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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 lower as oil prices slide, UK inflation data disappoints London stocks closed in the red on Tuesday after disappointing UK inflation data and a slump in oil prices.
UK inflation rose 0.6% in the year to August, unchanged from July's growth and below estimates for a 0.7% increase, the Office for National Statistics revealed. An increase in food prices and air fares was offset by cheaper prices for hotel rooms.
"August's inflation figure undershot the MPC's 0.8% forecast in last month's Inflation Report, so today's inflation release increases the likelihood that the Committee follows through on its guidance and cuts interest rates once more this year," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
"Above-target inflation in 2017, however, likely will ensure that the MPC holds back from additional government bond purchases next year once the current £60bn tranche has been completed." The Bank of England meets on Thursday to decide on policy but is expected to keep interest rates and the asset purchase programme unchanged.
The pound fell 1.21% against the dollar to $1.3176 at 1614 BST.
At the same time, oil prices retreated after the International Energy Agency said the crude market will be oversupplied at least through the six months of 2017. The IEA also cut its global oil demand forecasts for 2016 and 2017.
Brent crude dropped 2.3% to $47.19 per barrel and West Texas Intermediate fell 2.9% to $44.95 per barrel.
"Even if OPEC and Russia manage to reach a supply freeze deal, output would still be maintained at near record highs while demand falters," said Joshua Mahony, market analyst at IG.
"There is little surprise that we are seeing the bears come back into play to take advantage of the misguided ramp up in price recently."
Meanwhile, traders continued to mull over Federal Reserve governor Lael Brainard's speech on Monday, which was seen to suggest the central bank will refrain from hiking interest rates at the 20-21 September policy meeting. Brainard said she wanted to see a stronger trend in US consumer spending and evidence of rising inflation before the Fed raises rates.
Her comments came in contrast to more hawkish remarks from Fed policymakers last week, including Eric Rosengren and Robert Kaplan.
"The Federal Reserve blackout period is now upon us, giving traders a week to speculate on the impact of what has been said and the few pieces of data we get between now and the decision next Wednesday," said Craig Erlam, senior market analyst at Oanda.
"While a hawkish consensus does appear to be building among the committee, the absence of some key policymakers from this makes a hike at the meeting next week very unlikely."
In China, data showed the nation's fixed-asset investment was unchanged at 8.1% in the January to August period, better than the 7.9% expected.
Chinese industrial production grew 6.3% year-on-year in August, beating estimates for a 6.2% rise and following a 6% gain the previous month, the National Bureau of Statistics revealed.
Retail sales in the nation jumped an annualised 10.6% in August after a 10.2% increase in July. Analysts had forecast no change in growth.
In Germany, inflation remained unchanged in August at a 0.4% year-on-year rise, Destatis said, as expected by analysts.
German economic sentiment held steady in September, according to the latest survey from the ZEW Center for European Economic Research in Mannheim.
The index of investor and analyst expectations came in at 0.5, in line with the previous month but falling short of analysts' expectations for an improvement to 2.5.
On the company front, Associated British Foods shares fell as Numis downgraded its rating on the stock to 'hold' from 'add' and cut its target to 2,942p from 3,016p following a trading update from the Primark owner.
JD Sports rallied after the sports, fashion and outdoor brand retailer posted its interim results for the 26 weeks to 30 July, with revenue up 20% to £970.57m compared to the first half of last year.
Ocado slumped as it claimed its best quarterly volume growth in four years, although a slight acceleration in group revenue growth in the third quarter thanks to the Morrisons deal was overshadowed by comments about the tough margin environment.
Internet and telephone based insurer Esure gained on plans to demerge financial services comparison website Gocompare.com from the company.
CYBG, the holding company of the Clydesdale and Yorkshire Bank, as it announced it is shutting 50 branches as it ramps up cost-cutting efforts. |
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| Market Movers
FTSE 100 (UKX) 6,666.45 -0.51%
FTSE 250 (MCX) 17,662.32 -0.38%
techMARK (TASX) 3,444.19 0.04%
FTSE 100 - Risers
Carnival (CCL) 3,453.00p 2.40%
London Stock Exchange Group (LSE) 2,697.00p 1.28%
Worldpay Group (WI) (WPG) 291.70p 1.25%
Shire Plc (SHP) 4,806.00p 1.18%
Imperial Brands (IMB) 3,952.00p 1.14%
Burberry Group (BRBY) 1,276.00p 1.11%
Coca-Cola HBC AG (CDI) (CCH) 1,647.00p 1.10%
InterContinental Hotels Group (IHG) 3,173.00p 0.89%
SABMiller (SAB) 4,426.00p 0.82%
CRH (CRH) 2,471.00p 0.77%
FTSE 100 - Fallers
Anglo American (AAL) 783.80p -4.36%
Associated British Foods (ABF) 2,740.00p -2.66%
Provident Financial (PFG) 2,897.00p -2.65%
British Land Company (BLND) 629.00p -2.63%
Prudential (PRU) 1,333.50p -2.52%
Land Securities Group (LAND) 1,014.00p -2.41%
BHP Billiton (BLT) 968.10p -2.31%
Standard Life (SL.) 334.70p -2.16%
Glencore (GLEN) 177.05p -2.10%
Intu Properties (INTU) 289.20p -2.10%
FTSE 250 - Risers
JD Sports Fashion (JD.) 1,400.00p 5.03%
Electra Private Equity (ELTA) 4,120.00p 3.44%
Assura (AGR) 59.45p 3.30%
PayPoint (PAY) 1,040.00p 3.28%
Allied Minds (ALM) 329.30p 2.84%
Daejan Holdings (DJAN) 5,700.00p 2.70%
Synthomer (SYNT) 354.80p 2.54%
Lancashire Holdings Limited (LRE) 666.00p 2.46%
Fidessa Group (FDSA) 2,497.00p 2.25%
UK Commercial Property Trust (UKCM) 81.80p 2.25%
FTSE 250 - Fallers
Ocado Group (OCDO) 278.00p -13.66%
Circassia Pharmaceuticals (CIR) 90.10p -5.46%
CYBG (CYBG) 259.00p -4.74%
Pendragon (PDG) 31.55p -4.51%
Workspace Group (WKP) 683.00p -4.41%
Tullow Oil (TLW) 217.50p -4.14%
Amec Foster Wheeler (AMFW) 531.50p -3.97%
Petrofac Ltd. (PFC) 808.00p -3.81%
Polymetal International (POLY) 974.50p -3.80%
Cairn Energy (CNE) 179.50p -3.70% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks drop despite dovish Fedspeak European stocks tracked losses on Wall Street, despite dovish comments from a key Fed official overnight, although weakness in energy futures were a clear drag.
The benchmark Stoxx Europe 600 index fell 1.03% or 3.51 points to 338.72, France's CAC 40 surrendered 1.19% and Germany's DAX skidded 0.43% lower.
Stocks in the US ended higher on Monday on the back of a dovish speech by Federal Reserve governor Lael Brainard, who said at the Chicago Council on Global Affairs that although economic progress is being made, it would be wise for the Fed to keep monetary policy loose.
In addition, Minneapolis Fed President Neel Kashkari told CNBC that policy makers should take their time to when it comes to making a decision on rates.
Goldman Sachs cut its odds of US rate hike next week to 25% from 40% and lifted its odds that the next increase will come at the December meeting to 40% from 30% following a series of mixed comments from Federal Reserve officials that culminated in Brainard's speech.
Together, the changes lower Goldman's cumulative odds of at least one increase this year to 65% from 70%.
"Policymakers expressed a wide range of views, but a common element was the lack of a clear signal that the FOMC is prepared to raise rates as soon as next week's meeting. If action were likely, we would normally see an effort to raise market expectations, such that a rate increase did not startle markets. Thus, the lack of a signal is meaningful, and lowers the probability of an increase," the bank said.
Oil prices retreated after the International Energy Agency downgraded its forecast for global oil demand for 2016 and 2017 and said rebalancing the oil market would take longer than previously thought.
By the closing bell, West Texas Intermediate crude oil futures were down 2.5% to $45.18 a barrel while Brent crude was off 1.92% at $47.41.
In macroeconomic news, investors digested a survey from the ZEW Center for European Economic Research in Mannheim that showed German economic sentiment held steady in September.
The index of investors and analysts' expectations came in at 0.5, in line with the previous month but falling short of analysts' expectations for an improvement to 2.5.
The current expectations index, meanwhile, declined to 55.1 in September from 57.6 in August, missing expectations for a reading of 56.0.
On the corporate front, Swiss global private markets investment management company Partners Group rallied following well-received interim results. |
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| | Broker Tips | | Broker tips: AB Foods, Britvic, Purplebricks Associated British Foods shares fell on Tuesday as Numis downgraded its rating on the stock to 'hold' from 'add' and cut its target to 2,942p from 3,016p following a trading update from the Primark owner.
The company on Monday said it predicted full year earnings to be slightly ahead of last year's, although like-for-sales at Primark are expected to have deteriorated and news of a sizeable pension deficit set off alarm bells with investors.
A previous small pension surplus has in recent weeks morphed into a £200m pension deficit after the marked decline in UK long-term bond yields post the Brexit vote, which the company said would result in an increased service cost and a higher interest charge next year.
Apart from this scare, the 53 weeks to 17 September were mostly rosy for AB Foods, which also announced the sale of its cane sugar business in southern China for an unnamed amount.
Operating profits will now be ahead of last year after exceeding management expectations in the second half of the year, helping alongside lift earnings per share "marginally" ahead of last year.
Like-for-like sales at fast-fashion retail arm Primark are expected to be down 2%, decelerating from the 1% decline in the first half of the year.
Numis said: "This update is largely favourable, echoing many remarks in that of 7 July. Fresh news is that full year 2015/16 will be a 53 week period and that agreement has been reached to divest the cane sugar business in southern China for an undisclosed price."
The broker expects full year 2016 pre-tax profit of £1.076bn, down from a previous estimate of £1.128bn, taking into account the 53rd week and factoring in the update on the sugar and Primark businesses. Pre-tax profit in 2015 was 1.024bn.
Jefferies initiated coverage of Britvic at 'hold' with a 650p price target.
The bank said that over the medium term, its see a robust earnings outlook driven by benefits from the Business Capability efficiency programme on both Britvic's top and bottom line.
"From full-year 2018 onwards, there is potential for positive earnings momentum as the benefits from cost cutting are realised and tailwinds from favourable financial items from FY17 debt refinancing as well as a lower effective tax rate, given downward pressure on the GB corporation tax," it said.
However, in the near term, it reckons the shares lack catalysts, with FY17 a year of transition given ongoing high capex levels and limited scope for positive earnings momentum.
"We believe that the potential negative impact of the Brexit vote on underlying consumption of GB soft drinks could be overdone. However, the company faces some uncertainty around the impact of the sugar tax into 2018 as well as input cost headwinds from GBP weakness."
Following the UK's vote to leave the European Union, the shares have de-rated by around 10%.
"With limited potential for a re-rating until there is better visibility on the impact of the sugar tax, the macro impact from Brexit and rising input costs from GBP weakness, we initiate with a 'hold'.
Jefferies added that any volatility in the share price could offer an attractive entry point for longer-term investors.
Purplebricks got a boost on Tuesday as Citigroup initiated coverage of the stock at 'buy' with a 200p price target.
Citi said the company recently reported maiden full-year results, delivering around 450% revenue growth, albeit from a low base.
The bank expects Purplebricks to deliver strong year-on-year revenue growth of about 136% to full-year 2017, turning profitable in full-year 2018.
It said that while the majority of home buyers start their property search online, the online agency space had grown relatively slowly until the Purplebricks' business model was established in 2014.
It pointed out that in full-year 2016, the group's growing network of local property experts (LPE) helped the business facilitate around 60% of all online UK residential transactions, and increase total market share to about 1.2% from 0.4% in 2015.
"We expect the group to build on this strength and continue to expand the LPE network, helping drive share to 2.8% by FY17E and 4.1% in FY18E.
"The business offers a number of add-on services, largely through partnerships, which we expect to help drive revenue per transaction going forward."
Citi also highlighted the fact the company recently established operations in Australia and is expanding the lettings offer.
"These offer the group long-term growth potential as the operations leverage technology and its asset-light business model into new verticals providing scope for significant long-term upside."
Citi also initiated Softcat at 'buy', with a 410p price target, saying it expects the company to sustain strong organic growth and forecasts a 9.3% earnings per share compound annual growth rate over the next three years. |
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