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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: Stocks fall as Brexit fears drag on sentiment UK equities closed lower on Monday as worries about the fallout of Brexit continue to weigh on sentiment.
S&P Global Ratings on Monday downgraded economic growth forecasts for the UK and the euro-area, citing the impact of Britain's vote to leave the European Union.
The ratings agency said Brexit will cut UK gross domestic product by 1.2% next year and 1.0% percent in 2018, due to weaker investment prospects. S&P expects the EU referendum will knock 0.8% of eurozone GDP over 2017 and 2018.
To encourage continued investment in the UK, Chancellor George Osborne said he plans to cut corporation tax. He told the Financial Times he would cut the tax rate to below 15% from the current 20%, which would make it the lowest of any major economy.
The OECD, however, said that the UK is unlikely to entice business by becoming a tax haven after Brexit.
The pound rose 0.17% against the dollar to $1.3289 at 1621 BST.
Meanwhile, a survey showed that eurozone investor confidence has fallen to the lowest level since January after Brexit. Sentix's forward-looking headline index for measuring investor confidence in the eurozone fell to +1.7 points in July from +9.9 in June, missing analysts' estimates of +5.0.
Chief eurozone economist at Pantheon Macroeconomics, Claus Vistesen, said he believes the ECB's response to Brexit will be an extension of quantitative easing, which could "come as a disappointment to markets".
"This survey gives the first indication of the hit to sentiment from the Brexit fallout, and while further weakness next month is possible, the initial fall is smaller than we feared."
A separate report showed the pace of UK construction slowed more than expected in June. The Markit/CIPS UK construction purchasing managers' index fell to 46.0 from 51.2 in May, marking its lowest level in seven years and below the 50.0 threshold that separates contraction from expansion for the first time since April 2013. Economists had been expecting a reading of 50.5.
In commodities, oil prices reversed earlier gains as signs of slowing demand in Asia offset remarks by energy minister of Saudi Arabia Khaled Al-Faleh that global oil markets were heading towards balance.
Brent crude fell 0.47% to $50.11 per barrel and West Texas Intermediate dropped 0.36% to $48.81 per barrel at 1626 BST.
On the corporate front, mining stocks rallied as gold prices rose 1.05% and silver prices jumped 4.15% on the Comex.
Silver producer Fresnillo was the biggest riser. The company was also boosted by confirmation that construction of the San Julin project, phase 1, completed on time and on budget.
UK real estate investment trusts were the biggest fallers after Liberum downgraded its ratings on several big names. The brokerage cut British Land, Land Securities and Intu Properties to 'sell' from 'hold', and Hammerson to 'hold' from 'buy.'
Housebuilders, including Persimmon and Taylor Wimpey, also slumped after the weaker UK construction PMI report from Markit/CIPS.
Marks & Spencer was under the cosh as Deutsche Bank downgraded it to 'hold' from 'buy'.
Moneysupermarket edged down after Barclays downgraded its recommendation on shares following the "jolt" of the UK referendum from 'overweight' to 'equalweight' and cut the target from 390p to 260p.
Rightmove was another faller as Barclays lowered its recommendation on shares from 'overweight' to 'underweight' and reduced its target from 4,550p to 4,300p.
Clarkson declined after saying full year profits will be "materially lower" in 2016 as a result of lower freight rates, quiet capital markets and weak investor confidence. |
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| Market Movers
FTSE 100 (UKX) 6,522.26 -0.84%
FTSE 250 (MCX) 16,132.26 -2.02%
techMARK (TASX) 3,206.79 -0.86%
FTSE 100 - Risers
Fresnillo (FRES) 1,895.00p 7.67%
Glencore (GLEN) 163.10p 4.58%
Randgold Resources Ltd. (RRS) 9,160.00p 4.39%
Antofagasta (ANTO) 480.60p 2.34%
BHP Billiton (BLT) 951.70p 1.24%
SSE (SSE) 1,586.00p 1.02%
Shire Plc (SHP) 4,711.00p 0.83%
Anglo American (AAL) 764.00p 0.79%
Severn Trent (SVT) 2,448.00p 0.78%
British American Tobacco (BATS) 4,917.00p 0.78%
FTSE 100 - Fallers
British Land Company (BLND) 565.00p -7.15%
Persimmon (PSN) 1,435.00p -6.82%
Berkeley Group Holdings (The) (BKG) 2,485.00p -6.37%
Taylor Wimpey (TW.) 130.50p -6.32%
Barratt Developments (BDEV) 389.90p -6.05%
Land Securities Group (LAND) 980.00p -5.68%
Marks & Spencer Group (MKS) 303.90p -5.06%
Standard Life (SL.) 286.50p -4.50%
Hargreaves Lansdown (HL.) 1,192.00p -4.49%
Hammerson (HMSO) 509.00p -4.41%
FTSE 250 - Risers
Acacia Mining (ACA) 482.90p 4.10%
AO World (AO.) 147.20p 3.30%
Hochschild Mining (HOC) 202.90p 3.26%
Centamin (DI) (CEY) 146.20p 3.18%
Vedanta Resources (VED) 444.10p 2.63%
Indivior (INDV) 255.70p 2.20%
Daejan Holdings (DJAN) 4,953.00p 2.10%
Bodycote (BOY) 540.00p 2.08%
Polymetal International (POLY) 1,081.00p 2.08%
Vesuvius (VSVS) 295.10p 1.06%
FTSE 250 - Fallers
Clarkson (CKN) 1,850.00p -16.10%
Moneysupermarket.com Group (MONY) 243.70p -11.38%
Shawbrook Group (SHAW) 160.00p -7.83%
Crest Nicholson Holdings (CRST) 364.10p -7.82%
Bovis Homes Group (BVS) 708.50p -7.08%
Rightmove (RMV) 3,500.00p -6.37%
Bellway (BWY) 1,852.00p -6.09%
Kier Group (KIE) 987.00p -6.00%
Close Brothers Group (CBG) 1,070.00p -5.89% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Italian banks weigh, Basic Resources jump on stimulus hopes European stocks fell on Monday amid low trading volumes due to the US Independence Day holiday, as investors continued to mull over the implications of Britain's decision to leave the European Union and fretted about Italys banking sector.
The benchmark Stoxx Europe 600 index fell 0.74% or 2.46 points to 329.78 and Germany's DAX fell 0.69% or 67.03 points to end the day at 9.709.09, while France's CAC 40 was 0.91% weaker.
At the same time, oil prices drifted lower. Brent crude futures were off 0.4% at $50.16 a barrel.
Markets received a boost at the end of last week after Bank of England governor Mark Carney said interest rates were likely to be cut over the summer.
Mike van Dulken, head of research at Accendo Markets, said the theme this week was almost certainly going to remain about the continued fallout from Brexit as market participants continue to digest and re-price for the new financial, economic and political landscape.
"Any more hints from central banks about stimulus could also help keep the ball in the air, helping markets shrug off the Brexit impact and push on with their recoveries."
Chancellor George Osborne told the Financial Times that he plans to cut corporation tax to ensure businesses keep investing in the UK after it opted to leave the European Union.
He said he would cut the tax rate to below 15% from the current 20%, which would make it the lowest of any major economy.
Osborne said the move was part of his new five-point plan to build a "super-competitive economy" with low tax rates and said it was important for "Britain to "get on with it" show investors it was still "open for business".
Investors were also digested news that Nigel Farage has stepped down as leader of the UK Independence Party.
In a speech in London, Farage said he felt he had done his bit and "couldn't possibly achieve more". He said Ukip could be on track to do well in the 2020 election, pointing in particular to the potential to win over Labour supporters.
The outspoken politician said a new leader would be in place in time for the autumn conference but did not back a particular candidate.
It also emerged on Monday that law firm Mishcon de Reya has been retained by an unnamed group of clients to ensure the UK government does not trigger the procedure for withdrawal from the European Union without the approval of Parliament.
The firm argued that while the referendum was an exercise to obtain the views of UK citizens, the majority of whom expressed a desire to leave the EU, the decision to trigger Article 50 of the Treaty of the European Union - the legal process for withdrawal - rests with the representatives of the people under the UK Constitution.
In equity markets, the Stoxx 600 basic resources index was up 1.65% as metals prices rose, with London-listed Fresnillo surging as silver prices broke through $21 an ounce.
On the downside, however, Italian banking stocks were under the cosh. Banca Monte dei Paschi di Siena took a beating following a report in daily La Repubblica that the European Central Bank has written to the lender asking for a new three-year business plan that would require it to reduce non-performing loans to an adequate level.
Italy's FTSE MIB underperformed its peers, trading down 1.74%.
Meanwhile, Prime Minister Matteo Renzi said on Monday that Italy has no plans to defy EU rules by pumping billions of euros of public money into its banks, denying a report in the Financial Times.
Elsewhere, beleaguered German car maker Volkswagen was in the red after chief executive Matthias Muller rejected compensation calls for European customers in the wake of the emissions scandal.
Deutsche Boerse and London Stock Exchange were in focus as the latter was set to hold a general meeting for shareholders to vote on their recommended all-share merger.
Data released earlier showed eurozone investor confidence has fallen to the lowest level since January after Britain voted to leave the European Union. Sentix's forward-looking headline index for measuring investor confidence in the eurozone fell to +1.7 points in July from +9.9 in June, missing analysts' estimates of +5.0.
Brexit also dampened investors' economic projections in July with the index on expectations plummeting to -2 points in July from June's +10. It marks the lowest level since November 2014.
The index on investors' view of the current economic situation also fell to +5.5 in July from +9.8 in June, the lowest since February 2015.
There was also bad news on the UK data front, as the Markit/CIPS UK construction purchasing managers' index fell to 46.0 from 51.2 in May, marking its lowest level in seven years and below the 50.0 threshold that separates contraction from expansion for the first time since April 2013. Economists had been expecting a reading of 50.5. |
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| | US Market Report | | US open: Stocks rise ahead of Independence Day celebrations US stocks rose for a third day on Friday ahead of the long weekend as investors took a break from worrying about Brexit and the uncertainty surrounding the upcoming US Presidential election.
The Dow Jones Industrial Average rose 0.29%, the S&P 500 increased 0.35% and the Nasdaq gained 0.36% at 1518 BST.
Traders seemed to be buying up before US markets close for trading on Monday 4 July for Independence Day.
Oil prices were also higher with West Texas Intermediate crude up 0.33% to $48.49 per barrel and Brent up 0.22% to $49.82 per barrel at 1520 BST.
In economic data, the seasonally adjusted final Markit US manufacturing purchasing managers' index (PMI) registered 51.3 in June, up from 50.7 in May as manufacturers indicated a slight rebound in production volumes during June, helped by the fastest rise in new work since March. June's final reading marked a downward revision from a previous estimate of 51.4 but was better than the 51.2 that analysts had been expecting.
The Institute for Supply Management (ISM) said its index of national factory activity rose to 53.2 in June from 51.3 the month before. Analysts had pencilled in no change to the reading.
"Manufacturing data has been showing steady improvement for some time in the US, and today's promising numbers indicate that trend is set to continue," said Dennis de Jong, managing director t UFX.com.
"Janet Yellen and Co. will have obvious concerns about the potential impact of Brexit on US interests across all sectors, not least a strengthening dollar that will make manufactured goods more expensive for foreign buyers. However, with North American trade partners Canada and Mexico the main recipients of US exports, it may only be ripples that are felt from the earthquake that is gripping Europe at present."
US construction spending fell 0.8% in May after a downwardly revised 2.0% drop in April, the Commerce Department said, missing forecasts for a 0.7% increase.
Elsewhere, China's official manufacturing PMI fell slightly to 50.0 in June from 50.1 in May, as expected. Caixin's manufacturing PMI decreased to 48.6 in June from 49.2 the previous month, missing forecasts for a reading of 49.2.
In Japan, deflation eased in May with the consumer price index down 0.4% year-on-year compared to a 0.3% fall the previous month. Analysts had expected it to worsen to a 0.5% decline.
Japanese household spending shrank by 1.1% year-on-year in May, as expected.
The unemployment rate was unchanged at 3.2% in April, the Ministry of Internal Affairs and Communications said, also as expected.
In corporate news, Tesla Motors recovered from earlier falls after it emerged that US safety regulators would be investigating 25,000 Tesla S cars following an autopilot feature that was claimed to have caused a fatality.
Hersheys slumped after it rejected a bid from rival Mondelez.
Apple gained amid reports it is in talks to buy Jay Z's Tidal streaming music service.
Hewlett-Packard edged higher as the company won $3bn in damages from Oracle in a court battle. HP claimed that Oracle backed out of a deal to support HP servers that used the Itanium line of chips from Intel Corp. Oracle said it would appeal the ruling. |
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| | Broker Tips | | Broker tips: Moneysupermarket, HSBC, G4S Shares in Moneysupermarket.com tumbled on Monday after Barclays downgraded the price comparison website to 'equalweight' from 'overweight' and slashed the price target to 260p from 390p.
The bank said it had been positive on the stock since initiating on it last year, but that uncertainty has been building in the last nine months, mostly due to elevated competition.
"The Brexit vote and a likely recession in the UK is now a new uncertainty, and one too many for us," it said.
"We do see areas of cyclicality in the Moneysupermarket business model, notably in Travel Supermarket, travel insurance in Insurance, and credit cards in Money. At this point, it is hard to model the precise impact of the downturn on numbers - our first attempt is to put through a 9% EPS downgrade in 2017E."
The bank added that it sees clear risks to consensus for next year.
It wasn't all doom and gloom, however, with positives in the form of a likely special dividend at end-2016 and benefits from the capex programme still to filter through, Barclays said.
"But we no longer have confidence in positive forecast momentum, and on 17.7x 12 month forward P/E, the shares are only slightly below their historical average relative to the FTSE250."
Barclays said that while the valuation already captures the risks, it struggles to argue for a re-rating from here, hence the downgrade.
Investec downgraded HSBC to 'sell' from 'hold' and cut the price target to 425p from 450p.
The brokerage argued that former HSBC CEO Mike Geoghegan played a key role in the UK's decision to leave the European Union, articulating his view of a clear business-positive impact from Brexit.
Investec noted that since 23 June, HSBC shares haven risen 3%, while the FTSE 100 has gained 4%. HSBC's peers, however, Lloyds and Barclays, are both down 25%.
"HSBC's shareholders must be suitably grateful; unlike most UK banks HSBC has participated in the 'Brexit bounce' - a 4-day 10% rise in the FTSE 100 index.
"But in our view, a now likely cut in UK interest rates, with assumed negative loan growth, pushes out HSBC's 10% return on equity aspiration to 2020e. We expect the share price to retrace."
The brokerage expects UK interest rates to be cut by at least 25 basis points, probably in August or sooner, and argued that "lower-for-even-longer" interest rates will put further pressure on HSBC's net income margin.
G4S shares fell on Monday as Jefferies reiterated a 'underperform' rating on the stock and cut its target to 157p from 160p.
Jefferies said a slowdown in emerging market economies, the Brexit vote and tragic events in Orlando have created stumbling blocks for the security sector.
"The security industry has proven resilience and G4S is commendably refocusing on a higher quality core, but recent events create headwinds," Jefferies said.
Jefferies downgraded its earnings per share estimates for 2016 and 2017 by 7% and 8% respectively. The broker said risks include political changes, delayed bid timetables, contract mobilisation and dislocation in some emerging market countries as global carry trades unwind.
Jefferies suggested a 240m equity placing would derisk the balance sheet and allow attention to return to long-term value drivers. | | |
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