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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 rises ahead of Fed interest rate decision The FTSE 100 finished higher on Wednesday, rebounding from earlier declines, as investors weighed UK economic data and awaited the Federal Reserve's latest policy decision.
UK economic growth slowed to 0.4% in the first quarter of 2016 from 0.6% the previous quarter, the Office for National Statistics revealed.
The first quarter rise in gross domestic product was in line with expectations but marked the weakest pace of growth since the end of 2012, driven by weaker growth in services activity and declines in construction and industrial output.
On an annual basis, first quarter GDP climbed 2.1%, in line with the previous quarter's growth but above the 2.0% that was forecast.
The Bank of England has warned that growth could slow further in the second quarter amid uncertainty leading up to the 23 June referendum on Britain's membership in the European Union.
"We expect GDP growth to be limited to 0.3% quarter-on-quarter in the second quarter, amid heightened uncertainty in the run-up to the 23 June referendum on EU membership," said Howard Archer, chief UK and European economist at IHS Global Insight.
Investors are now looking ahead to the Federal Reserve's interest rate decision, announced at 1900 BST. The Fed is widely expected to keep interest rates unchanged amid a slowdown in global economic growth.
Many analysts are pricing in no chance of a rate hike over the next few meetings, and less than one full hike by the end of the year amid worries about the slowdown in the global economy.
The wording of the Fed's policy statement will be closely scrutinised for clues on the timing of the next rate hike, although Chair Janet Yellen is expected to remain dovish.
"Tonight's FOMC statement should not provide anything new from a policy standpoint, with markets implying the chances of a rate hike stand at 0% probability, with a cut at 2%," said Joshua Mahony market analyst at IG.
"The interesting part of today's meeting will instead be the tone and language with regards to future rate hikes. With markets showing a 21% implied probability of a June hike, the committee will want to align expectations with the likeliness of it happening."
Ahead of the announcement, official data showed the US trade deficit in goods shrank to $56.9bn in March, a 10.3% improvement on February's final reading of $63.4bn. The figures from the Commerce Department marked the lowest deficit in more than a year.
US pending home sales increased more than expected in March to reach their highest level in nearly a year, the National Association of Realtors said. The pending home sales index, based on contracts signed last month, climbed 1.4% to 110.5.
Elsewhere, the latest findings by market research group GfK showed German consumer sentiment is set to improve markedly in May from April. GfK said the overall index was forecasting 9.7 points for May compared to 9.4 points the month before, with growth for both economic and income expectations as well as propensity to buy. Economists had been expecting the index to be unchanged at 9.4.
Meanwhile, oil prices wavered after official data showed US crude oil inventories rose more than expected last week.
The US Energy Information Administration said domestic crude inventories rose by 2.0m barrels to 540.6m barrels in the week to 22 April, more than the 1.7m increase expected by analysts.
Earlier, data from the American Petroleum Institute revealed US crude inventories decreased by 1.1 million barrels last week.
At 1640 BST, Brent crude rose 0.69% to $46.05 per barrel and West Texas Intermediate climbed 0.27% to $44.16 per barrel.
In company news, GlaxoSmithKline's shares reacted positively to a rise in first-quarter sales and core earnings per share amid healthy demand for the company's new drugs.
Worldpay's shares jumped after UBS upgraded the stock to 'buy' from 'neutral', saying the pullback in the shares provides an opportunity.
Tesco's shares led the fallers after JP Morgan said the firm's ability to generate cash flow in the foreseeable future "could be more constrained than we thought before the results"
Standard Chartered reversed the previous day's rally as Deutsche Bank downgraded the bank to 'sell' from 'hold' and cut the price target to 454p from 460p following the company's first-quarter results on Tuesday. |
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| Market Movers
FTSE 100 (UKX) 6,319.91 0.56%
FTSE 250 (MCX) 17,083.71 0.82%
techMARK (TASX) 3,101.68 0.60%
FTSE 100 - Risers
Anglo American (AAL) 696.90p 4.45%
Worldpay Group (WI) (WPG) 269.40p 4.30%
International Consolidated Airlines Group SA (CDI) (IAG) 555.00p 3.64%
easyJet (EZJ) 1,513.00p 3.56%
Centrica (CNA) 240.10p 3.40%
Paddy Power Betfair (PPB) 9,015.00p 2.85%
SSE (SSE) 1,536.00p 2.67%
Royal Dutch Shell 'B' (RDSB) 1,815.50p 2.63%
Kingfisher (KGF) 370.30p 2.60%
Royal Dutch Shell 'A' (RDSA) 1,810.00p 2.49%
FTSE 100 - Fallers
Tesco (TSCO) 175.40p -4.39%
Prudential (PRU) 1,385.00p -1.74%
Legal & General Group (LGEN) 237.30p -1.41%
Sky (SKY) 952.00p -1.40%
Standard Chartered (STAN) 565.00p -1.12%
St James's Place (STJ) 908.00p -1.09%
Lloyds Banking Group (LLOY) 69.25p -1.07%
Hargreaves Lansdown (HL.) 1,288.00p -0.92%
Old Mutual (OML) 187.50p -0.85%
GKN (GKN) 288.20p -0.83%
FTSE 250 - Risers
Centamin (DI) (CEY) 108.80p 7.62%
Balfour Beatty (BBY) 248.20p 4.99%
Ophir Energy (OPHR) 86.30p 4.73%
Paysafe Group (PAYS) 386.50p 4.46%
TalkTalk Telecom Group (TALK) 273.60p 4.43%
Amec Foster Wheeler (AMFW) 505.50p 4.12%
Cairn Energy (CNE) 223.90p 3.95%
Aldermore Group (ALD) 192.30p 3.95%
Acacia Mining (ACA) 331.90p 3.65%
IP Group (IPO) 190.40p 3.53%
FTSE 250 - Fallers
McCarthy & Stone (MCS) 234.90p -6.23%
Stagecoach Group (SGC) 258.20p -3.66%
Weir Group (WEIR) 1,126.00p -2.68%
Polar Capital Technology Trust (PCT) 573.50p -2.30%
Rotork (ROR) 178.50p -2.19%
Kaz Minerals (KAZ) 178.20p -2.09%
Electrocomponents (ECM) 265.80p -1.95%
Essentra (ESNT) 822.50p -1.79%
Elementis (ELM) 226.40p -1.78% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Shares finish higher ahead of Fed announcement European stocks pulled off a slightly higher close on Wednesday as investors sifted through earnings ahead of the Federal Reserve's rate announcement.
The benchmark DJ Stoxx Europe 600 edged higher by 0.29% to 348.32, Germany's DAX was up by 0.39% and France's CAC 40 was 0.58% higher.
Stocks in Greece fell after its negotiations with international creditors stalled over demands for extra austerity measures.
Eurogroup president Donald Tusk called for Eurozone finance ministers to meet and discuss the Mediterranean country´s third bail-out programme so as to avoid unnecessary uncertainty.
However, Tusk decided not to call a special summit of the bloc´s leaders as Greek prime minister Alexis Tsipras had asked for.
At the same time, Brent oil prices advanced, breaching the $45 market for the first time since November after data from the American Petroleum Institute late on Tuesday revealed US crude inventories fell by 1.1m barrels last week compared with an expected build of around 0.8m.
West Texas Intermediate was up 0.81% to $44.40 a barrel and Brent crude was 1.1% firmer to $46.25.
"Corporate earnings reports continue to flow yet it's all a little restrained in risk assets this morning as traders stand by for the latest FOMC rate decision," said Brenda Kelly, head analyst at London Capital Group.
"If recent weakness in the greenback is to be believed and borne out, a more 'dovish' Fed is the likely catalyst as both macro data and corporate earnings in the US provide mixed messages on the state of the economy. The dollar index is making its way back towards the 94.00 support level - any indication that this will break with conviction in the aftermath of the statement could change sentiment towards stocks and may well give equity indices a boost."
Shares in US technology giant Apple fell sharply after its first-quarter results, which were published after the close of trading on Tuesday, revealed the first drop in revenue in 13 years as iPhone sales fell for the first time ever, dampening risk appetite globally.
In European corporate news, Barclays was a high riser. Although it posted a decline in first-quarter profit amid weakness in the investment banking division, the numbers were better than expected.
Delhaize was also in the black after the Belgian food retailer said net profit in the first quarter rose 291%.
Banco Santander pushed up after its first-quarter net profit and net interest income came in pretty much as expected, while oil giant Total gained after its quarterly profit beat analysts' estimates.
Adidas rallied after the German sports retailer lifted its full-year profit guidance for the second time in less than three months.
On the macroeconomic front, the latest findings by market research group GfK showed German consumer sentiment was set to improve markedly in May from April.
GfK said the overall index was forecasting 9.7 points for May compared to 9.4 points the month before, with growth for both economic and income expectations as well as propensity to buy.
Economists had been expecting the index to be unchanged at 9.4. |
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| | US Market Report | | US open: Stocks slide ahead of Federal Reserve's interest rate decision US stocks fell on Wednesday ahead of the Federal Reserve's latest policy decision.
The Dow Jones Industrial Average dropped 0.20%, the S&P 500 slid 0.19% and the Nasdaq shed 0.86% at 1512 BST.
The Fed is widely expected to keep rates unchanged when it announces its policy measures at 1900 BST amid a slowdown in global economic growth.
Many analysts are pricing in no chance of a rate hike over the next few meetings, and less than one full hike by the end of the year amid worries about the slowdown in the global economy.
The wording of the Fed's policy statement will be closely scrutinised for clues on the timing of the next rate hike, although Chair Janet Yellen is expected to remain dovish.
"Tonight's FOMC statement should not provide anything new from a policy standpoint, with markets implying the chances of a rate hike stand at 0% probability, with a cut at 2%," said Joshua Mahony market analyst at IG.
"The interesting part of today's meeting will instead be the tone and language with regards to future rate hikes. With markets showing a 21% implied probability of a June hike, the committee will want to align expectations with the likeliness of it happening."
Ahead of the announcement, official data showed the US trade deficit in goods shrank to $56.9bn in March, a 10.3% improvement on February's final reading of $63.4bn. The figures from the Commerce Department marked the lowest deficit in more than a year.
US pending home sales increased more than expected in March to reach their highest level in nearly a year, the National Association of Realtors said. The pending home sales index, based on contracts signed last month, climbed 1.4% to 110.5.
Meanwhile, oil prices rallied after data showed a surprise fall in US oil inventories.
The American Petroleum Institute said US crude inventories decreased by 1.1 million barrels last week. The Energy Information Administration will release its official data at 1530 BST with analysts expecting crude stocks to have risen by 1.7 million barrels.
At 1519 BST, West Texas Intermediate crude rose 2.1% to $45.00 per barrel and Brent gained 2.1% to $46.76 per barrel.
In company news, Apple's shares were in the red after US technology giant reported first-quarter results after Tuesday's close that revealed the first drop in revenue in 13 years as iPhone sales fell for the first time ever.
"Apple's had its critics from day-one who said that it was a one-trick pony and that iPhone sales couldn't rise indefinitely, so after 13 years they've got it right. Investors will be looking for evidence that this is just a blip caused by tough yearly comparisons because of the launch of the iPhone 6 and that demand will pick up once the new iPhone 7 is released," said CMC Markets' Jasper Lawler.
"Nonetheless, it does appear Apple has reached an inflexion point. Apple now needs a new ground-breaking product, like a car, to justify a higher price multiple."
Elsewhere on the corporate front, Twitter was also sharply lower after its first-quarter revenue of $595m missed analysts' expectations, while Chipotle Mexican Grill slumped after reporting its first quarterly loss as a public company. |
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| | Broker Tips | | Broker tips: Tesco, Weir Group, StanChart Shares in supermarket chain Tesco were under the cosh on Wednesday as JPMorgan Cazenove issued a downbeat note on the company and downgraded its estimates.
Having analysed Tesco's profit and loss, cash and balance sheet trends, JPM concluded: "Tesco's ability to generate cash flow in the foreseeable future could be more constrained than we thought before the results; the results were of lower quality than seemed at first glance; upcoming news flow will likely remain negative."
The bank argued that some of the tailwinds that supported earnings before interest and taxes in 2015/16 - such as GM expansion, shrinking fuel within the mix and declining operating leases - were unlikely to recur to the same extent.
In addition, it said that while Tesco's progress reducing indebtedness was impressive, the balance sheet remained stretch.
"This remains a concern in the context of Tesco's thin margins and the more marked structural and cyclical headwinds within its core UK market."
JPMorgan expects to see a sequential slowdown in Tesco's current sales run rate, weighed by its own price investments, in the context of increased competition.
JPM cut its adjusted earnings per share estimate for full year 2017 to 7.71p from 9.49p and 2018 estimate to 11.10p from 12.36p.
The bank maintained its 'underweight' rating and 150p price target on the stock.
Weir Group's shares were under pressure on Wednesday after Canaccord Genuity downgraded its rating on the stock to 'sell' from 'hold' and cut its price target to 880p from 940p.
Canaccord said it was lowering its earnings per share forecasts for 2016, 2017 and 2018, ahead of the engineering group's trading update on Thursday.
"We are putting in a cut of 16.9% to 54.7p for 2016 with a reduction of 7.8% for 2017 to make 65.0p and our initial forecast for 2018 is 75.8p," said Canaccord analyst Harry Phllips.
"These compare to Weir's own derived consensus of 62.3p and 70.9p for 2016 and 2017, respectively."
Weir is expecting a significant reduction in 2016 revenue at its oil and gas division due to lower crude prices. The minerals business is expected to show a slight decline in revenue in constant currency. Overall, the group predicts flat revenue and operating margins.
Canaccord has pencilled in full year sales of £1.7bn, down from £1.9bn the previous year.
"Despite considerable action on the cost base, including £45m to come from the full-year benefits from action taking in 2015 and £40m additional cost savings identified for 2016, we still see some potential downside risk to current year numbers particularly in oil and gas," said Phillips.
"Last week's rig count of 431 is 39.6% lower than the average for December 2015 and shows little sign of improving. In its Q1 results on 21 April, (oil services company) Schlumberger stated that the industry displayed 'clear signs of operating in a full-scale cash crisis' and that the environment is 'expected to continue deteriorating through the coming quarter'.
Deutsche Bank downgraded Standard Chartered to 'sell' from 'hold' and cut the price target to 454p from 460p following the company's first-quarter results on Tuesday.
It said the results beat its expectations thanks to a better cost, capital and impairment performance.
Deutsche said pre-tax profit was a beat versus its forecasts, as impairment came in at half the level it had expected and the core equity tier 1 ratio of 13.1% was also better than it estimated. Meanwhile, $539m of management adjusted PBT was much higher than DB's forecast of $29m.
However, the surge in the share price that followed the results is not justified by the revenue outlook and forecast returns in 2018, said DB, as it argued the long-term valuation of the stock should be driven by 2018 returns, not near-term improvements in credit quality.
"We have revenues in 2018 rising 13% from 1Q16 annualised levels but this is only enough to produce a 5% return on equity in 2018," the bank said.
"Revenues would either need to be $1bn higher to hit a 7% RoE, or impairments zero. Given the current environment, neither scenario seems likely and we downgrade our recommendation." |
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