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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: Equities led higher by energy shares on OPEC deal London stocks advanced on Thursday as investors weighed economic data and continued to evaluate OPEC's decision to limit oil production for the first time since 2008.
Energy shares led the FTSE 100 higher - including Royal Dutch Shell, BP and BHP Billiton - after OPEC ministers agreed during a meeting in Algeria on Wednesday to cut production to between 32.5m and 33m barrels a day, down from August output levels of 33.5m barrels. Further details of the agreement will be discussed at the next meeting on 30 November.
Oil prices were given an initial boost by the news but wavered throughout Thursday's session on pessimism that OPEC's plans would in fact help stabilise the market.
"While the news of a production cut is a welcome surprise, the deal will be treated with a degree of scepticism owing to the notoriously unreliable nature of OPEC discussions," said IG market analyst Joshua Mahony.
"Most notably, the meeting goes to show that Saudi Arabia and Iran can work together, despite public spats between the two nations. Arguably despite this deal, supply will continue to outstrip demand, while US production will likely fill the gap with increased output as price rises."
Brent crude rose 1.13% to $49.25 per barrel and West Texas Intermediate gained 1.5% to $47.79 per barrel at 1650 BST.
On the data front, the Bank of England revealed UK mortgage approvals fell to 60,058 in August from 60,925 in July - not quite as much as the consensus forecast of 59,800 but down over 17% from the peak of over 73,000 in January.
Yet last month consumer credit lending rose to £1.6bn after the dip to an 11-month low of £1.2bn in July. Annual growth in lending to corporates also picked up to 4.0% in August from 3.8% in July, contributing to an increase in the MPC's preferred measure of bank lending to 6.6% from 6.5%.
Shares of housebuilders were in the red after the report, including Barratt Developments, Persimmon and Taylor Wimpey.
The data was released after the BoE's Prudential Regulation Authority (PRA) on Thursday launched a series of affordability checks and interest rate "stress tests" that will be introduced from January 2017.
Buy-to-let lenders will need to verify that landlords can afford to pay the mortgage under potential future interest rates of 5.5% and the PRA recommended that the interest coverage ratio, a commonly used measure of the ratio of rental income to mortgage payments, does not fall below 125%.
Elsewhere, a report showed Eurozone economic sentiment rose more than expected in September. The European Commission's economic sentiment index edged up to 104.9 in September from 103.5 in August, beating expectations for an unchanged reading.
German unemployment rose by1,000 in September, surprising analysts who had expected a decline of 5,000 and following a 6,000 drop in August. The unemployment rate held at 6.1%, as anticipated.
German inflation picked up to 0.7% year-on-year growth in September from the prior month's 0.4% increase, beating forecasts for a 0.6% rise.
In the US, gross domestic product rose an annual seasonally adjusted 1.4% in the second quarter, the Commerce Department said in its final estimate, up from a previous estimate of 1.1% growth. Economists had expected a 1.3% increase.
Separately, initial jobless claims rose by 3,000 to a seasonally adjusted 254,000 in the week ended 24 September, the Labor Department said. Economists had pencilled in 260,000 claims.
US pending home sales dropped 2.4% in August compared to a month ago following a 1.2% increase in July, the National Association of Realtors said. Analysts had expected no change.
Meanwhile, Atlanta Federal Reserve President Dennis Lockhart said he expected the central bank would raise interest rates "before long".
At a separate event in Dublin, Philadelphia Fed President Patrick Harker said it was time for other policy areas to do their bit to encourage growth as the Fed has already played a large part.
Fed governor Jerome Powell said in St Louis that while the US economy is going strong, the central bank can be patient in raising interest rates due to a weak global environment.
Minneapolis Fed President Neel Kashkari and Fed chair Janet Yellen are due to speak after the closing bell.
In company news, Glencore advanced following a report that Genesee & Wyoming and Macquarie Infrastructure and Real Assets are working on a bid for some of the miner's coal operations in Australia.
Outsourcer Capita tumbled as it warned that full-year profits will be some way short of current forecasts after its third quarter was hit by a slowdown in some areas, one-off costs and recent hesitation among clients.
Fellow outsourcer Babcock slumped as it felt the impact of the sector turmoil around Capita's profit warning.
Leisure operator Merlin Entertainments pushed lower after it reported growth in revenue in the year to date but highlighted still-challenging trading. |
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| Market Movers
FTSE 100 (UKX) 6,919.42 1.02%
FTSE 250 (MCX) 17,864.86 0.41%
techMARK (TASX) 3,497.01 -0.20%
FTSE 100 - Risers
Royal Dutch Shell 'B' (RDSB) 2,022.00p 6.67%
Royal Dutch Shell 'A' (RDSA) 1,924.50p 6.59%
BHP Billiton (BLT) 1,168.00p 6.47%
Anglo American (AAL) 980.10p 6.11%
BP (BP.) 451.00p 4.34%
Rio Tinto (RIO) 2,634.00p 4.30%
Centrica (CNA) 231.80p 3.34%
Antofagasta (ANTO) 522.50p 3.26%
Sky (SKY) 910.50p 3.17%
Glencore (GLEN) 215.85p 3.10%
FTSE 100 - Fallers
Capita (CPI) 698.00p -26.72%
Merlin Entertainments (MERL) 442.10p -5.86%
Barratt Developments (BDEV) 472.90p -4.19%
Babcock International Group (BAB) 1,046.00p -3.77%
Persimmon (PSN) 1,741.00p -3.60%
Burberry Group (BRBY) 1,353.00p -2.45%
Taylor Wimpey (TW.) 150.00p -2.41%
AstraZeneca (AZN) 5,026.00p -1.87%
Hikma Pharmaceuticals (HIK) 2,049.00p -1.40%
Travis Perkins (TPK) 1,516.00p -1.37%
FTSE 250 - Risers
Tullow Oil (TLW) 240.10p 9.84%
Riverstone Energy Limited (RSE) 1,170.00p 8.84%
Hunting (HTG) 452.70p 7.68%
Allied Minds (ALM) 335.40p 7.29%
Kaz Minerals (KAZ) 224.30p 6.51%
AO World (AO.) 168.30p 5.72%
Weir Group (WEIR) 1,658.00p 5.54%
Cairn Energy (CNE) 190.60p 5.42%
Petrofac Ltd. (PFC) 879.50p 5.01%
Amec Foster Wheeler (AMFW) 569.50p 4.98%
FTSE 250 - Fallers
Bovis Homes Group (BVS) 834.50p -3.64%
Crest Nicholson Holdings (CRST) 436.90p -3.55%
Redrow (RDW) 389.30p -3.42%
Essentra (ESNT) 490.20p -3.41%
Bellway (BWY) 2,279.00p -3.31%
Kier Group (KIE) 1,311.00p -3.25%
Berkeley Group Holdings (The) (BKG) 2,506.00p -2.64%
Thomas Cook Group (TCG) 70.00p -2.57%
Just Eat (JE.) 531.50p -2.57%
G4S (GFS) 226.00p -2.54% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks end on mixed note despite OPEC European stocks were mostly higher on Thursday, with energy shares pacing the advance after OPEC ministers agreed a deal to cut production for the first time since 2008.
The benchmark Stoxx Europe 600 index was edging higher by 0.04%, Germany's DAX was 0.31% lower and France's CAC 40 was up 0.26%.
At the OPEC meeting in Algiers, ministers agreed to cut production to between 32.5m and 33m barrels a day, down from August's output levels of about 33.5m barrels, with further details of the agreement due to be discussed at the next meeting on 30 November.
Oil prices initially surged on the news, but by Thursday morning they were retreating, with investors booking profits as scepticism crept in about the deal.
By the closing bell in London, West Texas Intermediate was up by 2.35% at $48.18 a barrel and Brent crude by another 1.95% to $49.66.
Against that backdrop, energy stocks powered ahead, with the Stoxx 600 oil and gas index up 4.31%.
IG's Chris Beauchamp said: "OPEC's surprise decision to cut output has given oil markets a remarkable fillip, with the hope that more will come at the November meeting undoubtedly playing a part.
"Expectations of a bigger cut to output later on in the year, ideally with Saudi Arabia and Russia, the two biggest players, doing their bit, could see oil reverse its traditionally weak performance in the fourth quarter and push higher. It turns out that OPEC members can agree, and no doubt oil companies and their investors will be hoping that this outbreak of amity continues into the end of 2016."
In corporate news, Bankia gained ground on news the Spanish government is considering merging the bank with Banco Mare Nostrum.
Credit Suisse was also in the black amid reports the bank could settle a US investigation into its mortgage-bond dealings within weeks.
On the downside, Commerzbank was under pressure after saying it will reduce its workforce by 20% in the next few years by axing 9,600 jobs as it looks to cut costs and boost profitability.
Outsourcer Capita tumbled after it warned that full-year profits will be some way short of current forecasts after its third quarter was hit by a slowdown in some areas, one-off costs and recent hesitation among clients.
On the data front, figures from Destatis showed German unemployment unexpectedly rose in September, but the unemployment rate remained at a record low.
The unemployment rate came in at 6.1%, unchanged from the previous month and in line with economists' expectations.
Meanwhile, the number of unemployed people increased by a seasonally-adjusted 1,000 to 2.68m, versus expectations of a 5,000 drop. |
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| | US Market Report | | US open: Stocks fall as OPEC deal enthusiasm fades US stocks fell on Thursday as the initial enthusiasm over OPEC's agreement to limit production for the first time since 2008 faded.
At 1508 BST the Dow Jones Industrial Average dipped 0.02% to 18,338.59 BST, the S&P 500 shed 0.08% to 2,169.231 points and the Nasdaq declined 0.38% to 5,298.16.
At the same time oil prices wavered after OPEC ministers agreed during a meeting in Algeria on Wednesday to cut production to between 32.5m and 33m barrels a day, down from August output levels of 33.5m barrels. Further details of the agreement will be discussed at the next meeting on 30 November.
West Texas Intermediate crude rose 0.2% to $47.16 per barrel and Brent fell 0.14% to $48.62 per barrel.
Ranko Berich, head of market analysis at Monex Europe, said: "OPEC's agreement to cut production came as a complete surprise to markets last night, but it's interesting that Brent has failed to breach the $50/barrel level that has acted as resistance in recent months.
"It's also worth noting that USD, which was influenced heavily by the initial 2014 falls in crude oil prices, did not weaken noticeably on yesterday's events. It appears that market participants remain sceptical of OPEC's mettle, and if the cuts announced will be sufficient to clear the current supply glut in crude."
On the data front, US gross domestic product rose an annual seasonally adjusted 1.4% in the second quarter, the Commerce Department said in its final estimate, up from August's forecast of 1.1% growth. Economists had expected a 1.3% increase.
"With the data confirming continued progress for the US, one would expect expectations of a rate hike to rise in line with the improving economy," said Tom Floyd, senior sales trader at Foenix Partners.
"However, with the next Fed meeting due in November, the same month as the US election, a hike then would be surprising (despite the Fed's supposed non-partisan remit) with a rise most likely to occur in December at the earliest."
Separately, initial jobless claims rose by 3,000 to a seasonally adjusted 254,000 in the week ended 24 September, the Labor Department said. Economists had pencilled in 260,000 claims.
US pending home sales dropped 2.4% in August compared to a month ago following a 1.2% increase in July, the National Association of Realtors said. Analysts had expected no change.
Meanwhile, Atlanta Federal Reserve President Dennis Lockhart said he expected the central bank would raise interest rates "before long". In a speech in Florida, Lockhart added that he supported the Fed's decision last week to leave interest rates unchanged until the economy shows further evidence of improvement.
A another event in Dublin, Philadelphia Fed President Patrick Harker said it was time for other policy areas to do their bit to encourage growth as the Fed has already played a large part.
"The American economy has reached a point where monetary policy has done what it can," he said.
"As everyone in this room knows, the reach and arsenal of monetary policymakers is limited... Addressing issues of unemployment from the decline in American manufacturing requires fiscal policy and legislative action."
Fed governor Jerome Powell and Fed President Neel Kashkari were also due to speak on Thursday.
Fed chair Janet Yellen addresses a minority banking conference via video link at 2100 BST, a day after her testimony before the House Financial Services Committee.
In corporate news, PepsiCo shares gained after the softdrink giant raised its earnings forecast for the year and reported a surprise increase in core profit in third quarter.
ConAgra Foods rallied as it reported quarterly profit that exceeded analysts' expectations.
Costco is due to report its earnings after the close.
Progress Software fell sharply after its third-quarter sales and earnings released late on Wednesday missed analysts' expectations. |
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| | Broker Tips | | Broker tips: Imagination Technologies, Babcock, Sainsbury's Imagination Technologies shares fell on Thursday after Numis downgraded the stock to 'add' from 'buy' after the company sold its Pure digital radio business.
The group, which designs chips for iPhones, sold Pure to Austria's AVenture AT for £2.6m in cash as it looks to reduce debt. The deal also grants the buyer an option to buy one of Imagination's properties in Kings Langley, Hertfordshire, for £4.5m.
"The consideration for the Pure business is a little less than expectations, which were in the £5-10m range, however the delta is somewhat immaterial," said Numis.
"The Pure business had been classified as for sale by the new management team as it had been consistently loss making."
Imagination made the announcement about the sale as it reported its first quarter trading update. The company said the performance of its continuing operations in the first quarter continues to be in line with the board's expectations.
Numis said its rating downgrade reflects the recent rally in the stock, amid speculation that the company could be next up for grabs after Softbank agreed to buy ARM Holdings for £24bn in August. The broker raised its target to 280p from 220p.
"The stock has rallied strongly in recent months, with the acquisition of ARM by Softbank the main identifiable catalyst, increasing focus on the strategic value of the PowerVR graphics business (which is a key strategic technology used by Apple)."
Babcock International has seen a slower performance in the first half but still expects to grow revenues 6% in the full year, broker Shore Capital revealed as it reiterated a 'buy' recommendation on the engineering services outsourcer.
With Babcock's shares feeling some effect of the sector turmoil around fellow outsourcer Capita's profit warning on Wednesday, ShoreCap's note after a catch-up with the company's finance director Franco Martinelli was timely, with the company having not issued a trading update since July.
Babcock, "in the round", has performed in line with expectations, retaining organic revenue growth guidance in the 6% range for the full year but expecting performance to be slightly weighted to the second half.
"This is principally due to slower than anticipated conditions in South Africa operations and with oil services related contracts in MCS (helicopters) due to commence in H2. South Africa operations (those mainly in power related activities) are expected to improve in H2," explained analyst Robin Speakman.
"We sense that Babcock remain broadly positive on the environment and the medium to long term outlook," he added, with the company's order book remaining stable and indicated to remain at a similar level to the circa-£20bn last reported at the final results in May.
The pipeline was reported to have remained stable, with contract opportunities expected by Speakman "to begin to lift the pipeline early next year", with no further news on the award of the Defence Fire Risk Management Organisation contract with the Ministry of Defence for fire services management - also being bid by Serco and Capita.
HSBC has reiterated a 'reduce' rating and target of 185p on Sainsbury's after the supermarket reported a drop in second quarter sales.
The supermarket group, which is now also a major general merchandise retailer after completing the acquisition of Home Retail Group's Argos on 2 September, revealed on Wednesday that total retail sales fell 0.4% in the 16 weeks to 24 September, with like-for-like retail sales including VAT but excluding fuel down 1.1%.
Sainsbury's blamed industry-wide falling food prices for the decline in sales.
"ADI (Adverse Differential Inflation: cost inflation is higher than selling inflation) is a problem for any company, but is a particular problem for a company with declining sales and facing intensifying price competition," HSBC said.
"The industry is in the midst of the deepest and longest period of ADI in recent history and there is no sign this will end soon. Management says it is pleased with progress against its business plan, but that plan includes expected on-going decline in the core estate and with high operational gearing, this is worrying to us."
HSBC added that it believes Sainsbury's "lacks the scale" of Tesco and has a weaker balance sheet than Morrisons.
The bank also remains "unconvinced by the Argos deal and view it as a major distraction and management drain at a crucial time".
Sainsbury's plans to open another 15 Argos in its stores by Christmas, taking the total to 30, and to have 200 collection centres by the year end.
"We would also question would Sainsbury have opted to buy this company if they had known we would be heading for Brexit and the exchange rate would depreciate?" HSBC said.
"There may be some protection from short-term hedging but the long-term problem of rising costs is not going to go away - especially if consumer spending slows."
HSBC expects Tesco will become more aggressive in the fourth quarter and the current equilibrium will be upset. |
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