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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 closes higher as oil prices rally The FTSE 100 finished higher on Tuesday as oil prices jumped and as investors examined mixed economic data.
Oil prices edged higher amid supply disruptions in Canada and elsewhere that helped alleviate the global crude glut, knocking out 2.5m barrels a day of production.
Brent crude gained 3.08% to $45.02 per barrel and West Texas Intermediate rose 1.8% to $44.28 per barrel at 1622 BST.
"The recent resilience for crude prices has surprised many, with today's gains coming despite an announcement from Kuwait that they are seeking to raise output by 50% in the next four years," said Joshua Mahony, market analyst at IG.
"Despite today's rally, the near three week low set overnight is an indication that perhaps this recent strength may come under pressure once more in the coming weeks."
In economic data, UK trade deficit on goods and services narrowed to £3.8bn in March from £4.3bn the previous month, beating analysts' estimates of £4.2bn, the Office for National Statistics said.
The narrowing of the deficit was supported by a £0.4bn increase in exports to £23.7bn, which mainly included unspecified goods, machinery and transport equipment.
However, in the first quarter the total trade deficit for goods and services widened by £1.1bn to £13.3bn compared to the fourth quarter.
"Looking ahead, the slowdown in domestic demand should bear down on imports, helping the trade deficit to narrow further," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
"But the outlook for exports remains lacklustre; the real-effective exchange rate is about 5% above its 35-year average despite its recent depreciation, and sterling will rebound if the UK votes to remain in the EU, as we expect."
Meanwhile, the British Retail Consortium said British shoppers held back from buying new spring and summer clothes during an unusually cold April. Like-for-like retail sales fell 0.9% year-on-year in April, compared to a 0.7% fall in March and analysts' expectations for a 0.5% increase.
Elsewhere, China's consumer price index rose 2.3% year-on-year in April, unchanged from the previous month and in line with analysts' estimates. Food prices, particularly pork, were the biggest drivers of inflation.
The producer price index fell 3.4% last month compared to a year ago, easing from March's 4.3% decline and beating forecasts for a 3.7% drop.
In the US, small business confidence rebounded from a two-year low in April as optimism on the labour market grew, according to the National Federation of Independent Business. The small business optimism index rose 1.0 point to a reading of 93.6 last month, compared to forecasts for 93.1.
US job openings rose in March but hiring declined, according to the Labor Department's Job Openings and Labor Turnover Survey. Job openings increased 149,000 to a seasonally adjusted 5.8 million in March while hiring dropped 200,000 to 5.3m. The jobs openings rate rose to 3.9% in March from 3.8% in February but the hiring rate slid to 3.7% from 3.8%.
"The latest NFIB and JOLT surveys suggest that, contrary to the already reported slowdown in the pace of monthly payroll gains in April, labour market slack is still shrinking," said Capital Economics.
"That should eventually generate a marked acceleration in wage growth."
Separately, US wholesale inventories rose 0.1% in March from a month ago, in line with analysts' expectations and following a 0.5% drop in February, the Commerce Department said.
On the corporate front, Capita advanced after it reaffirmed its confidence of achieving 4% organic sales growth in 2016 despite having secured less than half the amount of contracts as at the same time last year.
EasyJet flew higher after reporting a smaller first half loss than expected.
TUI continued to gain after Deutsche Bank expressed confidence that the company would enjoy a strong summer.
Mining stocks reversed earlier losses as the recent plunge in iron ore prices abated. Anglo American, BHP Billiton and Rio Tinto were all sporting gains.
Going the other way, housebuilders were under pressure amid worries about a possible Brexit. The British Chambers of Commerce said its latest survey showed an increase in the percentage of businesses supporting a vote to leave the European Union in the June referendum. Taylor Wimpey, Travis Perkins and Berkeley Group Holdings declined.
Adding to concerns about Brexit, the National Institute of Economic and Social Research said Britain's currency would lose a fifth of its value if the country voted to leave the EU. The think-tank predicted that a vote to leave could see inflation in 2017 be as much as 3.8 percentage points higher than it would be if Britain stayed in the EU. It also expects the economy would be 1% smaller in 2017 and shrink 2.3% by 2018.
Commercial broadcaster ITV was also being punished ahead of results later this week, with investors expecting lacklustre television advertising revenue. HSBC last week forecast advertising revenue growth would be flat. |
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| Market Movers
FTSE 100 (UKX) 6,148.39 0.55%
FTSE 250 (MCX) 16,712.91 0.15%
techMARK (TASX) 3,066.41 0.06%
FTSE 100 - Risers
Capita (CPI) 1,077.00p 5.18%
Anglo American (AAL) 585.80p 4.70%
Standard Chartered (STAN) 495.95p 3.90%
TUI AG Reg Shs (DI) (TUI) 1,068.00p 2.99%
Barclays (BARC) 163.00p 2.87%
Babcock International Group (BAB) 967.00p 2.82%
BHP Billiton (BLT) 815.00p 2.74%
easyJet (EZJ) 1,510.00p 2.72%
Tesco (TSCO) 159.90p 1.98%
Royal Mail (RMG) 505.00p 1.88%
FTSE 100 - Fallers
Taylor Wimpey (TW.) 180.30p -2.01%
Paddy Power Betfair (PPB) 8,910.00p -1.93%
Associated British Foods (ABF) 3,109.00p -1.86%
Berkeley Group Holdings (The) (BKG) 2,940.00p -1.47%
Travis Perkins (TPK) 1,829.00p -1.24%
ITV (ITV) 218.30p -1.04%
Intu Properties (INTU) 296.00p -1.00%
Smith & Nephew (SN.) 1,155.00p -0.86%
Randgold Resources Ltd. (RRS) 5,890.00p -0.84%
Sky (SKY) 940.00p -0.58%
FTSE 250 - Risers
Ocado Group (OCDO) 295.00p 9.26%
Restaurant Group (RTN) 290.60p 6.14%
Lookers (LOOK) 135.20p 3.36%
Vedanta Resources (VED) 370.30p 3.15%
Virgin Money Holdings (UK) (VM.) 333.70p 2.96%
Tullow Oil (TLW) 238.50p 2.80%
JRP Group (JRP) 139.60p 2.65%
Greencore Group (GNC) 376.50p 2.59%
Drax Group (DRX) 316.80p 2.56%
Ophir Energy (OPHR) 66.75p 2.53%
FTSE 250 - Fallers
Allied Minds (ALM) 320.00p -5.02%
Shawbrook Group (SHAW) 265.20p -3.95%
Interserve (IRV) 298.30p -3.84%
Evraz (EVR) 112.30p -3.69%
Centamin (DI) (CEY) 105.80p -3.47%
Capital & Counties Properties (CAPC) 335.00p -3.15%
McCarthy & Stone (MCS) 216.30p -2.96%
P2P Global Investments (P2P) 915.00p -2.61%
Brown (N.) Group (BWNG) 246.50p -2.38% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Greek stocks pace gains Stocks in Europe were near their best levels of the day following stronger-than-expected inflation data out overnight in China, figures showing an increase in monthly passenger-vehicle sales in the Asian giant and signs of a possible debt-relief deal for Greece.
Europe's benchmark DJ Stoxx 600 finished 0.91% higher to 337.28, alongside gains of 0.65% to 10,045.4 for Germany's Dax and an advance of 0.36% to 4,338.21 for Paris's Cac-40.
The Stoxx 600 sector gauge for Automobiles&Parts jumped 1.78% to 485.73 points while other sub-indices tracking bank and oil&gas stocks rose by 1.63% and 1.44% each.
The Athens Stock Exchange's General Index rose 3.15% to 629.29 points, pacing gains on the Continent and yields on the country's benchmark 10-year sovereign debt dropped by 72 basis points to 7.71% - their year-to-date low.
During the previous session euro area finance chiefs reached appeared to reach an understanding regarding the need to offer Greece debt relief.
"This is the first time there is clarity on debt relief as well as a clear signal that Eurozone member states are willing to act on Greek debt. Additionally, the allusion to lower long-term primary surpluses is arguably not only macro-economically sensible but a way to satisfy the political desideratum of keeping the IMF involved in the Greek bailout," UBS strategist Lefteris Farmakis said in a research note sent to clients.
Acting as a backdrop, euro/dollar was largely unchanged, edging down by 0.05% to 1.1377. In parallel, front month Brent crude futures were up by 3.7% to $45.31 per barrel on the ICE.
Deflation eases in China
Consumer prices in the People's Republic of China held steady at 2.3% year-on-year in April, for a fourth consecutive month, as expected by analysts.
However, factory gate deflation decreased from -4.3% year-on-year in March to 3.4% in April, as energy prices rebounded.
"Following 26 straight months in negative territory, the m/m change in producer prices was positive in March and April, which should ease concerns over deflation," Julian Evans-Pritchard at Capital Economics said in a research report sent to clients.
Weak French IP
The move higher in equities came despite weaker than expected readings on industrial production out of Germany, France and Italy.
Output in Germany, arguably the Eurozone's growth engine, shrank by 1.3% month-on-month in March, exceeding forecasts for a 0.2% dip by a wide margin.
Nonetheless, over the first quarter of the year as a whole output jumped by 1.8%, rebounding from a 0.3% fall in the final three months of 2015, Pantheon Macroeconomics said.
"This points to a strong GDP print later this week, and suggests that the consensus' prediction of an upbeat 0.6% quarter-on-quarter is within reach."
French industrial production shrank by 0.3% month-on-month in March (consensus: 0.7%).
That was consistent with a quarterly drop for industrial output of 0.6% and a possible downward revision in the rate of growth for first quarter gross domestic product from 0.5% to 0.4% in terms of quarterly rates of change, analysts at Barclays said.
In Italy, industrial production was flat over the month in March but 0.7% higher over the first quarter as a whole.
Credit Suisse on track with cost-cutting
Investment bank Credit Suisse led the upside in the corporate space.
The Swiss outfit reported a 302m Swiss franc loss for the first quarter of 2016 - its first loss since 2008 - but nevertheless besting the 344m franc loss estimated by analysts, although it meant a sharp drop from the 1.05bn francs recorded in the comparable period of a year ago.
Helping the shares along, chief Tidjane Thiam expressed confidence in his ability to deliver the cost cuts promised for the year ahead.
Stock in Thyssenkrupp ended the session flat even after the company slashed its full-year forecasts because of the drop in prices for its products, including steel, which were deeper and longer than it had anticipated.
Danish jeweller Pandora A/S rocketed after the company reported earnings that beat analysts's estimates and boosted its full-year forecast. |
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| | US Market Report | | US open: Stocks rise as traders shrug off oil price decline US stocks gained on Monday as investors shrugged off a decline in oil prices and worse-than-expected Chinese trade data.
At 1513 BST, the Dow Jones Industrial Average rose 0.06%, the S&P 500 increased 0.26% and the Nasdaq climbed 0.23%.
In contrast oil prices reversed an earlier rally amid a government shake-up in Saudi Arabia. Saudi Arabia's veteran oil minister Ali al-Naimi will be replaced by Saudi Aramco chief executive Khalid al-Falih.
Oil was rising earlier on Monday, underpinned by the wildfires in the Canadian province of Alberta and strong Chinese crude import data, which showed a 7.6% increase in April on the year.
West Texas Intermediate crude fell 1.2% to $44.12 per barrel and Brent declined 1.7% to $44.58 per barrel at 1514 BST.
Meanwhile, data out of China over the weekend showed imports and exports fell more than expected in April. Exports dropped 1.8% on the year versus expectations for a flat reading, while imports tumbled 10.9% from the previous year, which was a much steeper fall than the 4% expected.
Stateside, there are no macroeconomic releases due with traders continuing to mull Friday's disappointing non-farm payrolls report.
Stocks on Wall Street finished in the black on Friday after the non-farm payrolls report showed the US added fewer jobs than expected in April, sparking hopes the Federal Reserve won't hike rates anytime soon. Payrolls rose by 160,000 versus expectations for a 200,000 gain.
"Probability for a rate hike at the June FOMC had been at 32% prior to Friday's jobs numbers but has subsequently dropped to just 19%, however the wage growth could be the shining light that keeps a move in rates solidly on the table in the run up to the Fed meeting on June 15, after Janet Yellen removed her fears about the global market effect on the US economy," said James Hughes, chief market analyst at GKFX.
On the corporate front, Tyson Foods advanced after the meat supplier raised its full year profit forecast due to strong consumer demand.
Sotheby's was in the red after reporting a first quarter loss as auction revenue fell. |
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| | Broker Tips | | Broker tips: RBS, Bovis Homes, British Land Royal Bank of Scotland was still on track to generate considerable surplus capital in the medium-term, but the exact amount and timing of any distribution were uncertain, HSBC said.
Possible delays to the separation of Williams&Glyn meant the lender might breach its State Aid Commitment which could trigger additional remedies, analysts Peter Toeman and Robin Down said in a research report sent to clients.
For the Prudential Regulatory Authority to approve a re-start of dividend payments RBS first needed to settle its litigation in the US linked to residential mortgage backed securities, to assure its exit from Williams&Glyn and pass the Bank of England's 'stress test' for 2016.
RBS also needed to maintain a minimum buffer of reserves equal to 13.0% of its common equity Tier 1 capital.
Unfortunately alongside its first quarter numbers management said difficulties in creating a cloned banking platform might push the separation of Williams&Glyn beyond the end-2017 deadline set by the regulator.
"In any event the financial cost of separation is likely to be significantly greater than the original estimate of GBP1.1bn (treated as a restructuring charge)," they said.
Combined with disposals/run-off of £47bn in risk weighted assets now in the pipeline and an estimated cost of additional litigation and regulatory fines of $8bn, CET1 would be in excess of 18% by the end of 2018, equating to surplus capital of £11bn over its 13.0% CET1 threshold, the broker estimated.
"However at this stage the exact of quantum of surplus capital, and timing of distribution, (most likely through repurchase of part of the Government's 73% interest) remains highly uncertain."
Toeman and Down reiterated their 'hold' recommendation but lowered their target from 260p to 240p.
Canaccord Genuity reiterated a 'buy' rating and target of 1,150p for Bovis Homes on Tuesday after the company released a "reassuring" trading update.
Bovis said it had experienced "no discernible impact" of Brexit worries hitting housing demand and that after an initial slowdown its sales rate has picked back up to where it was a year ago.
The sales rate for the year to date has reached 0.65 reservations per site per week, having been down at 0.6 earlier in the year.
The FTSE 250 company said market conditions remain positive with strong demand from home buyers who are benefitting from good access to mortgage finance.
"We think consensus forecasts are unlikely to change on the back of this update but the market should be reassured on two accounts: the improving sales rate and some early, tentatively positive comments for the longer-term outlook for margins," said Canaccord analysts Aynsley Lammin and Matthew Walker.
"Shares reside on a 2016 premium to net asset value (P/NAV) multiple of around 1.1 times, making it the lowest rated stock in the sector with the sector average P/NAV multiple at 1.95 times. Shares offer a dividend yield of around 5%."
Some of the recent negative trends at British Land would revert in the second half of the year and the risk of Brexit was already priced into its stock, Citi said.
Analyst Aaron Guy stuck by his 'buy' recommendation on the shares on Tuesday, heading into the London-based property investment company's fiscal-year results.
Recent rent and yield moderation would "positively accelerate" in the backhalf of the year.
Furthermore, the shares were already trading at a 25% discount to their net asset value and full-year NAV was set to grow by 17% over the full-year, alongside an expansion of 8% in earnings per share and dividends, he estimated. |
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