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| | London Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | | Europe close: Selling abates ahead of Fed meeting European stocks rose on Wednesday, as Brexit concern-driven selling abated as investors waited for the latest US interest rate announcement and comments from Federal Reserve Chair Janet Yellen.
The benchmark DJ Stoxx Europe 600 index was up by 0.97% or 3.10 points to 323.63, Germany's DAX was 0.92% or 87.51 points higher at 9.606.71 and France's CAC 40 was 1.0% or 41.25 points firmer at 4,171.58.
At the same time, oil prices were in the red amid ongoing worries the UK might vote to leave the European Union at next week's referendum and on supply glut fears. West Texas Intermediate was down 0.29% to $48.35 a barrel and Brent crude was 0.89% lower at $49.39.
Rebecca O'Keeffe, head of investment at Interactive Investor, said: "After a torrid few days for markets, European investors are bargain-hunting, having concluded the market is oversold. Although this may prove to be a very astute move, with volatility and the possibility of negative news still high and the EU referendum genuinely too close to call, the upside potential for UK and European stocks is likely to remain limited until the result is known.
"Although the chances of a US rate rise today are being priced at 0%, Janet Yellen's statement remains highly relevant as investors try to work out whether the Federal Reserve committee believes the US economy is starting to slow down, or if the most recent jobs report suggests the US has effectively reached full employment? If the latter - and with the Federal Reserve's dual mandate focused on inflation and employment, interest rates could start to rise faster than the market is predicting."
The Fed, which is widely expected to leave the funds rate unchanged at 0.50%, will present the latest projections and rate plots for the US economy after the rate announcement at 1900 BST.
On the corporate front, Swedish retailer Hennes & Mauritz was trading higher after reporting a 9% increase in sales in May. Zara owner Inditex rallied after its first-quarter profit beat analysts' expectations.
Shares in Zodiac Aerospace surged after its third-quarter sales numbers exceeded forecasts and after local press reports said Safran was planning a bid, a claim that was denied to Reuters by sources familiar with the matter.
In London, Poundland racked up solid gains after South African-based Steinhoff International confirmed it is considering a possible offer for the entire issued share capital of the company.
Property group Berkeley was under the cosh as it posted a decline in full-year profit, while information technology company Aveva tanked after ending takeover talks with France's Schneider Electric.
In macroeconomic news, the latest figures from Eurostat showed the Eurozone's trade surplus widened in April.
Exports were up 4.9% from March and imports increased 2.6%, meaning the trade surplus widened to a seasonally-adjusted €28bn from €23.7bn in March, which was above economists' expectations of €21.5bn.
On the year, exports were down 1% and imports were up 5%, giving a surplus of €27.5bn in April, wider than the €20.9bn
recorded in the same month last year.
Pantheon Macroeconomics said it was "a very strong headline, and much better than we expected".
"Overall, we think net exports will boost Eurozone GDP growth in the second quarter as surging import prices-due to the recovery in oil prices-depresses real imports via the deflator." |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Selling abates ahead of Fed meeting European stocks rose on Wednesday, as Brexit concern-driven selling abated as investors waited for the latest US interest rate announcement and comments from Federal Reserve Chair Janet Yellen.
The benchmark DJ Stoxx Europe 600 index was up by 0.97% or 3.10 points to 323.63, Germany's DAX was 0.92% or 87.51 points higher at 9.606.71 and France's CAC 40 was 1.0% or 41.25 points firmer at 4,171.58.
At the same time, oil prices were in the red amid ongoing worries the UK might vote to leave the European Union at next week's referendum and on supply glut fears. West Texas Intermediate was down 0.29% to $48.35 a barrel and Brent crude was 0.89% lower at $49.39.
Rebecca O'Keeffe, head of investment at Interactive Investor, said: "After a torrid few days for markets, European investors are bargain-hunting, having concluded the market is oversold. Although this may prove to be a very astute move, with volatility and the possibility of negative news still high and the EU referendum genuinely too close to call, the upside potential for UK and European stocks is likely to remain limited until the result is known.
"Although the chances of a US rate rise today are being priced at 0%, Janet Yellen's statement remains highly relevant as investors try to work out whether the Federal Reserve committee believes the US economy is starting to slow down, or if the most recent jobs report suggests the US has effectively reached full employment? If the latter - and with the Federal Reserve's dual mandate focused on inflation and employment, interest rates could start to rise faster than the market is predicting."
The Fed, which is widely expected to leave the funds rate unchanged at 0.50%, will present the latest projections and rate plots for the US economy after the rate announcement at 1900 BST.
On the corporate front, Swedish retailer Hennes & Mauritz was trading higher after reporting a 9% increase in sales in May. Zara owner Inditex rallied after its first-quarter profit beat analysts' expectations.
Shares in Zodiac Aerospace surged after its third-quarter sales numbers exceeded forecasts and after local press reports said Safran was planning a bid, a claim that was denied to Reuters by sources familiar with the matter.
In London, Poundland racked up solid gains after South African-based Steinhoff International confirmed it is considering a possible offer for the entire issued share capital of the company.
Property group Berkeley was under the cosh as it posted a decline in full-year profit, while information technology company Aveva tanked after ending takeover talks with France's Schneider Electric.
In macroeconomic news, the latest figures from Eurostat showed the Eurozone's trade surplus widened in April.
Exports were up 4.9% from March and imports increased 2.6%, meaning the trade surplus widened to a seasonally-adjusted €28bn from €23.7bn in March, which was above economists' expectations of €21.5bn.
On the year, exports were down 1% and imports were up 5%, giving a surplus of €27.5bn in April, wider than the €20.9bn
recorded in the same month last year.
Pantheon Macroeconomics said it was "a very strong headline, and much better than we expected". |
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| | US Market Report | | US open: Stocks rise ahead of Fed interest rate decision US stocks rose on Thursday ahead of the Federal Reserve's interest rate decision.
At 1451 BST the Dow Jones Industrial Average rose 0.28%, the S&P 500 climbed 0.32% and the Nasdaq increased 0.30%.
The Federal Reserve is expected to sit tight on interest rates in its policy decision at 1900 BST amid uncertainty surrounding Britain's EU referendum on 23 June and following weak employment data for May.
While the Fed is not expected to raise rates on Wednesday, chair Janet Yellen's post-meeting press conference may give clues on the timing of the next hike.
"With markets pricing in a zero percent chance of a rate hike at the June meeting, attention will instead turn to the Fed's characterisation of the domestic economy," said Societe Generale.
"Despite the weak May employment report, we expect the Fed will be keen on striking a balanced stance, offsetting a modest downgrading of the labour market with a somewhat more upbeat assessment of household spending."
Ahead of the policy announcement, data from the Fed showed industrial production contracted 0.4% in May after a revised 0.6% increase in April. The decline was in line with economists' expectations.
Manufacturing fell 0.4% in May driven by a sharp 4.2% decline in output of autos and auto parts. Analysts had expected a 0.1% fall last month compared to a 0.2% gain.
The Labor Department said US producer prices rose 0.4% in May against expectations for a 0.3% gain as an increase in fuel costs pushed wholesale inflation higher.
Oil prices have rebounded in the past few months.
However, oil prices were sitting lower on Thursday on worries about the global supply glut.
West Texas Intermediate crude fell 1.3% to $47.48 per barrel and Brent dropped 1.9% to $48.88 per barrel.
A report from the International Energy Agency on US weekly crude inventories will be released at 1530 BST.
Elsewhere, China's banks extended 985.5bn yuan in new yuan loans in May, exceeding analysts' expectations of 750bn yuan and well above the previous month's levels of 555.6bn yuan.
The move came as the central bank has pledged to keep policy accommodative to support the slowing economy.
In corporate news, shares in restaurant chain operator Bob Evans Farms were sharply lower after its financial forecasts missed analysts' expectations. |
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| | Broker Tips | | Broker tips: Wood Group, Jimmy Choo, Lonmin Shares in oil and gas services company Wood Group rose on Wednesday as Jefferies initiated its rating on the stock at 'buy'.
"The company, in our view, has executed a far more coherent growth/mergers and acquisitions strategy compared to UK Service peers, Amec Foster Wheeler and Petrofac and has the balance sheet to pursue further deals," Jefferies said.
The broker said the company is geared to US shale activity returning and holds a market leading engineering offering through its WG Mustang & WG Kenny businesses.
However Jefferies noted that Wood Group is dealing with further margin pressures amid a slump in oil prices and expected low activity by operators, particularly in the US shale business where the firm's upstream facilities construction offering is strongly correlated to well count
Jefferies added that the engineering business is working in a subdued market for new material offshore development projects.
"However, as we have seen from companies such as SUBC, your own costs can be aggressively managed in this environment and awards are still out there."
Jefferies issued a target of 750p.
Liberum upgraded Jimmy Choo to 'buy' from 'hold' with an unchanged target of 135p after the company's trading update.
It said the update suggests Choo is showing resilience in a difficult market.
Shares in the luxury goods maker shot higher on Wednesday after it said it had made a good start to the year, with trading in line with expectations despite the headwinds facing the sector.
Liberum said the update was timely as the stock has been hit by wider concerns about the luxury market, with peers such as Burberry, Ralph Lauren and Hugo Boss also taking a hit.
"LFL sales amongst the peers have been down mid-single digit in recent reporting. It is therefore welcome that management has provided comfort that the company is on track to meet full year forecasts," the brokerage said.
"The shares have been driven lower, we believe, by a combination of concerns over the wider luxury goods market malaise and fears over a possible Brexit which has impacted most of the UK market. In our view the Q1 statement should be sufficient to show that a strong brand with a flexible business model can continue to thrive."
Liberum made no call on Brexit but pointed out that Jimmy Choo has a natural hedge against any weakening in the pound: although it buys almost all of its stock in euros, it also makes over two thirds of its sales outside the UK so stands to benefit from translating dollar and euro profits back into sterling.
In addition, the brokerage argued the stock is oversold, down 30% year-to-date and 20% in the past few weeks.
UBS downgraded Lonmin to 'sell' from 'neutral' but lifted the price target to 140p from 110p, saying the valuation looks stretched following a strong share price performance.
The bank said Lonmin achieved good cost performance in the second quarter of 2016, with unit costs down 3% quarter-on-quarter.
"This is positive as labour reduction/cost-cutting initiatives start to bear fruit. However, we do not believe this level of performance is sustainable, especially as production declines into FY17/18E, and we expect costs to increase 8-10% per annum (versus company guidance of flat nominal costs)."
UBS reckons this will result in Lonmin being free cash flow negative in FY19, even if prices increase as it expects, and is likely to be a disappointment versus consensus.
The price target increase comes as the bank now bases it on a mix of EV/EBITDA and net present value - compared to NPV previously - bringing Lonmin in line with the rest of the South African platinum group metals sector. | | |
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