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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: Blue-chip miners, banks push FTSE higher as house builders fly London indices closed up thanks to heady gains among house builders after Persimmon posted robust first-half results, with miners, financials and supermarkets also on the up.
While house builders dominated the top end of the blue-chip leaders' ladder, it was "miners and banks that are doing the real heavy lifting," said IG senior market analyst Chris Beauchamp.
At about 16:57 BST, FTSE 100 was up 0.59% and FTSE 250 was up 0.62%.
Home-builder Persimmon's first-half pre-tax profit rose, but it was the company's outlook and accompanying data that pleased investors. Shares in Barratt Developments and Berkeley Group rose on the read-over.
Miners followed in numbers as the price of gold eased, while silver rose and copper slipped. Anglo American, BHP Billiton, Glencore and Rio Tinto were all firmly ahead.
Grocery titan Tesco rallied after Kantar Worldpanel said sales in the 12 weeks to 14 August fell 0.4%, the slowest rate of decline in six months. Sainsbury and Morrisons chased.
Within the wider financial sector, banks Barclays and Lloyds were gaining, while among insurers it was Standard Life and Aviva piloting the pack north.
Commercial property, leisure, high-street retail and utilities also put in strong showings.
Against this backdrop, the Euro zone's composite purchasing managers' index unexpectedly nudged up to a seven-month high in August. It printed at 53.3, from 53.2 in July.
The bloc's flash services PMI beat expectations, while that for manufacturing missed forecasts.
"The August flash PMI indicates that the eurozone remains on a steady growth path in the third quarter," said Chris Williamson, chief business economist at IHS Markit.
There were "no signs of the recovery being derailed by 'Brexit' uncertainty," he added.
Dennis de Jong, managing director of UFX.com, commented the European Central Bank (ECB) would have been pleased to see the strong PMI data from Germany and France, as well as the positive signals from the EU's manufacturing and services industries.
"ECB president Mario Draghi won't be overly concerned about the poor consumer confidence results released (separately) today as the downbeat sentiment has been part and parcel of the economic picture for some time now," de Jong said in a note.
European Commission's flash reading on consumer sentiment fell to -8.5 in August, from from -7.9 previously. Economists had been expecting a reading of -7.7.
Remaining with economic data, this time across the Atlantic, Markit's flash US manufacturing PMI fell more than expected to 52.1 in August, from a nine-month high of 52.9 in July.
"The August drop in the (US) PMI is a disappointment but less worrying when looked at in the context of July's better-than-expected reading," Williamson said.
"Taking the July and August readings together suggests that manufacturing is enjoying its best growth so far this year in the third quarter, and should help drive stronger gross domestic product growth."
In other US economic news, new home sales shot up a greater-than-expected 12.4% to 654,000 in July, Department of Commerce said. House prices were up, too.
The week's main event remained US Federal Reserve's annual conference at Jackson Hole on Friday. Analysts were looking for Fed chair Janet Yellen to shed light on the timing of the next US interest-rate hike, following hawkish remarks from policymakers last week.
"Investors are still not buying a 2016 rate hike, even following Stanley Fischer's comments over the weekend regarding the economy," said Craig Erlam, senior market analyst at Oanda.
"Markets (are) now marginally pricing in February (for a hike) - so the probability that Yellen says something that goes against what's priced in seems quite high," he said.
Meanwhile, oil prices continued to decline on doubts that the Organization of the Petroleum Exporting Countries (OPEC) would reach a deal to cut production at a meeting in September.
Reports said that Iraq - OPEC's second-biggest producer - was set to ramp up its exports. Separately, a Reuters report citing OPEC and oil industry sources said Iran was sending positive signals that it may support joint action to prop up the oil market.
Late this afternoon, West Texas Intermediate was down 3.03% to $47.05 a barrel, while Brent was up 1.4% to $49.85 a barrel.
Royal Dutch Shell's shares were down, having been under pressure most of the day. BP's shares rose. Neither had moved convincingly.
Among corporate stocks, JRP Group surged after saying trading to end-July continued in line with expectations. It continued to be well-capitalised, with its solvency capital II capital ratio standing at roughly 130% as of 30 June. Its merger also continued to progress well.
Kier Group was rising after being awarded three major UK construction frameworks totalling more than £5bn.
Paddy Power Betfair was on the back foot after Investec reiterated a 'Sell' rating and a set a target of 9,170p, saying this now indicated a potential 6.38% drop from the betting company's current price of 9,795p. |
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| Market Movers
FTSE 100 (UKX) 6,868.51 0.59%
FTSE 250 (MCX) 17,982.50 0.62%
techMARK (TASX) 3,510.30 -0.00%
FTSE 100 - Risers
Anglo American (AAL) 877.90p 5.14%
Barratt Developments (BDEV) 486.20p 4.90%
Persimmon (PSN) 1,878.00p 4.68%
BHP Billiton (BLT) 1,078.50p 4.40%
Tesco (TSCO) 166.45p 4.36%
Royal Bank of Scotland Group (RBS) 196.10p 4.20%
Taylor Wimpey (TW.) 165.20p 4.10%
Berkeley Group Holdings (The) (BKG) 2,649.00p 3.88%
Lloyds Banking Group (LLOY) 57.59p 3.69%
Glencore (GLEN) 189.80p 2.96%
FTSE 100 - Fallers
Mediclinic International (MDC) 1,070.00p -1.47%
Shire Plc (SHP) 5,040.00p -1.08%
British American Tobacco (BATS) 4,850.50p -0.79%
United Utilities Group (UU.) 982.00p -0.66%
AstraZeneca (AZN) 5,062.00p -0.57%
National Grid (NG.) 1,076.00p -0.46%
CRH (CRH) 2,497.00p -0.44%
London Stock Exchange Group (LSE) 2,877.00p -0.35%
Smith & Nephew (SN.) 1,246.00p -0.32%
Royal Dutch Shell 'A' (RDSA) 1,896.00p -0.26%
FTSE 250 - Risers
JRP Group (JRP) 103.10p 16.83%
McCarthy & Stone (MCS) 191.50p 6.39%
Bellway (BWY) 2,358.00p 6.07%
Aldermore Group (ALD) 140.00p 5.98%
Thomas Cook Group (TCG) 69.75p 5.28%
Kier Group (KIE) 1,249.00p 5.05%
OneSavings Bank (OSB) 237.40p 5.04%
Countrywide (CWD) 257.40p 4.76%
Grafton Group Units (GFTU) 568.00p 4.70%
Crest Nicholson Holdings (CRST) 473.60p 3.91%
FTSE 250 - Fallers
Diploma (DPLM) 837.00p -2.39%
Vectura Group (VEC) 140.60p -2.36%
Card Factory (CARD) 275.30p -2.13%
Synthomer (SYNT) 370.10p -1.99%
RIT Capital Partners (RCP) 1,750.00p -1.74%
Rank Group (RNK) 217.80p -1.67%
Dignity (DTY) 2,693.00p -1.64%
Evraz (EVR) 141.30p -1.60%
Moneysupermarket.com Group (MONY) 301.70p -1.18%
Dairy Crest Group (DCG) 651.50p -1.14% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Shares recoup previous day's losses European stocks rose on Tuesday, bouncing back from the previous session's losses despite weak oil prices, as investors continued to eye this week's speech by Federal Reserve Chair Janet Yellen at Jackson Hole.
The benchmark Stoxx Europe 600 index rose 0.93% or 3.17 points to close at 343.60 and Germany's DAX was up 0.94%, while France's CAC 40 was 0.72% firmer.
Oil prices reversed course to head higher approximately one hour before the closing bell, amid reports that Tehran was warming to the idea of an oil output freeze by the world's major producers.
West Texas Intermediate traded higher by 0.7% to $47.74 per barrel and Brent crude was up 0.91% to $49.60.
Goldman Sachs stuck to its forecasts that oil would remain at $45-$50 a barrel through next summer. "We reiterate our view that the oil price and fundamental recovery remains fragile," the bank said.
Investors were also looking ahead to Yellen's speech on Friday for further clues on the timing of an interest rate hike.
On the corporate front, housebuilder Persimmon rallied after reporting a better-than-expected jump in first half pre-tax profit of 29% to £352.3m.
UniCredit was also in the black following a report that the chief executive of Polish insurer PZU was heading to Milan for talks to buy Bank Pekao from the Italian bank.
BHP Billiton got a boost as Jefferies lifted its recommendation on the stock to 'buy' from 'hold'.
In macroeconomic news, Markit's flash eurozone composite purchasing managers' index unexpectedly nudged up in August to a seven-month high.
The composite PMI printed at 53.3 compared to 53.2 the month before, beating expectations for it to edge down to 53.1.
The services PMI rose to 53.1 from 52.9 in July, which was a three-month high and ahead of expectations for a reading of 52.8.
Meanwhile, the manufacturing PMI slipped to 51.8 from 52.0, missing forecasts for it to be unchanged and reaching a three-month low.
Stephen Brown, European economist at Capital Economics, said: "August's slight rise in the euro-zone composite PMI suggests that, despite shrugging off the UK's Brexit vote, economic conditions remain fairly subdued." |
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| | US Market Report | | US open: Stocks edge higher; Best Buy surges on Q2 results US stocks rose on Tuesday despite continued weakness in oil markets, as investors cheered earnings from Best Buy and Toll Brothers, as well as a strong reading on new home sales.
At 1510 BST, the Dow Jones Industrial Average was up 0.4%, the S&P 500 was 0.5% firmer and the Nasdaq was up 0.5%.
At the same time, oil prices remained under pressure as hopes of a production freeze faded and amid reports that Iraq - OPEC's second-biggest producer - was set to ramp up its exports. West Texas Intermediate was down 3% at $47.05 per barrel and Brent crude was 1.2% lower at $48.57.
Goldman Sachs stuck to its forecasts that oil would remain at $45-$50 a barrel through next summer. "We reiterate our view that the oil price and fundamental recovery remains fragile," the bank said.
Goldman said that while oil prices have rebounded sharply since the beginning of this month, the upward move was driven by better oil fundamentals but rather by headlines around a potential output freeze and a weaker dollar.
Some well-received corporate news helped to underpin the tone, with Best Buy sharply higher after the consumer electronics retailer's second-quarter results beat expectations.
Housebuilder Toll Brothers rallied after posting a 58% rise in third-quarter profit.
Wells Fargo nudged up despite news that the Consumer Financial Protection Bureau has fined the bank $3.6m for illegal student loan servicing.
On the downside, restaurant chain Zoe's Kitchen tumbled after it said late on Monday that it was cutting its guidance for the fiscal year.
Sophiris Bio shares tanked after the biopharmaceutical firm priced a public offering of 6.5m shares at $4.00 per share - a 31% discount to Monday's closing price.
On the macroeconomic front, investors digested weaker than expected data on US manufacturing sector activity, but encouraging new home sales.
Markit's flash US manufacturing purchasing managers' index fell to 52.1 in August from a nine-month high of 52.9 in July.
Economists had been expecting a less steep decline to 52.7. A reading above 50 indicates expansion.
Although the PMI has now pointed to improving business conditions in each month since October 2009, August's reading pointed to a moderate rate of improvement that was weaker than the post-crisis average.
New home sales figures were much more upbeat, rising 12.4% to an annualised pace of 654,000 units in July, versus economists' expectations for a 2% drop.
Meanwhile, investors continued to look ahead to Federal Reserve Chair Janet Yellen's speech at Jackson Hole on Friday in the hope she will provide further clues on the timing of an interest rate hike. |
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| | Broker Tips | | Broker tips: BHP Billiton, Petra Diamonds, Tullet Prebon Jefferies upped its recommendation on BHP Billiton to 'buy' from 'hold' as it took a look at the metals and mining sector.
The bank said it had been cautious on miners due to weak demand, ongoing supply growth, stretched balance sheets, and a lack of free cash flow for most mining companies.
However, it said on Tuesday that demand has stabilised, supply is declining in most cases, balance sheets have strengthened due to FCF and asset sales, and valuations are inexpensive.
"Fundamentals have clearly improved," Jefferies said.
The bank upgraded BHP on valuation, commodity exposure and better-than-expected free cash flow growth potential.
"Higher than expected prices for high grade (62% Fe content) iron ore fines, an improving outlook for high grade lump ore, an increase to our coking coal price forecasts, and our expectation for a recovery in the oil price have driven the upgrade," Jefferies said, adding that BHP and buy-rated Rio Tinto are its top picks.
"BHP is a low cost producer with low operational risk, low geopolitical risk, good long-term growth potential and relatively high free cash flow through the cycle. We would buy BHP Billiton shares at the current level."
Petra Diamonds shares edged higher on Tuesday as Canaccord Genuity reiterated a 'buy' rating and raised its target to 165p from 150p.
Canaccord said Petra's full year trading update on 25 July was ahead of its forecasts with a total diamond production of 3.7m carats (mct), compared to the broker's expectations of 3.6mct. Petra reported annual sales of 3.45mct, beating Canaccord's forecast of 3.43mct.
Average diamond prices dropped 6% against estimates for a 10% decline.
However, Canaccord said net debt of $387.4m at the end of 30 June, compared to $172.1m the same period a year ago, was higher than it expected.
"While the better-than-forecast trading update for fiscal year 2016 has resulted in a modest increase in our earnings before interest, tax, depreciation and amortisation (EBITDA) forecast, from $157M to $162M, we have increased our net finance costs (given that year-end net debt was higher than we had forecast), and have also changed our tax and minorities assumptions," the broker said.
"As a result, for 2016 our net profit estimate falls from $50M to $37M, and our earnings per share (EPS) estimate drops from 9.2 cents to 6.8 cents."
Looking ahead, Petra said it expects diamond production in fiscal year 2017 of 4.6-4.8mct, marking a 25-30% on the 2016 production.
As a result, Canaccord has upgraded its forecast from 4.25Mct to 4.73Mct for the year. The broker also raised its 2017 EBITDA estimate from $240M to $291M, net profit from $75M to $80M, and EPS from 13.9 cents to 14.8 cents.
"With a healthy increase in diamond production, and capital expenditure set to fall significantly, Petra Diamonds is well positioned to capture the benefit of improving production quality (as it mines more run-of-mine ore) and an anticipated gradual recovery in diamond prices."
HSBC Global Research has maintained its 'buy' rating on Tullett Prebon and hiked it price target on the stock to 440p, from 400, citing good momentum and dividend yield.
HSBC also raised its earnings per share estimate for FY 2016 to 20.08p, from 19.48p, and for FY 2017 to 37.1p, from 34.46p.
"Furthermore, the (Tullett) shares offer a good yield of 4.7%."
HSBC saw the next potential catalyst for Tullett as the closing of the pending IGBB (ICAP's global broking business) deal in the fourth quarter of 2016, which could be announced in September or October 2016.
"While we have optimistic forecasts, we believe the shares are undervalued as consensus seems to ignore merger benefits, and we rate the stock 'Buy' due to convincing upside of 22%," it said.
It linked its hike in target to an equity-value model based on 2018 estimates for the merged entity, forecasting a 13.4% return on equity.
Against this backcloth, the brokerage cut its growth-rate assumptions for interest rate derivatives from -4% to -6%.
"We believe that this is more than offset by better growth outlook for revenues from Energy & Commodities as well as Equities and Information Sales," HSBC said.
It forecast 3% underlying revenue growth in 2017 and 4% in 2018, along with declining costs.
"First of all, the broker compensation can be reduced by several measures and we decided to reduce our estimate for broker compensation by 0.5% for all years. | | |
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