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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 slide as US presidential debate and OPEC meeting eyed London stocks tumbled on Monday on jitters ahead of the first US presidential debate and an OPEC meeting.
Donald Trump and Hillary Clinton will come face-to-face at the US presidential debate scheduled for 0200 BST, which could pave the way for the outcome of the November election.
IG market analyst Joshua Mahony said: "Tonight's US presidential election debate is a major event for financial markets, with risky assets likely to see significant volatility, should Trump manage to further build on the gains he has made over recent weeks.
"Despite significant movements towards Trump in recent polls, IG clients perceive there still to be a 62% chance of a Clinton win, according to the IG binary market."
He added: "That being said, Hilary remains a somewhat uninspiring personality and there is a distinct risk that tonight's debate could see the polls tighten even further, thus driving investors towards havens such as the yen and Treasuries."
Meanwhile, oil prices gained on hopes that producers will agree to limit output to address the global supply glut. OPEC members are meeting informally in Algeria on the sidelines of the International Energy Forum which started on Monday and continues until Wednesday.
Brent crude jumped 3.06% to $47.34 per barrel and West Texas Intermediate rose 3.1% to $45.94 per barrel at 1642 BST.
The sharp sell-off in Europe was also attributed to shares in Deutsche Bank hitting an all-time low after reports that German Chancellor Angela Merkel is refusing to bail-out the lender in the wake of its legal dispute in the US. The US Justice Department has suggested the bank pay $14bn to settle a number of investigations related to mortgage securities.
On the FTSE 100, financial services firms were on the back foot after two surveys showed growing concerns over Brexit.
A survey by CBI and PwC showed optimism among financial services firms during the three months to September dropped for the third consecutive quarter. More than half of the firms surveyed saw the Brexit vote as a negative for the financial services industry.
A separate survey by advisory firm KPMG revealed more than 75% of British business leaders have said they are pondering moving their businesses overseas because of the EU referendum.
Housebuilders were under the cosh after data from the British Banking Association showed loans for house purchases fell to a new 19-month low of 36,997 in August from the revised previous figure of 37,672 a month before. Economists had expected 37,100 loans. Shares in Taylor Wimpey, Barratt Developments and Persimmon dropped.
InterContinental Hotels also slumped as Morgan Stanley downgraded the stock to 'underweight' and trimmed the target to 3,100p from 3,300p after the shares' recent outperformance and on concerns that the US hotel cycle is peaking.
Lloyds Banking Group was under pressure after Goldman Sachs cut its stance on the lender to 'sell' from 'neutral' and lowered the price target 6% to 50p as it pointed to increased competition and low rates.
Hays shares fell after RBC Capital Markets downgraded the recruiter to 'sector perform' from 'outperform' as the stock has performed well and is now near its 140p price target.
Carnival rallied after its net revenues rose 2.7% in the three months ended 31 July 2016, which was towards the top end of the 2-3% rise projected by the firm. As a result, management raised their expected earnings per share for the full year to $3.33 to $3.37, compared to the $3.25 to $3.35 range it had in June.
UDG Healthcare gained as it announced that Chris Corbin, the chief executive officer of its largest division, Ashfield Commercial & Medical Services, will retire in April 2019. |
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| Market Movers
FTSE 100 (UKX) 6,818.04 -1.32%
FTSE 250 (MCX) 17,722.80 -1.12%
techMARK (TASX) 3,485.86 -1.15%
FTSE 100 - Risers
Micro Focus International (MCRO) 2,137.00p 0.61%
Burberry Group (BRBY) 1,409.00p 0.57%
London Stock Exchange Group (LSE) 2,844.00p 0.53%
Fresnillo (FRES) 1,794.00p 0.45%
National Grid (NG.) 1,079.00p 0.42%
Coca-Cola HBC AG (CDI) (CCH) 1,740.00p 0.40%
Randgold Resources Ltd. (RRS) 7,900.00p 0.00%
Hammerson (HMSO) 585.50p -0.00%
Informa (INF) 711.00p -0.00%
GKN (GKN) 323.00p -0.06%
FTSE 100 - Fallers
InterContinental Hotels Group (IHG) 3,096.00p -5.75%
Pearson (PSON) 726.00p -4.22%
Taylor Wimpey (TW.) 149.00p -4.18%
Barratt Developments (BDEV) 476.80p -4.10%
Persimmon (PSN) 1,764.00p -4.03%
Kingfisher (KGF) 368.00p -3.89%
Dixons Carphone (DC.) 360.70p -3.35%
Lloyds Banking Group (LLOY) 54.25p -3.09%
Aviva (AV.) 438.10p -3.08%
Standard Life (SL.) 342.70p -2.97%
FTSE 250 - Risers
Evraz (EVR) 158.10p 1.41%
NMC Health (NMC) 1,413.00p 1.15%
AO World (AO.) 162.50p 1.12%
Homeserve (HSV) 566.50p 0.98%
Tritax Big Box Reit (BBOX) 145.00p 0.97%
Redefine International (RDI) 42.88p 0.92%
Cranswick (CWK) 2,311.00p 0.83%
Vedanta Resources (VED) 559.50p 0.81%
UDG Healthcare Public Limited Company (UDG) 630.00p 0.64%
Micro Focus International (MCRO) 2,137.00p 0.61%
FTSE 250 - Fallers
Sports Direct International (SPD) 285.00p -5.88%
Shawbrook Group (SHAW) 236.90p -4.67%
Crest Nicholson Holdings (CRST) 441.90p -4.60%
Thomas Cook Group (TCG) 69.70p -4.52%
Diploma (DPLM) 838.00p -4.45%
Bellway (BWY) 2,299.00p -4.21%
Bovis Homes Group (BVS) 838.50p -4.12%
Redrow (RDW) 392.70p -3.82%
Pagegroup (PAGE) 331.00p -3.81% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Banks lead losses European stocks fell on Monday, with banks under the cosh as Deutsche Bank slid, despite a strong reading on German business confidence.
The benchmark Stoxx Europe 600 finished 1.55% lower, Germany's DAX was off 2.19% and France's CAC 40 was 1.80% weaker.
In parallel, the Stoxx 600 gauge of lenders' shares retreated 2.28% with an equivalent subindex linked to the Oil&Gas sector down 1.55%.
Deutsche Bank hit its lowest level ever following a report in German magazine Focus over the weekend suggesting the country's government has ruled out state aid for the lender.
On Friday, MF reported that Italian officials had ruled out financial aid for another troubled European leader, Monte de Paschi di Siena.
Oil prices however registered a sharp bounce, after Algeria's energy minister Noureddine Bouterfa said on Sunday that all options for a production cut or freeze at this week's OPEC meeting were on the table. Bouterfa said: "We will not come out of the meeting empty-handed."
Oil prices had tumbled at the end of last week amid reports that Saudi Arabia was not expecting a deal to be made at the meeting.
West Texas Intermediate was up 3.28% at $45.99 a barrel and Brent crude was 3.21% higher to $47.41.
IG's Chris Beauchamp said: "The new week has started with a bang, as the parlous state of Deutsche Bank explodes onto everyone's radar once again. The bank has been limping along for months now, but reports that Angela Merkel may not step in to rescue the bank have sent the shares tumbling, dragging banks across the UK and Europe lower as a result.
"The gut feeling of most investors is that Berlin would be forced to act to avoid the loss of a key institution, but gut feelings do not always make the best trades. After a strong week for equities it looks like we are in for a swift reversal, as the last week of September lives up to its billing as being a particularly difficult one for stock markets."
The Ifo Institute's German business climate index rose to 109.5 in September from 106.3 the month before, beating expectations for a reading of 106.4.
The current assessment index increased to 114.7 from 112.9, surpassing expectations of 113.0, and reaching its highest level since May 2014.
A sub-index tracking companies' expectations was especially robust, jumping from 100.1 in the month before to a reading of 104.5.
Jennifer Mckeown, senior European economist at Capital Economics, said: "September's rebound in the German Ifo Business Climate Indicator offers hope that the economy remains in good health after the more negative signs from other surveys and hard data."
She added that the index is consistent with a further rise in GDP growth from the second quarter's 1.7% to around 2%.
Swiss-Irish food group Aryzta was also lower after the company reported an 8% drop in pre-tax profit for the 12 months to the end of July.
Icap was on the back foot after it said that highly experienced operating director Ken Pigaga has had second thoughts about moving to Tullett Prebon along with a colleague as part of its voice broking acquisition.
Lloyds was under the cosh after a downgrade by Goldman Sachs, while Hays and InterContinental Hotels were hit by downgrades from RBC Capital Markets and Morgan Stanley, respectively. Shire was also in the red as HSBC downgraded the stock to 'hold' from 'buy'. |
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| | US Market Report | | US open: Stocks fall ahead of presidential debate US stocks dropped on Monday as investors exercised caution ahead of the first US presidential debate and as OPEC met in Algeria.
The Dow Jones Industrial Average fell 0.80% to 18,116.06 points, the S&P 500 slid 0.68% to 2,149.94 points and the Nasdaq declined 0.81% to 5,262.54 points.
At the same time oil prices gained as OPEC members met informally on the sidelines of the International Energy Forum in Algeria which is held from Monday until Wednesday. Ahead of the meeting, Algeria's energy minister Noureddine Bouterfa said on Sunday that all options for a production cut or freeze were on the table.
West Texas Intermediate crude rose 2.04% to $45.41 per barrel and Brent increased 2.07% to $46.86 per barrel.
Meanwhile, Donald Trump and Hillary Clinton will come face-to-face at the US presidential debate later, which could pave the way for the outcome of the November election result.
"With Donald Trump closing the gap with Hillary Clinton in latest polls, the debate is becoming more interesting than any other TV show," said FXTM chief market Strategist Hussein Sayed.
"America's direction, achieving prosperity and securing America are the three major topics at the first presidential debate. Investors are becoming increasingly concerned on how to tweak their portfolios before Nov 8."
On the data front, US new home sales fell a monthly 7.6% to 609,000 units in August following a12.4% increase in July, the Commerce Department revealed. Economists had expected an 8.3% drop to 597,000.
In company news, Pfizer shares slipped as the pharmaceutical group said it has decided not to split into two separate publicly-traded companies following an extensive evaluation.
Philadelphia-based Chemtura surged after German specialty chemical group Lanxess announced plans to buy its US rival. |
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| | Broker Tips | | Broker tips: Lloyds, InterContinental Hotels, Hays Goldman Sachs cut its stance on Lloyds Banking Group to 'sell' from 'neutral' and trimmed the price target 6% to 50p as it pointed to increased competition and low rates.
GS pointed out that Lloyds saw a market decline in new business share in the first half of this year, which led to a 3% annualised decline in mortgage balances.
Goldman said it sees two further sources of incremental competition from here.
"(1) HSBC will continue to strengthen its intermediary distribution as it seeks to deploy significant excess deposits into UK mortgages; (2) the Term Funding Scheme will provide the 'challengers' with a very low-cost funding source.
"We view Lloyds' margin maintenance strategy as optimal. Nevertheless, we believe increased competition will have a significant impact on profitability, and downgrade our rating."
GS cut its earnings per share estimate for 2016-18 by 0%-10%, mostly to reflect a 10 basis point cut to the base rate in November and a continued drop in mortgage balances.
Goldman said management is pursing the right strategy by choosing to protect margins over market share or even stock, as a substantial pricing cut would have an even more pronounced impact on earnings.
"A key question for the group going forward will be by how long it can delay significantly lowering its mortgage pricing. Ultimately, we believe it will have to mark to market its pricing at some point. This is when the P&L is likely to take a further hit."
Morgan Stanley downgraded InterContinental Hotels Group (IHG) to 'underweight' on Monday after the shares' recent outperformance and on concerns that the US hotel cycle is peaking.
After rising 10% in the year to date, the price target was trimmed to 3,100p from 3,300p and saw a possible bear case of 2,000p as IHG was observed to now be trading at a 5% premium to its peers.
While the Holiday Inn and Crowne Plaza owner has attractive and resilient business model, Morgan Stanley has some concerns.
Growth in revenue per available room (revpar) in the USA has been slowing for some time, "and we think it will weaken further given declining occupancy, anaemic rate growth,
accelerating supply growth, one-fifth of submarkets in RevPAR decline", while its analysis of 'compression nights' - those high-demand nights where market-wide occupancy levels are 95% or more - has suggested Airbnb now having an impact as well as a trend for independent hotels to outperform branded chains.
"If we match these occupancy/RevPAR trends to the last two cycles, IHG shares are holding up much better," analysts wrote.
Forecasts for revpar have been reduced to 1.5% for 2017 and down to -1% in 2018 from earlier predictions of 2% growth, with the lower RevPAR offsetting another $500m stock buyback expected next year.
While IHG is still a quality operator, analysts highlighted that all hotel stocks de-rate sharply when revpar drops off.
In the last downturn, hotel stocks would on average move down to a price at 8-9 times EBITDA, whereas IHG is currently on 12 times 2017 expected EBITDA.
"M&A speculation may continue to provide support, but we think that IHG sees itself as more of a buyer than a seller, and it no longer owns 'trophy' assets.
RBC Capital Markets downgraded recruiter Hays to 'sector perform' from 'outperform' as the stock has performed well and is now near its 140p price target.
It pointed out that the stock has enjoyed a nice bounce and is one of the better-performing staffers year-to-date.
Still, it remained fairly upbeat, saying that although UK trading is expected to be tough, this will likely be offset by Europe and Australia.
RBC reckoned the company will be able to hold earnings before interest, tax and amortisation slightly above last year thanks to a robust picture in Europe and solid momentum in Australia, as well as a significant currency tailwind.
"Currency is a major tailwind, with the potential for special dividends now the balance sheet is near the £50m net cash mark," it said.
The Canadian bank said that given macro uncertainty, temp markets are more robust than perms and Hays' mix of geographies and maturities helps provide some resilience.
RBC highlighted the fact the group is now net cash and said it sees significant potential for special dividends going forward. |
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