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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 flat as US economic growth slows The FTSE 100 ended broadly flat on Thursday as US economic growth slowed in the first quarter and as investors continued to weigh central bank policy decisions in the US and Japan.
US economic growth slowed to an annual rate of 0.5% in the first quarter from the 1.4% rate enjoyed in the fourth quarter of 2016, the Commerce Department revealed. Analysts had forecast a 0.6% increase.
"We remain very skeptical of the growth number, which has been depressed temporarily by the stock market plunge in Jan, persistent seasonal adjustment problems which reduce Q1 growth but boost Q2, and the very early Easter, which has hit an array of March data, all of which will rebound in April," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
"The Fed pointed out yesterday that the labour market has continued to improve despite the apparent slowing in growth, perhaps suggesting that they, too, are suspicious of the GDP data."
The Federal Reserve on Wednesday decided to keep interest rates unchanged at 0.25% to 0.50%, as expected, but left the door open to a rate increase at the next meeting in June.
The Bank of Japan also announced its policy, shocking the market by refraining from any extra stimulus measures to bolster the stagnant economy. The BoJ decided to keep its negative interest rate of -0.10% in place and voted to continue its asset purchase programme.
Alongside the BoJ's policy announcement, official data showed annualised deflation of 0.1% in March, compared to inflation of 0.3% the previous month. In better news, the jobless rate unexpectedly fell to 3.2% in March from 3.3% in February.
Meanwhile, oil prices gained with Brent crude up 1.04% to $47.68 per barrel and West Texas Intermediate up 0.54% to $45.58 per barrel at 1632 BST.
In company news, shares in ITV, Legal & General, Informa and Relx were all firmly in the red as the stock went ex-dividend.
Lloyds Banking Group was under pressure after reporting a 6% drop in first-quarter underlying profit, although this was better than forecast as a reduction in impairment charges, PPI provisions and lower costs counterbalanced a small decline in income.
Royal Bank of Scotland was also on the back foot after saying it was likely to miss the 2017 deadline to spin off its Williams & Glyn subsidiary, laying the bank open to a "significantly greater" financial impact than hoped.
Anglo American bucked the trend, boosted by an agreement to sell its niobium and phosphates businesses in Brazil to China Molybdenum for a cash consideration of $1.5bn.
Taylor Wimpey gained after the company said the prospect of a British exit from the EU had not affected trading in the first four months of the year.
Tullow Oil rallied after saying 2016 capital expenditure would be cut by $100m to $1bn "with further savings expected".
Weir Group jumped as it reported trading that was "slightly ahead" of expectations in its first quarter on Thursday. |
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| Market Movers
FTSE 100 (UKX) 6,322.40 0.04%
FTSE 250 (MCX) 17,066.45 -0.10%
techMARK (TASX) 3,093.97 -0.25%
FTSE 100 - Risers
Anglo American (AAL) 753.20p 8.08%
Rio Tinto (RIO) 2,329.50p 4.27%
Rolls-Royce Holdings (RR.) 694.00p 3.12%
Randgold Resources Ltd. (RRS) 6,525.00p 2.27%
Glencore (GLEN) 156.45p 2.25%
BHP Billiton (BLT) 945.70p 2.11%
Fresnillo (FRES) 1,095.00p 2.05%
Direct Line Insurance Group (DLG) 359.10p 1.96%
ARM Holdings (ARM) 965.00p 1.90%
Morrison (Wm) Supermarkets (MRW) 192.80p 1.85%
FTSE 100 - Fallers
Legal & General Group (LGEN) 227.20p -4.42%
ITV (ITV) 225.60p -3.51%
St James's Place (STJ) 881.00p -2.97%
Royal Bank of Scotland Group (RBS) 244.80p -2.90%
Associated British Foods (ABF) 3,068.00p -2.88%
Merlin Entertainments (MERL) 435.30p -2.40%
Informa (INF) 654.50p -1.73%
Berkeley Group Holdings (The) (BKG) 3,066.00p -1.67%
Lloyds Banking Group (LLOY) 68.11p -1.65%
Provident Financial (PFG) 2,918.00p -1.59%
FTSE 250 - Risers
Tullow Oil (TLW) 280.60p 11.98%
Weir Group (WEIR) 1,213.00p 7.73%
Ophir Energy (OPHR) 91.90p 6.86%
Telecom Plus (TEP) 999.00p 3.89%
Centamin (DI) (CEY) 112.50p 3.59%
Cairn Energy (CNE) 231.30p 3.49%
Acacia Mining (ACA) 343.10p 3.37%
Aggreko (AGK) 1,115.00p 3.15%
Vedanta Resources (VED) 424.70p 2.86%
NCC Group (NCC) 272.20p 2.83%
FTSE 250 - Fallers
Cobham (COB) 163.10p -7.43%
IP Group (IPO) 176.30p -7.16%
Victrex plc (VCT) 1,414.00p -6.85%
Ted Baker (TED) 2,465.00p -4.58%
Tullett Prebon (TLPR) 343.00p -4.33%
Millennium & Copthorne Hotels (MLC) 462.70p -4.22%
Kaz Minerals (KAZ) 174.10p -3.95%
Indivior (INDV) 161.70p -3.80%
Elementis (ELM) 219.20p -3.48%
International Personal Finance (IPF) 277.50p -3.43% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks bounce back as BoJ and Fed stay put European stocks bounced back from their large losses early in the session despite some investors´ disappointment with the lack of any further action from the Bank of Japan to add to its stimulus. Overnight, the US central bank reiterated it would continue to tighten interest rates gradually and expressed a preference for keeping the door open to a possible hike in June, by omitting a reference to risks to growth from abroad, some analysts said. The benchmark DJ Stoxx Europe 600 index edged higher by 0.17% to 348.90, Germany’s DAX gained 0.21% and France’s CAC 40 drifted a tad lower, losing 0.04% to end the day at 4,557.36. Crude oil futures continuer their steady climb higher, with West Texas Intermediate crude futures up by 0.57% to $45.59 per barrel by the close of the trading day in London. The Bank of Japan left its policy rate at -0.1% earlier on Thursday, but did not extend its stimulus package to include negative rate bank loans, which many had been expecting. “It is hard not to feel sorry for the Bank of Japan. It has tried unconventional policy once this year, and it didn’t work. Now it has tried to be unconventionally conventional, sitting on its hands, and this hasn’t worked either,” said Chris Beauchamp, senior market analyst at IG. “The lack of action, perversely, proves that central bank stimulus still has the power to shock, both when it is tried and when it isn’t. This is a salutary lesson for the Fed and the ECB, both of whom are grappling with their own policy problems.” On Wednesday, the Fed chose to stand pat on interest rates, keeping the federal-funds rate at between 0.25% and 0.50%, as widely expected, but left the door open to a June hike. “The Federal Reserve was no more bold or committal following its monthly meeting only hours earlier. The central bank left rates unchanged which was expected but the statement it put out alongside it was fairly balanced and told us very little about the timing of the next rate hike,” saidOanda’s Craig Erlam. “The most significant thing in the statement was the removal of the balance of risks which suggests the Fed no longer sees this as posing a threat. Offsetting that though were warnings that economic activity appears to have slowed and household spending moderated, despite income rising at a solid rate. The addition of a positive to offset any negatives is clearly not a coincidence but it does suggest that while June remains on the table for the next hike, the Fed is not confident at this stage that the timing is right.” In corporate news, advertising agency WPP was in the red. Although growth in first-quarter revenue was welcome, the company struck a fairly cautious note about the outlook, pointing to the EU referendum and UK GDP weakness. Lloyds Banking Group was also under the cosh after it reported a 6% fall in first-quarter underlying profit, although the figures still beat expectations. Spanish bank BBVA was under pressure after reporting a 54% drop in first-quarter net profit, whileCaixabank slumped after its quarterly profit missed estimates. Broadcaster ITV was the biggest faller in London as its stock went ex-dividend. On the upside, Deutsche Bank rallied after it posted a first-quarter profit versus expectations of a loss. Luxury goods maker Hermes was higher after saying revenue grew 6.1% in the first quarter. Electrolux surged after the Swedish household appliance maker posted better-than-expected first-quarter net profit thanks to strong demand in Europe and North America. Anglo American was a high riser after announcing that it has agreed to sell its niobium and phosphates businesses in Brazil to China Molybdenum for a cash consideration of $1.5bn. In macroeconomic news, data from the European Commission showed economic sentiment in the Eurozone improved a little more than expected in April. The EC’s economic sentiment indicator rose to 103.9 in April from 103.0 in March, beating expectations for a reading of 103.4.
Meanwhile, the business climate indicator nudged up to 0.13 from 0.12, just missing expectations of 0.14. Elsewhere, figures from Germany´s Federal Statistics Office revealed that joblessness in the country held steady at 6.2% in April. The unemployment rate came in unchanged at 6.2% - the lowest level since reunification – as expected. However, the number of unemployed people fell by a seasonally-adjusted 16,000 to 2.706m from the previous month, beating expectations for no change. |
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| | US Market Report | | US open: Stocks mixed after FOMC rate decision, US GDP US stocks were mixed on Thursday after the Federal Reserve held interest rates steady and as official data showed economic growth slowed surprisingly in the first quarter.
At 1503 BST the Dow Jones Industrial Average fell 0.33%, the S&P 500 dropped 0.05% and the Nasdaq rose 0.26%.
The Fed on Wednesday decided to keep interest rates unchanged at 0.25% to 0.50% on Wednesday, as expected, but left the door open to a rate increase at the next meeting in June. Policymaker Esther George also voted to raise rates for a second month in a row as the Fed softened its tone on the economic outlook.
"Unless there's a robust pick up in the data for May, Fed policymakers are likely to be looking at some gloomy economic trends at the June meeting, making a rate hike hard to justify," said Chief market economist at Markit, Chris Williamson.
"The Fed may also not want to unsettle markets with a rate hike just days before the UK's 23 June referendum on remaining in the EU."
In Thursday news, US economic growth slowed to an annual rate of 0.5% in the first quarter from the 1.4% rate enjoyed in the fourth quarter of 2016, the Commerce Department revealed. Analysts had forecast a 0.6% increase.
"We remain very skeptical of the growth number, which has been depressed temporarily by the stock market plunge in Jan, persistent seasonal adjustment problems which reduce Q1 growth but boost Q2, and the very early Easter, which has hit an array of March data, all of which will rebound in April," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
"The Fed pointed out yesterday that the labour market has continued to improve despite the apparent slowing in growth, perhaps suggesting that they, too, are suspicious of the GDP data."
Another report from the Labor Department showed the number of Americans filing for unemployment benefits rose less than expected last week. US initial jobless claims rose by 9,000 to 257,000 from an upwardly-revised 248,000, coming in ahead of expectations for an increase to 260,000.
Elsewhere, the Bank of Japan shocked the market by voting to refrain from any extra stimulus measures to bolster the stagnant economy.
The BoJ decided to keep its negative interest rate of -0.10% in place and voted to continue its asset purchase programme.
Alongside the BoJ's policy announcement, official data showed annualised deflation of 0.1% in March, compared to inflation of 0.3% the previous month. In better news, the jobless rate unexpectedly fell to 3.2% in March from 3.3% in February.
Meanwhile, oil prices gained with West Texas Intermediate crude up 0.5% to $45.57 per barrel and Brent crude up 0.94% to $47.63 per barrel.
In company news, Facebook surged after its first-quarter results out late on Wednesday beat expectations. The social network posted earnings of $1.51bn, p from $512m in the same quarter a year before.
Solar panel maker First Solar was under the cosh as its quarterly results missed analysts' expectations.
Dow Chemical fell as the company said its revenue dropped sharply amid pricing and currency headwinds in the latest quarter.
Time Warner Cable advanced as its first quarter revenue and profit beat expectations.
Amazon reports its first quarter after the closing bell. |
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| | Broker Tips | | Broker tips: Stagecoach, Next, Tullow Oil Investec upgraded Stagecoach to 'reduce' from 'sell' saying that while the outlook for the company remains negative in many areas, much of this is already priced into the shares.
The brokerage said it has adjusted its sum-of-the-parts valuation, removing Megabus Europe losses from its embedded value calculation and instead choosing to DCF the Megabus Europe business.
"Although our SoTP valuation rises to 276p, we choose to apply a 10% discount to reflect the ongoing downgrade cycle and significant rail re-bid risk," said Investec, as it kept its 250p target on the stock.
The brokerage said Stagecoach's latest trading update was subdued again, mostly on the back of weakness in UK Rail.
It said implied trading in the eight-week period since the previous update was sharply softer, mainly due to the timing of Easter.
"Excluding this effect, Regional and London Bus trends are similar to those reported at the 40-week stage, though UK Rail has seen an underlying deterioration, due to weaker GDP growth and consumer confidence, as well as terrorism."
Goldman Sachs downgraded retailer Next to 'sell' from 'neutral', slashing the 12-month price target to 5,000p from 6,400p, highlighting limited upside relative to peers.
"We expect the structural headwinds that are facing apparel retail from online channel-shift and trading down to stall Next's EBIT growth," the bank said.
Goldman also said the recent negative combination of declining UK average selling prices (trading down activity) and the early signs of declining apparel volumes, increase the chances that UK apparel demand could deteriorate further, rather than recover this autumn/winter.
Due to its more cautious view on Next's earnings growth outlook, given the structural headwinds from increased online discount and international retail capacity, the bank has cut its target EV/EBIT multiple to 9x FY18E from 11.5x, in line with the group's 10-year average. This is equivalent to an 8% free cash flow yield and drives the price target downgrade.
"We expect stalled Next Brand LFL gross profit trends from here, with any material growth only coming from the international online and the label businesses," the bank said.
Barclays reiterated an 'overweight' rating and target of 280p for Tullow Oil on Thursday after the oil producer reported its first quarter trading update.
The Africa-focused oil miner said first quarter production was slightly below expectations due to technical issues at the Jubilee field off Ghana, adding that 2016 capital expenditure would be cut by $100m to $1bn "with further savings expected".
Group working interest production for the first quarter averaged 59,200 barrels per day for West Africa and 6,500 for Europe.
The company said it had to implement new Jubilee off-take procedures at the end of March following damage to a turret bearing.
Therefore, the group said full year 2016 average working interest production is likely to be below current guidance of 73,000-80,000 bopd and updated guidance will be provided when the new operating procedures have been fully implemented and stabilised.
"However, Tullow does not currently expect this issue to have a material impact on future cash flow, due to the imminent resumption of production and appropriate insurance policies in place," the firm said.
The company also agreed a $3.5bn deal with its lenders to extend its borrowing facilities.
Barclays said the extension of the loan facility would "comprehensively address remaining concerns about the balance sheet".
"The $1bn corporate facility has been extended by one year to April 2018 (commitments reduced to $800m from April 2017), sufficient to provide Tullow with at least $500m of financial headroom through 2017E," it said. |
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