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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 Brexit worries grow London stocks were in the red on Monday as worries about Brexit grew on the back of a report about the impact the vote will have on the economy.
The FTSE 100 finished down 1.07% to 6,947.55 points while the pound dipped 0.02% versus the dollar to trade at $1.2188.
Oil prices were also on the back foot after a report from Baker Hughes on Friday showed US oil drillers added four rigs in the week to 14 October to reach a total of 432. Brent crude dropped 1.2% to $51.33 per barrel and West Texas Intermediate fell 1.4% to $49.65 per barrel at 1650.
The EY Item Club said Britain faces a prolonged period of weaker growth as consumer spending slows and businesses curb investments.
The think tank expects inflation will rise due to a weaker pound post-Brexit, which may prompt consumers to refrain from spending.
Meanwhile, Chancellor Philip Hammond is reportedly butting heads with other ministers during talks about Brexit. He was also forced to deny claims he was trying to slowdown the formal Brexit process by delaying decisions on migrant curbs.
"Mr Hammond is thought to prefer a plan in which migration curbs are delayed and Britain would pay into the EU budget for single market access," said Jasper Lawler, market analyst at CMC Markets.
"It's a stance that would be welcomed by markets but he has been described as 'arguing like an accountant' and 'only seeing the risks' by fellow MPs."
In other UK news, Rightmove revealed house prices rose 4.2% in October from a year ago, following a 4% increase in September.
Elsewhere, Eurozone inflation was confirmed by Eurostat at 0.4% for September, up from 0.2% in August and in line with expectations. Year-on-year inflation also came in at 0.4%, as forecast.
The European Central Bank is targeting inflation of just below 2% and meets on Thursday to decide on policy.
In the US, the Federal Reserve revealed that industrial production rose 0.1% in September (consensus: 0.2%) after falling a revised 0.5% in August.
In contrast, the Empire State manufacturing index fell to -6.8 in October from -2 in September, which was below the consensus +1.
The new orders index edged up but remained negative at -5.6, suggesting an ongoing fall in orders, and the shipments index rose to -0.6.
On the corporate front, education publisher Pearson fell sharply after saying underlying sales for the nine months to the end of September fell 7%.
Housebuilders were also on the back foot amid growing concerns about Brexit.
On the upside, Standard Chartered gained ground on news that India's Essar Group - which owes the bank money - has agreed to sell a 98% stake in its Essar Oil unit to a consortium led by Russia's Rosneft.
Glencore and Anglo American benefited from a note by RBC Capital Markets, which upped its price forecasts for coking coal and thermal coal and recommended investors increase their exposure to non-precious metal mining shares.
RBC recommended shares of Anglo American, Glencore, Rio Tinto and South32. |
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| Market Movers
FTSE 100 (UKX) 6,947.55 -0.94%
FTSE 250 (MCX) 17,792.50 -1.04%
techMARK (TASX) 3,517.61 -0.75%
FTSE 100 - Risers
Rolls-Royce Holdings (RR.) 774.00p 1.24%
Standard Chartered (STAN) 658.40p 0.97%
BT Group (BT.A) 378.65p 0.89%
Lloyds Banking Group (LLOY) 52.82p 0.74%
Glencore (GLEN) 229.90p 0.72%
AstraZeneca (AZN) 4,974.50p 0.56%
Morrison (Wm) Supermarkets (MRW) 221.40p 0.54%
ITV (ITV) 173.40p 0.52%
Anglo American (AAL) 1,010.50p 0.45%
Randgold Resources Ltd. (RRS) 6,820.00p 0.29%
FTSE 100 - Fallers
Pearson (PSON) 762.50p -8.41%
Admiral Group (ADM) 1,945.00p -4.00%
Standard Life (SL.) 324.60p -3.71%
Hargreaves Lansdown (HL.) 1,155.00p -3.02%
Barratt Developments (BDEV) 468.70p -2.90%
DCC (DCC) 6,750.00p -2.74%
Persimmon (PSN) 1,664.00p -2.46%
Legal & General Group (LGEN) 205.70p -2.42%
Royal Mail (RMG) 485.10p -2.37%
Next (NXT) 4,494.00p -2.35%
FTSE 250 - Risers
Drax Group (DRX) 322.10p 3.47%
Telecom Plus (TEP) 1,142.00p 3.25%
Grafton Group Units (GFTU) 524.50p 2.74%
Kaz Minerals (KAZ) 262.00p 1.47%
Ibstock (IBST) 159.80p 1.33%
Spire Healthcare Group (SPI) 382.60p 0.95%
Go-Ahead Group (GOG) 2,025.00p 0.80%
Hastings Group Holdings (HSTG) 210.60p 0.77%
CLS Holdings (CLI) 1,550.00p 0.65%
SIG (SHI) 113.30p 0.62%
FTSE 250 - Fallers
PayPoint (PAY) 1,100.00p -5.82%
Euromoney Institutional Investor (ERM) 944.00p -5.22%
Rank Group (RNK) 193.30p -4.83%
Supergroup (SGP) 1,429.00p -4.16%
Senior (SNR) 208.90p -4.13%
Just Eat (JE.) 522.00p -3.42%
Crest Nicholson Holdings (CRST) 397.90p -3.40%
Renishaw (RSW) 2,782.00p -3.37%
Entertainment One Limited (ETO) 225.30p -3.35% |
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| | US Market Report | | US stocks were in the green on Friday as the Bank of America posted a rise in profits while US industrial production returned to growth.
At 1537 BST, the Dow Jones Industrial Average and the S&P 500 the Nasdaq were both up 0.3%, while the Nasdaq rose 0.4%.
Meanwhile, oil prices retreated after data from oil field service company Baker Hughes showed the number of active US oil rigs last week rose by four to 432.
Brent crude was down 0.97% to $51.45 a barrel while West Texas Intermediate was lower by 1.3% to $49.70 at 1452 BST.
Shares in Bank of America were up 0.5% as it reported third quarter profit unexpectedly increased as expenses fell and bond trading rose.
Revenue rose 3% to $21.64bn, ahead of the $20.97bn anticipated by analysts.
US industrial production rose 0.1% in September following a revised 0.5% fall in August, according to the Federal Reserve. Analysts expected a 0.2% gain.
In contrast, the Empire State manufacturing index fell to -6.8 in October from -2 in September, which was below the consensus +1.
The new orders index edged up but remained negative at -5.6, suggesting an ongoing fall in orders, and the shipments index rose to -0.6.
Paul Sirani, chief market analyst at Xtrade, said news that industrial production has returned to growth is the latest encouraging piece of data to come out in recent weeks, while it was also a positive considering the strength of the dollar and China's weakening trade demands.
He added: "There's more than one box to tick this week, though, and tomorrow's consumer price index will be closely observed. Federal Reserve Chair Janet Yellen knows that she needs to cool off the world's largest economy sooner rather than later, and anything better than expected tomorrow firms up the likelihood of a December hike, and also keeps a pre-election rate rise in the picture."
Naeem Aslam, chief market analyst at Think Markets, said: "What we have today is very much negative data from the US and this is impacting the sentiment in the market. Investors are not thrilled that the Fed is going to increase the interest rate in December - as the odds are highly skewed towards this side.
"If you look at the economic data, the US empire state manufacturing number, it tells you that things are very feeble. The number fell to -6.8 which is really shocking and industrial production number just added the cherry on top by missing the forecast of 0.3% when the actual number printed 0.1%."
September's consumer price index will be published on Tuesday at 1330 BST. |
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| | Broker Tips | | Broker tips: Wood Group, Petrofac, Ashmore, Debenhams Raymond James initiated coverage of Wood Group at 'outperform' with a 900p price target.
It said Wood was in the frontline to take advantage of the oil market recovery it expects.
Raymond James said management has weathered the downturn well, preserving the strong balance sheet.
"Wood's direct exposure to US shale activity, which is one of the earliest beneficiaries in the upturn, is a differentiator within the large European oil service players. The healthy free cash flow generation underpins the steady dividend growth and the bolt-on M&A strategy."
It said the recently-announced reorganisation may lead to more efficiency, adding that the valuation looks compelling, particularly relative to Amec.
Raymond James started Petrofac at 'strong buy' with a 1,200p price target.
It pointed to the many opportunities that exist in the group's core strengths in onshore engineering and construction activities in the Middle East and North Africa, where it is bidding heavily and stands out among the best-in-class contractors.
"As capex is set to drop, we expect free cash flow to grow materially, pointing to rapid deleveraging and continued generous distribution to shareholders. With a 5.9% dividend yield and sound prospects, valuation looks very attractive to us."
Numis has raised its rating on Ashmore Group to 'reduce' from 'sell', citing long-term prospects and foreign exchange (FX) tailwinds.
The broker also lifted its forecasts for earnings per share in fiscal years 2017, 2018 and 2019 by 8%, 3% and 2% respectively, as it expects the company to benefit from FX movements.
"We continue to think Ashmore is a good company with good long term prospects, but its share price is ahead of fundamentals today, albeit given the FX driven gains in the short - term, our negative recommendation moderates from 'sell' to 'reduce'," said Numis.
Numis noted that Ashmore's first quarter update reiterated a lag between an improvement in sentiment and flows. The broker also highlighted the company's apparent acceptance at the September analyst meeting that revenue margin declines will likely be an ongoing problem.
"This highlights that even if we did see bigger net flows returning, the net impact on revenue may be smaller than one might think," Numis said.
Numis reiterated a target of 315p.
Morgan Stanley downgraded Debenhams to 'equalweight' from 'overweight' and cut the price target to 70p from 95p on pension deficit concerns.
"When Debenhams reports its prelims next Thursday, we expect the operating results to be routine. We are concerned, however, that these may be overshadowed by the emergence of a material pension deficit," the bank said.
It pointed to a pension deficit of more than £200m on a scheme that was in surplus this time last year. MS said that in the context of a company whose market capitalisation has fallen to less than £700m, this would be very significant.
"Factoring in a £250m pension deficit into our valuation work reduces our estimate of fair value from circa 95p to circa 70p per share, highlighting how geared Debenhams' equity value has become to even small changes in assumptions."
MS said that while the new price target still implies 25% upside potential, this is not sufficient to keep the 'overweight' stance.
The bank said it prefers overweight-rated Marks & Spencer and B&M, both of which have more potential upside to Morgan Stanley's base case with far less downside risk.
MS said its rating and price target are heavily dependent on the assumption of £250m deficit. |
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