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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 fall as traders return from bank holiday London stocks finished lower on Tuesday as investors resumed trading after the bank holiday and looked ahead to the US non-farm payrolls report due at the end of the week.
Joshua Mahony, market analyst at IG, said: "Much like last week, which saw traders spend their time anticipating Friday's speech from Yellen, this week will also see a crescendo of anticipation into the August payrolls figure, which according to Stanley Fischer represents a deal breaker regarding whether the Fed will indeed raise rates in 2016.
"Following relatively robust numbers in the past two months, another 200K-plus figure could provide the spark needed for the committee to act this year, with markets currently pricing in a 61.4% chance. Given the threat associated with the US election in November, the likelihood is that December provides the best chance for action from the Fed."
In her speech at the Jackson Hole symposium last Friday, Fed Chair Janet Yellen noted that the US economy is improving and suggested the case for a move on rates had strengthened in recent months.
On Tuesday's agenda, data from the Bank of England revealed mortgage approvals in July fell to the lowest level since January 2015. Mortgage approvals dropped to 60,912 last month from 64,152 in June, missing analysts' expectations of 62,000.
Net consumer credit rose £1.18bn in July, compared to £1.85bn growth in June and forecasts for a £1.7bn increase.
"Looking ahead, the MPC's easing measures in August have it cheaper for firms to raise funds from bond markets and will help to prevent interest rates on new bank loans from rising," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
"But with huge uncertainty regarding the trade and regulatory environment for businesses post-Brexit unlikely to disappear soon, slightly cheaper borrowing costs will do little to prop up business investment over the coming quarters."
Meanwhile, the European Commission said its economic sentiment indicator for the eurozone fell to 103.5 in August from 104.5 in July, worse than estimates of 104.1.
The UK's economic confidence index rose to 104.0 in August from 102.6 in July, but remained well below the levels seen in the months leading up to the June 23 EU referendum.
Elsewhere, a report showed US house price growth slowed in June. The S&P Core Logic Case-Shiller 20-City Composite index rose 5.1% year-on-year, compared to expectations for an increase of 5.2% and May's revised 5.3% increase.
Separately, a gauge of US consumer confidence rose to the highest level in nearly a year in August. The Conference Board's consumer confidence index edged up to 101.1 in August from 96.7 in July, beating estimates of 97.0.
"On the whole, the US consumer has remained a robust proposition within an international context of weakening demand, and the positive data may put the long-speculated interest rate hike further up Yellen's agenda," said Dennis de Jong, managing director of UFX.com.
"The real test, however, is whether this confidence begins to waver as we enter what will surely be the most contentious US presidential race in living memory."
On the company front, Associated British Foods rallied after RBC Capital Markets upgraded the stock to 'outperform' from 'sector perform' and lifted the price target to 3,400p from 2,800p.
On the downside, Debenhams shares fell after RBC downgraded the retailer to 'sector perform' from 'outperform' with an unchanged target of 65p.
Mining stocks were under the cosh as metal prices dropped with Antofagasta, Rio Tinto and Fresnillo among the biggest fallers.
Oil prices also fell as the dollar strengthened and as hopes faded on a deal at next month's unofficial OPEC meeting. Brent crude dropped 1.5% to $48.50 per barrel and West Texas Intermediate declined 1.2% to $46.41 per barrel at 1550 BST.
BHP Billiton suffered a double blow as it reported that a report it commissioned into the dam disaster at its Samarco joint venture in Brazil last year was due to a poorly designed structure that had allowed water to seep into its infrastructure and left sand inside the dam "loose, uncompacted and saturated".
Shares in Emirates-based NMC Health jumped as the company said it was expanding into Saudi Arabia with the purchase of a 70% stake in a hospital for $45m and and investment in a long-term care facility. |
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| Market Movers
FTSE 100 (UKX) 6,825.49 -0.18%
FTSE 250 (MCX) 17,830.50 -0.56%
techMARK (TASX) 3,467.50 -0.12%
FTSE 100 - Risers
Associated British Foods (ABF) 3,051.00p 3.42%
HSBC Holdings (HSBA) 557.50p 1.94%
Barclays (BARC) 169.15p 1.90%
Ashtead Group (AHT) 1,277.00p 1.75%
Royal Bank of Scotland Group (RBS) 200.10p 1.73%
Standard Chartered (STAN) 633.20p 1.65%
CRH (CRH) 2,582.00p 1.65%
Lloyds Banking Group (LLOY) 58.86p 1.47%
St James's Place (STJ) 975.00p 1.46%
Aviva (AV.) 424.50p 1.39%
FTSE 100 - Fallers
Fresnillo (FRES) 1,690.00p -5.59%
Antofagasta (ANTO) 511.50p -5.54%
Anglo American (AAL) 817.50p -4.78%
Rio Tinto (RIO) 2,350.50p -4.74%
Paddy Power Betfair (PPB) 9,200.00p -4.51%
Glencore (GLEN) 177.05p -4.30%
Randgold Resources Ltd. (RRS) 7,355.00p -4.17%
BHP Billiton (BLT) 1,040.50p -3.66%
Persimmon (PSN) 1,836.00p -2.50%
Berkeley Group Holdings (The) (BKG) 2,597.00p -2.37%
FTSE 250 - Risers
Circassia Pharmaceuticals (CIR) 96.20p 4.57%
Riverstone Energy Limited (RSE) 1,102.00p 2.89%
Wizz Air Holdings (WIZZ) 1,576.00p 2.67%
Big Yellow Group (BYG) 743.50p 2.48%
Ocado Group (OCDO) 306.00p 2.03%
IP Group (IPO) 193.60p 2.00%
Phoenix Group Holdings (DI) (PHNX) 859.00p 1.96%
Micro Focus International (MCRO) 2,033.00p 1.90%
Electra Private Equity (ELTA) 3,855.00p 1.69%
Dairy Crest Group (DCG) 668.00p 1.67%
FTSE 250 - Fallers
Acacia Mining (ACA) 476.00p -10.94%
Centamin (DI) (CEY) 154.40p -8.37%
Hochschild Mining (HOC) 254.80p -8.21%
Allied Minds (ALM) 348.30p -6.57%
Restaurant Group (RTN) 395.80p -6.21%
Kaz Minerals (KAZ) 174.20p -4.81%
Evraz (EVR) 131.90p -4.49%
Debenhams (DEB) 60.05p -4.38%
Vectura Group (VEC) 131.90p -4.07% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Weaker euro proves boon for region´s stocks European stocks pushed higher on Tuesday, with a weaker euro lending a helping hand to exporters as investors continued to mull over Federal Reserve Chair Janet Yellen's speech at Jackson Hole at the end of last week.
The benchmark Stoxx Europe 600 index finished 0.45% higher, Germany's DAX gained 1.07% higher and France's CAC 40 was up 0.75%.
West Texas Intermediate closed with losses of 1.03% at $46.49 and Brent crude down 1.7% to $48.43.
Meanwhile, the euro slipped against the dollar, which gained ground amid rising expectations that the Federal Reserve might hike interest rates as early as September following Chair Janet Yellen's speech at Jackson Hole last Friday. Yellen noted that the US economy is improving and suggested the case for a move on rates had strengthened in recent months.
A weaker euro benefits European exporters, as it makes their goods cheaper for holders of other currencies.
IG's Joshua Mahony said: "Dollar strength has been a common theme since Friday, with the dollar index rising over 1.6% since Friday's low of 94.17."
Markus Huber, a trader at City of London Markets, said "Fed chief Yellen made it very clear during her speech in Jackson Hole last week that the timing of the next rate hike will very much depend on the strength of the economic data in the coming weeks. Consequently should employment figures turn out very strong again this Friday the likelihood of an interest rate increase as early as September will go up markedly."
In corporate news, BHP Billiton dropped after a review conducted by a panel of experts concluded that the Samarco dam disaster at a mine part-owned by the company in Brazil last year was caused by construction and design flaws. The, report commissioned by BHP, said problems at the dam made it more unstable, causing "liquefaction" in the dam wall.
Distribution and outsourcing group Bunzl rallied after it reported a rise in first-half profit as revenue grew and the company lifted its interim dividend. Also on Tuesday, Bunzl announced that it has completed two further acquisitions in Canada and has entered into an agreement to acquire a business in Hungary. |
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| | US Market Report | | US open: Stocks mixed as traders await non-farm payrolls US stocks were mixed on Tuesday as traders looked ahead to the non-farm payrolls report at the end of the week.
At 1503 BST the Dow Jones Industrial Average fell 0.06% to 18,490.56 points, the S&P 500 dipped 0.01% to 2,180.35 points and the Nasdaq rose 0.14% to 5,239.91 points.
Oil prices rose as operators in the US Gulf of Mexico shut production due to a tropical storm, easing worries about global supply glut. West Texas Intermediate crude grew 0.69% to $47.31 per barrel and Brent climbed 0.60% to $49.56 per barrel at 1507 BST.
Joshua Mahony, market analyst at IG, said: "Much like last week, which saw traders spend their time anticipating Friday's speech from Yellen, this week will also see a crescendo of anticipation into the August payrolls figure, which according to Stanley Fischer represents a deal breaker regarding whether the Fed will indeed raise rates in 2016.
"Following relatively robust numbers in the past two months, another 200K-plus figure could provide the spark needed for the committee to act this year, with markets currently pricing in a 61.4% chance. Given the threat associated with the US election in November, the likelihood is that December provides the best chance for action from the Fed."
In her speech at the Jackson Hole symposium last week, Fed Chair Janet Yellen noted that the US economy is improving and suggested the case for a move on rates had strengthened in recent months.
Meanwhile Fed Reserve vice chair Stanley Fischer told Bloomberg that while negative interest rates seem to be working in other countries, the US central bank is not "planning to do anything in that direction".
In economic data, US house price growth slowed in June. The S&P Core Logic Case-Shiller 20-City Composite index rose 5.1% year-on-year, compared to expectations for an increase of 5.2% and May's revised 5.3% increase.
A gauge of US consumer confidence rose to the highest level in nearly a year in August. The Conference Board's consumer confidence index edged up to 101.1 in August from 96.7 in July, beating estimates of 97.0.
"On the whole, the US consumer has remained a robust proposition within an international context of weakening demand, and the positive data may put the long-speculated interest rate hike further up Yellen's agenda," said Dennis de Jong, managing director of UFX.com.
"The real test, however, is whether this confidence begins to waver as we enter what will surely be the most contentious US presidential race in living memory."
On the corporate front, Abercrombie & Fitch shares plunged as reported a second quarter loss that was worse than expected as sales fell for a 14th straight quarter.
Apple was under the cosh after the European Commission ruled that Ireland should recover up to €13bn from the technology giant in back taxes.
Hershey shares tumbled after Mondelez International said late on Monday it has ended its bid to buy the chocolate maker. |
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| | Broker Tips | | Broker tips: Smiths Group, AB Foods, Micro Focus Smiths Group's shares gained on Tuesday as JP Morgan Cazenove reiterated an 'overweight' rating and lifted the price target to 1,585p from 1,300p.
JP Morgan said the technology company's 2016 financial year ended on a "very positive note", with the trading update on 9 August indicating that full year operating profit was well ahead of consensus expectations of £473m, although below the 2015 level of £511m.
"The full-year (July year-end) results on 28 September are to be accompanied by the presentation of the new management team's strategic vision for the group and we expect this, together with good results for 2016, to provide a further stimulus for the shares to continue to outperform the sector," JP Morgan said.
"With 18% upside to our price target and the prospect of the positive news flow continuing, we are reiterating our 'overweight' recommendation."
JP Morgan raised its 2016 revenue and earnings per share forecast by 2% to £2.93bn and 81.7p respectively, given the movement in exchange rates.
The broker said Smiths is trading at a "substantial discount" to the sector in terms of price-earnings ratio and enterprise value/ earnings before interest, tax and amortisation multiples "despite the prospect of delivering an operating profit margin more than 400bps above the average for our universe".
RBC Capital Markets upgraded Associated British Foods, but downgraded Debenhams and Sports Direct as it took a look at the European general retail sector.
"The general retail sector has bounced back from a post-Brexit selloff. However, we still see opportunities to buy stocks likely to see upwards earnings revisions.
"We favour higher quality merchants and online retailers and we are more cautious on companies likely to see like-for-like sales and margin pressure in H2 and 2017."
The bank upped AB Foods to 'outperform' from 'sector perform' and lifted the price target to 3,400p from 2,800p.
It noted the shares are down 12% year-to-date but said its full-year 2017/18 earnings per share forecasts are 6% higher than at the start of the year.
"We think ABF has a healthy double-digit EPS compound annual growth rate with EPS momentum owing to Primark share gains and recent strength in Sugar and euro prices. Our survey work favours Primark which still offers an attractive international rollout story."
On the downside, RBC cut Sports Direct to 'underperform' from 'sector perform' with an unchanged target of 280p.
It said Sports Direct shares have reacted well to the company's plans to buy back up to 5% of shares.
"However, our FY18 earnings before interest, tax, depreciation and amortisation forecast is still well below consensus (14%) given cost and currency pressures and as we think it will be challenging for SPD to raise prices when consumer disposable incomes are being squeezed."
The bank also downgraded Debenhams, to 'sector perform' from 'outperform' with an unchanged target of 65p.
It said Debenhams remains cash generative and according to its survey work, retains a range advantage over other retailers.
"However, it is relatively geared into a weaker outlook for consumer disposable incomes and also faces a more price competitive mid-market clothing sector."
RBC said that while the stock's valuation is undemanding, like-for-like and EPS growth will be challenging given consumer and dollar sourcing headwinds.
Canaccord Genuity has cut Micro Focus International's rating to 'hold' from 'buy' but lifted its target to 2,000p from 1,700p.
"We are updating our price target and forecasts to reflect the better-than-expected recent full year results and the impact of dollar strength," Canaccord said.
"We are also moving our recommendation from 'buy' to 'hold' as we expect the shares to pause for breath following a strong run. Our price target moves from 1700p to 2000p to reflect the beneficial impact of a stronger dollar and c10% upgrade to our earnings forecasts."
On 14 July the software product group reported a 59.1% increase in underlying adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to $532.5m on a 54.9% jump in revenues to $1.24bn on a constant currency basis. Micro Focus said the results beat its expectations, driven by a strong performance of its product portfolio under its data and cloud storage business SUSE where revenues grew 18.2%.
Canaccord has raised its EBITDA estimate for fiscal year 2017 to $639m from an earlier forecast of $556.1m following the results. The broker's net debt estimate of $1.3bn represents just over two times this EBITDA forecast. | | |
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