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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: Retail and property feature as FTSE retains gains after Yellen speech London equities ground their way marginally higher on Thursday in what was an overall cautious session, which also saw Federal Reserve chair Janet Yellen issue a hawkish comment that the US central bank needs to remain "forward looking" when setting policy.
At the close, FTSE 100 was up 0.67% to 6794.71. At about 17:01 GMT, sterling was up 0.05% to buy $1.2449 and the dollar-spot index was up 0.22% to $100.630.
Yellen added the Fed needed to be mindful of the risks that might be inherent in keeping rates low beyond their past due date. She also appeared to have joined the camp of those who believed another rate hike might be appropriate soon.
"Were the FOMC (Federal Open Market Committee) to delay increases in the federal funds rate for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of the Committee's longer-run policy goals.
Moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and ultimately undermine financial stability."
Returning to the FTSE, blue-chip gains were underpinned by buoyant turns by house builders, commercial property and miners, with US rates-touchy utilities gaining and retail-related stocks nipping ahead on macro data.
UK consumers continued to spend freely in October, surprising most economists. Retail sales volumes jumped 1.9% month-on-month, handily beating estimates for a rise of 0.5%.
"The markets sort of flattened out this afternoon, with a couple of items from the US cancelling out the moves made following the UK retail sales and Eurozone inflation figures earlier in the day," said Spreadex financial analyst Connor Campbell.
IG market analyst Josh Mahony described Thursday's session as yet another one laden with hesitation, noting the FTSE's rise had failed to bust out of its week-long range.
"The dollar is enjoying another resurgence after somewhat of a lull yesterday, with Janet Yellen's hawkish comments further raising expectations of a December hike," Mahony said.
"Unlike (Bank of England governor Mark) Carney, Yellen isn't going anywhere, after discarding the notion that she will step down earlier than planned."
On the data front, inflation in the euro-area was 0.5% on the year in October, up from 0.4% the month before, the highest reading in 28 months, according to Eurostat figures. Consumer prices were up 0.2% last month in the single-currency bloc.
Meantime, US initial jobless claims unexpectedly fell 19,000 from the previous week to 235,000 on 12 November 2016, when economists had been expecting a slight rise to 257,000.
US' headline consumer-price index (CPI) advanced 0.4% month-on-month in October and was up by 1.6% year-on-year, versus a rise of 1.5% in September, the Bureau of Labor Statistics said. Core CPI rose 0.1% during the month.
Markets were also expected to keep close tabs on the results of the first meeting between US President-elect Donald Trump and a foreign leader, Japanese prime minister Shinzo Abe.
Acting as a backdrop, reports indicated that JP Morgan Chase chief Jamie Dimon had turned down an offer to become the next US Secretary of the Treasury.
In corporate news, Royal Mail slumped after it said half-year revenue edged up thanks to its European business, but the EU referendum resulted in a reduction in UK marketing activity.
Building materials group CRH gained as it reported a 6% rise in cumulative sales in the first nine months of the year and said it continues to expect earnings for the year to be in excess of €3bn, while Great Portland Estates lost ground after reporting a half-year loss.
Engineering consultancy WS Atkins declined as it posted a 14% rise in underlying pre-tax tax profit for the six months to the end of September, but a 58% drop in statutory pre-tax profit.
Rio Tinto edged higher after terminating the contracts of two directors following an internal review into a controversial payment to a consultant concerning the Simando iron ore project in Guinea.
Investec advanced as it said first-half profit pushed up 20%, while Ted Baker rallied after it said revenue in the third quarter rose 14.8%, up a touch from the 14.4% acceleration seen in the first half of the year.
Merchant bank Close Brothers was also in the black as it said it has made a "very good start to the year", mainly on the back of strength in its banking division and higher trading income in market maker Winterflood. |
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| Market Movers
FTSE 100 (UKX) 6,794.71 0.67%
FTSE 250 (MCX) 17,600.94 0.73%
techMARK (TASX) 3,320.98 0.61%
FTSE 100 - Risers
Randgold Resources Ltd. (RRS) 6,085.00p 4.02%
Barratt Developments (BDEV) 486.00p 3.51%
Mondi (MNDI) 1,558.00p 3.11%
BT Group (BT.A) 373.40p 3.11%
Persimmon (PSN) 1,763.00p 3.10%
Anglo American (AAL) 1,126.50p 2.97%
British Land Company (BLND) 610.00p 2.95%
Provident Financial (PFG) 2,929.00p 2.77%
Taylor Wimpey (TW.) 152.10p 2.42%
Antofagasta (ANTO) 687.50p 2.31%
FTSE 100 - Fallers
Royal Mail (RMG) 464.00p -7.00%
Rolls-Royce Holdings (RR.) 699.00p -5.35%
Hikma Pharmaceuticals (HIK) 1,664.00p -3.98%
Johnson Matthey (JMAT) 3,227.00p -3.24%
TUI AG Reg Shs (DI) (TUI) 1,001.00p -2.82%
Sainsbury (J) (SBRY) 237.60p -0.75%
Lloyds Banking Group (LLOY) 59.98p -0.71%
Sky (SKY) 784.50p -0.70%
Bunzl (BNZL) 1,991.00p -0.65%
Polymetal International (POLY) 788.50p -0.44%
FTSE 250 - Risers
Vectura Group (VEC) 145.70p 8.41%
IMI (IMI) 948.00p 3.72%
Rightmove (RMV) 3,807.00p 3.70%
Debenhams (DEB) 57.95p 3.57%
Hill & Smith Holdings (HILS) 1,255.00p 3.47%
Daejan Holdings (DJAN) 5,670.00p 3.47%
Telecom Plus (TEP) 1,182.00p 3.41%
AA (AA.) 263.00p 3.38%
Zoopla Property Group (ZPLA) 313.80p 3.26%
Safestore Holdings (SAFE) 358.50p 3.22%
FTSE 250 - Fallers
Lancashire Holdings Limited (LRE) 636.50p -9.46%
Virgin Money Holdings (UK) (VM.) 316.70p -6.44%
Softcat (SCT) 306.00p -5.99%
Redefine International (RDI) 37.35p -3.79%
Atkins (WS) (ATK) 1,614.00p -2.77%
Greencore Group (GNC) 312.90p -2.62%
TalkTalk Telecom Group (TALK) 185.00p -2.37%
JPMorgan Indian Investment Trust (JII) 597.50p -1.89%
Fisher (James) & Sons (FSJ) 1,563.00p -1.88%
Man Group (EMG) 123.10p -1.76% |
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| | US Market Report | | US open: Markets mostly higher with December rate hike in the offing US equity markets were mostly higher on Thursday as investors largely shrugged off Reserve chair Janet Yellen all but confirming a December rate hike in her testimony to Congress.
The Dow Jones Industrial Average dropped 0.02% to 18,863.55 points, but the S&P 500 rose by 0.21% to 2,181.46 points, and the Nasdaq climbed 0.21% to 5,305.82 points at 1526 GMT.
Yellen, who appeared before the joint economic committee on Capitol Hill, said the Fed expects the growth of the US economy "will warrant only gradual increases in the federal funds rate over time to achieve and maintain maximum employment and price stability".
Neil Wilson, market analyst at ETX Capital, said there was slight rise in US Treasury yields, but there was little effect on financial markets after Yellen said interest rates could rise soon.
"The fact is a December rate hike has already been priced in - markets think there is a roughly 90% chance the Fed will increase the target federal funds rate. It now looks almost impossible for the Fed not to raise rates next month - it's painted itself in a corner and has to respond with a hike or all hell will break loose in the markets.
"Today's jobless numbers - showing unemployment at a four-decade low - only strengthens the case for the Fed to act. Rising bond yields since Donald Trump's win further add to the argument for the central bank to raise rates. Longer term, Trumpflation may not be all it's cracked up to be as a savings glut exists globally.
"The dollar is trading just shy of its highest level in 13 years, while the pound is trading virtually unchanged against the greenback."
On the date front, the Labor Department revealed that initial jobless claims dropped 19,000 from the previous week to 235,000, better than the expected rise to 257,000. This was the lowest number of Americans filing for unemployment benefits in 43 years.
It also said that the consumer price index in October increased 0.4% after rising 0.3% in September, and in line with expectations.
In the 12 months to October, the index surged 1.6%, which was the biggest year-on-year increase since October 2014.
The Commerce Department said that housing starts rose more than expected in October, surging 25.5% from the revised September figure to a seasonally-adjusted rate of 1.32m. This was a nine-year high and surpassed expectations for an increase to 1.15m.
In commodity markets, gold on Comex increased by 0.07% to $1,224.70 per troy ounce at 1450 GMT.
Oil prices gained, as Brent crude rose 1.7% to $47.44 per barrel and West Texas Intermediate was up 1.74% to $46.38 at 1502 GMT.
In currency markets, the dollar climbed 0.32% against the yen to 109.43, but was down 0.04% versus sterling to 0.8034 and lower by 0.05% against the euro to 0.9349.
In corporate news, shares in Wal-Mart fell 3.32% as the retail behemoth's third-quarter revenue rose less than expected and profit fell.
Revenue was up 0.7% to $118.2bn, below expectations for $118.69bn, while profit dropped to $3.03bn, or 98 cents a share, compared with $3.3bn and $1.03 a year ago, but above projections of 90 cents to $1.
However, Best Buy's shares surged 6.75% as the electronics retailer's fourth-quarter revenue rose above forecasts.
Revenue grew 1.4% to $8.95bn, above expectations of $8.4bn and profit increased to $194m, or 60 cents a share, from $125m or 37 cents last year.
Gap and Applied Materials are slated to report earnings after markets close. |
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| | Broker Tips | | Broker tips: TUI, Aggreko, Boohoo Morgan Stanley downgraded TUI to 'equalweight' as it expects the travel group's heavy investment programme will dilute cash flow and earnings per share.
The rating on the Anglo-German tour operator was cut from a previous 'overweight' rating and its price target cut to 1,100p from 1,200p.
While the company has had a strong year and is on track once again to exceed its 10% EBIT growth target, and in 2017 it should benefit from further merger synergies, new cruise ships, savings in Germany and France returning to a profit, there were still doubts.
Morgan Stanley thinks TUI will spend the €1.5bn proceeds from the HotelBeds disposal "on a heavy capex programme rather than M&A or cash returns, meaning the EPS dilution may be permanent, and FCF will remain poor".
Other downsides are the likelihood the UK will suffer from the weak pound, there is more competition coming from Jet2in the UK and Ryanair in Germany and that rebranding Thomson to TUI in the UK could bring some risk.
Although TUI looks cheap on a 1.0 times p/e-to-growth ratio and offers an attractive 5.5% 2017 dividend yield, peers such as Thomas Cook and the airline stocks have derated "and while TUI's Hotels and Cruise operations are more highly rated, its FCF is weak".
Jefferies upgraded Aggreko from 'underperform' to 'hold' but maintained its price target of 750p.
The broker cut its earnings per share estimate for 2017 to 60.15p from 66.71p and for 2018 from 72.47p to 66.27p. The 2017 forecast was 3-5% lower than the consensus.
The third quarter interim management statement (IMS) provided visibility over concerns surrounding the company's Argentina contract being re-tendered at lower rates and the 'difficult' collection of the venezuelan debt, Jefferies said.
The broker's base case for Argentina called for a reduction from around £75m in earnings before interest tax and amortisation (EBITDA) to £20m and for a £20m write off for Venezuela, resulting in a £212m profit before tax for the full year in 2017.
Jefferies also cautioned that "we still worry about an oversupplied market with flaccid demand, although helpfully we estimate that the key turnkey competitor, APR Energy, has utilisation of 60% potentially improving to 75%."
Returns look to have been structurally impaired, but the 11-12% post tax return on invested capital (ROIC) is still reasonable and yields an enterprise value/invested capital (EV/IC) ratio of 1.5, analysts Will Kirkness and Kean Marden said in a report sent to clients.
Liberum downgraded Boohoo.com to 'hold' from 'buy' on valuation grounds after the stock rose more than 216% year-to-date.
In a note on clothing retailers, Liberum said it remains bullish on Boohoo's prospects, but on a price-to-earnings ratio of 72x February 2017 after a surge in the share price, the stock should pause for breath.
The brokerage said Boohoo offers a significant early stage growth opportunity. "Capex of more than £100m over the next five years will lay a platform to grow sales to over £1bn versus £195m in FY16 and this will all be funded from internally generated cash. It sells only its own brand, which supports high margins." |
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