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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 jump as pound plunges to 31-year low on Brexit London stocks jumped on Tuesday as sterling fell to a 31-year low against the dollar after Prime Minister Theresa May said in the previous session she would trigger Article 50 by March 2017.
The FTSE 100 rose above 7,100 for the first time since April, closing up 1.30% to 7,074.34 points.
The pound fell 0.79% against the dollar to $1.2741at 1648 BST.
May at the weekend revealed the timing of the formal Brexit negotiation progress, which means Britain will leave the EU by the summer of 2019.
Adding downward pressure on the pound, Chancellor Philip Hammond on Monday warned Brexit may cause "turbulence" and business confidence would be on a "bit of a rollercoaster".
IG market analyst Joshua Mahony said the potential for another rate cut by the Bank of England to cushion the blow of Brexit has weighed on sterling but given equities a boost.
"Fears over the economic implications of a Brexit have been brushed aside in favour of a focus on the benefits a weak pound and loose monetary policy would bring to stocks," he said.
"As Phillip Hammond said, we are in for a roller coaster, yet on initial evidence, markets like the idea."
Meanwhile, the market seemed to shrug off the International Monetary Fund's downgrade on UK economic growth forecasts for 2017.
While the IMF raised its estimate for UK gross domestic product in 2016 to 1.8% from its July forecast of 1.7%, it now expects 2017 GDP to slow to 1.1% from a previous prediction of 1.3%. The cut to 2017 GDP estimates comes in the wake of May's announcement that formal Brexit negotiations will begin by March.
The IMF predicts "subpar" global growth this year of 3.1%, rising slightly in 2017.
In company news, Pearson got a boost as Morgan Stanley reiterated its 'overweight' rating on the stock and 1,050p price target, saying the market's expectations of another profit warning are unlikely to materialise.
Intertek was lifted by a double upgrade from Jefferies, which raised its stance on the stock to 'buy' from 'underperform' and lifted the price target to 4,300p from 3,000p.
On the downside, pharmaceutical giant Astrazeneca was on the back foot after it said its Brilinta drug did not meet the end point of a clinical trial. |
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| Market Movers
FTSE 100 (UKX) 7,074.34 1.30%
FTSE 250 (MCX) 18,342.07 0.87%
techMARK (TASX) 3,579.15 1.19%
FTSE 100 - Risers
Provident Financial (PFG) 3,320.00p 6.68%
Intertek Group (ITRK) 3,727.00p 5.22%
Pearson (PSON) 802.50p 5.18%
Standard Life (SL.) 358.50p 3.22%
Rolls-Royce Holdings (RR.) 760.50p 3.12%
CRH (CRH) 2,659.00p 3.02%
Micro Focus International (MCRO) 2,267.00p 2.86%
3i Group (III) 670.00p 2.76%
GKN (GKN) 332.50p 2.66%
Johnson Matthey (JMAT) 3,461.00p 2.64%
FTSE 100 - Fallers
Randgold Resources Ltd. (RRS) 7,330.00p -5.91%
Fresnillo (FRES) 1,729.00p -5.36%
Polymetal International (POLY) 928.00p -4.48%
easyJet (EZJ) 990.00p -1.59%
Anglo American (AAL) 986.30p -0.91%
Mediclinic International (MDC) 916.50p -0.81%
International Consolidated Airlines Group SA (CDI) (IAG) 393.70p -0.81%
Antofagasta (ANTO) 532.00p -0.65%
United Utilities Group (UU.) 994.50p -0.55%
AstraZeneca (AZN) 5,025.00p -0.32%
FTSE 250 - Risers
Allied Minds (ALM) 359.90p 7.27%
OneSavings Bank (OSB) 284.80p 5.99%
DFS Furniture (DFS) 278.00p 5.90%
Diploma (DPLM) 954.00p 4.95%
Renishaw (RSW) 2,870.00p 4.29%
International Personal Finance (IPF) 282.90p 4.20%
PayPoint (PAY) 1,113.00p 4.12%
Aberforth Smaller Companies Trust (ASL) 1,108.00p 4.04%
Meggitt (MGGT) 473.60p 3.88%
Bankers Inv Trust (BNKR) 692.00p 3.52%
FTSE 250 - Fallers
Acacia Mining (ACA) 476.00p -6.30%
Hochschild Mining (HOC) 277.00p -5.46%
Centamin (DI) (CEY) 145.20p -4.60%
Henderson Group (HGG) 261.20p -3.51%
NCC Group (NCC) 358.60p -2.50%
Kaz Minerals (KAZ) 231.90p -1.74%
Greencore Group (GNC) 330.90p -1.72%
Phoenix Group Holdings (DI) (PHNX) 869.50p -1.64%
Marshalls (MSLH) 288.80p -1.63% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks gain as banks push higher European equities rose on Tuesday, with shares in Deutsche Bank edging higher and stocks in London boosted by a weaker pound.
The benchmark Stoxx Europe 600 index gained 0.84%, Germany's DAX was 1.03% higher and France's CAC 40 was 1.11% firmer.
Oil prices reversed early losses to trade higher. West Texas Intermediate was down 0.3% higher at $48.94 a barrel and Brent crude was up by 0.5% at $51.16.
In currency markets, the pound slumped to a 31-year low against the dollar as Theresa May's pledge to trigger Article 50 by March continued to weigh on the currency. Sterling dropped to $1.2735 from $1.2858 late in New York on Monday. It briefly popped higher after the UK construction purchasing managers' index for September came in stronger than expected.
The drop in sterling benefited FTSE 100 exporters, helping to propel the index back above the 7,000 mark.
CMC Markets' Michael Hewson said: "Reports that UK Prime Minister Theresa May is not looking for any favourable treatment for the financial services sector has been cited as one reason behind the latest sterling decline, however this concern doesn't appear to be reflected in the share prices of financials today, all posting gains."
On the corporate front, Deutsche Bank was in the black, recovering from last week's losses despite there being no news on the US Department of Justice fine.
The Stoxx 600's gauge of lenders' shares advanced 1.06%.
US-listed shares in the lender surged on Friday after a media report suggested the DoJ fine could be reduced from $14bn to $5.4bn. On Monday, The Wall Street Journal reported that talks between the two were ongoing and no settlement has been reached.
Elsewhere, stock in French luxury group LVMH was also higher after saying it will buy an 80% stake in German luggage maker Rimowa for €640m.
Budget airline Ryanair moved lower despite reporting a 13% jump in traffic for September to 10.8m customers.
Education publisher Pearson rallied after Morgan Stanley reiterated its 'overweight' stance on the stock, saying the profit warning investors were fearing was unlikely to materialise.
Astrazeneca was a little lower after it announced a disappointing drug trial but said its Tagrisso drug has been recommended by NICE.
Figures released by Eurostat earlier showed Eurozone producer prices unexpectedly edged lower in August.
Producer prices fell 0.2% from July compared to expectations for a 0.1% increase. On the year, prices were down 2.1%, in line with economists' expectations.
Energy sector prices fell 0.8% and prices of intermediate goods declined 0.1%. Prices for both capital goods and durable consumer goods were stable, while prices for non-durable consumer goods were up 0.1%.
Excluding energy, prices in total industry were stable. |
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| | US Market Report | | US open: Stocks mixed as IMF cuts US economic growth forecasts US stocks were mixed on Tuesday as the International Monetary Fund lowered its growth forecasts for the world's largest economy and a Federal Reserve official suggested interest rates should rise.
At 1514 BST, the Dow Jones Industrial Average fell 0.14% to 18,227.93 points, the S&P 500 dropped 0.21% to 2,156.19 points, while the Nasdaq rose 0.03% to 5,302.59 points.
At the same time, oil prices rose despite Iran and Libya continuing to increase production in the wake of OPEC's agreement last week to limit output. West Texas Intermediate gained 0.18% to $48.90 per barrel and Brent crude edged up 0.50% to $51.15 per barrel.
The IMF on Tuesday cut its 2016 estimate for US gross domestic product to 1.6% from the 2.2% it predicted in July. However, it forecast global growth would remain steady at 3.1% this year, due to a rebound in emerging and developing economies.
Meanwhile, Richmond Fed President Jeffrey Lacker said he would have voted in favour of an interest rate hike at the September policy meeting if had been able to vote.
"I would have dissented," Lacker told reporters in Charleston, West Virginia where he gave a speech on the economic outlook.
The Fed last month decided to keep rates at between 0.25% and 0.50% as it waits for further evidence of improvement in inflation and the economy. The central bank indicated that it expects one rate increase this year.
On the company front, Deutsche Bank's US-listed shares reversed the previous day's decline as worries about the lender's financial state and legal troubles receded.
On Friday, shares in Deutsche Bank surged after a media report suggested its fine from the US Department of Justice could be reduced from $14bn to $5.4bn. On Monday, the Wall Street Journal said talks between the two were ongoing and no settlement has been reached.
Darden Restaurants also advanced after the operator of Olive Garden reported first quarter earnings that exceeded analysts' estimates.
Summit Therapeutics surged after saying it has entered into an exclusive license and collaboration agreement with Sarepta Therapeutics. |
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| | Broker Tips | | Broker tips: Intertek, Wolseley, Pearson Intertek was lifted by a double upgrade from Jefferies, which raised its stance on the stock to 'buy' from 'underperform' and upped the price target to 4,300p from 3,000p.
"Our recommendation is not predicated on a major near term beat. More, that we believe we should see from here a steady on-going improvement in a range of metrics, including organic growth, margins and free cash flow," the bank said.
Jefferies said its analysis of margin levers provides a strong case for profit growth faster than revenues, while strong FCF allows it to formally model M&A.
"Looking ahead, we expect that the process around M&A will become more rigorous. Partly we expect that this will be a sector phenomenon as players shy away from deals in cyclical areas and anything related to commodities (both mining and oil and gas) and as multiples across the sector move up."
Jefferies upped its full-year earnings per share estimate for 2017 to 188.10p from 170.80p.
The bank said its 'underperform' rating had been based on weakness in the trade division from a slower oil cargo business in 2016; lower for longer in oil and gas capex and opex activities in the resources business and concerns over sustainability of growth and margins in the products business.
Jefferies said updates from Intertek have confirmed some of these fears, but the products business remained resilient and margins have expanded on an organic basis.
Goldman Sachs has initiated Wolseley, the FTSE 100-listed distributor of heating and plumbing products, with a 'neutral' rating and target of 4,600p.
The bank said it believes Wolseley is strongly positioned with first and second ranks across 80% of its main markets. Goldman also thinks the company's B2C e-commerce offering will continue to add to its growth opportunities going forward.
"Over the last four years the company has managed to significantly improve its returns profile owing to restructuring efforts and strong growth in its core market, the USA," Goldman said.
"We believe this is fairly reflected in its valuation and combined with mixed leading indicators outside the USA, we see limited upside to our 12-month price target of 4,600p."
Goldman said risks to Wolseley include macro-economic changes, the reversal of recent foreign exchange trends, failure to execute on restructuring and acquisitions and pricing pressure from online peers.
The bank noted that Wolseley has reduced its exposure to new construction but its Renovation, Maintenance & Improvement (RMI) end-markets remain closely correlated to macro-economic developments.
"US leading indicators are broadly stable, while the UK & Nordics (predominantly Denmark) paint a more mixed picture."
Education publisher Pearson got a boost on Tuesday as Morgan Stanley reiterated its 'overweight' rating on the stock and 1,050p price target, saying the market's expectations of another profit warning are unlikely to materialise.
MS said the stock is too cheap, now down 25% from its highs and with a 2018 free cash flow yield of about 10% versus a price-to-earnings of 10x.
It added that Pearson shares are the worst-performing large dollar earners in the UK post the Brexit vote.
It said the shares have fallen since the first-half results on worries that lower H1 gross sales and higher returns in the US college business will lead it to miss its 2016 guidance of pre-restructuring cost EBITA of £580m-£620m, to abandon its 2018 £800m EBITA target and to cut its thinly covered dividend.
"Our view is that Pearson has structural challenges. I thas too much print (35%), it does not have enough proprietary content and there is customer resistance to the high price of US college textbooks," the bank said.
However, while accepting these shortcomings it also argued that the US College downturn will not be enough to cause Pearson to reduce its guidance for 2016, after it was already cut by around £400m in January 2016.
In addition, it said next year is likely to be an up year for the company as the US Schools adoption market bounces back, the effect of lost US testing contracts falls away, the UK qualifications business picks up and the US college market improves. | | |
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