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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 finish flat after uninspiring data London stocks finished broadly flat on Friday following a batch of uninspiring economic data including reports on UK construction, eurozone gross domestic product and US retail sales.
UK construction output fell 0.9% in June from May, more or less in line with consensus expectations for a 1% drop, according to the Office for National Statistics.
Compared to June 2015, construction output was down 2.2%, which was a touch steeper than the 2.1% drop forecast by economists and worse than the 1.6% decline the month before.
Pantheon Macroeconomics said: "June's official data confirm that the construction sector re-entered recession in the first half of this year, as public sector cuts and Brexit risk took their toll.
"The downturn looks set to deepen in the third quarter; July's construction PMI broadly is consistent with output falling by about 3.5% quarter-on-quarter. Meanwhile, Brexit negotiations will be protracted, so businesses will hold off committing to major capital expenditure for a long time to come."
Elsewhere, Eurozone gross domestic product rose by 0.3% in the second quarter, confirming preliminary estimates and in line with economists' forecasts, according to data released by Eurostat.
Compared with the same quarter last year, seasonally-adjusted GDP was up 1.6%, also as expected.
Dennis de Jong, managing director at UFX.com, said: "While the eurozone may have grown during the second quarter, a sharp drop from the first three months of the year reflects the uncertainty that gripped Europe ahead of June's Brexit vote."
Eurozone industrial production rose 0.6% in June from May, versus expectations for a 0.5% increase, separate Eurostat data showed. On the year, industrial production for the euro bloc was up 0.4%, missing expectations of a 0.7% increase.
In the US, retail sales were unchanged from the previous month, down from a 0.6% increase in June and missing expectations for a 0.4% gain, the Commerce Department revealed.
In another report, the Labor Department said its producer price index for final demand declined 0.4% in July compared to a 0.5% increase in June and analysts' expectations for a 0.1% rise. It marked the first decline since March and the largest since September 2015.
The University of Michigan's consumer confidence index also missed forecasts. The preliminary reading for August came in at 90.4, up from 90 the previous month but below estimates for 91.5.
Data out earlier on Chinese industrial output and retail sales for July came in below expectations, although Asian markets seemed to ignore the figures with equities closing higher.
The rate of growth in fixed asset investment year-to-date slowed to a 8.0% year-on-year clip versus expectations of 8.9%.
"A further sharp slowdown in investment growth means that unless the government steps up policy support, it is only a matter of time before the economy begins to slow again," Julian Evans-Pritchard, China economist at Capital Economics said.
Industrial production in China slowed to a 6.0% year-on-year pace in July, compared to expectations of 6.2% and down from 6.2% in the month before.
Meanwhile, oil prices gained after Saudi Arabia's energy minister Khalid al-Falih on Thursday said that oil producers would discuss ways to stabilise oil prices during a meeting next month in Algeria.
Brent crude rose 1.04% to $46.53 per barrel and West Texas Intermediate edged up 1.3% to 44.07 per barrel at 1611 BST.
On the corporate front, Coca-Cola HBC continued to fizz higher a day after it posted an 11% jump in first-half operating profit and sounded an upbeat note on the full-year outlook.
The Restaurant Group gained after the pub and restaurant chain announced the departure of its chief executive Danny Breithaupt, who has been with the company for 15 years.
Tullow Oil was given a boost after Bank of America Merrill Lynch upgraded the stock to 'buy' from 'neutral' and lifted the price target to 285p from 275p.
Going the other way, mining stocks were under the cosh on lacklustre China industrial data. Antofagasta, Rio Tinto and Anglo American were among the biggest fallers.
Genus shares were under pressure after a US judge ruled against the animal genetics company in its case versus US rival Sexing Technologies.
A.G. Barr shares also fell as Berenberg downgraded its rating on the stock to 'sell' from 'hold' and cut its target to 470p from 530p, citing a "weak" trading update by the soft drinks maker. |
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| Market Movers
FTSE 100 (UKX) 6,916.02 0.02%
FTSE 250 (MCX) 17,921.38 0.64%
techMARK (TASX) 3,533.94 0.17%
FTSE 100 - Risers
easyJet (EZJ) 1,101.00p 3.97%
Marks & Spencer Group (MKS) 354.00p 3.66%
Paddy Power Betfair (PPB) 9,580.00p 2.84%
Whitbread (WTB) 4,060.00p 2.78%
Tesco (TSCO) 160.50p 2.52%
Intu Properties (INTU) 313.00p 2.39%
Coca-Cola HBC AG (CDI) (CCH) 1,721.00p 2.38%
International Consolidated Airlines Group SA (CDI) (IAG) 407.60p 2.31%
Sainsbury (J) (SBRY) 238.00p 2.28%
Dixons Carphone (DC.) 367.60p 2.22%
FTSE 100 - Fallers
Antofagasta (ANTO) 514.00p -3.38%
Rio Tinto (RIO) 2,409.00p -3.21%
Anglo American (AAL) 856.90p -3.16%
Glencore (GLEN) 196.65p -1.67%
BHP Billiton (BLT) 1,040.00p -1.47%
AstraZeneca (AZN) 5,105.00p -1.09%
Sky (SKY) 875.00p -1.07%
DCC (DCC) 6,970.00p -0.99%
Randgold Resources Ltd. (RRS) 8,560.00p -0.98%
3i Group (III) 634.00p -0.94%
FTSE 250 - Risers
Restaurant Group (RTN) 417.70p 10.85%
Ibstock (IBST) 172.90p 7.73%
Polypipe Group (PLP) 286.60p 7.62%
Brown (N.) Group (BWNG) 190.10p 5.67%
Pagegroup (PAGE) 367.40p 5.24%
Ted Baker (TED) 2,462.00p 4.54%
Savills (SVS) 714.00p 4.54%
Tullow Oil (TLW) 230.70p 4.25%
Sports Direct International (SPD) 308.80p 4.11%
AO World (AO.) 153.80p 3.99%
FTSE 250 - Fallers
Genus (GNS) 1,782.00p -8.05%
Riverstone Energy Limited (RSE) 986.00p -4.46%
PayPoint (PAY) 991.00p -3.79%
Ocado Group (OCDO) 291.10p -3.51%
Hochschild Mining (HOC) 295.10p -2.61%
G4S (GFS) 226.60p -2.45%
Pendragon (PDG) 32.12p -2.43%
Barr (A.G.) (BAG) 514.00p -2.37%
Softcat (SCT) 340.00p -2.19%
Acacia Mining (ACA) 586.00p -1.92% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Economic data saps strength in stocks before weekend European equities wavered on Friday in fairly quiet trade, as market participants took in the latest economic numbers out of the Eurozone and China.
Weaker than expected figures on US retail sales and factory gate inflation did little to help matters, although the University of Michigan's preliminary gauge of consumer expectations for August did improve.
The benchmark Stoxx Europe 600 index was 0.16% or 0.57 points lower by the closing bell, France's CAC 40 drifted 0.08% lower and Germany's DAX was off 0.27%.
Oil prices on the other hand were higher again. West Texas Intermediate crude oil futures advanced 1.92% to $44.34 a barrel and Brent crude was 1.48% stronger to $46.73.
Dave Jeal, head of investment products at Interactive Investor, said: "With little by way of financial indicators to drive the market at present, expect more of the same, overall steady, outlook over the short-term whilst bursts of opportunity to be found below the surface: keeping a close eye on the detail could make it your perfect summer."
On Thursday, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq all set fresh records, underpinned by well-received results from retailers Macy's, Kohl's and Nordstrom.
Investors were also digesting data showing industrial output and retail sales in China missed expectations in July, although the figures were largely shrugged off in Asian trade.
Retail sales were up 10.2% on the year, down from 10.6% growth the month before and below expectations of 10.5%. Industrial production in the world's second-largest economy grew 6% on the year, down from 6.2% the month before and falling short of estimates of 6.1% growth.
Elsewhere, fixed asset investment growth came in at 8.1% on the year for January to July, missing expectations of 8.8%.
In European macroeconomic news, Eurozone gross domestic product rose by 0.3% in the second quarter, confirming preliminary estimates and in line with economists' forecasts, according to data released by Eurostat.
Compared with the same quarter last year, seasonally-adjusted GDP was up 1.6%, also as expected.
In the EU-28 group of nations, GDP grew 0.4% on the quarter and 1.8% compared with the second quarter of last year.
Germany saw 0.4% growth in the second quarter, with Spain's GDP up 0.7% and the Netherlands' expanding 0.6%.
Meanwhile, Eurozone industrial production rose a touch more than expected in June, according to Eurostat.
Industrial production was up 0.6% from May versus expectations for a 0.5% increase. Production of capital goods was up 1.3%, while durable consumer goods output rose 1% and non-durable goods production was 0.7% higher. The production of intermediate goods and energy fell by 0.2% and 0.6%, respectively.
On the year, production was up 0.4%, missing expectations of a 0.7% increase.
In the EU-28 group of countries, industrial production was 0.5% higher on the month and on the year.
Corporate news was thin on the ground on Friday.
Moller-Maersk rallied after the Danish shipping and oil company's second-quarter earnings topped analysts' expectations. |
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| | US Market Report | | US open: Stocks slip on weak retail sales, PPI data US stocks were in the red on Friday as key retail sales figures for July came in unexpectedly flat, triggering a sharp drop in Treasury yields.
At 1459 BST, the Dow Jones Industrial Average fell 0.13% to 18,588.04 points, the S&P 500 dropped 0.14% to 2,182.73 points and the Nasdaq decreased 0.11% to 5,222.56 points.
Retail sales in the US were unchanged from the previous month, down from a 0.6% increase in June and missing expectations for a 0.4% gain, the Commerce Department revealed.
Core retail sales - which exclude auto sales - declined 0.3% following a 0.7% increase in June, marking the worst reading since January and falling short of expectations for a 0.2% advance.
Friday's news on the economic front saw yields on benchmark 10-year US Treasuries drop by seven basis points to 1.4865% and odds of a Fed rate increase in December fall back to 38.5%.
Peter Read, co-founder of app-only trading network Pelican, said: "Fed Chair Janet Yellen will be disappointed to not be able to add today's retail sales data to the body of evidence she is building that supports raising interest rates later in the year.
"The possible intervention on rates received a notable backer in San Francisco Fed chief John Williams this week, which comes off the back of a second successive better than expected non-farm payroll result last week."
In a separate report, the Labor Department said its producer price index for final demand declined 0.4% in July compared to a 0.5% increase in June and analysts' expectations for a 0.1% rise. It marked the first decline since March and the largest since September 2015.
The University of Michigan's consumer confidence index also missed forecasts. The preliminary reading for August came in at 90.4, up from 90 the previous month but below estimates for 91.5.
Meanwhile, oil prices continued to gain after Saudi Arabia's energy minister Khalid al-Falih on Thursday said that oil producers would discuss ways to stabilise oil prices during a meeting next month in Algeria.
West Texas Intermediate crude increased 1.14% to $43.98 per barrel and Brent rose 0.73% to $46.38 per barrel at 1517 BST.
In corporate news, Nvidia Corp rallied after the graphics chip maker reported better-than-expected results late on Thursday.
J.C. Penney Co. gained after the retailer reported a second-quarter losses that was narrower than expected. |
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| | Broker Tips | | Broker tips: A.G. Barr, Drax, Tullow Oil A.G. Barr shares fell on Friday as Berenberg downgraded its rating on the stock to 'sell' from 'hold' and cut its target to 470p from 530p, citing a "weak" trading update by the soft drinks maker.
In a 2 August trading statement, the Irn Bru maker said it expected a 2.9% year-on-year drop in first half revenues to £125m due to challenging market conditions. A.G. Barr said it had faced continued deflation and volume declines. The market's overall performance was also expected to be hurt by poor weather in June and early July.
The company said if market conditions improve, it expects to meet its full year profit forecasts.
"In our view, this will be very tough to achieve as it requires both a significant turn around in sales performance and margin expansion," said Berenberg.
"In addition, we feel that over the coming years the company could struggle to deliver on its key growth strategies and is likely to see margins come under pressure."
Berenberg reduced its earnings per share estimate (EPS) by 5% for fiscal year 2017. It also lowered its forecast for EPS in 2018 and 2019 by 7% and 6%, respectively.
A.G. Barr has responded to a planned new sugar tax in the UK by announcing a new Irn Bru zero sugar variant called Irn Bru Xtra. However, Berenberg said it believes it could prove difficult to convert existing customers quickly and was unsure its new releases will substantially broaden the customer base.
The broker also reckons despite strong performances in international and Funkin sales, the businesses remain too small to contribute significantly to group growth.
Due to a weaker pound, A.G. Barr is likely to see the cost of raw materials purchased in foreign currencies increase notably in fiscal year 2018, Berenberg added.
"We expect the company to tightly control operating costs in order to counteract the issue, but believe the earnings before interest and tax margin will fall to 15.9% next year."
Drax got a boost on Friday as HSBC upgraded the stock to 'hold' from 'reduce' with an unchanged price target of 315p following weakness in the shares after the first-half results.
The bank pointed out that Drax has underperformed the market after its first-half results.
"The company mentioned that its FY 2016 EBITDA will come in at the bottom of the consensus range, which in our view has resulted in the share price weakness."
HSBC noted the share price has fallen around 8% in absolute terms in the last month, whereas the sector index - MSCI Europe utilities - remained relatively flat over that period. As a result, the stock is now trading in line with its price target, which implies 1% upside.
HSBC highlighted the short-term opportunity from auxiliary services.
"The short-term strategy is for Drax to offer services to National Grid as it seeks to balance intermittent and distributed power availability. National Grid suggested that these services could amount to £2bn by 2020."
The bank said there are a wide range of services such as balancing reserve, reactive power and black start capability, that Drax could offer.
"With 10.5GW (nearly 20% of UK-installed capacity) of solar on the system and 20% of power provided by renewables in 2015 in the UK, these services will be increasingly required."
HSBC said this was a considerable opportunity for Drax, which has capacity to service around 7-8% of the UK's power demand.
Bank of America Merrill Lynch upgraded Tullow Oil to 'buy' from 'neutral' and lifted the price target to 285p from 275p.
BofA noted the shares have materially underperformed the sector.
"Over the past 24 and 36 months, shares have returned -70% and -80% respectively, against the sector at - 60% in both time periods.
"Further, we believe when we overlay the operational progress with our commodity price view, Tullow Oil is one of the most compelling levered E&Ps to gain exposure to an upswing to a recovery in oil prices."
Merrill pointed out that Tullow is on the cusp of a 30% increase in group production, while simultaneously lowering opex and capex 25% and 40%, respectively.
"With the TEN field start-up imminent (18 August), Tullow is in a position to generate 15%+ free cash flow yields as group production grows 30% year-on-year."
In addition, BofA said that while Tullow's net debt position has been a perennial overhang for the company, with an organic pay-down focus, it will now be in a much stronger position in negotiating its reserves-based loan facility at year-end 2016.
"Indeed, we think Tullow is about to enter the most rapid deleveraging of any company in our coverage, moving from YE16 net debt: EBITDA of 5.9x to 3.9 x by year-end 2017." | | |
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