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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: Insurers, banks pace gains UK stocks gained on Tuesday following new poll results showing the Remain campaign was leading ahead of Britain's EU referendum.
The Telegraph's ORB poll revealed 55% of those wanting to stay in the EU and 42% who will vote to leave in the 23 June referendum.
Separately, the latest ICM telephone poll showed support for the Remain camp was 47% while support for the Leave camp was 39% and 14% were undecided.
The polls sent the pound higher against the dollar and lifted housebuilding stocks, including Berkeley Group, Persimmon and Travis Perkins.
However, it was insurance and bank shares that were most wanted.
As of 17:13BST cable was trading 0.96% stronger on the day at 1.4623.
On the Brexit debate, Bank of England governor Mark Carney defended his stance on the matter during questions in Parliament on Tuesday.
During evidence given before the Treasury Select Committee, Carney said he believes the central bank has highlighted the key issues around the EU referendum, including short-term uncertainty and the potential change in the trade-off between output and inflation, and he would not expect "something substantially different" to be said.
It came after the BoE released a markedly stern warning earlier this month on the impact of Brexit on the economic outlook in the Quarterly Inflation Report.
The governor joined Monetary Policy Committee members Ben Broadbent, Gertjan Vlieghe and Martin Weale in front of the select committee.
In economic data, UK government borrowing was higher than expected in April. The Office for National Statistics said borrowing, excluding support for state-owned banks, was £7.2bn in April, more than forecasts of £6.6bn but down from £7.5bn the same month last year.
The lower figure reflected weaker-than-expected corporation tax receipts and income from workers' national insurance contributions.
"The more the economy slows amid heightened uncertainty ahead of the June EU referendum, the more challenging the fiscal target of £55.5bn for 2016/17 will become. The Chancellor will certainly need growth to pick up once the referendum is out of the way, assuming that there is a vote to remain in the EU.
"Should the UK vote to leave the EU in June's referendum, the Chancellor's fiscal targets and plans would undoubtedly be blown out of the water and there would need to be major adjustments," Dr.Howard Archer, chief European and UK economist at IHS said in a research note sent to clients.
Meanwhile, oil prices reversed earlier falls with Brent crude up 0.37% to $48.53 per barrel and West Texas Intermediate up 0.846% to $48.49 per barrel.
Shares of Tesco, Old Mutual lead rise
Tesco was the top performer on the Footsie as investors flocked to buy the grocer's shares, many inspired by the reiteration of an 'outperform' rating from Bernstein and 220p price target.
Stock in Old Mutual jumped after confirming that it has received approaches from third parties to acquire its 66% stake in OM Asset Management.
Homeserve gained as the repair and insurance company posted a rise in profit for the year to the end of March as revenue and customer numbers grew.
Card Factory slumped as it reported lower sales growth for the first quarter due to weak consumer confidence.
Paragon dropped sharply despite the backdrop of rising markets amid concerns about the outlook for the buy-to-let market after the company reported a jump in first half profits driven by buy-to-let loans.
Aveva was in the doldrums after saying full year profits almost halved on the back of lower revenue and one-off exceptional costs related to the aborted merger with Schneider Electric. |
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| Market Movers
FTSE 100 (UKX) 6,219.26 1.35%
FTSE 250 (MCX) 17,135.67 0.61%
techMARK (TASX) 3,098.47 0.61%
FTSE 100 - Risers
Tesco (TSCO) 171.00p 6.81%
Old Mutual (OML) 177.10p 5.86%
Legal & General Group (LGEN) 236.50p 5.11%
Royal Bank of Scotland Group (RBS) 245.30p 4.78%
Prudential (PRU) 1,386.00p 4.72%
St James's Place (STJ) 943.50p 4.72%
Travis Perkins (TPK) 1,966.00p 4.24%
Aviva (AV.) 449.80p 3.90%
Schroders (SDR) 2,676.00p 3.68%
Barclays (BARC) 181.90p 3.53%
FTSE 100 - Fallers
Fresnillo (FRES) 1,042.00p -3.25%
Randgold Resources Ltd. (RRS) 5,895.00p -3.04%
Coca-Cola HBC AG (CDI) (CCH) 1,324.00p -3.00%
Ashtead Group (AHT) 963.50p -1.03%
Shire Plc (SHP) 4,281.00p -0.79%
Johnson Matthey (JMAT) 2,858.00p -0.45%
Royal Dutch Shell 'B' (RDSB) 1,661.50p -0.33%
Rexam (REX) 626.00p -0.24%
SABMiller (SAB) 4,262.50p -0.18%
Intertek Group (ITRK) 3,297.00p 0.18%
FTSE 250 - Risers
Homeserve (HSV) 463.00p 7.35%
Brown (N.) Group (BWNG) 253.00p 4.85%
Aberdeen Asset Management (ADN) 287.80p 4.85%
Auto Trader Group (AUTO) 401.20p 4.59%
Ibstock (IBST) 221.40p 4.43%
Ashmore Group (ASHM) 292.70p 3.87%
Daejan Holdings (DJAN) 6,015.00p 3.17%
Halfords Group (HFD) 445.50p 3.05%
PZ Cussons (PZC) 339.80p 3.00%
International Personal Finance (IPF) 272.90p 2.98%
FTSE 250 - Fallers
Paragon Group Of Companies (PAG) 302.60p -6.58%
Centamin (DI) (CEY) 106.40p -4.92%
Keller Group (KLR) 925.00p -4.64%
Aveva Group (AVV) 1,527.00p -4.56%
Card Factory (CARD) 367.10p -3.65%
Dairy Crest Group (DCG) 558.50p -3.46%
Acacia Mining (ACA) 322.00p -2.98%
Mitie Group (MTO) 281.50p -2.93%
Cairn Energy (CNE) 203.10p -2.78% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Gains in financials, stronger dollar send stocks higher European stocks reversed opening losses to trade higher, led by strength in the insurance and banking sectors as investors continued to focus on the timing of the next Federal Reserve rate hike.
The benchmark Stoxx Europe 600 index finished the session with gains of 2.21% or 7.43 at 344.12, while Germany's DAX was 2.18% higher to 10,057.31 and France's CAC by another 2.46% to 4,431.52.
Milan´s FTSE Mib was the standout gainer from among the main equity benchmarks on the Continent, as the Stoxx 600 bank sector index jumped 3.62% or 5.28 points to close at 150.96.
Nevertheless, it was shares in the main insurance oufits which paced gains, with the related sector gauge snapping 3.94% higher to end the day at 252.18.
"Confidence [in the bank sector] may have stemmed from UBS Boss Axel Weber telling CNBC that a US rate hike would not be a bad thing (i.e. what's all the fuss about?), yet maintaining he didn't think it would move anyway until better signs of economic strength are evident.
"An upbeat tone looks to have temporarily stifled the hitherto negative pressures stemming from (mainly non-voting, remember) US Federal Reserve hawks, who've seemed pretty chuffed with the effect they've had on the markets over the past week or so," said Augustin Eden at Accendo Markets.
Crude oil futures were to be seen higher despite strength in the US dollar. West Texas Intermediate was up by 1.01% to $48.57 a barrel and Brent crude was ahead by 0.58% at $48.63.
A weaker euro also helped to lift equities in Europe.
The single current was trading down 0.69% to 1.1143 by the close of trading in London, even as sterling got a boost from a Telegraph poll suggesting support for Brexit was on the decline.
In corporate news, shares in SEB rocketed after the French household equipment manufacturer announced the acquisition of Germany coffee machine maker WMF from KKR.
DIY retailer Kingfisher was a high riser after reporting a solid start to the year, with 6.2% like-for-like growth in B&Q and Screwfix stores in the UK and Ireland contributing to 3.6% group growth to £2.7bn.
Severn Trent was also in the black as it cut its dividend but posted a rise full-year profit.
Old Mutual edged up after confirming that it has received approaches from third parties to acquire its 66% stake in OM Asset Management.
On the downside, German speciality chemicals group Evonik was under the cosh after private equity firm CVC placed its shares at a discount.
Earlier, Destatis confirmed that German gross domestic product grew at 0.7% in the first quarter compared with 0.3% in the final quarter of last year.
It said positive contributions came mainly from domestic demand, which helped to offset weaker trade.
Elsewhere, the latest survey from the ZEW Center for European Economic Research in Mannheim showed German investor confidence unexpectedly deteriorated in May.
The indicator of economic sentiment declined 4.8 points from the previous month to 6.4, versus expectations for an increase to 12.0.
The current situation index, however, rose 5.4 points to 53.1, beating forecasts for a reading of 47.9. |
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| | US Market Report | | US open: Stocks rebound as Fed remains in focus US stocks rebounded on Tuesday from the previous day's decline amid speculation of an interest rate hike in June.
The Dow Jones Industrial Average rose 0.35%, the S&P 500 gained 0.43% and the Nasdaq climbed 0.61% at 1430 BST.
Hawkish statements from Federal Reserve officials had sent US equities into the red at the close on Monday.
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.
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.
San Francisco Fed chief John Williams said three or four interest rate hikes over the course of 2017 was also "about right", Reuters reported.
Societe Generale strategist Kit Juckes said: "The odds of a June Fed rate hike have risen to 30% according to Bloomberg, but the vast majority of people I speak to think the UK's EU membership referendum will be enough to stay the Fed's hand.
"For those tempted to look for an early move, July is the favourite, and the odds there, have increased to above 50%. I should add that SG's US economics team doesn't share that view, expecting a Q4 move, but the contrast with the UK where the chances of a July hike (pot-referendum, remember) remain firmly at zero."
Meanwhile, oil prices reversed earlier falls with West Texas Intermediate crude up 0.82% and Brent up 0.45% to $48.57 per barrel at 1414 BST.
In economic data, US new home sales figures are due at 1500 BST and the Richmond Fed manufacturing index will be released at 1500 BST.
On the corporate front, Toll Brothers gained after reporting better-than-expected second-quarter profit and revenue ahead of the open.
Best Buy slumped as it announced the departure of its chief financial officer and warned that earnings in the second quarter would hit by a disruption in supply of some high-margin products after an earthquake in Japan. |
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| | Broker Tips | | Broker tips: Imperial Brands, Paragon Group, BP Barclays upgraded Imperial Brands to 'overweight' from 'equalweight' and lifted the price target to 4,200p from 3,750p, driven by more bullish medium-term expectations.
The bank said organic sales momentum is improving and margin/cash generation increases underpin dividend growth of 10%+.
"Moreover, we are increasingly confident margins will surprise to the upside and that the US is performing ahead of expectations.
"Given increasing competitive threats from new entrants elsewhere in Staples, the ongoing high barriers in Tobacco should continue to protect the profit pool."
In addition, Barclays argued that regulatory fears over issues such as the revised EU Tobacco Products Directive (TPD) and plain packaging in the UK and France are overdone.
"With the UK accounting for c. 10% and c. 15% of group sales and EBIT (Barclays estimates), respectively, and in light of the significant down-trading witnessed in Australia after the implementation of plain packaging in 2012, investors' concerns on the potential damage to Imperial's UK business are understandable," the bank said.
However, Barclays said Imperial was well prepared to weather any storm.
It said the impact of plain packaging in the UK/France and EU TPD will be benign.
"Implementation costs are already in estimates, while Imperial's Australian experience and the narrower price gap between mainstream/economy brands should limit the impact of down trading."
Paragon's shares fell on Tuesday after Numis said it expects to downgrade its estimates "modestly" following the mortgage lender's first half results.
Numis said the company's results were "a little below our top of the range forecasts" but reiterated a 'buy' rating and target of 357p, saying Paragon remains cheap being valued at 7.4x earnings.
Paragon reported a 12.5% increase in underlying profits to £71.9m in the first half, driven by a 84.6% increase in buy-to-let lending to £823.6m.
The surge in buy-to-let lending came ahead of the introduction of higher stamp duty on such purchases from 1 April.
"We see the prospect of increased pressure on buy-to-let landlords which is reflected in our estimate that Paragon Mortgages will see its profit decline 3% in 2017, 9% in 2018 and 12% in 2019," Numis said.
Numis added that credit remains relatively tight with banks still undertaking real affordability tests. Household debt also remains down on the previous cyclical peak, although it has started to increase rapidly and bank sector leverage is much lower than pre-financial crisis levels, the broker added.
"A slowdown is possible but the Paragon share price is pricing in a lot worse."
A lower outlook for crude oil prices in 2016, following the weak start to the year, led analysts at JP Morgan to lower their forecasts for European integrated oil companies´ earnings per share in 2016 and 2017.
However, greater investor confidence in the outlook for oil prices meant the share price of those companies in their coverage universe - BP,Total, Galp - should trade closer to their analysts´ estimates for their valuation using a 'sum-of-the-parts' methodology.
Indeed, on average they raised their targets for those stocks.
Brent crude oil was now expected to trade at an average of $45 and $55 per barrel in 2016 and 2017, with the broker´s forecasts for each year having come down by $5.
In particular, analyst Nitin Sharma said he preferred those companies that had lower oil price breakevens, such as BP and Total.
Both oil majors were likely to "deliver organic cash cover for the dividend at or below $55/bbl", he said.
Sharma also added BP to the broker´s Analyst Focus List, explaining in a research note sent to clients that its dividend was "relatively high" and "safe".
The analyst bumped up his target from 400p to 410p and reiterated his 'overweight' view on the shares.
"We believe that question marks on BP's dividend sustainability are likely to decline through 2016 - BP's guidance of $50-55/bbl organic cash break-even (post dividend) is credible, in our view. We also believe that big-ticket M&A risk attached to BP is unwarranted given its healthy project pipeline, good long-term exploration track record, and limited balance sheet room." |
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