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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: Financials and miners gain on eve of referendum Shares of financials and miners continued their advance on the eve of the referendum, despite warnings from quite a few analysts that the result of Thursday's vote was too close to call.
The Footsie jumped 1.23% or 76.48 points to close at 6,303.03, with the mid-cap FTSE 250 index was up by 98.24 points or 0.58% to 17,078.55.
Sterling was up 0.22% the dollar at 1.4680 but down 0.26% versus the euro at 1.2997, with fresh Brexit opinion polls due out in late afternoon and the evening offering the potential for some sharper forex movements.
Indeed, the first of those, from Opinium, put support for the 'Leave' camp at 45% versus 44% of respondents backing 'Remain'.
Financial and betting markets were pricing in a high probability of a 'Remain' vote but the outcome was still "highly uncertain", Credit Suisse cautioned clients.
"Indeed, a 'Leave' vote might push the broker's measure of risk appetite into "panic", Credit Suisse said.
"The correlation between betting market odds and global risk appetite has been extraordinarily high in the past few weeks. That suggests an immediate, large and highly correlated move in both safe and risk assets once the outcome is clear," analysts Anais Boussie, Peter Foley, Neville Hill, Sonali Punhani and Giovanni Zanni said in a research note sent to clients.
In case of 'Leave' coming out on top, the broker forecast a "shallow" recession unfolding in the UK, together with a slowdown in the euro area and easing measures from the Bank of England and European Central Bank.
Iron ore and steel prices continued to gain ground in overnight trading, among signs of steady steel output globally and stockpiles in Chinese markets.
Global production of steel declined by 0.1% year-on-year in May, according to world steel data released on Tuesday and referenced by analysts at Macquarie.
To take note of, in its Article IV consultation with the US the International Monetary Fund said the greenback might be overvalued by between 10.0% and 20.0%.
In corporate news, department store chain Debenhams slipped lower after it revealed like-for-like sales fell in the third quarter and gross profit margins is likely to be flatter than previously thought. LFL sales were down 0.2% and full year profits are likely to be within the range of analyst forecasts, which many investors took to mean "at the bottom of the range".
Housebuilders Taylor Wimpey, Persimmon, Berkeley and Barratt Developments, all of which have been hit hard by concerns about the EU referendum, were among risers.
RSA Insurance, bolstered by a strong write-up from Barclays analysts, was at the top of the leaderboard, dragging peers Direct Line and Admiral and financial services group Hargeaves Lansdown, also indicating confidence about the result of Thursday's vote.
Shares in Associated British Foods were under the cosh after analysts at Morgan Stanley cut their stance on the stock and slashed the price target to 2,650p from 3,500p after taking a fresh look at Primark. The bank said that while Primark remains a great fast-fashion retail chain with attractive long-term growth prospects, its like-for-like sales have slowed to zero over the last 18 months or so.
Specialty chemicals company Elementis was a big faller after it issued a profit warning ahead of its interim results due to slower chromium sales. The FTSE 250 firm said that, as previously indicated, sales and contribution margins from the division in North America for the first six months of the year are expected to be similar to the prior year. |
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| Market Movers
FTSE 100 (UKX) 6,303.03 1.23%
FTSE 250 (MCX) 17,078.55 0.58%
techMARK (TASX) 3,074.20 1.01%
FTSE 100 - Risers
Hargreaves Lansdown (HL.) 1,381.00p 4.07%
Glencore (GLEN) 150.90p 3.29%
Old Mutual (OML) 193.40p 2.98%
Provident Financial (PFG) 2,846.00p 2.93%
Standard Life (SL.) 340.70p 2.81%
St James's Place (STJ) 909.00p 2.42%
Direct Line Insurance Group (DLG) 371.80p 2.20%
Experian (EXPN) 1,322.00p 2.16%
Standard Chartered (STAN) 566.70p 2.13%
RSA Insurance Group (RSA) 484.10p 2.09%
FTSE 100 - Fallers
Associated British Foods (ABF) 2,823.00p -2.69%
Coca-Cola HBC AG (CDI) (CCH) 1,399.00p -1.69%
Randgold Resources Ltd. (RRS) 6,400.00p -1.01%
Imperial Brands (IMB) 3,630.50p -0.98%
Whitbread (WTB) 4,070.00p -0.93%
Marks & Spencer Group (MKS) 361.30p -0.74%
SSE (SSE) 1,538.00p -0.58%
Antofagasta (ANTO) 430.90p -0.48%
SABMiller (SAB) 4,267.00p -0.45%
Compass Group (CPG) 1,301.00p -0.38%
FTSE 250 - Risers
Circassia Pharmaceuticals (CIR) 105.50p 8.76%
Shawbrook Group (SHAW) 294.60p 4.39%
Aberdeen Asset Management (ADN) 304.40p 4.25%
OneSavings Bank (OSB) 337.00p 4.14%
Cineworld Group (CINE) 589.50p 3.88%
Marshalls (MSLH) 315.00p 3.75%
esure Group (ESUR) 271.40p 3.59%
NCC Group (NCC) 279.00p 3.53%
Lancashire Holdings Limited (LRE) 576.50p 3.41%
Laird (LRD) 334.80p 3.24%
FTSE 250 - Fallers
Elementis (ELM) 208.70p -7.82%
Debenhams (DEB) 70.00p -5.72%
Synthomer (SYNT) 339.00p -4.78%
Genus (GNS) 1,503.00p -3.59%
Paysafe Group (PAYS) 380.80p -3.23%
Domino's Pizza Group (DOM) 1,010.00p -3.07%
Tritax Big Box Reit (BBOX) 131.80p -2.59%
Barr (A.G.) (BAG) 516.00p -2.55%
Essentra (ESNT) 526.50p -2.50% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks edge higher ahead of EU referendum vote European equities overcame their caution ahead of Britain's referendum on EU membership the next day, seeing the day out with moderate gains, although analysts were in a cautious mood.
The benchmark DJ Stoxx Europe 600 index finished the day sporting gains of 0.38% or 1.28 points to 341.32, Germany's DAX was 0.55% higher and France's CAC 40 was up 0.29%.
At the same time, oil prices retreated, with West Texas Intermediate lower by 1.60% at $49.08 a barrel and Brent crude off by 1.667% to $49.79.
Rebecca O'Keeffe, head of investment at Interactive Investor, said: "Although the poll predictions are still making the EU referendum results too close to call, global equity markets have maintained their positive Remain stance over the past few days and this has continued in European trade today, with equities pushing further forward.
"With less than 24 hours before voting starts, markets are now pricing in virtually no risk of an exit vote, which begs the question as to whether the euphoria is being overdone and how much upside still exists for investors, or whether this is irrational exuberance and investors are ignoring the risks?"
UBS strategist Yianos Kontopoulos said that given the risk-rally of the last few days, there is significant room for downside in the event of a Leave vote.
"We estimate percentage moves in the mid-teens for UK and EU equities but materially smaller moves for the S&P 500 and EM equities. While GBP may come under significant pressure, the EUR may be more stable."
In a Remain scenario, outside European and UK stocks - where a significant relief rally is likely - Kontopoulos expects much less pronounced moves across assets.
"In equities, we think the S&P 500 could reach new highs, albeit near-term no more than 1-3% higher than current levels. Fundamental pressures limit the potential upside in global bond yields. Yields could rise more for core euro-area bonds, which look the most expensive.
We also see limited upside across EM assets (except perhaps local currency bonds). Interestingly, we believe the potential sell-off in gold in a Remain scenario would be small relative to the upside potential in the opposite case."
On the corporate side of things, Swedish retailer Hennes & Mauritz rose despite reporting a 17% decline in second-quarter profit. |
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| | US Market Report | | US open: Stocks edge higher ahead of UK referendum US stocks edged higher in cautious trade on Wednesday, a day before Britain's referendum on EU membership.
At 1545 BST, the Dow Jones Industrial Average, the Nasdaq and the S&P 500 were all 0.4% firmer.
At the same time, oil prices slipped into the red after data from the Energy Information Administration showed US crude inventories fell by 900,000 barrels last week, which was a smaller drop than expected.
West Texas Intermediate was down 0.3% to $49.68 a barrel and Brent crude was off 0.4% at $50.42.
Joshua Mahony, market analyst at IG, said: "With less than 24 hours left until the UK hits the polling booth, there is a tangible feeling of uncertainty and anxiety permeating through financial markets this morning, with the bullish sentiment that started the week is short supply. We have a whole host of economic data points between now and Friday, yet the fact of the matter is that there is unlikely to be much which will avert the gaze of the trading community from the very real possibility of a Brexit.
"With betting markets and the IG binary (78% remain) all pointing towards a substantially higher likeliness of a 'remain' vote tomorrow, it is also likely that the wider markets also reflect this same bias. As such, while this vote is a binary one (yes or no), the market repercussions are likely to be substantially larger should the UK leave the EU."
Aside from the issue of Brexit, investors were digesting more comments from Yellen as she delivered the second part of her two-day testimony before Congress after she reiterated a cautious approach to hiking interest rates on Tuesday.
Yellen said on Tuesday that she sees "considerable uncertainty" over the US economic outlook, also highlighting the potential impact of the UK referendum.
"In the current environment of sluggish growth, low inflation, and already very accommodative monetary policy in many advanced economies, investor perceptions of and appetite for risk can change abruptly," Yellen said. "One development that could shift investor sentiment is the upcoming referendum in the United Kingdom. A UK vote to exit the European Union could have significant economic repercussions."
On the corporate front, Tesla Motors slumped nearly 9% after the electric car maker made an offer for SolarCity Corp. Shares in the latter surged.
Shares in motor homes manufacturer Winnebago Industries gained after its third-quarter profit came in better than expected.
Data out earlier from the National Association of Realtors showed sales of existing US homes rose to a nine-year high in May.
Sales were up 1.8% to a seasonally-adjusted annual rate of 5.53m from a downwardly revised 5.43m in April. This was a touch weaker than economists had expected.
Sales were up 4.5% from May 2015, at their highest annual pace since February 2007. Meanwhile, the median price for a home rose 4.7% from last May to $239,700. |
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| | Broker Tips | | Broker tips: ABF, Dixons Carphone, RSA Insurance Associated British Foods was under the cosh on Wednesday after Morgan Stanley cut its stance on the stock to 'equalweight' from 'overweight' and slashed the price target to 2,650p from 3,500p as it took a fresh look at Primark.
The bank said that while Primark remains a great business with attractive long-term growth prospects, its like-for-like sales have slowed to zero over the last 18 months or so.
"With Kantar data suggesting that trading momentum in the UK has weakened further recently, we now expect -1% LfL for FY H2.This means we now expect LFL to be negative for the year as a whole- something that we have not seen from Primark in more than 15 years."
MS said that it was not sure why LFL growth was slowing so much but is concerned it could be partly due to structural factors.
HSBC initiated coverage of Dixons Carphone at 'buy' with a 460p price target, saying it is well-place and well-run, with growth underpinned.
The bank said Dixons' core prospects are supported by a robust strategic position, solid consumer backdrop and a business well-suited to prevailing industry trends.
Dixons Carphone has recalibrated its business model amid competition from low-cost pure-play online operators and changing industry trends.
It now prices off Amazon but uses service to differentiate, aiming to sell higher-value product and higher-margin accessories to compensate for a higher cost model, the bank explained.
Barclays said it sees 15% upside at RSA Insurance after an encouraging meeting with some of the company's management, reiterating its 'overweight' rating.
RSA's chief financial officer Scott Egan repeated the recent mantra that, while it is early days on the roadmap to its 2018 targets, the company is on track and is "focused intently on executing".
Management's ambition is to achieve a combined ratio (COR) of less than 94% in UK, akin to Aviva UK at 93.5%, less than 94% in Canada and less than 85% in Scandinavia, which equates to group combined ratio of circa 91%.
"The plan was not predicated on any changes in the company's underlying markets, but purely on self help levers within their control. If they do not achieve the targets, management will be held accountable," Barclays relayed.
The bank upgraded RSA last month on the thesis that even if the insurer is able to partially achieve its 2018 ambitions, the stock offered significant upside to potentially become one of the highest yielder within FTSE 100 beyond 2018. | | |
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