latest minutes from the Federal Open Market Committee meeting, due after the close at 1900 BST.
In a speech last week, chair Janet Yellen struck a dovish note, saying rate rises will be gradual and quashing market speculation of an April hike.
After Yellen's speech, however, comments from Fed officials James Bullard, Dennis Lockhart and John Williams were a lot more hawkish in tone.
"The FOMC minutes are often stale given the two-week lag but speculation of a rift between policymakers has increased the importance of the release in April," said CMC Markets market analyst Jasper Lawler.
"Strength in the euro, mostly because of dollar weakness has been a thorn in the side of European markets so a lot hangs on how the Fed communicates."
On the corporate front, Glencore was lower after saying it has agreed to sell 40% of its agriculture commodities business to the Canada Pension Plan Investment Board for $2.5bn (£1.8bn) in cash.
Pharmaceuticals companies Shire, AstraZeneca and GlaxoSmithKline rallied in London as investors bet that the termination of Pfizer's agreement to buy Allergan might make them bid targets.
Shares in H&M rose despite the Swedish retailer posting a 30% decline in first quarter net profit.
It was a bad day for airlines, however. Easyjet flew lower after the budget carrier reported a rise in passenger numbers in March but a drop in the load factor. |
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| | US Market Report | | US open: Stocks edge higher ahead of Fed meeting minutes US stocks opened higher on Wednesday ahead of the release of minutes from the Federal Reserve's latest meeting.
At 1434 BST, the Dow Jones Industrial Average rose 0.09%, the S&P 500 increased 0.14% and the Nasdaq gained 0.27%.
The market will be closely scrutinising the minutes of the Federal Open Market Committee's 15-16 March meeting at 1900 BST for more details behind the central bank's decision to keep interest rates unchanged.
The market will also be searching for clues on the timing of the next interest rate increase.
Fed Chair Janet Yellen last Tuesday urged caution on raising interest rates amid concerns about global economic slowdown and low inflation.
Yellen's dovish remarks prompted many analysts to rule out a rate hike in April, however more hawkish comments from other policymakers have caused confusion.
"The decision at the last meeting to revise its forecasts for hikes this year from four to two was welcomed by the markets but now seems we're back in a position where the markets aren't even convinced we'll see a single rate hike this year," said Craig Erlam, senior market analyst at Oanda.
"Such is the conflicting comments coming from the different Fed officials on the economy and the outlook for interest rates that it's difficult to see where a consensus on a rate hike is going to come from."
Meanwhile, oil prices were in the black after the Kuwaiti governor for the Organization of Petroleum Exporting Countries, Nawal Al-Fuzaia, expressed confidence that both OPEC and non-OPEC members will go ahead with plans to cut crude output at the upcoming meeting in Qatar.
West Texas Intermediate was up 2.3% to $36.76 a barrel and Brent crude was 1.9% higher at $38.61 at 1353 BST.
In economic data, the Mortgage Bankers' Association revealed US mortgage applications rose 2.7% in the week to 1 April.
Still to come, the Department of Energy releases its weekly US crude inventories data at 1530 BST.
On the company front, Pfizer's shares gained after the company confirmed on Wednesday that the merger agreement with Allergan has been terminated by mutual agreement after the US Treasury announced new measures to curb tax inversions.
In connection with the termination of the merger agreement, Pfizer has agreed to pay Allergan $150m for reimbursement of expenses associated with the transaction. |
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| | Broker Tips | | Broker tips: CRH, Cranswick, Rotork The gloom hanging over emerging markets might be lifting on a 'tactical' basis, but the poor outlook for cement prices in that geography was set to drive a wedge between European building materials firms exposed to them versus those with a greater relative footprint in the US and Europe, JP Morgan said.
Following on from the above, analysts Elodie Rall, Rajesh Patki, Emily Biddulph and David Min upgraded their recommendation on shares of CRH from 'neutral' to 'overweight' and lifted their target from €26.0 to €29.0.
In the same research note, they started coverage Travis Perkins and Wolseley at 'overweight' and placed targets on each one of them of 2,400p and 4,300p, respectively.
However, on SIG JP Morgan moved from a target of 150p to 140p, albeit while keeping its recommendation at 'neutral'.
Cement prices in most EM's showed quarter-on-quarter deterioration over the last three months of the year, JP Morgan pointed out.
Hence, it moved to cut profit estimates for the sector and marked-to-market its forecasts to take into account movements in foreign exchange markets.
Even after those revisions - and after having outperformed the market year-to-date - the sector was still trading on 8.2 times the broker's estimates for firms' enterprise value over earnings before interest, taxes, depreciation and amortisation (EV/EBITDA).
That EV/EBITDA multiple was 16% higher than the historical average.
As a result, JP Morgan told clients to take profits in Heidelberg Cement and took its recommendation on the stock down a peg, from 'overweight' to 'neutral', while trimming its target from €83.0 to €79.0.
"We would play the sector through CRH (OW),St.Gobain (OW) and Wolseley (OW) overHeidelbergCement (N) and Lafarge Holcim (N) for the large caps."
Cranswick's target was lifted by Numis to 2,202p from 1,900p after the food producer reported a pre-close trading update.
The company said on Tuesday that it will report a trading performance for the year to the end of March in line with its expectations following continued positive trading in the final quarter of the year.
Cranswick, which is due to release its full year results on 24 May, said total full year sales volumes were 12% higher than the previous year.
Full year underlying sales volumes rose 10%, with corresponding revenues up 5% as customers and UK consumers benefited from lower pork prices.
"The impression gained post the third quarter update was that there was a desire to sustain the 10% like-for-like increase for volume for the entire full year, despite the tougher comparative in the fourth quarter. This has been achieved, with the exit run rate indicated to have been good too," Numis said.
Cranswick said it invested well in excess of £30m across its asset base in the last financial year to support future growth and drive further operating efficiencies - a level of investment that is expected to continue through the current year.
The company said it was "in a strong financial position", with committed, unsecured facilities of £120m "which provide comfortable headroom".
"The shares trade on a far higher than usual rating, so good news was discounted and we are projecting pre-tax profit of £69.8m for this full year" whereas as per Fidessa most estimates are in the £66.4-68.1m range," Numis said.
"Low pig meat prices may not last forever too, although this is a strongly-managed concern with a 25- year dividend growth record and a history of successful 'buy and build' deals."
Numis reiterated it's 'hold' rating for the stocks.
Cuts to capital expenditure budgets in the Oil&Gas space had only just begun and were beginning to filter through from the 'upstream' segment into Mid and Downstream activities, Morgan Stanley said.
There had been about $90bn of recent deferrals announced, the broker pointed out.
Indeed, Morgan Stanley's proprietary capex tracker was pointing to about a 20% year-on-year fall in mid/downstream spend in 2016 - for the first time ever.
For that reason, the analyst team led by Robert J.Davies downgraded its recommendation on shares of Rotork to 'underweight' and cut its target to 155p while cautioning clients that shares in capital goods manufacturers were now more exposed to downside risk.
Stocks in the oil services patch were trading at about a 20% discount to their historical troughs on a price-to-book value basis, whereas Morgan Stanley's engineering universe was still trading on approximately a 55.0% premium.
"CapGoods' PE valuation have reverted to levels consistent with approximately $100 oil," Davies and his team said in a research note sent to clients.
Morgan Stanley also reiterated its underweight stance on shares of Alfa Laval, Smiths, andMetso, but remained at equal-weight on IMI, although it reduced its target to 960p.
The broker also stuck to its equal-weight view on upstream-exposed Weir, highlighting its preference for the shares as compared to IMI, Rotork and Smiths as its earnings revisions had already been much higher - at about 60.0% - and the analyst consensus was already just for 'break-even' for the company's Oil&Gas margins as opposed to about 20% at the likes of Rotork orSmiths.
"Even if oil rallies we see limited benefits for CapGoods stocks relative to Oil Services." |
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