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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 end lower as investors look ahead to US non-farm payrolls UK equities finished Thursday's session in the red as investors erred on the side of caution ahead of the US non-farm payrolls report and as Brexit worries continued to weigh on sentiment.
Traders are eagerly awaiting Friday's non-farm payrolls report for the month of September, which is expected to show employers added 170,000 jobs in September.
Ahead of the report, the Labor Department revealed the number of Americans filing for unemployment benefits unexpectedly fell last week.
US initial jobless claims fell by 5,000 from the previous week's unrevised level to 249,000, marking the 83rd consecutive week of initial claims below 300,000.
"The low level of initial claims indicates that, from the separations side, the labour market remains healthy," said Barclays Research.
"With continuing claims also declining at a rapid rate, these data imply that workers who are losing their jobs are likely finding new ones. We expect this resumption in strength to manifest in improvement in employment growth over the remainder of this year at least relative to the doldrums we saw in the first half of 2016."
Closer to home, the pound hit another 31-year low as Chancellor Phillip Hammond tried to soothe concerns about Brexit during a visit to the US to meet Wall Street bosses.
In an interview with Bloomberg, Hammond said the UK will use Brexit to build on historic trading relationships outside of the EU. He dismissed speculation that the British government is turning anti-business and denied claims that it is pursuing a so-called hard Brexit.
The pound dropped 0.79% to $12.648 at 1656 BST.
His remarks came after UK Prime Minister Theresa May said formal Brexit negotiations would begin by March 2017. German Chancellor Angela Merkel on Wednesday stressed that if Britain wants access to the single market in the EU it must comply with the rules for free movement.
Meanwhile, oil prices surged past $50 a barrel after data from the Energy Information Administration on Wednesday showed another drop in US weekly crude inventories. West Texas Intermediate crude jumped 1.03% to $50.35 per barrel and Brent crude gained 1.16% to $52.47 per barrel at 1659 BST.
In company news, GKN got a lift as HSBC initiated coverage of the aerospace and automotive engineer at 'buy' with a 395p price target.
On the downside, budget airline easyJet flew lower after warning that profits for the year would be hit by the weakening of the pound.
Smith & Nephew was under the cosh as Berenberg downgraded the stock to 'hold' from 'buy' saying it has become more cautious about the organic revenue growth outlook, margins and earnings growth.
Smith & Nephew was also weighed by the fact that its stock went ex-dividend on Thursday, along with Travis Perkins and Aviva.
Homeware retailer Dunelm was down as its first quarter update painted a gloomy picture of recent trading. |
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| Market Movers
FTSE 100 (UKX) 7,013.29 -0.28%
FTSE 250 (MCX) 18,141.33 -0.33%
techMARK (TASX) 3,544.28 -0.29%
FTSE 100 - Risers
TUI AG Reg Shs (DI) (TUI) 1,130.00p 1.44%
Carnival (CCL) 3,831.00p 1.22%
Royal Bank of Scotland Group (RBS) 185.90p 1.14%
Barclays (BARC) 174.25p 1.04%
Experian (EXPN) 1,588.00p 1.02%
Shire Plc (SHP) 5,114.00p 0.95%
Mondi (MNDI) 1,676.00p 0.90%
GKN (GKN) 333.90p 0.82%
Rolls-Royce Holdings (RR.) 760.00p 0.73%
Wolseley (WOS) 4,494.00p 0.56%
FTSE 100 - Fallers
easyJet (EZJ) 936.00p -6.68%
International Consolidated Airlines Group SA (CDI) (IAG) 381.30p -3.91%
Fresnillo (FRES) 1,614.00p -3.64%
Capita (CPI) 632.50p -3.51%
Smith & Nephew (SN.) 1,224.00p -3.24%
British Land Company (BLND) 597.50p -2.92%
Centrica (CNA) 219.20p -2.71%
Travis Perkins (TPK) 1,527.00p -2.55%
Tesco (TSCO) 201.85p -2.54%
Polymetal International (POLY) 854.00p -2.40%
FTSE 250 - Risers
BTG (BTG) 685.00p 5.87%
Tullow Oil (TLW) 274.30p 4.77%
Aldermore Group (ALD) 192.50p 2.23%
AO World (AO.) 173.90p 2.11%
Smith (DS) (SMDS) 398.20p 1.66%
Victrex plc (VCT) 1,660.00p 1.47%
Croda International (CRDA) 3,610.00p 1.46%
Drax Group (DRX) 307.50p 1.35%
Fidelity China Special Situations (FCSS) 185.30p 1.26%
Tate & Lyle (TATE) 771.50p 1.25%
FTSE 250 - Fallers
Dunelm Group (DNLM) 819.00p -4.49%
Hochschild Mining (HOC) 250.30p -3.73%
Entertainment One Limited (ETO) 224.50p -3.48%
Ted Baker (TED) 2,461.00p -3.19%
Wizz Air Holdings (WIZZ) 1,625.00p -3.10%
Countrywide (CWD) 209.90p -3.00%
Unite Group (UTG) 617.00p -2.91%
Countryside Properties (CSP) 245.90p -2.88%
Aberdeen Asset Management (ADN) 338.90p -2.78% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Markets tread cautiously ahead of US jobs data European stocks reversed earlier gains to trade a little lower as caution crept in ahead of Friday's US non-farm payrolls release.
The benchmark Stoxx Europe 600, Germany's DAX and France's CAC 40 were all down 0.3%.
Meanwhile, oil prices were steady after rallying overnight on the back of US Energy Information Administration data showing crude supplies fell by 3m barrels in the week ended 30 September, down for the fifth straight week.
West Texas Intermediate crude oil futures on the other hand continued to gain altitude, rising 1.163% to $52.47 a barrel and Brent crude was up 1.05% at $50.38.
Joshua Mahony, market analyst at IG, said: "Despite an incredible start to the week, we are seeing hesitancy creep in ahead of the week's main event, with the chances of a December hike likely to be dictated by forthcoming data.
"European and US markets are looking at a relative lull in economic data, with traders hotly anticipating tomorrow's jobs report. However, despite the lack of market moving events, strong gains for stocks and the US dollar earlier in the week will provide us with a theme that is expected to return soon enough."
Investors will be eyeing the release of the European Central Bank's minutes of the September meeting at 1230 BST. The minutes could provide some clues as to why the Governing Council chose to remain silent about the possible extension of quantitative easing.
On the corporate front, Deutsche Bank rallied on reports that German officials have said the government was pursuing discreet talks with US authorities to help the lender secure a swift settlement over the mis-selling of mortgage-backed securities.
The banking sector also got a boost from a note by Citigroup, which upped its recommendation on European banks to 'overweight' from 'neutral'.
Deal news also helped to lift the mood, with Osram Licht shares sharply higher on reports it has received a takeover offer from Chinese chipmaker Sanan Optoelectronics Co.
On the downside, budget airline EasyJet tanked after warning that profits for the year would be hit by the weakening of the pound. |
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| | US Market Report | | US open: Stocks fall on investor caution ahead of non-farm payrolls US stocks fell as investors sat on their hands ahead of Friday's non-farm payrolls report.
At 1526 BST the Dow Jones Industrial Average dropped 0.45% to 18,198.57 points, the S&P 500 declined 0.28% to 2,153.56 points and the Nasdaq edged down 0.43% to 5,293.31 points.
Oil prices, on the other hand, were higher after data from the Energy Information Administration showed another drop in US weekly crude inventories. West Texas Intermediate crude rose above the $50 per barrel mark for the first time since June, up 0.83% to $50.25 per barrel. Brent crude gained 0.7% to $52.37 per barrel.
Meanwhile, the main event this week is Friday's non-farm payrolls report as the Federal Reserve considers the health of the labour market in deciding the timing of the next interest rate hike.
Economists expect the report to show US employers added 170,000 jobs in September following a 151,000 increase in August. The unemployment rate is forecast to remain at 4.9%.
Ahead of the report, the Labor Department revealed the number of Americans filing for unemployment benefits unexpectedly fell last week.
US initial jobless claims fell by 5,000 from the previous week's unrevised level to 249,000.
This marked the 83rd consecutive week of initial claims below 300,000 - the longest streak since 1970.
The four-week moving average came in at 253,500, down 2,500 from the previous week's unrevised level. This is the lowest level for this average since 9 December, 1978.
"The low level of initial claims indicates that, from the separations side, the labour market remains healthy," said Barclays Research.
"With continuing claims also declining at a rapid rate, these data imply that workers who are losing their jobs are likely finding new ones. We expect this resumption in strength to manifest in improvement in employment growth over the remainder of this year at least relative to the doldrums we saw in the first half of 2016."
On the corporate front, Twitter shares tumbled following a report that Alphabet's Google is not planning to make a bid for the company.
Technology news website Recode also cited sources familiar with the matter on Wednesday as saying that Disney and Apple were also unlikely to make a bid.
Yum Brands share fell after its quarterly results released late on Wednesday missed analysts' expectations. |
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| | Broker Tips | | Broker tips: GKN, Smith & Nephew, Europe banks HSBC initiated its rating on GKN at 'buy' with a target of 395p on Thursday, saying it believes the automotive and aerospace engineer is a "well-managed, technology-led, high market share business".
The bank said GKN has a clear strategy focused on sustainable growth. The delivery of shareholder value is bearing fruit with new technology and the possibility of further acquisitions providing potential for enhanced earnings, HSBC added.
"We believe that GKN has strong brand recognition in its chosen markets.
"For example, 90% of the world's automotive manufacturers partner with GKN and it supplies passenger cabin windows for all of Boeing and many of Airbus aircraft."
HSBC sees the main drivers of future growth as: demographics - globalisation, rising population, urbanisation and ageing; environmental - fuel efficiency, electrification and automation; and technology - additive and digital manufacturing.
The bank said GKN has world-leading technology, is an important supplier to major original equipment manufacturers in its core end markets and has exposure to structural growth drivers.
"This is compounded with the potential for the group to expand margins, improve earnings quality and thus enhance valuation multiples," HSBC said.
"We accept that the group's lower-than-sector margins and large pension liability are a cause for GKN's valuation discount, but even when adjusting for these, the stock still looks cheap."
HSBC expects the third quarter trading update on 25 October to be in line with forecasts and to highlight a continuation of the positive trends seen in the first half of 2016.
Smith & Nephew's shares fell on Thursday as Berenberg downgraded the stock to 'hold' from 'buy' and cut the target to 13.40p from 14.85p.
"Smith & Nephew has gradually de-emphasised its slower growth areas and implemented various cost-savings measures, reinvesting the proceeds in faster growth areas of the business," according to Berenberg.
"However, the success of this strategy has been largely offset by various missteps and one-off headwinds, a trend we expect to continue."
Berenberg said it has become more cautious about the medical equipment manufacturing company's organic revenue growth.
While the broker expects earnings growth to accelerate to 12% in 2017, three percentage points of it is dependent on a yet-to-be announced buyback, which is far from certain.
"Hence we no longer expect a large enough inflection in earnings growth of sufficient quality to drive the stock higher and reduce our rating to 'hold'."
Berenberg added that it believes Chinese destocking, a slowdown in oil states, share losses in Wound Care and a weak hip business are all hampering growth.
"Other parts of the business, such as Knees and Sports Medicine Joint Repair, are continuing to trend well, in our view, but when more than 40% of sales are either declining or virtually stagnating, as we expect to be the case in Q3 2016, it is hard for the group to deliver the mid-single-digit revenue growth that we think is needed to: a) drive operating leverage; and b) satisfy shareholders."
Berenberg said it thinks revenue growth and the pace of margin expansion are likely to fall short of investor expectations in the next 12 to 18 months.
The broker said an eventual emergence of a bid for the company seems likely but it has now been 48 years since the idea was first appreciated when Unilever tried to acquire the firm so it might be "a long time coming".
It's been a turbulent couple of weeks for the banking sector as investors worried Deutsche Bank wouldn't be able to cough up its $14bn fine to the US Department of Justice, but Citigroup provided some cheer for the sector by upgrading European banks to 'overweight' from 'neutral'.
In its latest equity strategy note, Citi pointed out that eurozone banks are the worst performing region/sector of the 285 it tracks in the last 10 years, making them the world's "biggest contrarian position".
Citi said that while it acknowledges fundamental headwinds such as low interest rates and regulatory risks, there are also signs of improvement such as the credit cycle, loan growth and improving returns.
"European banks are back to 2008-09 and 2011-12 levels on several valuation metrics, i.e. previous levels of system risk. European banks have never traded this cheap relative to US banks, the gap between European bank credit and equity is at system risk wides and banks have been sharply de-rated in the last year on a DY relative basis.
"The sector is better priced for disappointments and not priced for reducing risks, in our view."
However, Citi wasn't bullish across the board, as it remained cautious on UK domestic banks.
The bank downgraded telecoms to 'neutral' to fund the move on banks, but said it continues to prefer telecoms to utilities. | | |
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