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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: FTSE ends lower after worse-than-estimated PMIs The FTSE 100 ended lower on Friday after manufacturing data in the eurozone and in the US missed forecasts.
Markit's purchasing managers' index on Eurozone manufacturing fell to 51.5 in April from 51.6 in March, falling short of estimates of 51.9. A reading above 50 signals an expansion in sector activity while a level below that indicates a contraction.
The PMI on Eurozone services also trailed expectations, rising to 53.2 in April from 53.1 in March, instead of the 53.3 that was predicted by analysts.
"Overall, the PMIs' message of stationarity confirms the message from other data that gross domestic product growth in the Eurozone has settled at about 0.3%-to-0.4% quarter-on-quarter in recent quarters," according to Pantheon Macroeconomics.
Stateside, Markit's PMI on US manufacturing fell to 50.8 in April from 51.5 in March, compared to analysts' projections of 52.0.
"A below expectations performance by US manufacturing will be cause for concern, particularly among those who had predicted the sector was heading towards growth," said Dennis de Jong, managing director a UFX.com.
"The challenge for Janet Yellen and her colleagues at the Fed will be to build some momentum for a sector which has stubbornly avoided significant growth in recent months."
The Federal Reserve is due to announce its latest policy decision next Wednesday when it is expected to keep interest rates unchanged.
Elsewhere, international lenders told Greece on Friday to prepare a package of additional savings measures as part of its reforms to help pave the way for more debt relief.
"We came to the conclusion that the policy package should include a contingent package of additional measures that would be implemented only if necessary to reach the primary surplus target for 2018," the chairman of euro zone finance ministers Jeroen Dijsselbloem told a news conference in Amsterdam after the ministers met.
In company news, mining stocks were the biggest fallers on the FTSE 100 including Glencore, Anglo American and Rio Tinto.
BHP Billiton's shares were also under pressure after saying it did not expect recent rise in iron ore and metallurgical coal prices to hold for more than a few months, as more low cost supply is set to hit the market.
Paddy Power Betfair continued to traipse lower for the third successive day after negative comments on the newly merged bookmaker from Credit Suisse earlier in the week.
Of the risers, the residential construction sector was building momentum, thanks in part to a positive note on the builders from broker Liberum, which upgraded Barratt Developments and Persimmon to 'hold' as it toned down its caution on the sector. Having come over all of a quiver on housebuilders in November due to stretched valuation and fears of margin pressure, Liberum was feeling more relaxed on the sector after its shares since subsided 13% due to worries about Brexit and prime London property.
Sainsbury's also rallied after a rating upgrade to 'buy' from Deutsche Bank - a sign those in the City were warming to the grocer's mammoth takeover of Argos.
Tesco edged higher after Fitch upgraded its outlook on the recovering retail giant from 'negative' to 'stable'. |
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| Market Movers
FTSE 100 (UKX) 6,310.44 -1.11%
FTSE 250 (MCX) 16,871.46 -0.64%
techMARK (TASX) 3,120.99 -1.02%
FTSE 100 - Risers
Travis Perkins (TPK) 1,828.00p 1.22%
Sainsbury (J) (SBRY) 292.20p 1.18%
Tesco (TSCO) 186.60p 0.86%
Barratt Developments (BDEV) 514.00p 0.78%
Kingfisher (KGF) 363.30p 0.53%
Persimmon (PSN) 1,886.00p 0.21%
Whitbread (WTB) 3,889.00p 0.21%
Hargreaves Lansdown (HL.) 1,301.00p 0.15%
Randgold Resources Ltd. (RRS) 6,525.00p 0.15%
Dixons Carphone (DC.) 419.70p 0.14%
FTSE 100 - Fallers
Paddy Power Betfair (PPB) 8,375.00p -3.90%
Land Securities Group (LAND) 1,071.00p -3.34%
Glencore (GLEN) 161.30p -3.27%
Rio Tinto (RIO) 2,329.00p -3.14%
Smith & Nephew (SN.) 1,121.00p -2.78%
Old Mutual (OML) 193.20p -2.77%
Carnival (CCL) 3,462.00p -2.75%
Mondi (MNDI) 1,281.00p -2.73%
Associated British Foods (ABF) 3,140.00p -2.70%
GKN (GKN) 291.90p -2.67%
FTSE 250 - Risers
Ted Baker (TED) 2,423.00p 6.74%
Clarkson (CKN) 2,462.00p 3.75%
Ophir Energy (OPHR) 82.85p 3.24%
Telecom Plus (TEP) 900.50p 2.50%
CLS Holdings (CLI) 1,544.00p 2.25%
Beazley (BEZ) 333.00p 1.99%
QinetiQ Group (QQ.) 224.20p 1.96%
Tullett Prebon (TLPR) 348.50p 1.84%
Saga (SAGA) 205.00p 1.79%
Debenhams (DEB) 79.80p 1.79%
FTSE 250 - Fallers
Mitchells & Butlers (MAB) 270.50p -4.38%
Hays (HAS) 128.20p -3.68%
Petrofac Ltd. (PFC) 870.00p -3.49%
Essentra (ESNT) 860.00p -3.48%
Smith (DS) (SMDS) 383.00p -3.48%
Moneysupermarket.com Group (MONY) 303.30p -3.47%
LondonMetric Property (LMP) 157.60p -2.60%
Victrex plc (VCT) 1,539.00p -2.59%
Elementis (ELM) 228.50p -2.48% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks move lower as investors ponder next moves from the Fed and BoJ Stocks moved lower going into the weekend, weighed down by slightly weaker than expected readings on the euro area economy and ahead of next week's US Federal Reserve policy meeting.
The benchmark DJ Stoxx 600 was 0.32% or 1.13 points lower to 348.46, the Dax was down by 0.60% or 62.24 points at 10.373.49 and the Cac-40 registered a decline of 0.29% or 13.17 points to 4,569.66.
Athens's general index was one exception, rising 1.20% to 605.92, on hopes that deal with Brussels to reduce the country's debt load can be reached next week.
Automobile stocks weighed on the main benchmarks throughout the session, with the Stoxx 600 Automobiles&Parts sub-index retreating by 2.36% to 500.42.
Basic resource companies were also a drag with a gauge for the sector down by 1.05% to 302.96, despite commodity prices putting in another strong performance.
Three-month copper futures rose 1.6% to $5,047.50 per metric tonne on the LME.
"Earnings season continues to underwhelm on both continents and the economic data doesn't give much to be happier about.
"It's worth noting that we are still broadly higher on the week but still, there is a feeling that we needed a decent earnings season to justify equities at these elevated levels, particularly in the US where the Dow and S&P 500 are within touching distance of all-time highs." Craig Erlam, senior market analyst at Oanda, said in a research note sent to clients.
Looking out to the Fed meeting next week, analysts at Deutsche Bank told clients that "market expectations for the Fed already appear close to maximum 'dovishness', with improving US macro momentum, lower financial stress and rising inflation all making it more likely that the Fed will attempt another rate hike over the coming months."
Adding to the downbeat mood, Markit's 'flash' composite purchasing managers' index for Germany dipped from a reading of 54.0 in March to 53.8 in April, a nine-month low, as a gauge of service sector activity weighed.
On the other hand, the 'flash' manufacturing PMI for the euro area's largest economy - arguably the most important of the two - improved from a reading of 50.0 to 51.9 (consensus: 50.7).
Despite that, and commenting on the equivalent PMI data covering the whole of the euro area, Chris Williamson, chief economist at Markit said: "A failure of business expectations to revive following the ECB's announcement of more aggressive stimulus in March is a major disappointment and suggests that the modest pace of growth is unlikely to accelerate in coming months."
To take note of, a Bloomberg report that Japanese central bank officials were planning further easing measures at their 28 April policy meeting set off selling in the yen but also led to some market-chatter among traders about the 'defensive' nature of the moves seen of late from many major central banks in their attempts to try and stem deflationary forces and kick-start activity.
That report sent dollar/yen down by an out-sized 2.02% to 111.67, dragging the euro down with it to 1.1225 versus the Greenback. Sterling on the other hand leapt by an even steeper 2.49% against the Japanese currency.
Stock in Daimler dropped 4.44% after the US Department of Justice disclosed it was conducting a probe into its emissions certification process.
The carmaker's shares fell 6.02% to €62.04 having also reported its latest first quarter results.
Zodiac Aerospace rocketed 11.11% to €21.09 on reports that French rival Safran might be studying an offer to take out the aerospace supplier, whose shares had been pumelled after delivering eight warnings over the last six months.
Swedish truck maker SSAB saw its stock jump 6.29% after it lifted its forecast for the continent's truck market, although it turned more pessimistic on North America and Brazil. |
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| | US Market Report | | US open: Stocks nudge lower as investors digest mixed earnings and data US stocks were a touch weaker on Thursday as investors sifted through mixed economic and corporate releases, amid softer oil prices.
At 1510 BST, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq were all 0.2% lower.
In Europe, the main indices were also in the red after the European Central Bank left interest rates and monetary policy unchanged, as widely expected, with chief Mario Draghi reiterating his commitment to using all the instruments available to get inflation back to target.
Oil prices were weaker in choppy trade, with West Texas Intermediate down 1.5% to $43.50 a barrel and Brent crude down 1.4% to $45. 17.
On the corporate front, Qualcomm shares were lower after the chipmaker's profit forecast missed expectations, while toy manufacturer Mattel tumbled after saying losses widened in the first quarter.
Verizon Communications fell into the red after its quarterly earnings matched expectations, but revenue disappointed.
On the upside, American Express was in the black after its first-quarter numbers beat analysts' expectations.
Sports clothing retailer Under Armour was sharply higher after it reported solid growth in quarterly profit and revenue.
General Motors rallied after it said first-quarter net income more than doubled compared with the previous year, while Biogen Inc rose after posting better-than-expected first-quarter profit.
Economic news was also mixed.
The latest report from the Federal Reserve Bank of Philadelphia showed manufacturing conditions in the region deteriorated a lot more than expected in April.
The diffusion index for current activity tumbled to -1.6 from 12.4 in March, versus economists' expectations for a slip to 8.9.
March had marked the first positive reading following six consecutive negative readings.
The index for current new orders fell to zero from 15.7, while the index for current shipments declined even more sharply, to -10.8 from 22.1.
Data from the Labor Department was a lot more encouraging, however, showing the number of Americans filing for unemployment benefits unexpectedly fell last week, to the lowest level since November 1973.
US initial jobless claims fell by 6,000 to 247,000 from the previous week's unrevised level of 253,000, versus expectations for a rise 263,000.
The four-week moving average of new claims was 260,500, down 4,500 from the previous week's unrevised 265,000.
Pantheon Macroeconomics said: "This number is as spectacular as the Philly Fed was awful, but unfortunately it's about as plausible, too. The Labor Dept says no special factors affect this week's numbers, but the early Easter, in our view, continues to distort the seasonal adjustments. |
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| | Broker Tips | | Broker tips: Sainsbury's, Sky, Northgate Deutsche Bank upgraded Sainsbury's to 'buy' from 'hold' due to the expected benefit to earnings from the pending Argos acquisition and the supermarket's reduced level of price promotions.
Deutsche said it believed investors were currently reluctant to factor-in the likely earnings accretion due to risks around the execution of the takeover.
Sainsbury's said it expects the deal to be earnings-accretive in the first full year post completion and double digit accretive in the third full year post completion.
That was based on estimated EBITDA synergies of £120m, but they have since been increased to £160m.
The German bank forecasts in the long-term the synergies from lower Argos costs will generate 4.5p of additional earnings per share, adding 20% to consensus forecasts for the 2018/2019 financial year of 22.4p and 25% on its own forecast of 18.2p.
"Within the context of high fixed costs and slim margins, we think rents are one of the key challenges facing UK food retailers today. The ability to enhance asset turn, and the related cost savings which drive the earnings accretion, is a key attraction of this deal in our view," DB said.
Although Argos' general merchandise and electricals offering is more cyclical than food, the lower cost base from the merger is felt likely to increase its profitability from its previously 1%-2% margin.
Reading data from Kantar that suggested Sainsbury's give-away - the value of promotions over total sales - declined circa 2% in calendar 2015 vs 2014, while the market was broadly flat and Big 4 peers were flat or up, indicated Sainsbury's has achieved the greatest reduction in the level of promotions of the Big Four grocers over the past 18 months.
Analysts think this can contribute to a better margin trend.
With Sainsbury's shares trading at 13 times consensus 2016/17 earnings, the price "already reflects downside risk to near term earnings", analysts wrote, viewing the risk/reward skewed to the upside.
Sky's shares fell on Friday as HSBC trimmed the broadcaster's target to 1,010p from 1,020p and maintained the stock at 'hold'.
HSBC said while Sky's third quarter interims on Thursday were in line with the company's consensus, key performance indicators were soft in places. "In particular, concerns are likely to centre on churn and net additions," HSBC added.
Sky won 177,000 new customers in the three months to March, 160,000 fewer than the previous quarter. Both the number of new broadband customers and TV customers eased. The slowdown sent shares lower on Thursday, despite the group reporting a 5% increase in revenue to £8.7bn and a 12% rise in operating profit to £1.14bn in the nine months to the end of March.
"Churn stepped up quarter-on-quarter in the UK (10.7% versus 10.2%) and in Italy (11.0% versus 9.9%). As Sky has lost Champions League coverage in both markets, this raises the issue of the company's relative competitiveness," HSBC said.
The bank said its view was that "a number of 'known unknowns' provide an overhang" to near-term share performance.
It noted that Germany's federal cartel office has approved plans to stop any single buyer from winning all the live television rights for Bundesliga soccer matches for the four seasons starting in 2017. This would mean Sky, which virtually won all live broadcasting rights in the last auction, would be unable to achieve the same in the next auction.
HSBC said there is also uncertainty over Mediaset Premium's future plans following its acquisition by Vivendi. Vivendi chairman Vincent Bolloré said he plans to launch a streaming service to rival Sky's pay-TV outfit and Nexfix.
Meanwhile, the UK outlook is somewhat uncertain ahead of Britain's referendum on its European Union membership on 23 June, HSBC added.
The 'bears' on Northgate had it all their way last year, but the company's fortunes might be set for a turnaround, analysts at Citi said as they started coverage of the firm's shares with a 'buy' recommendation and target of 600p.
In 2015, the stock price of the light commercial vehicle hiring company was beaten down by approximately 35%, which analysts Christopher J Mcvey and Rahul Chopra put down to a decline in UK utilisation rates and changes made to how the firm accounted for depreciation.
However, that left the shares discounting "recessionary" conditions in the business, the analysts argued.
That was far too pessimistic, their proxy for gross domestic product - to which the company's top line was tightly-correlated - in the UK was pointing to steady growth, barring Brexit.
In Spain, a recovery was also ongoing, they pointed out.
"We suggest the business is well placed, with a materially stronger balance sheet than pre financial crisis."
Recent changes to its management team in the UK should also help Northgate step on the gas on its already reinvigorated UK performance, they said. |
| | Award winning Barclays Stockbrokers Investment ISA | | Use your ISA allowance by 5 April 2016. You don't have to make investment choices straight away - as long as you have the cash in place, that’s enough to secure the tax benefits of this year’s allowances.
The value of investments can fall, tax rules may change and their effects depend on individual circumstances.
Find out more about a Barclays Stockbrokers Investment ISA | | |
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