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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: Mining stocks lead equities higher after FOMC rate decision London stocks closed higher on Thursday, with mining shares leading the gains, as the dollar weakened on the Federal Reserve's decision to keep interest rates unchanged.
The Federal Open Market Committee on Wednesday decided to keep the range for the Fed funds rate unchanged at between 0.25% and 0.50% and to cut the number of rate increases they expect this year from one to two.
The Fed was split in its decision to leave interest rates unchanged with three members dissenting in favour of an immediate 25 basis point hike.
The FOMC also signalled that the case for a hike later this year has strengthened, saying inflation was on track to reach the 2% target and near-term risks were "balanced".
Goldman Sachs said its US economics team assigns a cumulative 65% probability to a rate hike by the 14 December FOMC meeting, which is roughly the same as implied by fed fund futures.
Meanwhile, FXTM research analyst Lukman Otunuga said: "Although the decision to keep rates unchanged was warmly welcomed by global equities, the shocking divide between Fed officials is something which remains a cause for concern. With expectations hanging on a thin line over the Fed actually taking action this year, the Dollar could be vulnerable to further losses."
Traders are now turning their focus to a speech by Bank of England Governor Mark Carney at 1800 BST.
Ahead of his speech, BoE policymaker Kristen Forbes on Thursday said she did not see a case for a further interest rate cut following the Brexit vote on 23 June.
Her remarks put her at odds with the majority of BoE rate-setters who last month said the longer-term outlook for the economy may warrant another rate cut later this year.
Earlier, the central bank's Financial Policy Committee released a statement acknowledging that while the market has calmed following the immediate volatility after the 23 June Brexit vote, Britain still faces a "challenging period of uncertainty and adjustment".
In economic data, the Council of Mortgage Lenders revealed that UK gross mortgage lending increased by 6.8% in August to an estimated £225.5bn, from July's £21.1bn.
CML senior economist Mohammad Jamei said the widely voiced fears recently about the housing market have proved to be wide of the mark as prospects for house buying activity after the EU referendum in June look "slightly subdued" in comparison to late 2015 and early 2016.
The Confederation of British Industry said industrial trends orders remained unchanged in August at -5, in line with expectations.
In the Eurozone, consumer confidence improved in September, according to the European Commission. The Economic Sentiment Indicator rose to negative 8.2 in September, in line with expectations, following negative 8.5 in August, the Commission's preliminary estimate revealed.
In US data, the Labor Department said jobless claims fell for an 81st consecutive week last week. Initial jobless claims dropped by 8,000 to 252,000, compared to economists' estimates of 261,000.
US house price rose 0.5% in July following a 0.2% increase in June, according to the monthly house price index by the Federal Housing Finance Agency. Analysts had expected a 0.3% increase.
Separately, US existing home sales fell 0.9% to an annual rate of 5.33 million units in August, the National Association of Realtors said, compared to forecasts for a 1.1% increase. July's sales were also revised lower to 5.38 million units from a previously reported 5.39 million.
Meanwhile, oil prices jumped after official data on Wednesday showed a surprise drop in US crude inventories last week. Brent crude rose 1.7% to $47.66 per barrel and West Texas Intermediate increased 2.2% to $46.37 per barrel at 1634 BST.
Among corporate stocks, miners were the biggest risers on the FTSE 100, supported by a weaker dollar following the Fed's policy announcement. A weaker greenback makes dollar-denominated commodities more affordable for holders of other currencies. BHP Billiton, Glencore and Fresnillo led the rally.
Glencore also benefited from an upgrade to 'hold' from 'sell' by Liberum on the back of improved prospects for thermal coal prices.
On the downside, education publisher Pearson declined after Exane BNP Paribas downgraded the stock to 'neutral' from 'outperform' and cut the price target to 900p from 1,000p, saying it fears more turbulence ahead following last year's shock profit warning.
Premier Inn and Costa owner Whitbread was under the cosh as UBS reiterated its 'neutral' rating on the stock and assessed whether Costa can crack the Chinese market. The bank said Costa was "not as well positioned as Starbucks, UBC, or McDonald's with lower awareness score, and less loyalty among its customer base".
BBA Aviation edged higher after Barclays initiated coverage of the stock at 'overweight' with a 280p price target.
MCarthy & Stone gained ground as Nicholas Hyett, equity analyst at Hargreaves Lansdown, said investors are taking a more positive view in what has so far been a torrid September following a cautious full-year trading update.
Shares in Countrywide fell after the estate agency group said it has sold its remaining stake in property website Zoopla. |
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| Market Movers
FTSE 100 (UKX) 6,911.40 1.12%
FTSE 250 (MCX) 17,987.77 0.30%
techMARK (TASX) 3,538.78 0.53%
FTSE 100 - Risers
Glencore (GLEN) 207.90p 5.48%
Fresnillo (FRES) 1,802.00p 5.20%
Randgold Resources Ltd. (RRS) 8,015.00p 4.36%
Antofagasta (ANTO) 517.50p 4.31%
TUI AG Reg Shs (DI) (TUI) 1,093.00p 4.19%
BHP Billiton (BLT) 1,094.50p 4.14%
Anglo American (AAL) 920.50p 3.58%
Rio Tinto (RIO) 2,490.00p 3.28%
Coca-Cola HBC AG (CDI) (CCH) 1,741.00p 3.14%
Hammerson (HMSO) 585.50p 2.90%
FTSE 100 - Fallers
HSBC Holdings (HSBA) 577.30p -1.94%
Informa (INF) 721.00p -1.30%
Shire Plc (SHP) 5,189.00p -1.07%
Pearson (PSON) 774.00p -1.02%
Whitbread (WTB) 3,970.00p -0.82%
Travis Perkins (TPK) 1,569.00p -0.44%
Direct Line Insurance Group (DLG) 382.50p -0.42%
Hikma Pharmaceuticals (HIK) 2,106.00p -0.33%
ITV (ITV) 194.20p -0.31%
Vodafone Group (VOD) 223.50p -0.22%
FTSE 250 - Risers
Hochschild Mining (HOC) 291.00p 8.18%
Vedanta Resources (VED) 554.50p 7.05%
JRP Group (JRP) 127.00p 5.83%
Evraz (EVR) 161.70p 4.59%
Kaz Minerals (KAZ) 216.70p 3.83%
Big Yellow Group (BYG) 775.00p 3.68%
Amec Foster Wheeler (AMFW) 569.50p 3.55%
BBA Aviation (BBA) 255.70p 3.35%
McCarthy & Stone (MCS) 167.30p 3.14%
Investec (INVP) 477.60p 3.04%
FTSE 250 - Fallers
Ladbrokes (LAD) 140.90p -4.47%
CMC Markets (CMCX) 217.70p -3.93%
Countrywide (CWD) 219.10p -3.18%
Paragon Group Of Companies (PAG) 314.40p -3.05%
Smurfit Kappa Group (SKG) 1,836.00p -2.75%
Softcat (SCT) 314.50p -2.52%
Redrow (RDW) 398.00p -2.44%
International Public Partnerships Ltd. (INPP) 153.60p -2.41%
IP Group (IPO) 183.30p -2.34%
Millennium & Copthorne Hotels (MLC) 436.00p -2.30% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Shares move higher after Fed decision European stocks rose on Thursday after the Federal Reserve stood pat on rates but indicated a hike would come later this year.
The benchmark Stoxx Europe 600 index finished up 1.58%, while Germany's DAX and France's CAC 40 were both 2.3% firmer.
Meanwhile, oil prices advanced as the dollar lost ground, with West Texas Intermediate up 2.12% to $46.33 a barrel and Brent crude 1.24% firmer at $47.42.
On Wednesday, the Fed kept interest rates unchanged at between 0.25% and 0.50%, with three members dissenting in favour of an immediate 25 basis points hike. This was the first time in five years that three voters have dissented in the same direction.
Meanwhile, the Summary of Economic Projections was a bit more dovish, showing one hike this year and two next year, down from two and three, previously.
The central bank said the case for a rate increase has strengthened, leaving the door open to a move by the end of the year.
The Federal Open Market Committee said: "The Committee judges that the case for an increase in the federal funds rate has strengthened, but decided, for the time being, to wait for further evidence of continued progress toward its objectives."
Goldman Sachs said its US economics team assigns a cumulative 65% probability to a rate hike by the 14 December FOMC meeting, which is roughly the same as implied by fed fund futures.
IG's Joshua Mahony said: "European stock markets are following their US and Asian counterparts higher, as investors react to the FOMCs decision to leave rates unchanged once again. Whilst the committee decided against raising rates, it has not given up aspirations of implementing a rate rise at least once in 2016.
"December has seemed the likeliest month for some time, with the Fed likely to want the US election in November out of the way before such an important shift is implemented."
In corporate news, shipping company Moeller-Maersk traded higher after announcing it will split into two separate units.
Micro Focus International was in the black after confirming its full-year guidance, while Kier Group rallied after its full-year numbers met analysts' expectations.
Pub group Mitchells & Butlers gained ground after it reported a drop in full year sales but a rise in the most recent eight weeks of trading, as it reiterated that full-year margins will be below the previous year.
On the downside, EDF was in the red after it said on Wednesday that it was downgrading its expectations for 2016.
Rolls Royce reversed course to end higher even after it appointed Stephen Daintith of the Daily Mail as chief financial officer from 2017.
Education publisher Pearson was also weaker after Exane BNP Paribas downgraded the stock to 'neutral' from 'outperform'. |
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| | US Market Report | | US open: Stocks gain as traders weigh Fed policy decision US stocks were in the green on Thursday as traders continued to digest the Federal Reserve's decision to leave interest rates unchanged.
At 1448 BST the Dow Jones Industrial Average rose 0.81% to 18,442.76 points, the S&P 500 increased 0.71% to 2,178.39 points and the Nasdaq edged up 0.58% to 5,326.03 points.
At the same time, oil prices jumped after official data on Wednesday showed a surprise drop in US crude inventories last week. West Texas Intermediate crude gained 2.2% to $46.37 per barrel and Brent rose 1.8% to $47.69 per barrel.
The Federal Open Market Committee on Wednesday decided to keep interest rates unchanged at between 0.25% and 0.50% and cut the number of rate increases they expect this year from one to two.
The Fed was split in its decision to leave interest rates unchanged with three members dissenting in favour of an immediate 25 basis point hike.
The FOMC also signalled that the case for a hike later this year has strengthened, saying inflation was on track to reach the 2% target and near-term risks were "balanced".
Goldman Sachs said its US economics team assigns a cumulative 65% probability to a rate hike by the 14 December FOMC meeting, which is roughly the same as implied by fed fund futures.
Meanwhile, Societe Generale said: "The outcome of the September FOMC meeting was in line with our expectations, as the Committee reintroduced the balance of risks statement, removed a rate hike this year and in 2017, and cut the longer-run nominal neutral funds rate.
"In our view, the reintroduction of the balance of the risks statement was a way to bridge the divide between the hawks and doves on the Committee, and it took the Fed a step further towards raising the funds rate in December."
In economic data, US jobless claims fell for an 81st consecutive week last week. Initial jobless claims dropped by 8,000 to 252,000, the Labor Department said, compared to economists' estimates of 261,000.
US house price rose 0.5% in July following a 0.2% increase in June, according to the monthly house price index by the Federal Housing Finance Agency. Analysts had expected a 0.3% increase.
Separately, US existing home sales fell 0.9% to an annual rate of 5.33 million units in August, the National Association of Realtors said, compared to forecasts for a 1.1% increase. July's sales were also revised lower to 5.38 million units from a previously reported 5.39 million.
The Chicago Fed National Activity Index fell to negative 0.55 in August compared with a revised 0.24 in July and forecasts of 0.15.
In corporate news, shares in Bed Bath & Beyond gained even as the company reported quarterly earnings that fell short of analysts' estimates. |
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| | Broker Tips | | Broker tips: Dunelm, BBA Aviation, Pearson Dunelm Group's shares rose on Thursday as HSBC initiated the stock at a 'buy' rating and target of 1,000p.
HSBC said the home furnishings retailer has strong management and an attractive business model with high margins, cash flow and returns.
"It is the leading UK homewares retailer with exposure focused at the low ticket end of home spend but with growing exposure to furniture from a low base," the bank said.
"Operating margins of around 15% are supported by an efficient cost structure, with Dunelm able to accept lower gross margins than many incumbents while still generating high operating margins."
The bank said Dunelm is able to generate substantial amounts of cash flow with free cash conversion at more than 80% of net profit with a capital light model, even while growing its store base.
"This and a conservatively geared balance sheet support strong returns to shareholders, with special returns announced in each of the past four years."
The company has a market share of 8%, which implies a greater degree of fragmentation than other categories such as grocery, clothing, electricals and DIY.
HSBC expects future share gains will be achieved through like-for-like (LFL) outperformance and rollout.
"LFL growth is sensitive to the consumer backdrop but should be supported by a number of strategic initiatives under the new management team led by John Browett. These include further investment in online, category expansion, and increased focus on customer service."
In the long-term, HSBC sees potential for the business to deliver earnings of more than 78p at 200 stores with online penetration of 20% of sales.
BBA Aviation got a boost on Thursday as Barclays initiated coverage of the stock at 'overweight' with a 280p price target.
It said that operating in an attractive market with excellent market positioning, there are two potential areas for further share price upside.
The first is the Landmark acquisition, where integration is going to plan and cost synergies are marginally ahead of expectations.
Secondly, Barclays said that thanks to very strong cash generation, it sees scope for the group to deleverage quickly and expects BBA to review its target capital structure in 2017, allowing for incremental shareholder return potential over the medium term.
The bank said BBA's Signature Flight Support business is a unique asset, with leading share in an attractive market providing aviation services for the business and general aviation market.
"A decent long-term growth profile underpinned by both cyclical and structural factors is further strengthened by BBA's track record of growth ahead of the market, which we see as sustainable as the company begins to take advantage of network benefits from the Landmark acquisition."
Barclays said that on an earnings basis, BBA trades more or less in line with the FTSE 250 but looks more attractive on a dividend yield basis, and offers a growth profile that is ahead of the market.
Exane BNP Paribas downgraded education publisher Pearson to 'neutral' from 'outperform' and cut the price target to 900p from 1,000p saying it fears more turbulence ahead.
The bank said that after last year's shock profit warning, Pearson has needed to deliver on expectations to rebuild confidence. However, the US higher education courseware market looks weaker-than-expected despite signs of an improvement in enrolment over the summer.
"This raises the risk of a further setback at the Q3 results," it said.
Exane cut its 2016 earnings per share estimate by 6% and its 2017 forecast by 5%, saying it was concerned consensus might have to revise 2016 forecasts lower following the third-quarter results.
In addition, it noted that US peer John Wiley & Sons pointed to a weak market in July.
Exane said its industry contacts suggest August was below expectations too and it reckons this weakness was largely caused by destocking at bookstores. It said market share gains were unlikely to be enough to offset industry weakness.
"We continue to anticipate an organic revenue growth recovery next year. The stock remains on sector and peer group relative lows and offers a sustainable dividend yield of 6.6%. |
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