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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 flat after mixed economic data London stocks were flat at the closing bell on Friday as traders assessed mixed economic data and awaited a speech from Federal Reserve chair Janet Yellen.
UK consumer confidence improved in May, according to a survey. GfK's consumer confidence index improved to -1 in May from -3 a month earlier, beating estimates for a reading of -4.
"It is a relief that consumer confidence was a little firmer in May following April's drop to a 16-month low, but the suspicion is that consumers will be cautious in their spending amid heightened uncertainty in the run-up to the 23 June referendum on UK membership of the European Union," said Howard Archer, chief UK and European economist at IHS Global Insight.
At the same time, a declaration at the G7 meeting in Japan said a vote by the UK to leave the EU would pose a "serious threat to global growth".
The group warned in its final statement that Brexit would reverse the trend of increased global trade, investment and jobs.
In the US, the Commerce Department's second estimate of first quarter gross domestic product was for a 0.8% rise at a seasonally-adjusted rate, up from the initial estimate of 0.5% but a touch below expectations of 0.9%.
Meanwhile, consumer spending was up 1.9%, in line with the initial estimate and outlays on new home construction rose at a rate of 17.1% compared to an initial estimate of 14.8%.
Pantheon Macroeconomics said: "Overall, these data don't materially change our view that second quarter growth will be 3% or better, and they don't fix the very long running statistical problem which tends to depress first quarter GDP growth relative to the trend.
Consumer sentiment in the US improved less than expected in May, according to the final reading from the University of Michigan.
The University of Michigan's consumer sentiment index printed at 94.7, down from the initial estimate of 95.8 but above the April reading of 89.0 and the May 2015 reading of 90.7.
Federal Reserve chair Janet Yellen was due to give a speech in Harvard, which investors will be scrutinising for any further clues on the timing of the next interest rate hike.
In commodities, oil prices were under the cosh as supply glut concerns persisted. Brent crude fell 0.52% to $49.33 per barrel and West Texas Intermediate dropped 0.24% to $49.36 per barrel at 1654 BST.
On the corporate front, Carnival was also on the front foot, having slumped in the previous session as it went ex-dividend.
United Utilities bounced back after falling on Thursday, when it reported a big drop in full-year underlying profits following the introduction of new regulated price controls and because of the expected increase in depreciation and other costs.
On the downside, outsourcer Capita was under the cosh after Exane BNP Paribas downgraded the stock 'underperform' from 'neutral'.
Dublin-based pharmaceuticals group Shire was weaker after it announced that 93.8% of its shareholders voted in favour of its $32bn merger with US-based Baxalta Inc. |
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| Market Movers
FTSE 100 (UKX) 6,264.77 -0.01%
FTSE 250 (MCX) 17,206.33 0.08%
techMARK (TASX) 3,117.97 -0.11%
FTSE 100 - Risers
Royal Mail (RMG) 532.50p 2.01%
Carnival (CCL) 3,438.00p 1.75%
3i Group (III) 552.00p 1.66%
Next (NXT) 5,535.00p 1.65%
Hammerson (HMSO) 588.00p 1.47%
United Utilities Group (UU.) 969.00p 1.47%
Burberry Group (BRBY) 1,097.00p 1.39%
easyJet (EZJ) 1,551.00p 1.24%
Kingfisher (KGF) 375.10p 1.13%
InterContinental Hotels Group (IHG) 2,667.00p 1.10%
FTSE 100 - Fallers
Anglo American (AAL) 612.00p -2.73%
Antofagasta (ANTO) 436.60p -2.52%
Randgold Resources Ltd. (RRS) 5,735.00p -2.05%
Capita (CPI) 1,076.00p -2.00%
Rolls-Royce Holdings (RR.) 614.50p -1.76%
Fresnillo (FRES) 1,017.00p -1.45%
BHP Billiton (BLT) 840.30p -1.35%
DCC (DCC) 6,260.00p -1.34%
Berkeley Group Holdings (The) (BKG) 3,330.00p -1.33%
Standard Chartered (STAN) 542.00p -1.31%
FTSE 250 - Risers
Synthomer (SYNT) 361.90p 5.14%
B&M European Value Retail S.A. (DI) (BME) 304.90p 4.88%
PayPoint (PAY) 950.50p 4.85%
Softcat (SCT) 343.50p 4.25%
Serco Group (SRP) 107.90p 3.75%
Phoenix Group Holdings (DI) (PHNX) 879.50p 3.53%
OneSavings Bank (OSB) 331.60p 3.08%
esure Group (ESUR) 284.40p 2.97%
Rank Group (RNK) 254.80p 2.82%
Marshalls (MSLH) 330.30p 2.10%
FTSE 250 - Fallers
Acacia Mining (ACA) 309.40p -4.71%
Centamin (DI) (CEY) 95.55p -4.45%
Sophos Group (SOPH) 217.80p -3.29%
Clarkson (CKN) 2,311.00p -3.22%
Kaz Minerals (KAZ) 150.60p -2.40%
Amec Foster Wheeler (AMFW) 442.70p -2.08%
Rotork (ROR) 195.50p -2.05%
Diploma (DPLM) 741.50p -1.98%
Tullow Oil (TLW) 237.50p -1.94% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks end the week on a quiet note European equity markets were little changed on Friday, struggling for direction as oil prices fell back and investors awaited a speech from Federal Reserve Chair Janet Yellen.
The benchmark Stoxx Europe 600 index was up by 0.21% or 0.73 points to 349.64 by the end of trading, while Germany's DAX edged higher by 0.13% or 13.60 points to end at 10,286.31 and France's CAC 40 advanced 0.05% or 2.10 points to 4,514.74.
US data were again a bit of a mixed bag, but did appear to point to a more solid outlook for economic growth in the second quarter of 2016.
The rate of growth for US gross domestic product in the first quarter of the year was revised higher from an annualised pace of 0.5% to 0.8%, but the preliminary estimate of a 1.9% expansion in household consumption was left unchanged, contrary to some analysts´ expectations for a larger increase.
On a more positive note, the final reading on the University of Michigan´s consumer confidence gauge for May saw a sub-index tracking current conditions set a fresh post-recession high alongside expectations bouncing back sharply from their recent declines, Barclays´s Jesse Hurwitz said in a research note sent to clients.
"The morning's final May release comes as a welcome sign for the consumer outlook. We expect that better readings on sentiment and a healthy rebound in April consumption growth will solidify expectations for a bounce-back in Q2 real GDP growth," Hurwitz said.
At the same time, oil prices were on the back foot after Brent crude breached the $50 a barrel mark on Thursday for the first time since November. West Texas Intermediate was 0.41% lower at $49.28 a barrel and Brent crude was down 0.73% at $49.23.
"Markets here, and in the US and Asia, have lost momentum after big gains midweek," said Lee Wild, head of equity strategy at stockbroker Interactive Investor.
"A drop in oil prices back below $50 and caution ahead of Fed chair Janet Yellen's speech tonight will make it difficult for them to make much headway, especially ahead of a long weekend in the UK. Revisions to US first-quarter GDP later could also fuel another dollar rally. A Fed rates meeting next month, the EU referendum and weak corporate earnings make this a tricky time for investors, and many are sitting on cash."
Market participants were also watching out for Yellen's speech at Harvard which was scheduled for after the close of trading in London, as they looked for further clues on the timing of the next Fed rate hike, although there was a chance that she might not address monetary policy at all on this ocassion.
Societe Generale said: "Little emphasis on the monetary policy outlook is expected at this event. The appearance to look forward to will be the Chair's speech in Philadelphia on 6 June, the Monday following the May employment report and a day before entering the blackout period for the upcoming FOMC meeting.
In corporate news, Swiss pharmaceutical company Roche rallied after announcing positive results from its trial of drug Gazyva.
Spain's Banco Popular was under the cosh again a day after it announced a rights issue.
AstraZeneca reversed course in late trading to end higher after the phamaceuticals giant announced positive results for its Faslodex drug for the treatment of metastatic breast cancer, but also said US regulators will not currently approve its new drug for high potassium levels because of a manufacturing issue. |
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| | US Market Report | | US open: Stocks gain after US GDP beats forecasts US stocks gained on Friday after a better-than-expected gross domestic product report.
At 1445 BST the Dow Jones Industrial Average rose 0.12%, the S&P 500 increased 018% and the Nasdaq grew 0.17%.
The Commerce Department's second estimate of first quarter US gross domestic product was for a 0.8% rise at a seasonally-adjusted rate, up from the initial estimate of 0.5% but a touch below expectations of 0.9%.
Meanwhile, consumer spending was up 1.9%, in line with the initial estimate and outlays on new home construction rose at a rate of 17.1% compared to an initial estimate of 14.8%.
Pantheon Macroeconomics said: "Overall, these data don't materially change our view that second quarter growth will be 3% or better, and they don't fix the very long running statistical problem which tends to depress first quarter GDP growth relative to the trend.
"This, presumably, is why the April FOMC minutes showed that "most" participants believed growth "had likely not deteriorated as much as was suggested by the recent data on spending and production". In other words, when they said they wanted to see evidence of a rebound in Q2, they were pretty sure they would get it."
Federal Reserve chair Janet Yellen is due to give a speech at Harvard at 1530 BST, which investors will be scrutinising for any further clues on the timing of the next interest rate hike.
However, Societe Generale expects there to be little emphasis on the monetary policy outlook at the event.
"The appearance to look forward to will be the Chair's speech in Philadelphia on June 6, the Monday following the May employment report and a day before entering the blackout period for the upcoming FOMC meeting," the French bank said.
In commodities, oil prices were under the cosh as supply glut concerns persisted. West Texas Intermediate crude fell 1.16% to $48.91 per barrel and Brent dropped 1.7% to $48.76 per barrel at 1456 BST.
In corporate news, Ulta Salon Cosmetics & Fragrance jumped after releasing better-than-expected first-quarter results.
Valeant Pharmaceuticals was also on the front foot after saying it had rejected a takeover approach from Takeda Pharmaceutical and TPG. |
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| | Broker Tips | | Broker tips: M&S, Capita, Softcat Societe Generale downgraded Marks & Spencer to 'hold' from 'buy' and cut the price target to 424p from 545p following the retailer's full-year results earlier in the week.
The French bank said M&S was certainly worth holding for the total dividend yield. It said the company remains strongly cash generative, backed by healthy margins and growth in the food business, with a commitment to making ongoing surplus cash returns to shareholders.
M&S announced a 4.6p special dividend for the first half and SocGen assumes a further 4.6p special dividend in the second half, along with special dividends in the outer years, in view of the company's target net debt/EBITDA range of 1.5x-2.0x.
"The 7% total estimated dividend yield is attractive. However, we would need more than 15% total shareholder return to retain the 'buy' recommendation," the bank said.
SocGen said that while M&S was lucky to have a top-end market position focusing on specialty, convenience, health and quality, Clothing and Home present an ever-increasing challenge from all angles.
"We do not expect sustainable like-for-like sales recovery at any point. It is difficult to disagree with the measures that are being taken in response to detailed customer feedback, but there is very low visibility on recovery at this stage in our view. Hence we downgrade," it said.
The quality of Capita´s earnings is weak and both on and off-balance sheet liabilities continue to rise, analysts at Exane BNP Paribas said.
In particular, analysts George Gregory and Henry Naish took issue with the outsourcer´s accounting treatment for non-underlying software & license amortisation.
Following a meeting with the company´s finance chief, Nick Greatorex, the analysts said Greatorex´s efforts to reduce the tendency towards high accruals upon acquistion and for cutting accrued income were "encouraging".
Nonetheless, "earnings quality has remained weak and meanwhile both on and off-balance sheet liabilities have continued to rise, pointing to a concerning imbalance," Gregory and Naish said in a research note sent to clients.
So while Capita shares were trading at a discount versus peers in terms of their price-to-earnings mulltiples it was simultaneously - and with few exceptions - changing hands at a premium on the basis of its enterprise value/unlevered free cash flow.
Exane downgraded shares of Capita to 'underperform' from 'neutral' but stuck by its 1,050p target.
Berenberg initiated coverage of Softcat, which provides IT infrastructure to corporate and public sector organisations, with a 'buy' rating and a 425p price target.
The bank said the business has successfully quadrupled revenues in the past five years and delivered EBIT margins materially higher than peers.
It said that with its capital-light model, Softcat should be able to deliver a return on capital employed of 60% in 2016.
"Despite a strong performance in the shares since its IPO in November 2015, we believe Softcat still has scope to grow its customer base and take market share.
"With strong cash conversion we forecast the business to grow its net cash position substantially, giving capacity for major shareholder returns."
Berenberg highlighted "serious top-line potential" at Softcat, pointing out that the company has delivered a revenue compound annual growth rate of 33% since 2010.
The market growing at around 6% a year across the same period means Softcat outperformed the market by a factor of 5x. |
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