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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 close higher after UK and US inflation The FTSE 100 closed higher on Tuesday as oil prices wavered and investors weighed UK and US inflation data.
Oil prices were volatile after reaching a 2016 high on Monday. At 1632 BST Brent crude rose 0.38% to $49.16 per barrel and West Texas Intermediate increased 0.81% to $48.11 per barrel.
Global supply disruptions have helped soothe the crude glut that has been blamed for pushing prices lower. Goldman Sachs on Sunday said the market had finished almost two years of oversupply and moved to a deficit following global production disruptions.
Meanwhile, UK inflation came in worse than expected. The Office for National Statistics said the consumer price index rose 0.3% in the year to April, down from 0.5% in March. Analysts had predicted 0.4% year-on-year growth.
The slowdown was driven by declines in air fares and prices for clothing, vehicles and social housing rent.
Between April and March inflation also eased to 0.1% from the previous 0.4% month-on-month gain, missing forecasts of 0.3%.
The Bank of England, which is targeting 2%, has said that it is reacting more cautiously to UK news and data ahead of the European Union referendum on 23 June.
"On the assumption that the UK votes to stay in the EU, we expect the Bank of England's eventual next move will be to raise interest rates from 0.50% to 0.75% - but not until May 2017," said Howard Archer, chief UK and European economist at IHS Global Insight.
Separately, the ONS revealed UK house price growth accelerated to 9.0% in March compared to the previous year, mostly due to the surge in demand for second homes ahead of an increase in buy-to-let stamp duty. It marked a 12-month high and a pick-up in growth from the previous 7.60%.
Data from the Council of Mortgage Lenders British showed UK house purchase lending spiked 60% higher in March on a monthly and annual basis as investors rushed to beat the buy-to-let stamp duty increase in April.
In the US, inflation rose 1.1% year-on-year in April compared to 0.9% in March, the Labor Department said, in line with estimates. On a month-on-month comparison inflation rose 0.4% in April following a 0.1% increase in March, better than the 0.3% expected.
"Today's CPI figures provide powerful evidence that the Fed's accommodative monetary policy, combined with a broadly neutral fiscal policy, have had the desired effect on the US economy," said Ranko Berich, head of market analysis at Monex Europe.
"If this type of data holds up it's almost certain that Esther George won't be the only FOMC member voting for a hike in June. Today's figures mean that Wednesday's FOMC minutes will be picked apart with a fine tooth comb for indications that the Fed is gearing up to raise rates again."
The US also saw the release of data on housing starts from the Commerce Department which showed a 6.6% increase in April, ahead of estimates for a 3.3% gain. Housing starts had fallen 8.8% in March.
US industrial production grew 0.7% in April, more than the 0.3% rise expected and following a 0.9% decrease in March, the Federal Reserve revealed. Manufacturing output was up 0.3%, in line with forecasts and following a 0.3% dip in March.
On the company front, shares in Taylor Wimpey jumped after the housebuilder announced enhancements to its dividend policy and raised its guidance on operating profit margins between 2016 and 2018.
Vodafone gained after the company's organic sales returned to growth and beat expectations in the full year after a strong performance in the fourth quarter, hiking the final dividend 2%.
Land Securities advanced after it posted what it described as "strong" preliminary results on Tuesday, with asset values, revenue and earnings all increasing in the 12 months to 31 March.
Inmarsat rallied thanks in part to a note from Credit Suisse that reiterated its 'outperform' rating on the satellite group while downgrading rival Eutelsat to 'neutral' after its substantial profit warning.
Healthcare company BTG edged higher as it more than doubled full year pre-tax profits to £57.5m on the back of a 22% jump in revenues to £447.5m.
Halma's shares slumped after UBS downgraded the stock to 'sell' from 'neutral'. |
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| Market Movers
FTSE 100 (UKX) 6,160.90 0.15%
FTSE 250 (MCX) 16,845.08 0.87%
techMARK (TASX) 3,073.41 0.69%
FTSE 100 - Risers
Ashtead Group (AHT) 927.50p 5.82%
Taylor Wimpey (TW.) 193.50p 4.65%
DCC (DCC) 6,385.00p 3.82%
Inmarsat (ISAT) 777.00p 3.81%
Anglo American (AAL) 628.70p 3.15%
BHP Billiton (BLT) 861.70p 2.58%
Berkeley Group Holdings (The) (BKG) 3,059.00p 2.48%
Barratt Developments (BDEV) 551.00p 2.42%
Glencore (GLEN) 136.75p 2.36%
Land Securities Group (LAND) 1,162.00p 2.02%
FTSE 100 - Fallers
TUI AG Reg Shs (DI) (TUI) 1,027.00p -2.47%
Associated British Foods (ABF) 2,980.00p -2.33%
Diageo (DGE) 1,851.50p -1.99%
Unilever (ULVR) 3,106.50p -1.79%
Imperial Brands (IMB) 3,713.50p -1.66%
Paddy Power Betfair (PPB) 8,875.00p -1.50%
Tesco (TSCO) 164.25p -1.47%
British American Tobacco (BATS) 4,175.00p -1.42%
Sainsbury (J) (SBRY) 253.30p -1.21%
BAE Systems (BA.) 484.80p -1.08%
FTSE 250 - Risers
Lookers (LOOK) 139.90p 6.23%
Aggreko (AGK) 1,089.00p 5.63%
Weir Group (WEIR) 1,209.00p 5.50%
Polymetal International (POLY) 812.50p 4.50%
Ladbrokes (LAD) 119.70p 3.82%
BTG (BTG) 608.50p 3.75%
Kaz Minerals (KAZ) 159.40p 3.51%
Restaurant Group (RTN) 314.40p 3.46%
Drax Group (DRX) 301.60p 3.11%
Bovis Homes Group (BVS) 925.50p 3.06%
FTSE 250 - Fallers
TalkTalk Telecom Group (TALK) 248.20p -3.42%
Halma (HLMA) 892.00p -2.89%
ICAP (IAP) 441.90p -2.62%
Hikma Pharmaceuticals (HIK) 2,260.00p -1.74%
Shawbrook Group (SHAW) 262.00p -1.69%
Ocado Group (OCDO) 264.80p -1.41%
Interserve (IRV) 310.40p -1.27%
Britvic (BVIC) 711.00p -1.18%
Greencore Group (GNC) 382.10p -1.14% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Auto stocks lead retreat European stocks finished on the back foot on Tuesday, with early gains having been progressively eroded as the day wore, with traders seemingly fixated on the guessing-game surrounding Fed policy.
By the closing bell the benchmark DJ Stoxx 600 was exactly flat at 334.72, while Germany's DAX gave back 0.63% or 62.71 points to reach 9,890.19 and France CAC up 0.01% or 4.25 points to 4,316.86, with Spain's Ibex rising 0.38% or 32.80 points and at 8,714.90.
Shares in Automobiles&Parts companies were especially weak, with the DJ Stoxx 600's sector gauge dropping 2.88% to 463.68 as broker Exane downgraded Fiat Chrysler to a 'sell', telling clients a bubble in automotive lending in the States might be set to burst.
Consumer goods companies were also weaker, with a sub-index tracking those companies' shares down by 0.89% to 839.24, mimicking sector price action on Wall Street in afternoon trading.
Also in focus were the on-going negotiations between European capitals and the International Monetary Fund on the degree of debt relief which Athens should be given, which in turn might determine to what extent, or not, the IMF would participate in the country's next rescue package.
Involvement by the IMF was considered key for keeping Athens on the straight and narrow and hence protecting the credibility of any programme. Washington was also keen to avoid any renewed flare-ups in the Greek crisis given the already tense situation elsewhere and politically in the wider euro area, The Wall Street Journal reported.
The Eurozone's trade surplus with the rest of the world increased from €20.6bn in February to €22.3bn in March (consensus: €22bn), data from Eurostat showed.
Oil prices were higher by the end of trading, with Brent crude oil futures up by 0.891% to $49.41 per barrel and West Texas Intermediate 1.18% higher to $48.29 per barrel in ICE trading.
Consumer price inflation in Britain slowed to a 0.3% year-on-year clip in April, missing forecasts for a rise of 0.5% by a wide margin.
"The sharp fall in inflation in April is not a signal that inflation pressure is easing. The fall mainly reflected a decline in airline fares inflation [...] The other main downward influence on inflation was a fall in clothing inflation which merely seems to reflect retailers discounting in response to unusually bad weather.
"Sterling's decline has boosted apparel retailers' costs and will compel them to raise their prices soon," Samuel Tombs, chief UK economist at Pantheon Macroeconomics said in a research note sent to clients.
Among corporate stocks, Vodafone shares gained after the company's organic sales returned to growth and beat expectations in the full year after a strong performance in the fourth quarter, hiking the final dividend 2%. |
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| | US Market Report | | US open: Wall Street lower after slightly mixed data Wall Street was struggling following the release of slightly mixed readings on US industrial production and homebuilding.
As of 16:38 BST the Dow Jones Industrial Average was 61.98 points or 0.34% lower to 17,648.11, alongside a fall of 5.57 points or 0.27% in the S&P 500 and a 9.65 point or 0.21% loss for the Nasdaq Composite.
Industrial production sped ahead by 0.7% month-on-month in April (consensus: 0.3%), albeit flattered by a 5.8% jump in utilities' output.
"The industrial economy is strong enough for inflation hawks to remain hawkish and weak enough for doves to remain dovish. The battle at the next FOMC will be fought over the labor market and inflation numbers," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a research report sent to clients.
As expected, data earlier in the data revealed that year-on-year CPI advanced at a 1.1% clip in April following a 0.9% increase a month earlier.
The Federal Reserve is targeting 2% inflation and will be taking the data into consideration ahead of its next decision on interest rates in June. The Fed releases the minutes of its 26-27 April meeting on Wednesday which may offer clues on the central bank's plans for policy.
Housing starts Staeside rocketed 6.6% to 1,172m in April, above the consensus forecast for an annualised rate of 1,125m.
However, permits, a lead indicator for activity in the sector, were weaker than expected, climbing by 3.6% over the month to reach an annualised rate of 1.116m (consensus: 1,135m).
Later on Tuesday afternoon, San Francisco Federal Reserve Bank President John Williams was scheduled to speak on the economy at the Politico Event in New York at 1700 BST, a day after saying he expects between two to three interest rate hikes this year.
Fed Bank of Dallas President Robert Kaplan is also due to speak in a moderated question and answer session at the Petroleum Club of Midland in Texas at 1815 BST.
Company-wise, Apple's shares edged higher a day after Warren Buffett's Berkshire Hathaway Inc. bought a 9.8 million-share stake during the first quarter.
Shares of LendingClub Corp. dropped sharply as the online lender revealed it was being investigated by the US Justice Department late Monday, following the disclosure of faulty internal controls.
Home Depot advanced after raising its 2016 earnings outlook and reporting better-than-expected first quarter results.
Perrigo Co. slumped after the maker of health care products reported a fourth-quarter loss.
From a sector standpoint, the largest gains were to be seen in the following industrial groups: Non-ferrous metals (6.05%), Marine transportation (5.82%) and Gold mining (3.59%).
Oil prices reversed course after early losses, with West Texas Intermediate crude oil futures climbing 1.1% to $48.24 per barrel and Brent up by 0.83% to $49.38 per barrel.
S&P 500 - Risers
United Rentals Inc. (URI) $65.66 +7.75%
Southwestern Energy Co. (SWN) $12.25 +6.89%
Freeport-McMoRan Inc (FCX) $11.80 +6.88%
Chesapeake Energy Corp. (CHK) $4.13 +5.90%
Williams Companies Inc. (WMB) $21.80 +5.88%
Seagate Technology Plc (STX) $20.14 +5.11%
Diamond Offshore Drilling Inc. (DO) $24.81 +3.89%
Transocean Ltd. (RIG) $9.84 +3.80%
Stericycle Inc. (SRCL) $99.06 +3.76%
Western Digital Corp. (WDC) $36.81 +3.49%
S&P 500 - Fallers
Westrock Company (WRK) $37.92 -4.31%
AbbVie Inc (ABBV) $59.82 -4.21%
Activision Blizzard Inc. (ATVI) $38.10 -3.26%
Alexion Pharmaceuticals Inc. (ALXN) $140.19 -3.03%
Constellation Brands Inc. Class A (STZ) $157.78 -2.92%
Kimco Realty Corp. (KIM) $28.43 -2.37%
Hormel Foods Corp. (HRL) $39.31 -2.31%
Eli Lilly and Company (LLY) $76.52 -2.26%
International Paper Co. (IP) $41.26 -2.25%
Kraft Heinz Co. (KHC) $84.02 -2.15%
Dow Jones I.A - Risers
Caterpillar Inc. (CAT) $72.06 +1.92%
E.I. du Pont de Nemours and Co. (DD) $64.99 +1.01%
Goldman Sachs Group Inc. (GS) $156.78 +0.90%
JP Morgan Chase & Co. (JPM) $61.93 +0.43%
Walt Disney Co. (DIS) $100.79 +0.43%
Nike Inc. (NKE) $57.30 +0.28%
Exxon Mobil Corp. (XOM) $89.67 +0.11%
Dow Jones I.A - Fallers
Home Depot Inc. (HD) $132.81 -1.87%
Microsoft Corp. (MSFT) $50.98 -1.64%
Coca-Cola Co. (KO) $45.00 -1.35%
Procter & Gamble Co. (PG) $80.62 -1.24%
Visa Inc. (V) $77.01 -1.02%
McDonald's Corp. (MCD) $128.33 -1.01%
American Express Co. (AXP) $63.47 -0.94%
Travelers Company Inc. (TRV) $111.37 -0.78%
Pfizer Inc. (PFE) $33.13 -0.75%
Cisco Systems Inc. (CSCO) $26.77 -0.74%
Nasdaq 100 - Risers
Seagate Technology Plc (STX) $20.14 +5.11%
Stericycle Inc. (SRCL) $99.06 +3.76%
Western Digital Corp. (WDC) $36.81 +3.49%
American Airlines Group (AAL) $33.10 +3.05%
JD.com, Inc. (JD) $24.05 +2.91%
Endo International Plc (ENDP) $14.71 +2.84%
TripAdvisor Inc. (TRIP) $66.57 +2.57%
Baidu Inc. (BIDU) $172.20 +2.52%
Mylan Inc. (MYL) $41.46 +2.50%
Vodafone Group Plc ADS (VOD) $33.49 +2.29%
Nasdaq 100 - Fallers
Activision Blizzard Inc. (ATVI) $38.10 -3.26%
Biomarin Pharmaceutical Inc. (BMRN) $83.70 -3.20%
Alexion Pharmaceuticals Inc. (ALXN) $140.19 -3.03%
Incyte Corp. (INCY) $74.70 -2.31%
Kraft Heinz Co. (KHC) $84.02 -2.15%
Electronic Arts Inc. (EA) $74.99 -2.13%
Regeneron Pharmaceuticals Inc. (REGN) $383.92 -2.05%
Mondelez International Inc. (MDLZ) $43.66 -1.93%
Maxim Integrated Products Inc. (MXIM) $35.72 -1.76% |
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| | Broker Tips | | Broker tips: Inmarsat, Halma, Taylor Wimpey Credit Suisse reiterated its 'outperform' rating on Inmarsat while downgrading rival Eutelsat to 'neutral' after its substantial profit warning.
The Swiss bank admitted its positive view over the past 18 months on the outlook for global satellite revenue growth has proved overly optimistic, mainly due an underestimated impact of a weakening global economy on certain regions such as Latin America and Africa and rising competition from Intelsat in LatAm.
"While we still see positive growth trends in certain segments, particularly 4KTV and US government spend, we acknowledge that these trends are coming through slower than we had imagined 18 months ago."
"Having capacity in the right place increasingly important. Going forward exposure to different end users and the allocation of future satellite capacity to different geographies will increasingly drive our satellite stock views, rather than a one size fits all approach."
Eutelsat now looks increasingly exposed to Latam and Africa and applications such as global data services and professional video that are increasingly under pressure.
The more positive rating on Inmarsat was maintained but Credit Suisse analysts cut their target to 1,060p from 1,186p to reflect the delay to the introduction of key GlobalXpress products and ongoing economic headwinds in maritime.
After a weak quarter, the FTSE 100 group recently cut its 2016 revenue guidance by $50m but maintained its 2018 revenue outlook. Growth concerns have been raised in the market due to tough conditions in maritime that outweigh the pleasing return to growth in government revenue.
Inmarsat also notified of larger agreed Ligado payments out to 2018, now expecting to receive $337m over the three-year period that is around $35-40m per year above consensus.
Third rival SES was also maintained at 'outperform' and its target also reduced to €25 from €29 as it is seen as having similar revenue exposure to Eutelsat in Latam and Africa, though its exposure to commoditised point-to-point data services is lower than Eutelsat in both regions.
UBS has downgraded Halma to 'sell' from 'neutral' with the health and safety technology group's shares tottering at 25-year highs and at a 49% premium to the engineering sector.
"If the world is better than expected Halma will likely underperform versus the group as it is less cyclical and if the economic outlook weakens we still see absolute downside risks," UBS said.
Acknowledging the FTSE 250 group's strong organic growth track record amid a declining sector, the Swiss bank noted that Halma has previously endured organic sales weakness in recessionary phases as its niche portfolio reduces its risks but does not completely remove them.
Consensus forecasts point to a 6% per annum ongoing sales growth, meaning that the risk of organic growth exceeding that "looks very limited" and acquisitions have generally fallen short of matching organic growth.
With deal sizes appearing on the rise, UBS stressed that striving for more
acquired growth increases the risks.
Analysts set a price target of 785p based on discounted cash flow, reasoning that even if management targets to grow at 15% per annum via organic and acquisitions are delivered, it would still only see 2020 expected EPS rise by 25% and Halma's EV/EBITA ratio in year-five back in line with its 20 year average.
"Looking at it another way, the share is pricing in stable margins and perpetuity growth of 3.5-4% per annum", which is 1.5-2 times the rate of perpetuity growth priced in for most of the other stocks covered by the same analysts.
Canaccord Genuity reiterated a 'buy' rating and target of 210p for Taylor Wimpey on Tuesday after the housebuilder announced enhancements to its dividend policy.
Taylor Wimpey has increased its ordinary dividend to around 5% of net assets to be paid through the cycle from 2017 and announced a special dividend of £300m to be paid in July 2017.
The group also raised its guidance on operating profit margins to 22% between 2016 and 2018, compared to 20.3% in 2015.
Last month the company said its trading had not been affecting by uncertainty surrounding the 23 June European Union referendum.
Canaccord said: "Comments on current trading are consistent with what we recently heard from the group. Overall core principles of the group's strategy remain, with the group committed to driving further operational improvement. |
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