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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 down, pound up as May set to become Prime Minister The FTSE 100 closed slightly lower on Tuesday as the pound rallied on news Theresa May is set to be the new Prime Minister.
Sterling rose 1.6% against the dollar to $1.3206 at 1620 BST.
May will take over from David Cameron as Prime Minister of the UK on Wednesday after a strong backing from members within the Conservatives Party.
"Theresa May's confirmation as the country's new leader may not have had the expected effect on stock markets today, for the appreciation seen in sterling has effectively suppressed the FTSE 100 today," said IG market analyst Joshua Mahony.
"Last week's FTSE gains were largely associated with fact that international firms will earn abroad and repatriate that money at a better rate. However, with sterling showing signs of recovery, this relationship is working in inverse, with the FTSE 100 being left behind as its European and US counterparts storm ahead."
Meanwhile, Bank of England Governor Mark Carney was forced to defend the Bank's role in the EU referendum on Thursday after being accused of peddling phony forecasts and scare stories that undermined the central bank's independence.
Speaking to lawmakers on Tuesday in Parliament, Carney also said he did not decide in advance what action the Bank should take on Brexit.
In May Carney was criticised by Leave supporters in the EU referendum after saying there was a chance of a recession.
Minutes of the BoE's last Financial Policy Committee meetings on 28 June and 1 July were also released on Tuesday. The minutes showed that the Committee had reviewed the sharp moves in the market following the Brexit vote along with recent economic data before deciding to reduce the UK countercyclical capital buffer rate from 0.5% to 0% of banks' UK exposures.
The BoE is expected to cut interest rates at Thursday's policy meeting to prevent an economic fallout from Britain's vote to leave the European Union.
Bank of America Merrill Lynch said the central bank is likely to cut rates by at least 25 basis points. "Rate setters have already recognised Brexit as a bad economic shock. Plenty of data confirm that view. Mark Carney said easing would probably be required. Even if no data were available, we believe the right action would be to cut: just in case."
Elsewhere, German inflation improved in line with forecasts in June but remained well below the European Central Bank's target of just below 2%, official data showed on Tuesday.
The consumer price index, on a harmonised basis or HICP, rose 0.1% on the month and by 0.2% on the year, according to the final estimate by Destatis - which was unchanged from the previous estimate. In May HICP inflation grew 0.4% on the month and was unchanged on the year.
Across the Atlantic, St. Louis Fed President James Bullard reiterated in a speech that he reckons only a single interest rate increase will be needed for the foreseeable future.
The NFIB's US small business optimism index rose to 94.5 in June from 93.8 a month earlier, beating expectations for 94.0.
US wholesale inventories rose 0.1% in May compared to a month ago, the Department of Commerce said, following an upwardly revised 0.7% increase in April. Analysts had expected a 0.2% gain.
The Labor Department revealed in its Job Openings and Labor Turnover Survey that the number of job openings fell by 345,000 to 5.5m in May, driven by a decline in the private sector. The job openings rate was at 3.7% in May. The number of hires was little changed at 5m at a rate of 3.5%.
In the commodities sector, oil prices rose on a weaker dollar with Brent crude up 3.7% to $48.04 per barrel and West Texas Intermediate up 3.3% to $46.31 per barrel at 1652 BST.
The Organization of the Petroleum Exporting Countries on Tuesday downgraded its global growth forecast in 2017 to 3% from a likely 3.1% this year. OPEC said growth in eurozone could slow to 1.2% from 1.5% in 2016 due to the impact of Brexit on the region, where demand for oil could fall.
On the company front, financials rallied after Carney suggested the central bank could intervene if the economy weakened. Aviva, Barclays, Standard Life, Legal & General and Prudential all rose on the news, while wealth manager St James's Place was also higher.
Shire shares rose after the US Food and Drug Administration approved its lifitegrast eye drops for treating signs and symptoms of dry eye disease. Lifitegrast, to be sold under the Xiidra name, is expected to launch in the third quarter.
The stronger pound hit dollar earners such as miners with Randgold Resources, Fresnillo, Centamin and Acacia lower.
Online fashion retailer ASOS gained as it reported a 30% rise in total sales for the four months to 30 June to £500.5m and said it expects full-year sales growth to be at the upper end of the 20-25% range. Total retail sales beat analysts' expectations of around 23% growth.
The property sector received a boost from Galliford Try after the housebuilder said it still expected full-year profits to be in line with expectations. |
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| Market Movers
FTSE 100 (UKX) 6,677.21 -0.08%
FTSE 250 (MCX) 16,775.14 0.41%
techMARK (TASX) 3,290.61 -0.72%
FTSE 100 - Risers
International Consolidated Airlines Group SA (CDI) (IAG) 409.90p 5.05%
Glencore (GLEN) 186.00p 4.61%
St James's Place (STJ) 825.50p 4.56%
easyJet (EZJ) 1,142.00p 4.29%
Aviva (AV.) 381.80p 4.23%
Prudential (PRU) 1,284.00p 3.38%
Taylor Wimpey (TW.) 145.30p 3.20%
Dixons Carphone (DC.) 329.20p 3.13%
Schroders (SDR) 2,575.00p 2.96%
Legal & General Group (LGEN) 188.90p 2.89%
FTSE 100 - Fallers
Mediclinic International (MDC) 1,060.00p -5.02%
Randgold Resources Ltd. (RRS) 9,115.00p -4.30%
Hikma Pharmaceuticals (HIK) 2,505.00p -3.65%
Fresnillo (FRES) 1,929.00p -2.77%
National Grid (NG.) 1,092.50p -2.24%
Reckitt Benckiser Group (RB.) 7,525.00p -2.17%
Bunzl (BNZL) 2,330.00p -1.98%
AstraZeneca (AZN) 4,467.50p -1.94%
Unilever (ULVR) 3,586.00p -1.91%
Centrica (CNA) 227.50p -1.90%
FTSE 250 - Risers
Rathbone Brothers (RAT) 1,919.00p 11.38%
DFS Furniture (DFS) 207.60p 8.69%
Galliford Try (GFRD) 957.00p 8.50%
Evraz (EVR) 158.30p 8.35%
Marshalls (MSLH) 267.00p 8.27%
Brown (N.) Group (BWNG) 189.50p 8.16%
Aldermore Group (ALD) 139.00p 7.92%
Keller Group (KLR) 1,008.00p 7.69%
Shawbrook Group (SHAW) 164.60p 7.44%
Ocado Group (OCDO) 254.50p 7.38%
FTSE 250 - Fallers
NMC Health (NMC) 1,120.00p -10.33%
Centamin (DI) (CEY) 159.10p -5.63%
Hochschild Mining (HOC) 233.00p -4.31%
Genus (GNS) 1,680.00p -4.22%
Circassia Pharmaceuticals (CIR) 99.40p -3.87%
Acacia Mining (ACA) 538.00p -3.84%
Rotork (ROR) 211.00p -3.48%
UK Commercial Property Trust (UKCM) 76.35p -2.86%
Victrex plc (VCT) 1,545.00p -2.59% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks rise for fourth session in a row on stimulus hopes, UK stability European stocks closed higher on Tuesday, making it four successive rises amid growing expectations of central bank stimulus and following the removal of political uncertainty in the UK.
The benchmark Stoxx Europe 600 index was up 1%, while Germany's DAX and France's CAC 40 were both 1.3% and 1.5% higher respectively.
Stocks had racked up healthy gains on Monday as it emerged that Theresa May was set to succeed David Cameron as Prime Minister this week.
The tone was also underpinned by comments from Japanese Prime Minister Shinzo Abe, who promised on Tuesday to stimulate the country's economy. Abe, whose ruling party and coalition won a majority in upper-house elections on Sunday, said he wants "the swift formulation of comprehensive, bold economic measures".
Markus Huber, a trader at City of London Markets, said investors were continuing to cheer the fact that at least some degree of certainty has returned concerning the UK government.
"Furthermore much better than expected earnings from Daimler, Alcoa kicking off the US earnings season on a positive note with a beat in earnings and ongoing optimism that Japan will step up efforts to combat low inflation and weak growth all are adding to the positive sentiment," he said.
Nevertheless, he said it remains to been seen whether the rally has legs, especially as regards the new PM's plans to trigger Article 50, which will start the formal two process to take the UK out of the EU.
Investors were also looking ahead to Thursday's Bank of England rate announcement amid growing expectations of a rate cut in the wake of the UK's decision to leave the European Union.
Bank of America Merrill Lynch said it expects the BoE to cut by at least 25 basis points. BofA said the central bank had nothing to gain by waiting.
"Rate setters have already recognised Brexit as a bad economic shock. Plenty of data confirm that view. Mark Carney said easing would probably be required. Even if no data were available, we believe the right action would be to cut: just in case."
In European corporate news, Shire rallied after the US Food and Drug Administration approved its lifitegrast eye drops for treating signs and symptoms of dry eye disease.
Daimler was also a high riser after the car maker's second-quarter results beat analysts' expectations.
Earlier, data from Destatis showed German inflation improved in line with forecasts in June but remained well below the European Central Bank's target of just below 2%.
The consumer price index, on a harmonised basis or HICP, rose 0.1% on the month and by 0.2% on the year, according to the final, which was unchanged from the previous estimate.
In May HICP inflation grew 0.4% on the month and was unchanged on the year.
Consumer prices according to national standards climbed 0.1% on the month and by 0.3% on the year, as expected by analysts and in line with the first estimate.
Energy prices continued to slide but at a slower pace to the previous month, down 6.4% in June compared to a 7.9% fall in May. |
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| | US Market Report | | US open: Stocks gain on oil price rebound, earnings season US stocks gained on Tuesday as oil prices rebounded and Alcoa kicked off the new earnings season with better-than-expected second quarter results.
At 1450 BST the Dow Jones Industrial Average rose 0.61%, the S&P 500 increased 0.65% and the Nasdaq climbed 0.74%.
At the same time oil prices rose on a weaker dollar with West Texas Intermediate crude up 2.5% to $45.95 per barrel and Brent up 3.1% to $47.74 per barrel at 1452 BST.
The dollar fell 1.12% against the pound and dropped 0.24% versus the euro at 1522 BST
Shares in Alcoa continued to rally a day after the aluminium reported quarterly earnings and revenue that surpassed analysts' forecasts.
Fastenal, on the other hand, slumped after reporting an unexpected drop in second quarter profit.
Later this week major banks are due to report including JP Morgan Chase & Co., Citigroup and Wells Fargo & Co.
In other company news, Shire rallied after the US Food and Drug Administration approved its lifitegrast eye drops for treating signs and symptoms of dry eye disease.
Seagate Technology surged after it announced late on Monday that it will cut 6,500 jobs globally, or around 14% of its workforce.
Meanwhile, St. Louis Fed President James Bullard on Tuesday reiterated in a speech that he reckons only a single interest rate increase will be needed for the foreseeable future.
Fellow Fed official Daniel Tarullo urged better regulation of short-term funding both inside and outside the banking system in a separate speech on Tuesday in Washington.
In economic data, NFIB's small business optimism index rose to 94.5 in June from 93.8 a month earlier, beating expectations for 94.0.
US wholesale inventories rose 0.1% in May compared to a month ago, the Department of Commerce said, following an upwardly revised 0.7% increase in April. Analysts had expected a 0.2% gain.
The Labor Department revealed in its Job Openings and Labor Turnover Survey that the number of job openings fell by 345,000 to 5.5m in May, driven by a decline in the private sector. The job openings rate was at 3.7% in May.
The number of hires was little changed at 5m at a rate of 3.5%. Hiring within private and government were broadly stable.
Elsewhere, investors were also looking ahead to Thursday's Bank of England rate announcement amid growing expectations of a rate cut in the wake of the UK's decision to leave the European Union.
Bank of America Merrill Lynch said it expects the BoE to cut interest rates by at least 25 basis points, saying the central bank had nothing to gain by waiting. |
| | Broker Tips | | Broker tips: Vodafone, ITV, Rathbone Brothers Vodafone was under the cosh on Tuesday after Citi downgraded the stock to 'neutral' from 'buy' but raised the target to 245p from 240p.
Citi said it does not expect a "significant positive catalyst" for another two quarters following the company's full year results in May, as its joint venture with the Netherlands is likely to take until the end of the year to close.
Vodafone and Liberty Global are merging their operations in the Netherlands. They will create a 50-50 joint venture, combing Liberty's Ziggo cable operator and Vodafone's mobile operations.
Vodafone in May posted its first quarter of revenue growth in Europe since the end of 2010. Europe revenue grew 0.5% in the fourth quarter as two of Vodafone's biggest markets, Germany and Italy, returned to growth.
For the full year, the company reported a 2.7% gain in ear earnings before interest, tax, depreciation and amortisation on a 2.3% increase in total revenue.
"We downgrade Vodafone to 'neutral' from 'buy' as the stock looks up with events after a decent performance," said Citi analyst Simon Weeden.
"Vodafone has so far ridden out the general political risk in Europe, outperforming UK stable-mate BT by 27% year-to-date (YTD) (only partly due to £/€ -13% YTD), but the October constitutional referendum in Italy could challenge this, among other election risk
"In Italy we also see potential for greater competitive pressure with Iliad positioning to enter the market. We update our forecasts and transfer to Euros from sterling, lowering growth in the UK (near term) and Italy (longer term)."
UBS upgraded broadcaster ITV to 'neutral' from 'sell' following an 18% share price fall, despite macroeconomic uncertainty and operational headwinds, noting that fundamental downside was limited.
The bank said its economists have cut their 2016 UK GDP growth forecast to 1.3% and to 0.5% for 2017.
"We would expect political and economic uncertainty to weigh on TV ad spend from the third quarter of 2016; although the magnitude of this is difficult to predict and will depend on media mix, deflation, ad loads and sector weights."
UBS's new forecasts see ITV's TV net advertising revenue fall 1.5% in full-year 2016 from +1%, -5% in FY17 from +1%, before recovering +5% in FY18 and FY19.
The bank cut its FY16-18 earnings per share estimates by 6-19%. Its adjusted earnings per share estimate for FY17 is 13.9p versus consensus of 18.4p before the UK referendum. UBS cut its price target on ITV to 170p from 195p.
Rathbone Brothers shares surged on Tuesday as Numis upgraded its stance on the stock to 'buy' from 'add', with a 2,350p price target.
The brokerage said that with the stock trading at a discount of around 20% to its 10-year average price-to-earnings of 15x, it was an ideal time to invest in the quality play.
"During its 275 year history, Rathbone has successfully navigated its way through a number of storms. So whilst uncertainty surrounding Brexit may indeed impact near-term fund under management flows, we believe Rathbones' conservative operating model combined with the long-term industry growth drivers should continue to support average earnings growth of around 10% per annum over the medium-term."
Numis said wealth management was a structural long-term growth industry due to the rapidly-evolving defined contribution pension market, an ageing and wealthier population, historical under saving by the UK market and favourable regulatory changes.
"We believe Rathbone's reputable brand, steady investment performance and established network have helped it become one of the more reliable private wealth managers in terms of organic FUM growth," Numis said.
It said that this, along with strategic team hires, bolt-on acquisitions and stable margins, has helped to generate consistent double digit annual earnings per share growth over the last six years. | | |
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