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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: Brexit worries weigh on UK equities London stocks finished in negative territory on Tuesday on Brexit fears and a worse-than-expected UK inflation report.
Recent polls showing support for leaving the EU ahead of the 23 June referendum have weighed on the market this week.
An online poll by TNS on Tuesday showed 47% of respondents said they will opt to leave the EU, compared to 40% who want to stay.
The latest YouGov poll, published in The Times on Tuesday, revealed support for Brexit jumped by three percentage points to 46% over the latest week, while backing for 'Remain' lost three percentage points to 39%.
The pound dropped 1.18% to $1.4102 at 1624 BST.
Oil prices were also lower as investors remained risk-averse ahead of the EU referendum. Brent crude fell 1.5% to $49.56 per barrel and West Texas Intermediate decreased 1.3% to $48.22 per barrel at 1626 BST.
Meanwhile, UK inflation remained depressed in May, with the consumer price index (CPI) flat at 0.3% on an annual basis, short of expectations for a 0.4% increase, data from the Office for National Statistics showed.
The month-on-month rate of CPI only rose to 0.2% when it had been expected to rise to 0.3% from 0.1% in April.
CPI inflation looks set to remain fairly subdued for most of the second half of this year, said Paul Hollingsworth at Capital Economics, with some clear risks on the horizon.
"If the UK votes to leave the EU next week, we expect sterling to fall sharply, which would put significant upward pressure on inflation further ahead. On the other hand, if the UK votes to remain, then sterling could recover a bit.
"But the economy would probably get a post-referendum rebound too. So whatever happens, we expect inflation to regain some momentum over the coming quarters, and should be closer to 1% around the turn of the year."
In the US, retail sales rose 0.5% from the previous month versus expectations of a 0.3% gain, the Commerce Department said.
A measure of small-business sentiment in the US rose in May, according to the National Federation of Independent Business. The optimism index climbed 0.2 point to 93.8, beating forecasts of 93.5.
US business inventories rose 0.1% in April after a downwardly revised 0.3% in March, missing estimates for a 0.2% increase.
Among corporate stocks, housebuilders were the biggest fallers on the FTSE 350 amid Brexit worries. Berkeley Group, Taylor Wimpey, Crest Nicholson and Barratt Developments were in the red.
Ashtead rallied after announcing a bumper dividend and a £200m share buyback following a strong fourth quarter where profit margins grew to record levels.
Educational publisher Pearson was recovering from an afternoon in decline yesterday, after it received a 'sell' rating from analysts at Deutsche Bank.
Go-Ahead plunged after saying in a trading update it expects margins over the life of the Govia Thames Railway franchise to be lower than previously anticipated during periods of operational challenges and industrial disputes. Investec downgraded its stance on the transport operator to 'add' from 'buy' and cut the price target to 2,500p from 2,800p following the trading update.
FirstGroup jumped after reporting a rise in full-year profit despite a drop in revenue following the loss of rail franchises.
Ted Baker gained after reporting a 12.7% increase in first quarter retail sales and saying it expects full year results to meet expectations. |
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| Market Movers
FTSE 100 (UKX) 5,923.20 -2.01%
FTSE 250 (MCX) 16,241.47 -2.01%
techMARK (TASX) 2,975.27 -1.08%
FTSE 100 - Risers
Ashtead Group (AHT) 985.50p 2.98%
ARM Holdings (ARM) 959.00p -0.10%
BAE Systems (BA.) 475.60p -0.15%
Rolls-Royce Holdings (RR.) 597.50p -0.50%
Carnival (CCL) 3,322.00p -0.54%
SABMiller (SAB) 4,260.00p -0.56%
Rexam (REX) 629.50p -0.63%
CRH (CRH) 1,999.00p -0.70%
Vodafone Group (VOD) 209.55p -0.73%
Pearson (PSON) 788.00p -0.82%
FTSE 100 - Fallers
Anglo American (AAL) 598.30p -5.84%
Antofagasta (ANTO) 394.50p -5.30%
Sky (SKY) 852.00p -4.43%
Berkeley Group Holdings (The) (BKG) 2,990.00p -4.17%
BHP Billiton (BLT) 789.70p -4.09%
Morrison (Wm) Supermarkets (MRW) 173.70p -3.98%
Taylor Wimpey (TW.) 173.00p -3.73%
Barratt Developments (BDEV) 516.50p -3.73%
Glencore (GLEN) 128.15p -3.57%
St James's Place (STJ) 811.00p -3.51%
FTSE 250 - Risers
Ted Baker (TED) 2,524.00p 8.56%
FirstGroup (FGP) 109.30p 6.01%
Allied Minds (ALM) 339.60p 4.11%
Indivior (INDV) 214.50p 2.14%
Euromoney Institutional Investor (ERM) 950.00p 1.06%
P2P Global Investments (P2P) 854.00p 1.01%
PayPoint (PAY) 950.00p 0.96%
Fidelity China Special Situations (FCSS) 136.40p 0.89%
Assura (AGR) 56.15p 0.36%
Riverstone Energy Limited (RSE) 850.00p 0.35%
FTSE 250 - Fallers
Go-Ahead Group (GOG) 1,998.00p -17.88%
Telecom Plus (TEP) 950.00p -6.86%
Crest Nicholson Holdings (CRST) 522.00p -6.79%
Essentra (ESNT) 521.50p -6.21%
Restaurant Group (RTN) 335.00p -6.06%
Electrocomponents (ECM) 261.00p -5.88%
Stagecoach Group (SGC) 234.50p -5.52%
Interserve (IRV) 292.00p -5.44%
Paragon Group Of Companies (PAG) 275.50p -5.36%
Rightmove (RMV) 3,899.00p -5.16% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Ongoing Brexit concerns keep a lid on shares European stocks fell on Tuesday as investors again shunned risk for the relative safety of bonds amid growing concern the UK might indeed vote to leave the European Union at the upcoming referendum and ahead of rate announcements from the Federal Reserve, the Bank of England and the bank of Japan later this week.
The benchmark DJ Stoxx 600 index closed down 1.92% or 6.27 points to 320.53, Germany's DAX finished off by 1.43% or 138.24 points at 9,519.20 and France's CAC 40 was 2.29% lower.
Lee Wild, head of equity strategy at Interactive Investor, said: "Those who thought fears about a possible Brexit were confined to the UK and Europe should think again. All the major markets have begun to price in a 'Leave' vote, and it's still over a week to polling day.
Investors are hugely reluctant to take new 'long' positions before the 23 June vote.
"There's the small matter of a Federal Reserve policy meeting, too. There's no way the Fed will raise interest rates on Wednesday night, but comment on policy will be widely-watched, and traders are not in buying mood.
Investors have a lot on their plates. There are some big decisions to be made which will have a massive impact on economies and company profits. It's why the volatility index, or 'fear' index, just surged to its highest since February."
As investors looked for somewhere safe to park their cash, yields on Germany's 10-year bund turned negative for the first time, while the yield on the 10-year UK gilt was five basis points lower. When a bond falls below zero it means investors are effectively paying the government to hold its bonds.
Oil prices were weighed down by US dollar strength even after the International Energy Agency said oil markets are moving close to balance in the second half of this year, with West Texas Intermediate down 1.14% at $48.32 a barrel and Brent crude down 1.43% at $49.64.
Meanwhile, the pound was up against the euro but down versus the US dollar as more polls suggested the UK would vote to leave the European Union in next week's referendum and after weaker-than-expected UK inflation data.
Societe Generale strategist Kit Juckes said: "Our best guess of a post-Brexit reaction is still that GBP/USD loses 5-10% quickly, dragging other European currencies down too against the yen and dollar."
"What's changing this week...is that the very near-term outlook around the vote is now more symmetrical. GBP/USD is now as likely to rally by 10 figures in the immediate aftermath of the vote as to fall by 10, depending on the outcome."
Brexit wasn't the only thing on investors' minds, as this week sees rate announcements from the FOMC on Wednesday, and the BoE and BoJ on Thursday.
In corporate news, Ashtead was on the front foot after the equipment rental firm said it had a strong fourth quarter and announced a bumper dividend and a £200m share buyback.
Shares in London-listed electronic component maker Premier Farnell rocketed after it agreed to be bought by Swiss-based Daetwyler Holding for 165p per share in cash.
Denmark's Novo Nordisk was sharply lower despite announcing that its best-selling diabetes drug cuts the risk of heart attacks by 13%.
On the macroeconomic front, figures released by Eurostat showed Eurozone industrial production grew more than expected in April.
Industrial production was up 1.1% from March versus expectations of 0.8% growth. Compared with April 2015, production grew by 2%, exceeding forecasts for a 1.3% increase.
However, Capital Economics economist Stephen Brown, said: "April's strong rise in euro-zone industrial production is unlikely to be the start of a strong upturn."
Other data released by Eurostat revealed that employment in the euro bloc increased 0.3% compared to the final three months of 2015, rising to the highest levels since the third quarter of 2008. |
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| | US Market Report | | US open: Stocks fall ahead of EU referendum, Fed rate decision US stocks fell on Tuesday as investors remained risk-averse ahead of Britain's European Union referendum and the Federal Reserve's interest rate decision.
At 1518 BST the Dow Jones Industrial Average dropped 0.33%, the S&P 500 slid 0.28% and the Nasdaq dipped 0.15%.
Polls this week showing a growing support for Brexit ahead of the 23 June referendum have weighed on investor sentiment.
According to the latest YouGov poll, published in The Times on Tuesday, support for Brexit jumped by three percentage points to 46% over the latest week, while backing for 'Remain' lost another three percentage points to 39%.
Oil prices were lower on Brexit worries with West Texas Intermediate crude down 1.17% to $48.34 per barrel and Brent down 1.2% to $49.71 per barrel at 1557 BST.
With uncertainty surrounding the EU referendum and weak employment data for May, analysts see the Federal Reserve leaving interest rates at 0.50% on Wednesday at the policy meeting.
Fed chair Janet Yellen on 6 June said the federal funds rate will need to rise "gradually over time" but was silent on the timing of an interest rate hike. Her dovish tone was viewed as a signal that a June rate hike was off the table.
Rabobank said it revised its expectations for the next rate hike to September, instead of June as previously estimated, following Yellen's remarks and the much worse-than-forecast non-farm payrolls report released on 3 June.
"After the Fed had finally convinced the markets that it was serious about hiking in June/July, the markets are now again pricing in at most one hike this year and not before December (50.1% priced in according to fed funds futures)," Phil Marey, senior US strategist at Rabobank, said.
Meanwhile, a better-than-expected report on US retail sales failed to lift spirits. The Commerce Department said sales rose 0.5% from the previous month versus expectations of a 0.3% gain.
A measure of small-business sentiment rose in May, according to the National Federation of Independent Business. The optimism index climbed 0.2 point to 93.8, beating forecasts of 93.5.
US business inventories rose 0.1% in April after a downwardly revised 0.3% in March, missing estimates for a 0.2% increase.
On the corporate front, Revance Therapeutics tumbled after saying on Monday that a late-stage clinical study of its crow's-feet treatment did not reach its main goal. |
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| | Broker Tips | | Broker tips: Go-Ahead, Henderson Group, Ted Baker Investec downgraded its stance on transport operator Go-Ahead to 'add' from 'buy' and cut the price target to 2,500p from 2,800p following the company's full-year pre-close trading update.
The brokerage noted that while the outlook for full-year 2016 was broadly unchanged, the outlook for the GTR franchise margins was reduced.
GTR margins over the life of the franchise are now expected to be around 1.5% versus 3% previously, with the downgrade driven by ongoing additional expenditure to maintain service levels during periods of operational challenges and industrial disputes.
Investec cut its medium-term forecasts around 11-12%, almost entirely due to GTR. It now expects GTR to be marginally loss-making in FY17, reaching breakeven in FY18.
Still, the brokerage pointed out the performance elsewhere in the group has been robust, with the London bus business expected to have a strong end to the year, due in part to rail replacement services.
All the asset managers were facing a difficult second quarter, but a combination of several smaller factors unique to Henderson Group led broker Exane BNP Paribas to downgrade its recommendation on the shares.
Furthermore, its recent stellar fund performance had come off a bit and the manager had a higher exposure to US investors, where the pensions system is mature and penetration of passives/ETF is higher, analysts Arnaud Giblat and Gregory Simpson said in a research note sent to clients
Using its proprietary bottom-up fund flow analysis, Exane said Henderson was seeing outflows in Global, European and US equities, alongside some deterioration in fund performance.
We continue to see upside risk to the company's target of achieving an operating margin in excess of 40%, Arnaud Giblat and Gregory Simpson said in a research note sent to clients, adding that "upside risks should remain years out".
Giblat and Simpson downgraded their recommendation on the shares from 'outperform' to 'neutral' and took their target from 270p to 240p.
Ted Baker clocked in with strong growth for the first 19 weeks of fiscal year 2017, with sales rising by 11.3% after a 24.2% increase in the year before, despite "challenging external trading conditions" especially in Hong Kong and mainland Europe.
That led Cannacord Genuity analyst David Jeary to reiterate his 'buy' recommendation and 3,571p target on the shares of the fashion retailer.
Jeary noted continued strong growth at the company's e-commerce channel, with sales up by 32.3%
Wholesale has also put in a solid showing, with sales more than doubling over the course of the past three years, the same analyst said.
"Our positive view and the investment case are based on the global growth potential of the iconic Ted Baker brand," Jeary said in a research note sent to clients. | | |
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