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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: Oil, metal price rises inspire resources-led rally London shares closed higher on Wednesday led by a strong showing in the resources sector on the back of rising oil and metals prices.
Miners helped to revive a the session as better-than-expected UK industrial output figures were offset by disappointing Chinese trade data and the FTSE 100 traded in the red earlier in the day.
Industrial output grew 1.6% year-on-year in April, beating forecasts for a 0.3% decline and following a 0.2% drop in March, the Office for National Statistics revealed.
Manufacturing production edged up 0.8% on the year, compared to forecasts for a 1.3% decrease and after a 1.9% fall in March.
Earlier, official data showed China's global trade surplus widened to $49.98bn in May from April's $45.6bn, missing estimates of $55.70bn.
Exports fell 4.1%, compared to analysts' forecast for a 4% drop and the previous month's 1.8% slide. Imports dipped 0.4% in May but it was an improvement on April's 10.9% plunge and better than expectations for a 6.8% decrease.
At the same time China's central bank slashed its forecast for exports to a drop of 1% this year compared to a previous estimate of 3.1% growth. However, the People's Bank of China said the economy will still grow 6.8% this year as it sees domestic recovery remaining on track.
Oil prices continued to rally after data showed a fall in US crude stockpiles, helping to ease concerns on the global supply glut. Continued supply disruptions in Nigeria also bolstered prices.
Brent crude jumped 1.11% to $52.07 per barrel and West Texas Intermediate increased 1.08% to $50.91 per barrel.
On the corporate front, Sainsbury's jumped after reporting a better-than-expected 0.8% like-for-like drop in first quarter sales.
Fellow grocer Tesco gained after Sky News reported the group may announce this week a sale of its Turkish unit Kipa and British restaurant chain Giraffe.
Royal Dutch Shell edged higher as RBC Capital raised its target on the stock to 2,000p from 1,900p and reiterated an 'outperform' rating after the oil producer announced plans for more asset sales and cost-cutting over the next few years.
Mining stocks were also on the rise as metal prices gained. Fresnillo, Antofagasta, Randgold Resources and Anglo American rallied.
3i Infrastructure jumped after it confirmed the successful completion of a £385m capital raise, having finished its open offer, placing and intermediaries offer and increased the initial target size from £350m.
WH Smith declined after it said like-for-like sales in the 14 weeks to 4 June 2016 as High Street sales fell, offset slightly by an increase in sales at the travel business.
Travel stocks were under the cosh, including TUI AG, easyJet and Thomas Cook, on the prospect of higher fuel costs following the recent rally in oil. A car bombing on Wednesday in the popular holiday destination of Turkey also weighed on sentiment in the sector. |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Tesco to sell Giraffe restaurant chain and its Turkish retail business Tesco, the UK's biggest retailer, was reportedly set to announce the sale of its Turkish unit and Giraffe restaurant chain in an effort to offload its underperforming businesses.
Tesco was in talks to sell its Turkish unit Kipa to Migros, a Turkish-owed retailer, Sky News reported on Tuesday
Giraffe, which Tesco has only owned for three years, was to be sold to an unidentified buyer who has existing restaurant assets in the UK.
In May, Kipa said they were in talks with Migros and Tesco but no agreement was finally reached.
Chief executive Dave Lewis took over Tesco in 2014 and has since been seeking to cut debt and sell floundering businesses owned by the grocer.
Profits sunk as the retailer lost market share to rivals such as Aldi, Lidl and Sainsbury's, with its reputation recently sullied by an accounting scandal.
Last year, Tesco sold its biggest overseas business Homeplus for £4.2bn, its first major disposal. |
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| | US Market Report | | US open: Stocks edge higher, alongside gains for crude Wall Street was sporting modest gains in early trading in New York, despite the release of a mixed report on the state of the country´s labour market.
As of 16:30 BST, the Dow Jones Industrials Average was rising by 0.31% or 55.67 points to 17,993.95, the S&P 500 was tacking on 0.22% or 4.71 points taking it to 2,116.88 and the Nasdaq Composite gained 0.21% or 10.20 points to 4,971.81.
Oil prices were holding higher despite the release of a rather neutral set of weekly statistics on commercial US oil inventories.
Crude stockpiles declined by 3.2m barrels, the Energy Information Administration reported, but that came alongside offsetting product builds.
West Texas Intermediate crude was up by 1.27% to $51.01 per barrel on the NYMEX and Brent gained 1.49% to $52.22 per barrel.
The US dollar spot index was 0.36% lower at 93.49.
The number of job openings in the US increased from 5.67m to 5.788m in April, matching the cycle-high hit in July 2015, according to the Bureau of Labor Statistics´s JOLTS survey. Economists had been expecting a reading of 5.675m.
However, hiring (5.092mn, previous: 5.29mn) slowed down significantly for a second month in a row in April, from 5.29m in March to 5.09m in April.
"This morning's report provides further support for the negative signal from May payrolls. That said, the information gain from the JOLTS data is marginal, as these data are revised by the BLS to be consistent with the establishment survey. Next month's payroll report, as well as weekly unemployment insurance data, will provide the next major indications on the state of US labor markets and the broader economy," Barclays´s Jesse Hurwitz said.
Meanwhile, US mortgage applications rose 9.3% in the week to 3 June, compared to a 4.1% fall the previous week, the Mortgage Bankers' Association revealed.
On the corporate front, Lululemon Athletica shares fell in in pre-market trade after the yoga clothing retailer reported a second-quarter sales forecast that was well below analysts' expectations.
Dave & Buster's Entertainment rallied as it raised its annual outlook and said the board approved a $100m share buyback plan.
UnitedHealth Group declined as it raised its quarterly dividend by 25%.
Gevo Inc. surged after saying on Tuesday the first two commercials flights using its renewable alcohol to jet fuel technology were used by Alaska Airlines.
From a sector standpoint the best performing industry groups were: Industrial&Metals (3.65%), Iron&Steel (3.63%) and Forestry&Paper (2.33%). |
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| | Broker Tips | | Broker tips: Shell, William Hill, WH Smith Royal Dutch Shell shares gained on Wednesday after RBC Capital Markets lifted its target on the stock to 2,000p from 1,9000 and reiterated an 'outperform' rating.
The oil producer on Tuesday announced plans for more asset sales and cost-cutting over the next few years amid lower oil prices.
Shell will exit oil and gas operations in up to 10 countries and sell 10% of its production as part of a $30bn asset sale plan by 2018. The group lowered its planned 2016 capital expenditure (capex) to $29bn, with exploration set at $2.5bn, in a third cut from an initial $35bn.
The company also said it expected to save another $1bn from its takeover of BG Group. Chief executive Ben van Beurden confirmed that Shell was cutting another 2,200 jobs after the BG deal, on top of the 2,800.
"Management's hardceiling on capex is a clear positive, in our view, although this commitment is likely to be tested over time," RBC said.
"We see this commitment as significant, in particular for the dividend focused community, as many had likely feared that any oil price increase would ultimately lead to higher capex. While we do think this is likely to be the case for some oil companies, we think Shell's focus on dividend sustainability means additional capex will have to compete with the buyback programme from now until 2020."
RBC said it continues to believe Shell has some of the best project optionality in the peer group and its rigorous capital allocation process should support the investment case in the long run. The BG Group acquisition brings project optionality with the introduction of BG's Brazil assets and liquefied natural gas volumes likely to kick-start the high-grading process, the broker added.
In the short - term, however, RBC said cash flows are likely to be outstripped by Shell's capex and dividends so confidence on divestments could weigh on investor sentiment.
"We remain positive, and think Shell should remain a core energy holding for longer term investors."
UBS reiterated a 'sell' rating and left its target of 290p unchanged on betting group William Hill on Wednesday.
The bank said William Hill has lost market share in Australia amid fierce competition.
UBS said its own data showed Ladbrokes has grown significantly faster than William Hill over the past three quarters down under. Ladbrokes has wagered growth averaging more than 50% compared to an 8% fall at William Hill.
"The growth in Sportsbet, Ladbrokes and CrownBet over the last three years has intensified competition in the Australian online sportsbetting market, driving William Hill's market share from 34% to just 12% (of the digital market), and net revenue flat in 2015 versus 2013 despite the market growing at around 15% per year," said UBS analyst Chris Stevens.
In March William Hill said it expected operating profit for this year to fall to between £260m and £280m, from £291m last year.
Chief executive James Henderson said dire horse racing results at Cheltenham and unfavourable European football results meant online revenues were about £15m worse than expected.
While the Australian Open in January had a positive impact, UBS believes William Hill continues to lag behind Ladbroke and other smaller competitors.
The bank also highlighted the impact on the sector of recent regulatory changes by the Gambling Commission in October to combat problem gambling. Online customers can now tell a bookmaker they want to take between 24 hours and six months off from gambling while keeping their account open.
Canaccord Genuity stuck to its 'hold' recommendation and 1,695p target on WH Smith despite what it described as a "solid" third quarter trading update from the speciality retailer.
WH Smith´s sales rose by 2% during the third quarter of its fiscal year, alongside flat like-for-likes, the company said in a statement.
The star performer was the firm´s Travel segment, which reported a 3% increase in like-for-like sales and a headline increase of 9%.
Gross margins in-line with plan implied about 40 basis points of improvement for the full-year as a whole, analyst David Jeary said in a research note sent to clients.
On the High Street, the firm was still grinding it out, Jeary said, with like-for-likes down by 3%.
However, full-year gross margins were expected to grow by 110 basis points.
The final quarter of the year on the other hand would see the company trade against last year´s "50 Shades" and the Harper Lee publications, with no comparables titles this year, he pointed out.
Notwithstanding the firm´s "prodigious" cash generation, the shares were changing hands at a price-to-earnings multiple of 17.8 for 2016 and 16.5 for 2015, for an approximately 20% premium against the sector.
According to Jeary, it was a similar story in terms of the company´s enterprise value-to-earnings before interest, taxes, depreciation and amortisation, which stood at 11.7 and 11.2 for this year and next. | | |
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