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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 fall after disappointing manufacturing data UK equities declined on Monday as traders weighed a batch of disappointing manufacturing reports and hawkish remarks from Federal Reserve officials.
Manufacturing data came in worse-than-expected in the eurozone, in Japan and in the US.
Markit's eurozone manufacturing purchasing managers' index dipped to 51.5 in May from 51.7 in April, missing forecasts for a reading of 51.9 but above the 50 level that separates an expansion from a contraction in sector activity.
The Nikkei flash PMI for Japanese manufacturing dropped to 47.6 in May from 48.2 in April, signalling a further contraction.
Markit's flash US manufacturing PMI fell to 50.5 in May from 50.8 in April, below the 51.0 reading expected by economists.
The US also saw a batch of Fed policymakers fuelling speculation of an interest rate hike at the 14-15 June meeting.
St Louis Federal Reserve president James Bullard said that the relatively tight labour market in the US may place upward pressure on inflation, strengthening the case for higher interest rates.
San Francisco Fed president Eric Rosengren said in an interview with the Financial Times, published on Monday, that the US economy was displaying the conditions needed for a 25 basis point interest rate hike next month.
San Francisco Fed chief John Williams said three or four interest rate hikes over the course of 2017 was also "about right", Reuters reported.
Meanwhile, a strong dollar and signs that the global crude supply glut continues sent oil prices lower with Brent crude down 1.03% to $48.22 per barrel and West Texas Intermediate down 0.66% to $48.09 per barrel at 1638 BST.
On the company front, Royal Mail rallied after RBC Capital Markets upgraded the stock to 'sector perform' from 'underperform' and lifted the price target to 525p from 445p.
ARM Holdings, which designs chips for Apple, was also in the black following reports the US tech giant has asked its suppliers to deliver up to 78 million of its upcoming updated iPhone models.
Mitie Group advanced after saying total annual operating profit grew 100.9% to £112.5m, with basic earnings per share growth of 119.6%. £112.5m, with basic earnings per share growth of 119.6%.
Inmarsat was under the cosh after Morgan Stanley downgraded the stock to 'equalweight' from 'overweight' and slashed the price target to 800p from 1,350p as it cut its earnings forecasts for the stock.
ICAP slumped after Credit Suisse downgraded its stance on the stock to 'neutral' from 'outperform' and cut the price target to 450p from 475p following the full-year 2016 results, with the valuation up with events.
Sports Direct was also lower as Goldman Sachs downgraded the stock to a 'neutral' rating and removed the retailer off its Pan-Europe Buy List after cutting its earnings per share (EPS) forecasts for this and next year. |
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| Market Movers
FTSE 100 (UKX) 6,147.53 -0.14%
FTSE 250 (MCX) 17,046.71 0.74%
techMARK (TASX) 3,081.78 0.41%
FTSE 100 - Risers
Royal Mail (RMG) 513.00p 4.29%
3i Group (III) 521.50p 3.17%
DCC (DCC) 6,620.00p 2.08%
ARM Holdings (ARM) 963.00p 1.96%
easyJet (EZJ) 1,498.00p 1.90%
Hargreaves Lansdown (HL.) 1,284.00p 1.66%
Travis Perkins (TPK) 1,890.00p 1.61%
Royal Bank of Scotland Group (RBS) 235.30p 1.51%
International Consolidated Airlines Group SA (CDI) (IAG) 524.00p 1.45%
Berkeley Group Holdings (The) (BKG) 3,241.00p 1.19%
FTSE 100 - Fallers
Inmarsat (ISAT) 724.50p -4.04%
Tesco (TSCO) 161.85p -1.49%
Vodafone Group (VOD) 225.85p -1.42%
Old Mutual (OML) 167.80p -1.12%
Rolls-Royce Holdings (RR.) 636.00p -1.09%
GKN (GKN) 272.30p -1.05%
Standard Life (SL.) 328.20p -1.00%
SSE (SSE) 1,521.00p -0.91%
BP (BP.) 358.25p -0.90%
Imperial Brands (IMB) 3,667.50p -0.86%
FTSE 250 - Risers
Mitie Group (MTO) 292.20p 6.80%
Pendragon (PDG) 40.09p 5.42%
Shawbrook Group (SHAW) 294.00p 4.89%
Entertainment One Limited (ETO) 180.90p 4.33%
Polypipe Group (PLP) 318.10p 4.30%
Laird (LRD) 348.60p 4.12%
CLS Holdings (CLI) 1,603.00p 4.09%
IP Group (IPO) 157.40p 3.62%
Indivior (INDV) 169.50p 3.48%
Countrywide (CWD) 373.10p 3.27%
FTSE 250 - Fallers
ICAP (IAP) 413.90p -4.12%
Sports Direct International (SPD) 354.10p -4.04%
Ocado Group (OCDO) 263.10p -2.41%
Allied Minds (ALM) 328.70p -2.26%
Vedanta Resources (VED) 371.50p -2.11%
Tullow Oil (TLW) 242.40p -1.86%
Assura (AGR) 56.90p -1.64%
Hastings Group Holdings (HSTG) 183.90p -1.55%
Greencore Group (GNC) 356.20p -1.47%
Wood Group (John) (WG.) 618.50p -1.36% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Drop in chemicals stocks, oil prices weighs on shares European stocks ended lower in choppy trading, with a drop in shares of German chemicals-maker Bayer and falling crude oil futures prices acting as a drag.
Investors were also weighing up some encouraging German data against the possibility of a June rate hike by the US central bank.
The benchmark Stoxx Europe 600 index finished down 0.39% at 336.69 points, with Germany's DAX giving back 0.74% or 73.73 points to end at 9,842.29 and France's CAC 40 moving 0.66% or 28.80 points lower to 4,325.10.
The Stoxx 600 sub-index of chemical companies retreated 1.52% or 11.45 points to close at 741.18 while a gauge of Oil&Gas stocks dropped 1.10% or 3.00 points to 269.42.
Oil prices retreated amid ongoing supply glut concerns as Iran said it had no plans to freeze production. West Texas Intermediate was down 1.36% to $47.76 a barrel and Brent crude was 1.56% lower at $47.97 by the close of trading.
The session had kicked off in the red after data showed Japanese exports fell 10.1% on the year in April, in line with forecasts but a much weaker performance than March's 6.8% drop. Imports slumped 23%, missing expectations for a 19% decline.
Investors were also busy digesting comments from St Louis Federal Reserve President James Bullard, who said in a speech in Beijing that a tight labour market in the US could put pressure on inflation, in turn underpinning the argument for higher interest rates.
Also on Monday, Fed Reserve Bank of San Francisco President John Williams said it was likely the Federal Reserve would hike rates two or three times in 2016.
Philadelphia Fed President Patrick Harker was due to speak later in the day and his remarks would also be closely scrutinised.
JP Morgan´s Mislav Mateka cautioned that the US central bank´s reaction function was acting as a dampener on equities, as evidenced by the price action seen in stockmarkets in the previous week.
On the one hand, "somewhat better data flow" led to the Federal Reserve opening the door to interest rate hikes. In turn, that boosts the value of the US dollar and places renewed pressure on the Chinese yuan.
However, any spell of weakness in the data automatically throws into question the ability of companies to deliver earnings in a sustainable manner, the strategist said in a research report sent to clients.
Data point to solid growth in Germany, slowdown in Spain
On the economic front, Markit's flash composite purchasing managers' index for Germany rose to a five-month high of 54.7 in May from 53.6 in April, beating economists' expectations for a reading of 53.8.
The manufacturing PMI increased to a five-month high of 52.4 from 51.8, surpassing expectations of 52.0, while the services PMI edged up to a three-month high of 55.2 from 54.5 in April, ahead of estimates of 54.6.
"Overall, the [data] shows that the PMI points to solid GDP growth in Germany, but it also suggest that the 0.7 quarter-on-quarter growth rate in Q1 will not be sustained," Pantheon Macroeconomics said.
The flash Eurozone composite purchasing managers' index slipped to a 16-month low of 52.9 in May from 53.0 in April, missing expectations for a reading of 53.2.
The services PMI was unchanged at 53.1, undershooting forecasts of 53.3.
Meanwhile, the manufacturing PMI dipped to a three-month low of 51.5 from 51.7 in April, missing estimates of 51.9.
Pantheon Macroeconomics said a weaker performance in Spain was likely behind the weak print in the euro area composite PMI.
RyanAir gains, Bayer drops
In corporate news, lost-cost carrier Ryanair edged higher after reporting a 43% jump in full-year net profit but cautioning that profit growth for this year is likely to be modest.
Legal & General was touch lower after announcing the acquisition of a £3bn annuity portfolio from Aegon.
German drugs company Bayer was under the cosh after making a $62bn bid for US agriculture group Monsanto.
French Insurer AXA was a little weaker after it announced plans to sell all its exposure to tobacco companies, valued at approximately €1.8bn. |
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| | US Market Report | | US open: Stocks rise despite hawkish Fed speakers US stocks gained on Monday as investors seemed unfazed by hawkish statements from Federal Reserve officials and a worse-than-expected manufacturing report.
At 1516 BST Dow Jones Industrial Average rose 0.14%, the S&P 500 increased 0.4% and the Nasdaq advanced 0.32%.
St Louis Federal Reserve president James Bullard said on Monday that the relatively tight labour market in the US may place upward pressure on inflation, strengthening the case for higher interest rates.
"By nearly any metric, US labour markets are at or beyond full employment," said Bullard in notes for a speech given in Beijing, China.
Fellow Fed policymaker Eric Rosengren said in an interview with the Financial Times, published on Monday, that the US economy was displaying the conditions needed for a 25 basis point interest rate hike at the 14-15 June meeting.
The Boston Fed president, who two weeks ago said rate hikes should resume said: "I want to be sensitive to how the data comes in, but I would say that most of the conditions that were laid out in the minutes, as of right now, seem to be...on the verge of broadly being met."
Meanwhile, San Francisco Fed chief John Williams said three or four interest rate hikes over the course of 2017 was also "about right", Reuters reported.
In economic data, Markit's flash US manufacturing purchasing managers' index fell to 50.5 in May from 50.8 in April. This is only a touch above the 50 mark that separates contraction from expansion and below the 51.0 reading expected by economists.
Chris Williamson, chief economist at Markit, said: "The weak manufacturing PMI data cast doubt on the ability of the US economy to rebound from its disappointing start to the year in the second quarter."
A drop in oil prices also failed to pull down US equities. A strong dollar and signs that the global crude supply glut continues sent crude prices lower with West Texas Intermediate down 0.70% to $48.07 per barrel and Brent down 1.2% to $48.14 per barrel at 1527 BST.
The dollar rose 0.13% against the pound, increased 0.22% against the euro but fell 0.68% against the yen.
The yen strengthened after official data showed a surprise trade surplus in April for Japan. Japan's trade surplus came in at 825.5bn yen, well above the market forecast of 535bn yen.
On the company front, Boeing Co. rallied after Vietnamese carrier VietJet Aviation JSC said on Monday that it had signed a $11.3bn deal to buy 100 planes from the US plane maker. |
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| | Broker Tips | | Broker tips: Sports Direct, Royal Mail, Inmarsat Goldman Sachs has downgraded Sports Direct International to a 'neutral' rating and taken the retailer off its Pan-Europe Buy List after cutting its earnings per share (EPS) forecasts for this and next year.
"We expect the combination of a demanding European apparel demand environment, gross margin pressure and elevated opex growth due to a one-off wage bill increase to stall Sport Direct's EPS progress in FY16, FY17 and FY18, despite the European football event this summer."
Reflecting the current demanding market and "a slower second-half sales growth trend", Goldman has cut its forecast for earnings before interest, tax, depreciation and amortisation (EBITDA) for the full year by 4% to £375m and for next year by 8% to £365m.
On top of this lower EBITDA base, Goldman said its concerns about gross margins were that the company would find it difficult to pass onto customers the recent input cost inflation being driven by currency fluctuations.
Together, this has resulted in it cutting its full year pre-tax profit forecast to £282m and further to £264m for 2017, leading to earnings per share of 36.04p and 33.76p.
The target for the shares was also slashed to 400p from 525p.
Royal Mail's shares gained on Monday after RBC Capital Markets raised its rating on the stock to 'sector perform' from 'underperform' and lifted its target to 525p from 445p.
The postal delivery service last week reported a 33% drop in full year pre-tax profits to £267m as UK revenue fell 1% to £7.6bn. Letter volumes dropped 3% while parcel deliveries rose 3%.
RBC said it sees "modest recovery in the parcel price/mix as the company becomes more volume selective".
The broker said the summer/autumn season should see greater certainty emerge on the direction of future wage inflation, cash pension costs and more detail from Ofcom on its review of the regulation of the company.
RBC said with stability on these points, Royal Mail will be free to increase focus on efficiency efforts that might improve the logistics, sorting and delivery processes.
RBC lifted its earnings before interest and tax forecasts by 1% for fiscal years 2017 and 2018 - "based on a presumption of a competitive parcel market pricing closer to the five-year median price/mix seen at Austrian Post, DP DHL, CTT, Post NL and Swiss Post".
Morgan Stanley downgraded Inmarsat to 'equalweight' from 'overweight' and slashed the price target to 800p from 1,350p as it cut its earnings forecasts for the stock.
The bank said that despite a 33% drop year-to-date, offsetting a 42% jump in 2015, revenue guidance is too ambitious and there is scope for earnings downgrades.
It pointed out that management has already cut 2016 revenue guidance by 4%, but kept 2018 targets, and MS expects these to be the next to fall away. It reduced its 2017-2018 earnings per share forecasts by 18-22%.
"Inmarsat targets revenue growth of 2% in 2016, but sees acceleration to 11-13% compound annual growth rate for 2017 and 2018. We think this looks too ambitious given pressure in the data business, with Eutelsat citing 'slowing industry-wide growth'."
It said the revenue boost for Inmarsat relies on Global Xpress, mostly in the maritime and government markets. However, Morgan Stanley sees two headwinds in maritime: a recession in the global maritime market resulting in vessels being laid up or scrapped, and increased competition in new growth markets, such as cruiseliners and oil & gas rigs. |
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