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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: Equities rally on US non-farm payrolls, BoE stimulus UK equities advanced on Friday after the US non-farm payrolls report smashed expectations.
US employers added 255,000 jobs in July, beating forecasts of 180,000, the Labor Department's non-farm payrolls report revealed. It followed an upwardly revised 292,000 increase in June.
London´s top flight index finished the session up by 53.31 points or 0.79% to 6,793.47.
The unemployment rate was unchanged at 4.9% in July, compared to estimates of 4.8%. Average hourly earnings rose 0.3% on the month, beating estimates for a 0.2% increase and following a 0.1% rise in June. On the year, hourly earnings growth in July was unchanged at 2.6%, as expected.
"The steady job market improvement and keeps alive the possibility of the Fed hiking rates again this year, but worries about sluggish economic growth and deteriorating productivity, as well as uncertainty created by the presidential election, suggests that any tightening of policy will be delayed until December," said Chris Williamson, chief business economist at IHS Markit.
"The problem facing the Fed is that the ongoing robust rate of job creation is taking place against a backdrop of weak output growth, suggesting productivity and profit margins are likely to be suffering."
Less positively, US trade data showed the deficit rose 8.7% in June to a 10-month high of $44.5bn, more than the $43.0bn expected by economists.
Meanwhile, UK stocks continued to receive a boost following the Bank of England's decision on Thursday to cut interest rates by 25 basis points to 0.25% and to increase its asset purchases by £60bn. The Bank also hinted at a further cut to interest rates this year if economic data worsens.
"Whilst the BoE's 25bp was fully expected by the market, hints of further cuts to come led the front end to rally further," said Bank of America Merrill Lynch. "With Bank rate now priced to fall to 10bp by the turn of the year we think the front end is fully priced."
Housebuilders enjoyed healthy gains on Friday while defensive sectors such as Gas, Water & Multiutilities and Fixed Line Telecommunications slumped as risk appetite picked up on the back of both the US jobs numbers and the BoE´s latest moves.
On the company front, Royal Bank of Scotland was the top faller on the FTSE 100 after reporting a wider first half loss.
Utility stocks slumped, including Severn Trent and United Utilities, after HSBC released a note to investors saying the industry faces the key challenge of resilience in the face of tighter regulations.
Going the other way, Rio Tinto shares jumped as it completed the sale of its Mount Pleasant thermal coal assets to MACH Energy Australia Pty, taking its tally for divestments since January 2013 to $4.7bn.
Bellway trotted higher as the housebuilder said it expected full year housing revenue to increase by around 27% to £2.2bn with a 12.5% increase in the number of housing completions to 8,721.
Cairn Energy was up as UBS upgraded the stock to 'buy' from 'neutral' following recent underperformance, with an unchanged price target of 220p. |
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| Market Movers
FTSE 100 (UKX) 6,793.47 0.79%
FTSE 250 (MCX) 17,465.35 1.28%
techMARK (TASX) 3,511.75 0.78%
FTSE 100 - Risers
Hikma Pharmaceuticals (HIK) 2,389.00p 7.61%
Paddy Power Betfair (PPB) 9,150.00p 3.62%
Hargreaves Lansdown (HL.) 1,322.00p 3.20%
Standard Life (SL.) 314.70p 3.08%
Persimmon (PSN) 1,723.00p 3.05%
BHP Billiton (BLT) 1,012.50p 3.01%
Berkeley Group Holdings (The) (BKG) 2,658.00p 2.94%
easyJet (EZJ) 1,035.00p 2.68%
Barratt Developments (BDEV) 436.70p 2.66%
WPP (WPP) 1,745.00p 2.65%
FTSE 100 - Fallers
Royal Bank of Scotland Group (RBS) 178.20p -7.19%
Fresnillo (FRES) 1,884.00p -3.58%
Randgold Resources Ltd. (RRS) 8,375.00p -3.01%
Pearson (PSON) 882.50p -1.23%
National Grid (NG.) 1,069.00p -1.16%
Standard Chartered (STAN) 638.60p -1.15%
Centrica (CNA) 232.80p -1.10%
Severn Trent (SVT) 2,399.00p -1.07%
BT Group (BT.A) 406.55p -0.83%
United Utilities Group (UU.) 987.00p -0.70%
FTSE 250 - Risers
Ibstock (IBST) 153.00p 7.67%
Restaurant Group (RTN) 369.30p 6.46%
Cairn Energy (CNE) 193.00p 6.22%
Hastings Group Holdings (HSTG) 209.00p 6.09%
Polypipe Group (PLP) 259.50p 6.00%
McCarthy & Stone (MCS) 179.80p 5.76%
IP Group (IPO) 159.80p 5.13%
Bellway (BWY) 2,131.00p 5.03%
Inmarsat (ISAT) 870.00p 4.95%
Amec Foster Wheeler (AMFW) 461.20p 4.72%
FTSE 250 - Fallers
Hochschild Mining (HOC) 270.20p -6.08%
esure Group (ESUR) 268.50p -4.14%
Acacia Mining (ACA) 569.50p -4.04%
Centamin (DI) (CEY) 164.90p -2.94%
Hays (HAS) 117.20p -2.50%
Circassia Pharmaceuticals (CIR) 94.55p -2.32%
Serco Group (SRP) 128.20p -2.29%
Barr (A.G.) (BAG) 514.50p -2.28%
Capital & Counties Properties (CAPC) 278.90p -2.14%
Cobham (COB) 163.30p -1.51% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks close at session-highs European stocks jumped in the final hours of trading following the release of a surprisingly strong set of US jobs figures for the month of July and in the wake of Thursday´s aggressive easing by the Bank of England.
The Stoxx Europe 600 index gained 1.05% or 3.54 points to end the day at 341.38 and Germany's DAX was up 1.36% or 139.35 points to 10,367.21, while France's CAC 40 clocked in with an advance of 1.49% or 64.92 points to 4,410.55.
West Texas Intermediate declined 0.987% to $41.52 a barrel, while Brent crude slipped 1.003% to end the day at $43.85.
US non-farm payrolls rose by a bumper 255,000 persons last month, easily eclipsing forecasts for an increase of 180,000.
"The strong report reduces some of the concerns about the current economic situation in the US but we still need further data to confirm that both GDP growth and employment growth are still on track. Despite the strong jobs report for July, we stick to our call that the Fed will stay on hold for the rest of the year, although it makes a hike later this year more likely," analysts at Danske Bank said.
Their peers at Barclays Research were more upbeat, telling clients that: "On the whole, this morning's strong July employment report indicates that labor market health remains intact and, in our view, reduces near-term recession risk for the US economy. Furthermore, the print should boost FOMC members' confidence in the outlook, especially following the unexpected weakness in Q2 GDP. We continue to expect the Fed to hike rates at its September meeting, and we look to Chair Yellen's appearance at the Jackson Hole Policy Symposium on August 26 for confirmation of this view."
On Thursday, the Bank of England cut interest rates to a record low of 0.25%, expanded the asset purchase programme by £60bn and launched a new £100bn funding scheme for banks.
On the corporate front, Royal Bank of Scotland was under the cosh after it reported a £2bn loss for the first half of the year.
Allianz was also in the red after the German insurer posted a 46% drop in net profit for the second quarter, while Novo Nordisk tumbled as it cut its profit and sales forecast for the year. |
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| | US Market Report | | US open: Stocks gain after non-farm payrolls smash estimates US stocks gained on Friday as the July non-farm payrolls report came in much better than expected.
At 1434 BST the Dow Jones Industrial Average rose 0.55%, the S&P 500 increased 0.46% and the Nasdaq edged up 0.55%.
In contrast, oil prices retreated with West Texas Intermediate crude down 1.18% to $41.44 per barrel and Brent down 1.02% to $43.84 per barrel at 1508 BST.
US employers added 255,000 jobs in July, smashing forecasts of 180,000, the Labor Department's non-farm payrolls report revealed. It followed an upwardly revised 292,000 increase in June.
The unemployment rate was unchanged at 4.9% in July, compared to estimates of 4.8%. Average hourly earnings rose 0.3% on the month, beating estimates for a 0.2% increase and following a 0.1% rise in June. On the year, hourly earnings growth in July was unchanged at 2.6%, as expected.
"The steady job market improvement and keeps alive the possibility of the Fed hiking rates again this year, but worries about sluggish economic growth and deteriorating productivity, as well as uncertainty created by the presidential election, suggests that any tightening of policy will be delayed until December," said Chris Williamson, chief business economist at IHS Markit.
"The problem facing the Fed is that the ongoing robust rate of job creation is taking place against a backdrop of weak output growth, suggesting productivity and profit margins are likely to be suffering."
The CME FedWatch tool indicates an 18% chance of an interest rate rise in September, a 20% chance in November and 43% in December.
On the corporate front, Zygna shares dropped after the videogame developer released a weak outlook on third quarter revenues.
FireEye slumped after the security software company reported quarterly sales that missed its own forecast and announced plans to cut 300 to 400 jobs.
Liberty Media Corp. as it reported strong quarter results, with a 10% increase in revenue and a 13% rise in earnings. |
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| | Broker Tips | | Broker tips: RBS, Wolseley, Cairn Energy Royal Bank of Scotland's rating was placed 'under review' from 'buy' on Friday by Shore Capital after the lender reported "disappointing" first half results.
The bank posted a £2.05bn loss for the first six months of the year, compared to a £179m loss in the corresponding period a year earlier. Chief executive Ross McEwan blamed the loss on legacy issues.
The group also said it will no longer separate and list its Williams & Glyn unit, blaming lower interest rates and complexities. RBS will now sell the 300-branch High Street bank, with Santander UK understood to be a potential buyer.
RBS issued a cautious outlook, citing increased uncertainty following the UK's vote to leave the European Union and the lower interest rate environment.
"While the H1 financial performance and the outlook are disappointing (and are likely to drive estimate downgrades) we note that balance sheet capitalisation remains strong with the group reporting a core tier 1 ratio of 14.5% and leverage ratio of 5.2% at the end of the period (broadly consistent with the position at the end of the second quarter), thus putting the group in a good position to absorb further potential losses," said ShoreCap analyst Gary Greenwood.
"In addition, the overall credit quality of the balance sheet continues to improve with risk elements in lending reducing as a percentage of overall balance sheet exposure. "
Greenwood noted that there appeared to have been no material progress on the resolution of outstanding US RMBS litigation for mis-sold packaged accounts. Significant further provisions are anticipated although management notes that it has had positive discussions with a number of interested parties in respect of Williams & Glyn, the analyst said.
"Uncertainty around the achievement of both outcomes has increased during H1 and so, despite the stock trading at a significant discount to book value, it is hard for us to retain a positive stance. We therefore place our recommendation under review (from buy)."
Shorecap reiterated a target of 192p.
Jefferies downgraded builders' merchant Wolseley to 'hold' from 'buy' as it took a look at the wider sector.
It pointed out the shares have risen 17% from their post-Brexit lows and now sit 8% higher than before the UK's vote to leave the European Union.
"Having heard from three merchants post-Brexit and having seen another month's macro data we would prefer exposure to the UK-focused companies, where we believe the risk/reward opportunities are more favourable.
"Overall, it is our sense that the immediate share price response to the UK focused names has been an overreaction and, at this stage, trading appears to be better than feared. To that end, with the UK focused names still down 23% post-Brexit, we would prefer exposure to these companies, rather than Wolseley."
Jefferies noted there have been three updates from the sector post-Brexit. Demand weakened for the traditional merchants in the second quarter and was negative for Grafton in June, butTravis Perkins has been reporting improving trends in July, it said.
The bank said consumer-focused businesses appear to be performing better than those exposed to the wider construction space.
"Howden has seen only a small slowdown in their volume in July and Travis' consumer division continues to see mid-single digit growth in the first half.
"Perhaps the impact of Brexit on the UK at large is being overstated by those in the London bubble. The housebuilders are telling us that, post an immediate one-week slowdown, reservation rates have returned to previous levels."
Jefferies said that while the impact of Brexit means remains unclear, it is increasingly confident that it does not mean a return to the volume declines of 2008/9.
Cairn Energy got a boost on Friday as UBS upgraded the stock to 'buy' from 'neutral' following recent underperformance, with an unchanged price target of 220p.
The bank said several potential sources are emerging in Cairn. Firstly, it said the resumption of drilling in Senegal later this year sees multi-hundred million barrels of upside tested in a frontier, but proven basin.
Secondly, UBS argued that investors get paid to wait for the oil price recovery.
"Cairn's North Sea projects don't ramp-up until 2H17E and so weak spot prices impact sentiment but not value. Once on-stream Catcher and Kraken give it around 25kboe/d of production which, given large tax loss pools, is notably cash generative."
Thirdly, UBS said that while visibility on recovery of its 10% Cairn India stake is low ahead of arbitration next year, so are market expectations.
The bank pointed out that Cairn's share price has sold off in reaction to two partner transactions: Woodside's acquisition of Conoco's 35% stake in the SNE discovery and the mooted Delek/EnQuest Kraken deal. |
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