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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 end higher as UK retail sales rise, oil prices jump London stocks gained on Thursday as oil prices jumped and UK retail sales data beat expectations.
Oil prices rallied, with Brent crude rising past the $50 mark, on a weaker dollar and hopes of a deal on output at next month's unofficial OPEC meeting.
Adding to the positive sentiment, data from the Energy Information Agency on Wednesday showed a bigger-than-expected fall in US weekly crude inventories.
At 1622 BST, Brent crude edged up 1.4% to $50.56 per barrel and West Texas Intermediate increased 2.3% to $47.90 per barrel.
UK retail sales rose 1.4% month-on-month in July after a 0.9% decline in June, beating forecasts for a 0.1% increase. The Office for National Statistics said the pick-up in retail sales was driven by better weather and discounts.
July sales were up 5.9% on the same month last year, up from the 4.3% gain in June and again beating the consensus estimate of a 4.2% rise.
Economist Sam Tombs at Pantheon Macroeconomics said consumers appeared to have been protected from the immediate fallout of the Brexit vote, noting that retailers had to continue to cut prices rapidly in order to get consumers to open their wallets, with the retail sales deflator falling 1.7% year-over-year.
But he warned that with firms intending to stop hiring and inflation set to soar, the high street "is set for a tough year" and expects the wider economy to slow in Q3 driven by sharp falls in business investment and de-stocking by firms.
The pound rose 0.87% against the dollar to $1.3155 at 1622 BST.
Meanwhile, investors continued to digest the minutes of the Federal Reserve's July meeting which showed policymakers were divided over the timing of the next interest rate hike.
"Judging from the overall tone of the minutes it would appear the reality is that a strong US dollar, combined with weakening inflation gauges appears to be preventing the Fed from pulling the trigger," said Michael Hewson, chief market analyst at CMC Markets.
"Putting that altogether and you have a perfect recipe for policy paralysis and indecision, which is a far cry from the beginning of this year when four rate hikes for 2016 appeared to be a view the Fed appeared keen to encourage."
In other US news, the Labor Department said initial jobless claims dropped 4,000 in the week to 13 August to 262,000, compared to an unrevised 266,000 the previous week. Economists had pencilled in 265,000 claims.
The Federal Reserve Bank of Philadelphia's manufacturing sector index increased from a reading of -2.9 in July to 2.0 in August. Consensus had forecast a print of 1.3.
On the company front, Admiral Group's shares rose, bouncing back from heavy losses in the previous session when the insurer's results sparked concerns about its Solvency II position.
Mining stocks were on the front foot as commodity prices advanced on the back of a weaker dollar and as investors adopted a risk-on approach, with Antofagasta, Glencore and BHP Billiton sharply higher.
Kaz Minerals advanced after it reported a rise in first half earnings and said its new Bozshakol project is on track for commercial output in the second half.
On the downside, ex-dividends were weighing on the FTSE, with Pearson, British American Tobacco, Imperial Brands, Legal & General and Reckitt Benckiser all in the red as they traded with no entitlement to their latest dividend payout.
Evraz shares slumped after the Russian steel miner reported a drop in half year revenue due to weaker steel prices. |
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| Market Movers
FTSE 100 (UKX) 6,865.95 0.10%
FTSE 250 (MCX) 17,860.66 0.57%
techMARK (TASX) 3,507.60 0.11%
FTSE 100 - Risers
Antofagasta (ANTO) 571.00p 5.25%
Sainsbury (J) (SBRY) 241.60p 3.07%
easyJet (EZJ) 1,078.00p 2.96%
Taylor Wimpey (TW.) 157.30p 2.81%
BHP Billiton (BLT) 1,075.00p 2.77%
Morrison (Wm) Supermarkets (MRW) 192.40p 2.61%
London Stock Exchange Group (LSE) 2,867.00p 2.50%
Admiral Group (ADM) 2,132.00p 2.45%
Tesco (TSCO) 159.55p 2.11%
Travis Perkins (TPK) 1,556.00p 2.03%
FTSE 100 - Fallers
British American Tobacco (BATS) 4,834.00p -2.28%
Pearson (PSON) 863.00p -2.21%
Royal Bank of Scotland Group (RBS) 186.90p -1.79%
Imperial Brands (IMB) 4,065.00p -1.54%
Legal & General Group (LGEN) 208.60p -0.95%
Reckitt Benckiser Group (RB.) 7,418.00p -0.92%
Carnival (CCL) 3,613.00p -0.91%
BT Group (BT.A) 393.40p -0.61%
AstraZeneca (AZN) 5,046.00p -0.45%
Mondi (MNDI) 1,592.00p -0.44%
FTSE 250 - Risers
Kaz Minerals (KAZ) 180.00p 9.96%
Thomas Cook Group (TCG) 66.10p 7.48%
Clarkson (CKN) 2,297.00p 6.84%
Hochschild Mining (HOC) 308.80p 4.82%
Diploma (DPLM) 867.50p 4.77%
IMI (IMI) 1,095.00p 4.29%
Hays (HAS) 127.10p 4.01%
Brown (N.) Group (BWNG) 189.80p 3.77%
ICAP (IAP) 475.20p 3.55%
Polypipe Group (PLP) 277.30p 3.55%
FTSE 250 - Fallers
Evraz (EVR) 153.80p -11.05%
Laird (LRD) 297.90p -3.28%
Indivior (INDV) 319.80p -2.32%
JRP Group (JRP) 89.00p -2.20%
BGEO Group (BGEO) 2,680.00p -2.15%
William Hill (WMH) 302.60p -1.69%
Tritax Big Box Reit (BBOX) 141.40p -1.67%
Card Factory (CARD) 285.10p -1.52%
PZ Cussons (PZC) 341.60p -1.47% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Benchmarks break four-session losing streak European stocks moved higher on Thursday following four downbeat sessions, as investors digested the Federal Reserve meeting minutes that showed policymakers were in no hurry to hike interest rates.
The benchmark Stoxx Europe 600 index finished 0.72% higher at 342.91, Germany's DAX was up by 0.62% on the day and France's CAC 40 gained 0.44%.
Oil prices were on the up too, with West Texas Intermediate gaining 2.66% to stand at $48.07 a barrel and Brent crude advanced 1.72% to $50.72.
Minutes from the Fed's 26-27 July policy meeting released on Wednesday showed a continued reluctance to jump to any conclusions about the state of the economy.
Policymakers were divided on the pace of rate hikes needed, meaning a September move is unlikely.
The minutes stated that, regarding the near-term outlook, members of the Federal Open Markets Committee "generally agreed that the prompt recovery in financial markets following the Brexit vote and the pickup in job gains in June had alleviated two key uncertainties about the outlook that they had faced at the time of the June meeting".
Lee Wild, head of equity strategy at stockbroker Interactive Investor, said while America's economy is growing it was "hardly shooting the lights out".
"It's why Federal Reserve chiefs remain split on raising interest rates any time soon, according to minutes from the policymaker's latest meeting released overnight. That means less likelihood of a US rate hike in September, which underpins equity markets still trading only a short stroll from record highs."
In corporate news, Vestas Wind Systems surged after its second-quarter numbers beat expectations and the company lifted its full-year forecasts.
Nestle nudged just a touch higher after reporting a drop in first-half profit.
Fresnillo gained ground as it said the milling plant at its San Julin milling facility has successfully begun processing ore and operations at the leaching plant were confirmed as having run "normally" for a week.
B&Q owner Kingfisher rose as it said sales slowed only slightly in the second quarter.
On the data front, figures from Eurostat confirmed annual inflation in the eurozone at 0.2% year-on-year for July.
This was up from 0.1% in June and unchanged from July of last year, but still a mile below the European Central Bank's target of just under 2%.
On the month prices were down 0.6%, which was steeper than the 0.5% forecast and came after a 0.2% increase in the previous month.
Core inflation, which excludes unprocessed food and energy, was unchanged at 0.8% last month, in line with estimates. Excluding energy, food, alcohol and tobacco products, inflation was unchanged at 0.9%, also in line.
Energy prices declined by 6.7% following a 6.4% annual drop in June. On the month, they were down 1%.
Unprocessed food prices rose 2.9% on the year in July, up sharply from 1.5% in June, while services prices were up 1.2% on the year. |
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| | US Market Report | | US open: Stocks fall as investors mull Fed minutes, data US stocks were lower on Thursday as investors continued to assess the Federal Reserve's meeting minutes which showed policymakers were divided over the timing of an interest rate hike.
At 1448 BST the Dow Jones Industrial Average fell 0.06% to 18,564.21 points, the S&P 500 dipped 0.02% to 2,181.92 and the Nasdaq shed 0.06% to 5,225.69 points.
At the same time, oil prices rose as the dollar weakened and data from the Energy Information Agency showed a bigger-than-expected decline in US weekly crude inventories. West Texas Intermediate crude increased 1.4% to $47.50 per barrel and Brent crude edged up 0.7% to $50.22 per barrel at 1453 BST.
The dollar dropped 0.80% against the pound, fell 0.30% versus the euro and decreased 0.08% versus the yen.
Meanwhile, investors were left baffled by the minutes of the Fed's July meeting, released late on Wednesday. The minutes revealed that some policymakers believed the US economic outlook and labour market were strong enough to "warrant taking another step". Although others urged caution, saying more economic data was needed.
"Judging from the overall tone of the minutes it would appear the reality is that a strong US dollar, combined with weakening inflation gauges appears to be preventing the Fed from pulling the trigger," said Michael Hewson, chief market analyst at CMC Markets.
"Putting that altogether and you have a perfect recipe for policy paralysis and indecision, which is a far cry from the beginning of this year when four rate hikes for 2016 appeared to be a view the Fed appeared keen to encourage."
Turning to Thursday's news, the Labor Department said US initial jobless claims dropped 4,000 in the week to 13 August to 262,000, compared to an unrevised 266,000 the previous week. Economists had pencilled in 265,000 claims.
"On balance, this morning's report shows no change in the trend of low labor market separations and, all else equal, points to a healthy August employment report," according to Barclays Research.
The Federal Reserve Bank of Philadelphia's manufacturing sector index increased from a reading of -2.9 in July to 2.0 in August. Consensus had forecast a print of 1.3.
On the company front, shares in Wal-Mart Stores jumped after the company posted quarterly results that beat expectations, due to stronger sales.
Cisco Systems was in the red after the technology company released better-than-expected earnings late on Wednesday and said it plans to cut 5,500 jobs.
Caterpillar shares slumped after the industrial machine and equipment maker reported a drop in retail sales of machines in the three-month rolling period ending July. |
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| | Broker Tips | | Broker tips: Admiral Group, William Hill, Laird Motor insurance company Admiral Group looks overvalued compared to peers, RBC Capital Markets said on Thursday as it reiterated an 'underperform' rating and cut its target to 1,600p from 1,625p.
RBC reduced its profit before tax estimates for fiscal years 2017-18 by 8% on average, with dividends also cut by a similar level, following Admiral's first half results on Wednesday.
The broker said Admiral's share price has benefited from improving UK motor insurance pricing, a shift towards defensive positioning in the sector and the search for dependable yield.
"Although we continue to see Admiral as a force to reckon with in UK motor, we continue to see risk reward in the stock skewed to the downside with Admiral trading at a material premium to UK motor peers," RBC said.
"Despite tailwinds from an strengthening pricing in UK motor insurance, we reduce our estimates for Admiral's UK motor insurance business. This decline primarily relates to commutations which were well below our expectations at the first half results, coming in at 12.8m versus our 43.5m estimate."
RBC said another area of surprise for Admiral in the first half was the decline in the Solvency II ratio, reflecting a drop in yields following the UK EU referendum vote which affected the ratio by 20 percentage points.
"If we mark to market the Solvency II ratio, we now believe it is in the range of 167%, still above the top of the 125-150% target range."
William Hill's shares fell on Thursday as Berenberg reiterated a 'sell' rating on the stock, saying a takeover by 888 Holdings and Rank Group for the company is unlikely to materialise.
The bookmaker on Monday rejected a revised takeover proposal worth more than 3bn from 888 and Rank. William Hill received a proposal from online gambling company 888 and casino operator Rank on 14 August after turning down an approach on 8 August.
"We believe the deal is extremely unlikely to materialise, which leaves the company short of potential suitors (on our numbers, it looks difficult to extract value from William HIll even assuming a very leveraged private equity acquisition)," said Berenberg.
The broker said reasons a merger probably won't happen include a limited cash component, stretched financials, unclear synergies and a three-way deal burdened with execution risks.
Berenberg noted speculation of possible other bidders given William Hill's "unique situation" with a temporary management team and the fixing of its digital division underway.
"We think these are far-fetched, as: 1) other industry players do not have the critical mass to acquire such a big target, and 2) a private equity fund would need to releverage William Hill very substantially (over 7x starting net debt/EBITDA) or offer a price below the current market price to generate a satisfactory IRR (10-15% in five years), according to our calculations."
Berenberg raised its target to 334p from 225p due to higher earnings estimates following the first half results. The broker increased its adjusted earnings per share forecast by around 2% for 2016-2018 to account for a lower tax rate guidance this year and a slightly more optimistic view of the digital re-launch.
Laird was under the cosh on Thursday as Berenberg initiated coverage of the stock at 'sell' with a 230p price target following the company's first-half results.
"After reporting a weak first half, with profit before tax missing estimates by between 30-40%, the market seems to have shrugged off what we saw as a profit warning."
The bank said that in order to meet consensus numbers, Laird must deliver an "exceptional" second half, which it struggles to see happening given headwinds facing the industry and business.
"These issues, compounded by the resignation of CEO David Lockwood yesterday, lead us to initiate with a sell recommendation," it said.
Berenberg pointed out that consensus currently estimates Laird will generate about 80m of pre-tax profit this year, despite the first-half numbers showing pre-tax profit of only 16.4m.
As a result, Laird would have to deliver a weighting of around 80% for the second half, which the bank said it had never done before. | | |
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