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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: FTSE ends higher as mining stocks rally The FTSE 100 finished higher on Friday as traders weighed a batch of data including the US non-farm payrolls report.
The US added 38,000 jobs in May, well below the 160,000 that economists had expected, the Labor Department revealed. It marked the weakest non-farm payrolls report since September 2010 and compared to a downwardly revised 123,000 jobs in April.
The unemployment rate fell to 4.7% in May from 5.0% in April, beating estimates of 4.9%. This was due in part to a drop in the labour force participation rate from 62.8% to 62.6%.
Average hourly earnings grew by 0.2% month-on-month and 2.5% year-on-year, in-line with economists´ forecasts.
"The Federal Reserve's plans to raise interest rates in the near future have hit a serious bump in the road in the form of the May jobs report, which has fallen well below expectations and shown the lowest monthly rate of job creation since 2010," said Ranko Berich, head of market analysis atMonex Europe.
"The Fed has recently been signalling that it is willing to raise rates if fundamental data continues to improve, but today's report shows that this is no longer the case. Only the most bullish FOMC members are likely to be willing to look through this month's weak NFP report, and as a result there's a very good chance we'll see the Fed hold fire on interest rates for even longer."
Oil prices fell following the report with Brent crude down 1.17% to $49.46 per barrel and West Texas Intermediate down 1.2% to $48.55 per barrel at 1646 BST.
Economic data
UK services growth picked up in May but remained subdued, data showed. The Markit/CIPS services purchasing managers' index rose to 53.5 from April's 38-month low of 52.3, beating expectations for a reading of 52.5. A reading above 50 signals an expansion in the sector while a level below that suggests a contraction
The Caixin China services PMI fell to 51.2 in May from 51.8 in April.
The eurozone services PMI for May was unexpectedly revised higher to 53.3 from 53.1.
Eurozone retail sales were stable in April compared to a month ago, missing forecasts for a 0.4% increase, Eurostat said. On the year sales grew 1.4% in April, below estimates for a 2.1% gain.
The final US services PMI came in at 51.3 in May, up a touch from the flash estimate of 51.2 but down from 52.8 in April.
The ISM non-manufacturing composite came in at 52.9 in May, trailing estimates for a reading of 55.4 and following a level of 55.7 in April.
US factory orders rose the most in six months in April, according to the Commerce Department. New orders for manufactured goods jumped 1.9% year-on-year in April, ahead of forecasts for a 1.8% increase and following a 1.5% gain in March.
The US trade deficit widened in April by 5.3% from March to a seasonally adjusted $37.44bn, the Commerce Department said. Exports of goods and services rose 1.5% while imports climbed 2.1%. A deficit of $41.50 was expected by analysts.
Companies
Heavily-weighted mining stocks were the standout gainers as metals prices advanced, with silver miner Fresnillo the top performer.
Merlin Entertainments racked up healthy gains a day after Barclays reiterated its 'overweight' stance on the stock saying the shares were cheap.
BP was also in the black after the oil giant settled a lawsuit arising from the 2010 Deepwater Horizon oil spill by agreeing to pay investors who bought American Depository Shares $175m.
Supermarkets suffered the brunt of the losses. HSBC maintained its 'reduce' stance on Sainsbury in a note on Friday, noting the company is losing sales as it prepares to integrate Argos and as completion intensifies.
PZ Cussons was under the cosh after Canaccord Genuity cut the stock to 'hold' from 'buy', keeping the price target at 345p as it recommended taking profits ahead of the full-year update. |
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| Market Movers
FTSE 100 (UKX) 6,206.90 0.34%
FTSE 250 (MCX) 17,062.15 -0.08%
techMARK (TASX) 3,121.81 -0.11%
FTSE 100 - Risers
Fresnillo (FRES) 1,122.00p 7.47%
Randgold Resources Ltd. (RRS) 6,250.00p 6.84%
Glencore (GLEN) 135.45p 5.37%
Anglo American (AAL) 616.80p 4.99%
BHP Billiton (BLT) 833.60p 3.48%
Merlin Entertainments (MERL) 433.10p 3.29%
Antofagasta (ANTO) 428.30p 2.61%
National Grid (NG.) 979.30p 2.05%
Associated British Foods (ABF) 2,953.00p 1.83%
Rio Tinto (RIO) 1,896.00p 1.63%
FTSE 100 - Fallers
Tesco (TSCO) 162.15p -4.34%
Sainsbury (J) (SBRY) 246.10p -4.20%
Morrison (Wm) Supermarkets (MRW) 188.60p -3.97%
Johnson Matthey (JMAT) 2,938.00p -1.90%
Standard Life (SL.) 327.30p -1.89%
Pearson (PSON) 836.50p -1.53%
Prudential (PRU) 1,330.00p -1.48%
London Stock Exchange Group (LSE) 2,663.00p -1.37%
Legal & General Group (LGEN) 232.60p -1.32%
Standard Chartered (STAN) 526.70p -1.31%
FTSE 250 - Risers
Indivior (INDV) 235.10p 36.21%
Acacia Mining (ACA) 330.00p 7.46%
Centamin (DI) (CEY) 106.30p 6.73%
Supergroup (SGP) 1,496.00p 4.62%
Allied Minds (ALM) 350.80p 3.91%
Kaz Minerals (KAZ) 147.80p 2.78%
DFS Furniture (DFS) 296.10p 2.46%
Tullow Oil (TLW) 235.50p 2.08%
Polymetal International (POLY) 847.50p 1.86%
Investec (INVP) 455.40p 1.81%
FTSE 250 - Fallers
Ocado Group (OCDO) 262.80p -5.30%
Interserve (IRV) 319.90p -4.73%
JRP Group (JRP) 140.20p -4.10%
Dechra Pharmaceuticals (DPH) 1,134.00p -3.74%
Sophos Group (SOPH) 191.00p -3.39%
PZ Cussons (PZC) 329.80p -3.14%
CLS Holdings (CLI) 1,553.00p -2.94%
Rotork (ROR) 192.70p -2.28%
Laird (LRD) 336.50p -2.21% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks fall back as euro jumps on weak US jobs report European stocks ran into a wall of selling at the end of the week, in the form of a much weaker-than-expected reading on the state of the US Jobs market in May.
US non-farm payrolls rose by a meagre 38,000 in that month, undershooting economists´ forecasts for a rise of 160,000 by a very wide margin.
"History suggests that payroll growth slowing persistently below its expansion-average points to higher risk of a recession. Since 1960, when payroll growth has dipped persistently below its recovery-period average, the US economy has more often than not found itself in an NBER-defined recession 9 to 18 months in the future," Barclays´s Michael Gapen said in a research note sent to clients.
A near two percentage point jump in the value of the euro against the US dollar contributed to the DJ Stoxx 600´s late 0.89% slide to end the day 3.06 points lower at 341.29, Germany's DAX fell 1.03% to 10,103.26, while France's CAC was 0.99% lower to 4,421.78.
Somewhat ironically, Friday´s losses in European stockmakets came close on the heels of weekly fund flow data, from EPFR and Bank of America-Merrill Lynch, which revealed the first inflow into global equities in eight weeks.
Cyclicals bore the brunt of selling, with the Stoxx 600 Auto&Parts gauge finishing down by 2.38% for the day and a similar gauge for banks´shares retreating 2.20%.
Euro area economy stuck in low gear, Markit says
On the European data front, Markit's final Eurozone composite output index came in at 53.1 in May, up from the flash estimate of 52.9 and April's reading of 53.0.
The upturn was again led by the service sector, which saw a modest growth acceleration. Manufacturing production also rose, albeit at a slightly lesser pace than the previous month.
Meanwhile, the final Eurozone service business activity index printed at 53.3, up from the flash estimate and April's reading, both of which were 53.1.
Chris Williamson, chief economist at Markit, said: "The final PMI numbers for May have come in slightly ahead of the earlier flash readings, but still point to a Eurozone economy which seems unable to move out of low gear. The survey data are signalling a GDP rise of 0.3% in the second quarter, suggesting the growth spurt seen at the start of the year will prove frustratingly short-lived.
"June looks likely to prove equally disappointing, as inflows of new business slowed in May to the weakest for almost one-and-a-half years."
Retail sales in the 19 countries that share the euro were stable in April from March compared with expectations of a 0.3% increase, according to Eurostat.
Food, drinks and tobacco sales rose 0.5%, while non-food products remained stable and automotive fuel decreased by 0.1%.
On the year, Eurozone retail sales were up 1.4%, missing forecasts of a 1.9% rise.
Corporate news was thin on the ground.
Oil giant BP was on the front foot after it agreed to pay $175m to settle claims by US investors that its managers lied about the size of the Gulf of Mexico oil spill.
Stock in German power producer RWE AG tacked on 5% after analysts at Bank of America-Merrill Lynch recommended clients buy its shares.
AstraZeneca was in the black after announcing the completion of its licensing agreement with Ironwood Pharmaceuticals for the exclusive US rights to the drug. |
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| | US Market Report | | US open: Stocks slide after non-farm payrolls miss forecasts US stocks dropped on Friday after the non-farm payrolls report fell far short of analysts' expectations.
The Dow Jones Industrial Average dipped 0.57%, the S&P 500 declined 0.62% and the Nasdaq slid 0.62% at 1516 BST. Banks were the worst performing industry group, with the Philadelphia/KBW gauge of lenders´ shares dropping 3.52% to 68.88, alongside an eight basis point drop in the yield on the benchmark 10-year US Treasury note to 1.72%.
The US added 38,000 jobs in May, well below the 160,000 that economists had expected, the Labor Department revealed. It marked the weakest non-farm payrolls report since September 2010 and compared to a downwardly revised 123,000 jobs in April. The unemployment rate fell to 4.7% in May from 5.0% in April, beating estimates of 4.9%. This was due in part to a drop in the labour force participation rate from 62.8% to 62.6%.
Average hourly earnings grew by 0.2% month-on-month and 2.5% year-on-year, in-line with economists´ forecasts.
"The Federal Reserve's plans to raise interest rates in the near future have hit a serious bump in the road in the form of the May jobs report, which has fallen well below expectations and shown the lowest monthly rate of job creation since 2010," said Ranko Berich, head of market analysis at Monex Europe.
"The Fed has recently been signalling that it is willing to raise rates if fundamental data continues to improve, but today's report shows that this is no longer the case. Only the most bullish FOMC members are likely to be willing to look through this month's weak NFP report, and as a result there's a very good chance we'll see the Fed hold fire on interest rates for even longer."
Oil prices fell following the report with West Texas Intermediate crude down 0.80% to $48.81 per barrel and Brent crude down 0.73% to $49.64 per barrel at 1529 BST.
Earlier on Friday, Federal Reserve Bank of Chicago President Charles Evans said the US economy continues to be affected by downside risks.
"I see the value in making small and gradual adjustments to the fed-funds rate as the data improve and confirm my positive baseline outlook for the US," he said.
The Fed is due to next meet on 16-17 June when it announces its next decision on interest rates.
Adding to the negative sentiment, data released by Markit pointed to a slowdown in the US services sector in May. The final US services purchasing managers' index came in at 51.3 in May, up a touch from the flash estimate of 51.2 but down from 52.8 in April. A reading above 50 signals an expansion while a level below that indicates a contraction.
The ISM non-manufacturing composite came in at 52.9 in May, trailing estimates for a reading of 55.4 and following a level of 55.7 in April.
More positively, US factory orders rose the most in six months in April, according to the Commerce Department. New orders for manufactured goods jumped 1.9% year-on-year in April, ahead of forecasts for a 1.8% increase and following a 1.5% gain in March.
In company news, shares in retailer GAP advanced despite the company saying late on Thursday that sales in May fell 5%, while same-store sales dropped 6%.
Talen Energy Corp. gained following news the independent power producer has agreed to be bought by private investment company Riverstone Holdings. |
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| | Broker Tips | | Broker tips: HSBC, PZ Cussons, IG Group Investec downgraded HSBC to 'hold' from 'buy', pointing to just under 1% residual upside to its unchanged 450p price target.
"Our continuing belief that HSBC can, should and will maintain an (uncovered) 51c dividend, an implied 2016e dividend yield of 7.9% is, by itself, insufficient to sustain a 'buy' recommendation," the brokerage said.
"However, we believe that June could offer a number of potentially positive catalysts (Brazil disposal, Fed/Brexit decisions) which may generate profit-taking opportunities."
Investec said that in both relative and absolute terms, HSBC has performed resiliently over the past few weeks. It said this may represent an element of anticipation of forthcoming events such as the Brazil disposal due to complete this month and a potential increase in US interest rates, which would be a net positive for the bank.
However, the brokerage said the twin challenges of an ongoing drop in net interest margin and declining customer loans make HSBC's 10% return on equity target unrealistic.
Investec said it continues to see better value in the challenger bank space generally, and for Aldermore in particular, which it rates at 'buy'.
PZ Cussons was under the cosh on Friday after Canaccord Genuity cut the stock to 'hold' from 'buy', keeping the price target at 345p as it recommended taking profits ahead of the full-year update.
The brokerage noted that since the interim results on 26 January, the shares are up 37%, helped by a 57% rise in the oil price and outperforming the FTSE 250 index by 31%.
"We think risk from the scheduled full year trading update on 9th June is no better than equally weighted (with April's update stating that performance 'overall...has been in line with expectations'), and would take profits in the light of the rerating and the lack of a near-term catalyst."
Canaccord pointed out that Nigeria, having been as much as 40-45% of group profit three years ago, now accounts for just 25%. It said visibility here remains limited, with further devaluation of the naira possible and Cussons continuing to have to buy dollars at a 50% - or higher - premium to the official rate.
"While the company has been drawing on its 100+ years of experience in Nigeria, enabling it to perform creditably in Home & Personal Care products (through the sale of smaller pack sizes, for example), we see little prospect of a near term rebound in its more economically sensitive electrical white goods business in Nigeria - despite a strong market share performance."
As a result, the brokerage cut its growth assumptions for the Africa division.
Still, it said Cussons' performance elsewhere continues to be strong.
IG Group had its target lifted to 815p from 800p and its 'sector perform' rating reiterated by RBC Capital Markets on Friday after the spread-betting operator reported its fourth quarter trading update.
The company on Tuesday said it had performed "well" in the last three months of the fiscal year despite a relatively quiet quarter in financial markets.
IG said it expected to post full year earnings slightly ahead of expectations next month, driven a continued robust performance and ongoing strength in trading revenue.
"Post IG's pre-close statement on 31 May and incorporating our updated thoughts on the company's future potential, we increase our forecasts across the board, largely by 2%," RBC said.
RBC expects full year revenue of £442.1m, compared to £399.4m the previous year. Earnings before interest, tax, depreciation and amortisation (EBITDA) is pencilled in at £216.9m and earnings per share (EPS) at 44.0p, following 2015's £204.1m and 41.1p respectively.
"IG is a well-run company that is benefiting from market volatility through increased client activity. Further positives include IG's market leadership in key markets, a 40-year operating history and well-known brand, high profit margins (2016 full year EBITDA margin: 48%), a shareholder-friendly dividend policy (70% pay-out) given strong free cash flow characteristics (high profit margins and cash flow conversion yield healthy levels of operating cash generation; capital expenditures are minimal), an increasingly cash-rich balance sheet, and ongoing growth, as we expect net revenue, pre-tax profit, EBITDA, EPS and the dividend to grow at 7% to 9% compound annual growth rate from fiscal years 2015 to 2018."
The broker said shares are trading just below their fair value and therefore continues to believe that IG warrants a 'sector perform' rating.
RBC added that the volatile market backdrop, coupled with uncertainty around economic growth, interest rates and the UK's EU referendum, are presenting ideal conditions for IG's clients to increase their trading activity. | | |
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