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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 boosted by weaker pound after dismal UK PMIs The FTSE 100 ended higher on Friday as the pound weakened following dismal UK data on the services and manufacturing industries.
The latest data from Markit released on Friday showed the UK economy contracted at its steepest pace since early 2009 in July.
Markit's flash UK composite purchasing managers' index, which combines both the services and manufacturing sectors, fell to 47.7 in July from 52.4 in June. A reading below 50 indicates contraction.
The flash services PMI slid to 47.4 from 52.3 in June, missing expectations of 49.2 and marking the lowest reading since March 2009.
The manufacturing PMI came in at 49.1 from 52.1 the month before, falling short of economists' expectations for a reading of 50. This was the lowest level since February 2013.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The collapse in the composite PMI to its lowest level since April 2009 provides the first major evidence that the UK is entering a sharp downturn.
"The confidence shock from the (UK's vote to leave the European Union on 24 June) might wear off over the coming months, but the decline in the new orders index to just 46.2, from 53.0 in June, points to even faster falls in output ahead."
The pound fell 1.16% against the dollar to $1.3080 at 1631 BST as the report fuelled hopes the Bank of England will cut interest rates at next month's meeting.
BoE Governor Mark Carney said at last week's policy meeting that the Bank was waiting on more evidence on the impact of the Brexit vote before considering further stimulus. The central bank shocked the market by keeping interest rates unchanged at the meeting.
"A dire set of PMI numbers for the UK, which will be taken by those once in the 'Remain' camp as evidence of the dire impact of the Brexit vote, caused the pound to shed much of the (admittedly limited) ground gained in the past week," said Chris Beauchamp, senior market analyst at IG.
"The data, plus the implication that the BoE will look to ease policy, has hit sterling hard."
The flash Eurozone composite PMI also slipped to 52.9 from 53.1 in June, hitting an 18-month low but better than expectations for a reading of 52.5.
The services PMI came in at 52.7, down from 52.8 in June, also marking an 18-month low but ahead of expectations of 52.5.
The manufacturing PMI nudged down to 51.9 in July from 52.8 the previous month. This marked a two-month low and was a touch below the expected reading of 52.0.
"The eurozone economy showed surprising resilience in the face of the UK's vote to leave the EU and another terrorist attack in France," said Chris Williamson, chief economist at Markit.
"The overall rate of economic growth is largely unchanged, suggesting GDP is growing at a sluggish but reasonably steady annual rate of around 1.5%."
Stateside, Markit's flash US manufacturing PMI rose to an eight-month high of 52.9 in July from 51.3 in June. This was ahead of expectations for a reading of 51.6, led by a robust expansion of incoming new work and the fastest upturn in production volumes for eight months.
In corporate news, Home Retail Group gained ground after the Competition and Markets Authority cleared Sainsbury's acquisition of the Argos owner.
Vodafone was higher after its first-quarter revenue beat analysts' expectations, while building materials group CRH rallied after lifting its earnings estimate as a result of exceptional trading in the second quarter.
Shares in gold miner Acacia Mining surged after it reported a jump in first-half profit and lifted its dividend.
On the downside, Sports Direct was under the cosh after a report by the Business, Innovation and Skills committee compared working conditions at the company to a Victorian workhouse and said founder Mike Ashley must be held accountable.
Elsewhere, Marks & Spencer was in the red after Barclays downgraded the stock to 'underweight' from 'equalweight'.
EasyJet fell as Investec downgraded the stock to 'hold' from 'buy' as it cut the price target to 1,100p from 2,050p to reflect the revised outlook following the airline's third-quarter update on Thursday. The brokerage said third quarter trading was broadly in line with post-Brexit expectations. However, the fourth-quarter yield outlook is highly uncertain, with yields achieved for Q4 post-Brexit down around.12%, compared to those before Brexit down around 5%. |
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| Market Movers
FTSE 100 (UKX) 6,728.13 0.42%
FTSE 250 (MCX) 16,983.46 -0.38%
techMARK (TASX) 3,411.74 0.39%
FTSE 100 - Risers
Vodafone Group (VOD) 236.05p 4.86%
Hikma Pharmaceuticals (HIK) 2,590.00p 2.70%
CRH (CRH) 2,252.00p 2.60%
AstraZeneca (AZN) 4,608.00p 1.87%
Diageo (DGE) 2,138.00p 1.45%
Sky (SKY) 878.50p 1.33%
Randgold Resources Ltd. (RRS) 8,850.00p 1.32%
GlaxoSmithKline (GSK) 1,659.50p 1.31%
Centrica (CNA) 241.00p 1.26%
Reckitt Benckiser Group (RB.) 7,450.00p 1.15%
FTSE 100 - Fallers
easyJet (EZJ) 1,027.00p -3.75%
Marks & Spencer Group (MKS) 316.80p -3.56%
Berkeley Group Holdings (The) (BKG) 2,605.00p -3.41%
Lloyds Banking Group (LLOY) 54.50p -3.02%
Rolls-Royce Holdings (RR.) 721.50p -3.02%
Travis Perkins (TPK) 1,514.00p -2.39%
Taylor Wimpey (TW.) 147.10p -2.32%
Barratt Developments (BDEV) 412.00p -2.25%
Persimmon (PSN) 1,598.00p -2.14%
Kingfisher (KGF) 325.90p -1.90%
FTSE 250 - Risers
Acacia Mining (ACA) 558.00p 7.10%
Vedanta Resources (VED) 549.00p 5.58%
Hochschild Mining (HOC) 232.00p 4.79%
IP Group (IPO) 152.60p 3.67%
Home Retail Group (HOME) 154.30p 3.35%
William Hill (WMH) 314.10p 3.22%
Millennium & Copthorne Hotels (MLC) 432.70p 2.61%
Allied Minds (ALM) 367.00p 1.77%
Big Yellow Group (BYG) 720.00p 1.69%
Foreign and Colonial Inv Trust (FRCL) 478.60p 1.51%
FTSE 250 - Fallers
Vesuvius (VSVS) 339.60p -5.90%
Daejan Holdings (DJAN) 5,235.00p -5.33%
Countrywide (CWD) 239.60p -5.18%
Zoopla Property Group (WI) (ZPLA) 271.90p -5.00%
OneSavings Bank (OSB) 202.00p -4.08%
Countryside Properties (CSP) 230.40p -4.00%
Euromoney Institutional Investor (ERM) 957.00p -3.72%
Crest Nicholson Holdings (CRST) 406.20p -3.52%
Shawbrook Group (SHAW) 167.50p -3.51% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks end flat amid raft of data and corporate news European stocks were relatively flat at close on Friday as investors digested eurozone PMI data and sifted through corporate releases.
The benchmark Stoxx Europe 600 index was last down 0.12%, France's CAC 40 was 0.11% higher and Germany's DAX slipped 0.09%.
At the same time, oil prices were losing ground, reversing earlier gains. West Texas Intermediate was down 1.89% to $43.92 a barrel while Brent crude was 1.83% firmer at $45.37.
Investors were still mulling over the European Central Bank's decision on Thursday to leave the benchmark refinancing rate at 0%, with market participants now expecting further monetary policy stimulus down the line.
"What goes up, must eventually come down, so no surprise that US stocks dipped overnight following an incredible run of seven consecutive record highs," said Lee Wild, heady of equity strategy at Interactive Investor.
"ECB president Mario Draghi wasn't playing ball yesterday," he said, adding that the focus now shifts to rate decisions from the Federal Reserve and Japanese central bank next week.
In corporate news, telecoms firm Vodafone was higher after its first-quarter revenue beat analysts' expectations, while building materials group CRH rallied after lifting its earnings estimate as a result of exceptional trading in the second quarter.
Home Retail Group gained ground after the Competition and Markets Authority cleared Sainsbury's acquisition of the Argos owner.
On the downside, Spain's Banco de Sabadell slumped after its second-quarter net profit dropped more than expected due to higher loan-loss provisions
Swedish construction company Skanska was sharply lower after its second-quarter earnings fell short of analysts' expectations.
Sports Direct was also under the cosh after a report by the Business, Innovation and Skills committee compared working conditions at the company to a Victorian workhouse and said founder Mike Ashley must be held accountable.
Marks & Spencer was in the red after Barclays downgraded the stock to 'underweight' from 'equalweight'.
On the data front, Markit's flash eurozone composite purchasing managers' index, which combines both the services and manufacturing sector, fell less than expected in July.
The PMI slipped to 52.9 from 53.1 in June, hitting an 18-month low but better than expectations for a reading of 52.5.
The services PMI came in at 52.7, down from 52.8 in June, also marking an 18-month low but ahead of expectations of 52.5.
Meanwhile, the manufacturing PMI nudged down to 51.9 in July from 52.8 the previous month. This marked a two-month low and was a touch below the expected reading of 52.0.
Chris Williamson, chief economist at Markit, said: "The eurozone economy showed surprising resilience in the face of the UK's vote to leave the EU and another terrorist attack in France. The overall rate of economic growth is largely unchanged, suggesting GDP is growing at a sluggish but reasonably steady annual rate of around 1.5%.
It was a much bleaker picture for the UK, where Markit's flash composite purchasing managers' index fell to 47.7 in July from 52.4 in June, marking its lowest reading since April 2009 in the aftermath of the Brexit vote.
The flash services PMI slid to 47.4 from 52.3 in June, missing expectations of 49.2 and marking the lowest reading since March 2009. |
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| | US Market Report | | US open: Stocks little changed as investors sift through earnings US stocks flitted between small gains and losses on Friday as investors sifted through a raft of corporate news.
At 1500 BST, the Dow Jones Industrial Average and the S&P 500 were both flat, while the Nasdaq was up 0.1%.
At the same time, oil prices were in the red. West Texas Intermediate was down 1.1% to $44.27 a barrel while Brent crude was 0.9% lower at $45.77.
It was a busy day for corporate news. General Electric rocketed after it reported earnings of 51 cents per share for the second quarter, up nearly 65% on the year earlier and ahead of estimates.
Coffee shop chain Starbucks was just a touch higher despite its third-quarter revenue released late on Thursday falling short of analysts' expectations.
Whirlpool pushed up after posting better-than-expected net profit for the second quarter, but Honeywell slid after its second-quarter earnings beat estimates but sales missed.
Chipotle Mexican Grill was a little firmer despite reporting an 82% decline in second-quarter profit on Thursday.
Advanced Micro Devices surged after saying it swung to a profit in the second quarter and reported its first sales increase in nearly two years.
On the data front, Markit's flash manufacturing purchasing managers' index rose to an eight-month high of 52.9 in July from 51.3 in June.
This was ahead of expectations for a reading of 51.6, led by a robust expansion of incoming new work and the fastest upturn in production volumes for eight months.
Chief economist Chris Williamson said: "July saw manufacturers battle against a strong dollar, the ongoing energy sector downturn and political uncertainty ahead of the presidential election, yet still achieved the best growth seen since last year.
"It remains too early to say if this is the start of a stronger upturn, but this is a welcome and encouraging sign of revival after the second quarter, in which the PMI signalled the sector's worst performance for over six years."
Next week, the focus will be on the Federal Open Market Committee's rate announcement on Wednesday. HSBC expects the Fed to leave the target range for the federal funds rate unchanged at 0.25% to 0.50%.
"We expect the July policy statement will be amended to reflect the latest monthly data showing a strong rebound in employment gains," the bank said. "However, we expect that the forward guidance elements of the statement will be unchanged, with the Committee continuing to expect 'gradual adjustments' in the stance of monetary policy." |
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| | Broker Tips | | Broker tips: Man Group, EasyJet, M&S Man Group shares rose on Friday as RBC Capital Markets upgraded the stock to 'outperform' from 'sector perform' and reiterated a target of 140p.
"We are confident Man's balance sheet should provide the firepower for a positive catalyst (either a merger and acquisition or extraordinary returns) this year," RBC analysts said in a note to investors.
"While investors may need to be patient for one to emerge, it is our opinion that those who take advantage of the current valuation discount to peers will be rewarded."
RBC said it believes Man Group is retaining surplus capital to fund potential acquisitions. The broker estimates the company has around $500m of surplus capital to deploy.
"In our view there is a small possibility that Man announces a share buyback programme concurrent with first half results on 26 July, but it is more likely that Man continues its search for acquisitions.
"Therefore, while investors may need to show patience, we believe that those that do will be rewarded, either with a higher yield or a rerating driven by M&A-led earnings growth."
Man Group's shares are down 30% in the year to date and the company has underperformed the asset managers sector which is on average down by 11%.
RBC believes the share price performance reflects a lack of positive catalysts so far this year, a poor run for is its alternative investment management business AHL, and upcoming first half results which are expected to be lacklustre.
RBC cut its earnings per share forecast by 10%, 8% and 4% in 2016, 2017 and 2018, respectively, largely because of reflecting higher variable compensation from performance fees.
Investec downgraded EasyJet to 'hold' from 'buy' as it cut the price target to 1,100p from 2,050p to reflect the revised outlook following the airline's third-quarter update on Thursday.
The brokerage said Q3 trading was broadly in line with post-Brexit expectations. However, the fourth-quarter yield outlook is highly uncertain, with yields achieved for Q4 post-Brexit down around.12%, compared to those before Brexit down around 5%.
Investec noted that capacity plans for the second half have also been reduced from +6.5% to +6.1%, while cost savings are expected to pick up materially in the fourth quarter, from a 0.4% increase per seat year-to-date to a 1% drop for the full year, suggesting savings of around 4.4%.
The brokerage said it has downgraded its full-year 2016-18 earnings forecasts by 20-30%.
On Thursday, the low-cost airline posted a drop in revenue per seat and total revenue for the third quarter amid difficult trading that was hit by the terror attack in Brussels and the Egyptair tragedy.
For the quarter ended 30 June, total revenue per seat was down 8.3% at constant currency or 7.7% on reported basis to £54.54, while total revenue fell by 2.6% to £1.196bn as increased seat capacity was offset by the impact on yield of overall market capacity and cancellations as a result of external events.
Marks & Spencer was under pressure on Friday after Barclays downgraded the stock to 'underweight' from 'equalweight' and slashed the price target to 290p from 410p saying things were likely to get worse before they get better under the new turnaround plan.
"We expect a painful transition and material earnings per share downgrades. We view the price cuts in clothing lines as an essential but mostly corrective action that could keep General Merchandise LFLs deep in negative territory in FY17 and FY18."
The bank said it expects the strong appreciation of the US dollar and higher cotton prices to have a 130 basis points negative impact on FY18 gross margin, adding to the pressure, while investment in service does not leave much room for cost cutting.
Barclays said it does not see material downside risk to M&S's multiple but has cut its full-year 2018 EPS estimate by 20% and is now 17% belowReuters consensus.
"November's strategy update may include positive news on the simplification of the clothing sub-brands, the rationalisation of M&S's international business and better use of the company's store estate. While we expect this to be positive in the longer term, it is unlikely to have a positive impact on earnings over the next two years." | | |
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