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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: Miners pull equities lower as commodity prices fall UK equities finished on the back foot on Wednesday as mining shares slumped on weak sentiment and falling commodity prices.
"Commodity prices suffered at the hands of a resurgent dollar today, with Fresnillo and Randgold Resources feeling the effects of a circa 1% drop in gold prices, while a similar fate for copper prices sent Anglo American and Antofagasta southward," said IG market analyst Joshua Mahony.
Glencore's shares were under pressure even as it narrowed its adjusted first half net loss to $369m from $676m the previous year but disappointed analysts on news of a $395m charge on a coal hedging operation.
Analysts were also dissatisfied that the company hadn't raised its target for full year earnings of $2.4-$2.7bn for its commodity trading business.
News that Glencore will delay resuming production at its Katanga Mining unit to early 2018 due to stubbornly low copper prices was another drag on the group's shares.
Shares in Old Mutual, which is listed on the Johannesburg Stock Exchange, also declined as the South African rand tumbled amid speculation the country's finance minister could be arrested imminently.
Hikma Pharmaceuticals was under the cosh after the drug maker reported a fall in first half operating profit due to a lower contribution from specific market opportunities for the generics business compared with the first half of 2015.
On the upside, advertising giant WPP gained after it reported better-than-expected headline pre-tax profit and organic sales growth for the first half.
Lloyds was higher as it emerged that boss Antonio Horta Osorio has sent a memo to his staff to apologise for 'adverse publicity' following reports of an affair.
Housebuilders were on the front foot again, with sentiment towards the sector still boosted by Persimmon's results on Tuesday.
Economic data
London mortgage borrowing fell 23% quarter-on-quarter over the three months to June and by 3% year-on-year to £5.5bn, according to the Council of Mortgage Lenders, as a rise in first-time buying was not enough to offset a big decline from those moving house.
Numbers of mortgages fell 17% to 17,500 quarter-on-quarter and 8% compared to the second quarter of 2015.
Elsewhere, Germany's gross domestic product rose at a quarterly rate of 0.4%, according to the Federal Statistical Office, Destatis, in line with the flash estimate but down on the first quarter's 0.7% growth.
German exports increased 1.2%, but imports dropped 0.1%, signalling slack domestic investment. Economists had expected a 0.7% increase in exports and a 0.3% fall in imports.
In the US, the National Association of Realtors said sales of existing US homes fell more than expected in July. Sales were down 3.2% to a seasonally-adjusted annual rate of 5.39m, missing expectations for a much smaller drop of 0.4%.
Compared to a year ago, sales were down 1.6%. The median price for an existing home was up 5.3% from July last year to $244,100.
Separately, the US Federal Housing Finance Agency's house price index rose 0.2% in June after a 0.2% gain in May, which was slightly weaker than the 0.3% expected.
Oil prices fall on inventories report
Oil prices tanked after official data showed an unexpected increase in US weekly crude inventories. The Energy Information Administration said crude inventories rose 2.5m barrels to 523.6m barrels in the week to 19 August. It compared to expectations for a 500,000 drop in barrels.
Brent crude plunged 1.6% to $49.14 per barrel and West Texas Intermediate slumped 2.5% to $46.91 per barrel at 1600 BST, following the release of the data.
Oil prices were already falling prior to the EIA data after a report from the American Petroleum Institute showed crude stockpiles rose by 4.46m barrels last week against an expected drawdown of 850,000.
Looking ahead, the market is highly anticipating the Federal Reserve's annual conference in Jackson Hole on Friday with chair Janet Yellen's speech to be closely eyed for any remarks on interest rates. |
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| Market Movers
FTSE 100 (UKX) 6,835.78 -0.48%
FTSE 250 (MCX) 18,014.65 0.18%
techMARK (TASX) 3,500.43 -0.28%
FTSE 100 - Risers
Travis Perkins (TPK) 1,695.00p 4.05%
Barratt Developments (BDEV) 500.50p 2.94%
Lloyds Banking Group (LLOY) 59.27p 2.92%
Berkeley Group Holdings (The) (BKG) 2,717.00p 2.57%
ITV (ITV) 201.40p 2.49%
Persimmon (PSN) 1,911.00p 2.19%
International Consolidated Airlines Group SA (CDI) (IAG) 401.70p 2.14%
Taylor Wimpey (TW.) 168.60p 2.12%
WPP (WPP) 1,781.00p 1.95%
Kingfisher (KGF) 372.90p 1.91%
FTSE 100 - Fallers
Randgold Resources Ltd. (RRS) 7,615.00p -5.05%
Fresnillo (FRES) 1,762.00p -4.03%
Old Mutual (OML) 196.40p -3.96%
Mediclinic International (MDC) 1,026.00p -3.93%
Antofagasta (ANTO) 532.00p -3.88%
Anglo American (AAL) 846.80p -3.34%
Hikma Pharmaceuticals (HIK) 2,230.00p -3.17%
Glencore (GLEN) 184.00p -3.06%
Rio Tinto (RIO) 2,386.00p -2.61%
BHP Billiton (BLT) 1,052.00p -2.46%
FTSE 250 - Risers
OneSavings Bank (OSB) 274.10p 15.51%
Marshalls (MSLH) 314.90p 9.76%
Shawbrook Group (SHAW) 204.10p 7.70%
Countrywide (CWD) 271.40p 5.44%
Brown (N.) Group (BWNG) 211.90p 5.32%
Grafton Group Units (GFTU) 598.00p 5.28%
Aldermore Group (ALD) 147.00p 4.78%
McCarthy & Stone (MCS) 200.00p 4.66%
Card Factory (CARD) 288.10p 4.65%
Virgin Money Holdings (UK) (VM.) 306.10p 3.76%
FTSE 250 - Fallers
Acacia Mining (ACA) 542.50p -5.41%
Investec (INVP) 465.90p -5.38%
Hochschild Mining (HOC) 283.80p -4.22%
Centamin (DI) (CEY) 162.20p -4.14%
Kaz Minerals (KAZ) 185.00p -3.14%
Amec Foster Wheeler (AMFW) 540.50p -2.52%
Just Eat (JE.) 569.00p -2.49%
JPMorgan Emerging Markets Inv Trust (JMG) 695.50p -1.77%
Polymetal International (POLY) 1,139.00p -1.56% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks climb slippery slope European stocks edged higher on Wednesday, but gains were limited amid weakness in the basic resources sector and lower oil prices.
The benchmark Stoxx Europe 600 index was up 0.4%, France's CAC 40 was 0.32% higher and Germany's DAX was 0.28% firmer.
Oil prices were under pressure again on Wednesday after data from the US Energy Information Administration revealed a stockbuild of 2.5m barrels last week.
West Texas Intermediate was down 3.1% to $46.67 a barrel while Brent crude was 1.9% weaker at $49.00.
On the corporate front, Glencore shares slipped after it reported a 66% drop in first-half statutory profits. The commodity trader's results weighed on the broader mining sector, with the Stoxx 600 sub-index for basic resources - which was also hit by falling copper prices - down by 1.53%.
Advertising giant WPP was on the front foot after it reported a 12% increase in first-half revenue and lifted its full-year revenue forecast.
In macroeconomic news, data from Destatis confirmed that Germany's economy slowed in the second quarter.
Gross domestic product grew at a quarterly rate of 0.4% and an annualised rate of 1.7%, down from 0.7% quarterly growth in the first quarter.
Meanwhile, investors continued to look to Federal Reserve Chair Janet Yellen's speech at Jackson Hole on Friday for clues on the timing of an interest rate hike.
FXTM research analyst Lukman Otunuga said: "Uncertainty has enveloped the global markets this week with investor jitters intensifying as the lack of direction continues to send ominous warnings ahead of Friday's Jackson Hole gathering.
"Investors should keep diligent this week as the increasing focus on Yellen's speech may present a threat of creating explosive levels of volatility if market participants are left empty-handed on US rate hike timings."
There are no further eurozone data releases of note due but in the US, existing home sales are at 1500 BST.
Societe Generale said it expects sales essentially flattened out at 5.55m units on an annualised basis in July. |
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| | US Market Report | | US open: Stocks slide on oil prices, housing data US stocks dropped on Wednesday as oil prices fell and data on the housing market missed forecasts.
The Dow Jones Industrial Average fell 0.10% to 18,528.22 points, the S&P 500 dropped 0.11% to 2,184.49 while the Nasdaq dipped 0.02% to 5,259.25 points at 1507 BST.
Oil prices were also under the cosh after official data from the Energy Information Administration showed US weekly crude increased by 2.5m barrels last week to 523.6m barrels. It followed a report from the American Petroleum Institute, which showed an increase of 4.5m barrels in US crude stockpiles last week.
West Texas Intermediate crude declined 1.3% to $47.47 per barrel and Brent fell 0.66% to $49.63 per barrel at 1538 BST.
On the economic data front, the US Federal Housing Finance Agency's house price index rose 0.2% in June after a 0.2% gain in May, which was slightly weaker than the 0.3% expected.
Separately, the National Association of Realtors said sales of existing US homes fell more than expected in July. Sales were down 3.2% to a seasonally-adjusted annual rate of 5.39m, missing expectations for a much smaller drop of 0.4%.
Compared to a year ago, sales were down 1.6%.
Meanwhile, the median price for an existing home was up 5.3% from July last year to $244,100.
Looking ahead, the market is highly anticipating the Federal Reserve's annual conference in Jackson Hole on Friday with chair Janet Yellen's speech to be closely eyed for any remarks on interest rates.
"While the message coming from Fed officials has been quite mixed and left the markets with little idea of what the Fed is planning -it initially intended to raise rates four times this year and so far it hasn't done so once - the message from Stanley Fischer and William Dudley, both permanent voters on the FOMC, last week were quite hawkish," said Craig Erlam, senior market analyst at Oanda.
"Should Yellen deliver an equally hawkish warning on Friday then I expect markets to respond accordingly, with December likely becoming the most likely meeting but September being more priced in that it currently is."
In corporate news, Pfizer shares edged higher after agreeing to buy AstraZeneca's antibiotics division.
La-Z-Boy slumped after its first-quarter earnings and sales late on Tuesday missed analysts' expectations.
Intuit Inc. shares dropped after the software company's revenue forecast left investors disappointed late on Tuesday, despite better-than-expected fourth-quarter results. |
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| | Broker Tips | | Broker tips: Hikma, Drax, TT Electronics Hikma Pharmaceuticals' shares have been maintain as 'hold' by Numis, with a target of 2660p, following the company's surprise profit warning earlier in August and its interim numbers out on Wednesday.
In the six months to end-June, Hikma's core revenue rose to $882m, from $709m, but operating profit slipped to $176m, from $204m. Interim dividend was 11c a share, in line.
The drug maker continued to expect revenue in 2016 to be $2bn-$2.1bn in constant currency.
"With revenue expectations for the year unchanged the announcement details several areas where Hikma has made strategic investments for the long term that have repressed near term margins," said Numis in a research note.
"A significant increase in expensed R&D on the differentiated generic pipeline and increased costs of the US Branded sales force has increased underlying costs in the generics business."
"With product approvals in generics delayed (1 product launched, 9 approved), Hikma took on lower margin contract manufacturing that further impacted generic margins."
Numis added that with much work to do in genetics in the second half and into 2017, and recommended Hikma as a 'Hold' with the shares trading on 27-times in full-year 2016.
The brokerage's forecasts for Hikma's ful-year core EBITA and core EPS were unchanged at $382m and 111c respectively, these being in keeping with consensus.
"This clearly leaves much to do in H2 with ongoing glycopyrolate sales potentially driving an upgrade to guidance that is already anticipated in our forecasts. The outlook for FY17 is less clear."
In a first-half trading update on 4 August, the drug maker said it expected full year core operating profit of its generics arm to be between $30m and $40m, compared to $46m in 2015.
Citigroup upgraded Drax to 'neutral' from 'sell' as an 8% drop in the share price since the beginning of the month has left the shares trading near the bank's unchanged 305p price target.
Citi noted that despite the recent rally in oil and gas prices, Drax shares have underperformed and it is now more fairly valued.
"We believe the current valuation now fairly reflects the risk/reward profile of the shares and therefore we upgrade," it said.
Citi said its downgrade of the stock had been a call on inconsistency between commodity prices and Drax valuation, which in its view have played out.
"News flow relating to the European Commission approval of Drax's third unit biomass conversion into contract-for-difference could still surprise on the downside. However, given Drax's recent share price movement despite higher oil and gas prices, we now believe more risk is being priced in for a lower CfD."
The bank said the maximum level the EC has indicated it will allow Drax to earn on the CfD is £100 per megawatt-hour, and it assumes £99/MWh within its forecast and valuation.
On the upside, Citi noted the UK government is currently reviewing the case for new nuclear in the UK.
"If a decision to scrap plans for new nuclear were to come, we believe the UK government could also announce plans to introduce additional incentives to build new combined cycle gas turbines or they could postpone the closure of coal to beyond 2025. Such move could support gas prices (therefore UK power prices), which could benefit Drax's earnings and valuation in the longer term."
TT Electronics shares gained on Wednesday as Canaccord Genuity raised its rating on the stock to 'buy' from 'hold' and lifted its target to 180p from 165p.
Canaccord said TT Electronics' first half results on 11 August showed strong progress across the group and "we have become increasingly confident in the company's ability to deliver its target of sustainable, profitable growth in the medium term".
"This is a very different and, in our view, much improved business to three years ago; however, current valuations (FY2 PE 12.2x vs. 3yr avg. 12.6x) do not appear to reflect this."
The British maker of automative parts reported a 25% increase in first half pre-tax profit to £11.4m on a 5% rise in revenue to £277m, driven by its Transportation Sensing and Control division returning to profitability. Underlying operating profit increased by 32%to £13.7m. The acquisition of electronics manufacturer Aero Stanrew in December 2015 and ongoing improvements in cost efficiency also supported the figures.
"With demand for electrification, automation, and connectivity increasing, the structural drivers are attractive, and we believe TT is becoming progressively well aligned to capture these trends," said Canaccord.
"A key component of this is the continued investment in research and development, which the company has grown +20% over the last two years to c.6% sales (ex. IMS)." | | |
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