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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: Footsie little changed despite sharp gains in oil and copper futures London´s top flight index eked out a small rise as the US dollar paused for breath amid big gains for key commodity markets.
The FTSE 100 finished 0.03% or 2.19 points higher at 6,777.96, propped up by gains of 3.5% for front month Brent crude oil futures to $48.68 a barrel and a rise of 2.10% for COMEX-traded copper futures to $2.5350 per pound.
In parallel, traders were digesting the panoply of political news out over the weekend.
Oil futures jumped after Russian president Vladimir Putin said on Sunday: "we will do everything that our partners from Opec are expecting. To freeze crude production is not an issue for us."
A report from Reuters later in the day referencing progress at a two-day meeting between OPEC experts that started on Monday also contributed to oil´s advance.
Copper futures on the other hand were higher on upbeat sentiment about the outlook for demand in China.
"Feedback from last week's CESCO conference in Shanghai will likely be a hot topic [...] overall sentiment was solid, with most Chinese players we spoke to expecting good demand for next year (3-5%) on sustained government stimulus policies and continued signal strength from both customers and national data. [...] From here, the outlook from the hedge funds we spoke to ranged from neutral to cautiously bullish," analysts at Macquarie said in a research note sent to clients.
Meanwhile, the pound bounced back against the US dollar after Prime Minister Theresa May appeared to suggest in a speech to the CBI that she would seek a transitional Brexit deal to soften the impact for businesses once the UK leaves the EU.
By the closing bell, cable was up by 1.05% to 1.2484.
The weekend saw another political upset as ex-French prime minister Francois Fillon (44.2%) beat Nicolas Sarkozy (21%) in the French Republican party's primary elections. Fillon was now set to face another ex-prime minister, Alain Juppe (28.5%), in a second run-off vote on 27 November.
Significantly, some recent polls had shown Fillon easily beating the National Front's Marine Le Pen in a hypothetical confrontation, but there was uneasiness among some observers about the risk that Le Pen might yet upend the current political landscape.
"[Le Pen´s] presidential hopes mighthave risen after the US election result, but based on the polls released since the US elections,her chances have not. However, deep divisions among the Left, intensified by former economy minister Emmanuel Macron's presidential bid, may discourage left-wing voters from voting. This could conceivably give an advantage to Le Pen. Moreover,a rejection of the Italian referendum and a far-right victory in the Austrian presidential elections on December 4 could add momentum to anti-establishment parties," analysts at Morgan Stanley said.
Traders also welcomed news that German Chancellor Angela Merkel had announced she would run for a fourth time in next year´s elections.
Profit warnings from Essentra and MITIE
Higher commodity prices were behind the rise in blue chip resources heavyweights Glencore, Randgold Resources, Anglo American, Fresnillo, Antofagasta and Polymetal International.
Meanwhile, Big oil found a bid on the back of the rise in oil futures.
In corporate news, as well as reporting worse profits for the first half and cutting its dividend, facilities management group Mitie said the second half should see an improvement but the full year turnout will fall short of expectations.
The company also took the decision to withdraw from the domiciliary healthcare market, placing the business under strategic review, with several big write-offs leading to a large first-half loss.
Essentra also cut its profit guidance for the year due to delays in delivering projects, a "soft" Chinese market and the slow integration of an acquisition. The FTSE 250 plastics company now expects the calendar year will see a 7% like-for-like revenue decline in line with the first half of the year, with adjusted operating profit of £137-142m, which was revised down from £155-165m.
The third piece of disappointing profit news came from clothing retailer Bonmarche, which reported a drop in revenue and profit for the 26 weeks to 24 September, attributing the decline in part to the weather and the fact that competitor BHS went into administration.
More positively, GlaxoSmithKline filed a US regulatory submission for a new three-drug inhaler treatment for patients with chronic obstructive pulmonary diseases such as chronic bronchitis and emphysema around 18 months earlier than originally planned.
Technical products supplier Diploma said full-year pre-tax profits rose 4% to £54m on the back of a rise in revenue to £382.6m from £333.8m. The total dividend jumped 10% to 20p a share.
Direct Line skidded lower, with a note from Barclays on the motor insurance sector highlighing that the company faces headwinds from the loss of the Nationwide and Sainsbury's contracts "and faces more pressure in home insurance versus peers".
TalkTalk was also unloved after analysts at Redburn downgraded their recommendation on the shares to a 'sell', telling investors they no longer expected a dividend payment in fiscal years 2018 and 2019.
US science and technology developer Allied Minds has created a new subsidiary, Vatic Materials, which has agreed to license certain technologies from Pennsylvania State University. Vatic Materials will focus on developing materials and fabrication processes for transparent conducting thin films, such as on touch screens, lighting and photovoltaics, which will allow conductive surfaces to be potentially thinner and more cost effective. |
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| Market Movers
FTSE 100 (UKX) 6,777.96 0.03%
FTSE 250 (MCX) 17,527.55 -0.75%
techMARK (TASX) 3,296.36 -0.64%
FTSE 100 - Risers
Randgold Resources Ltd. (RRS) 6,005.00p 3.71%
Fresnillo (FRES) 1,328.00p 3.18%
Anglo American (AAL) 1,122.50p 3.03%
Polymetal International (POLY) 782.00p 2.56%
Pearson (PSON) 785.00p 2.48%
Glencore (GLEN) 268.15p 2.39%
Antofagasta (ANTO) 681.50p 2.33%
BP (BP.) 456.25p 1.92%
Croda International (CRDA) 3,198.00p 1.81%
GKN (GKN) 309.10p 1.58%
FTSE 100 - Fallers
ITV (ITV) 165.60p -2.59%
Whitbread (WTB) 3,511.00p -2.58%
Direct Line Insurance Group (DLG) 346.50p -2.48%
Centrica (CNA) 195.20p -2.20%
Sky (SKY) 750.50p -2.15%
St James's Place (STJ) 932.50p -2.05%
Barratt Developments (BDEV) 479.60p -1.90%
Paddy Power Betfair (PPB) 8,610.00p -1.88%
Schroders (SDR) 2,818.00p -1.88%
Dixons Carphone (DC.) 334.00p -1.82%
FTSE 250 - Risers
Hochschild Mining (HOC) 230.10p 4.45%
Tullow Oil (TLW) 278.80p 4.11%
Centamin (DI) (CEY) 136.50p 3.25%
Cairn Energy (CNE) 198.40p 3.06%
Metro Bank (MTRO) 3,280.00p 2.56%
AO World (AO.) 168.00p 2.44%
Evraz (EVR) 240.50p 1.99%
Hays (HAS) 140.90p 1.95%
Petra Diamonds Ltd.(DI) (PDL) 149.00p 1.85%
Petrofac Ltd. (PFC) 804.00p 1.77%
FTSE 250 - Fallers
Essentra (ESNT) 393.30p -20.43%
Mitie Group (MTO) 190.00p -9.52%
Polypipe Group (PLP) 288.30p -6.03%
Greencore Group (GNC) 290.80p -5.58%
TalkTalk Telecom Group (TALK) 171.00p -5.00%
Laird (LRD) 142.10p -3.79%
Workspace Group (WKP) 663.50p -3.63%
Intermediate Capital Group (ICP) 671.00p -3.58%
Atkins (WS) (ATK) 1,516.00p -3.50%
JPMorgan Indian Investment Trust (JII) 582.50p -3.25% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks higher even as investors mull political risks European stocks advanced as oil and metal prices continued rising and some analysts said the risk of political instability in Europe had weakened somewhat over the weekend, although others remained a tad wary.
The benchmark Stoxx Europe 600 index finished higher by 0.25%, Germany's DAX added 0.19% and France's CAC 40 was 0.56% higher. However, Italy's FTSE MIB edged up by 0.19% as bank shares in the country came under pressure.
Oil prices also rose amid growing expectations that OPEC will agree a production cut at its meeting later this week. Brent crude increased 4.31% to $48.97 per barrel and West Texas intermediate was 4.14% higher at $48.36. The Stoxx 600 oil and gas index gained 2.26% while the sub-index tracking Basic Resources closed up by 2.01%.
Technical experts from OPEC made some progress in the first of two days of conversations to try and hammer out the details for a deal to cut their combined production levels, Reuters reported late in the day.
Politics were in focus in Europe as former French President Nicolas Sarkozy conceded defeat after a vote to choose the centre-right candidate, leaving Francois Fillon and Alain Juppe as contenders to become the centre-right´s candidate in next year´s presidential elections.
"[Le Pen´s] presidential hopes mighthave risen after the US election result, but based on the polls released since the US elections,her chances have not. However, deep divisions among the Left, intensified by former economy minister Emmanuel Macron's presidential bid, may discourage left-wing voters from voting. This could conceivably give an advantage to Le Pen. Moreover,a rejection of the Italian referendum and a far-right victory in the Austrian presidential elections on December 4 could add momentum to anti-establishment parties," analysts at Morgan Stanley said.
Meanwhile, in Germany, Chancellor Angela Merkel confirmed that she will run for a fourth term in office.
"The confirmation that Angela Merkel is set to run for a fourth term as German chancellor in next year's election, combined with a Marine Le Pen-damaging victory for Francois Fillon in the first round of France's right-wing primaries, has given life to the euro this morning," said Spreadex Financial Analyst Connor Campbell.
In a speech delivered at the European Parliament in Strasbourg, European Central Bank chief Mario Draghi reiterated the monetary authority´s commitment to maintaining "the very substantial degree of monetary accommodation, which is necessary to secure a sustained convergence of inflation towards level below, but close to, 2% over the medium-term."
On the corporate front, German chip designer Aixtron slumped after a US regulator moved to stop a planned Chinese takeover of the company.
Italian banks were under the cosh, with Banca Popolare di Milano and Banca Popolare dell'Emilia Romagna both in the red amid worries about political stability ahead of the referendum on constitutional reform on 4 December and concerns about whether lenders can raise the capital they need.
In London, profit warnings weighed on outsourcing group Mitie and plastic and fibre products supplier Essentra.
Meanwhile, GlaxoSmithKline edged lower after saying it has filed a US regulatory submission for a new three-drug inhaler treatment for patients with chronic obstructive pulmonary diseases. |
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| | US Market Report | | US open: Stocks rise as oil prices surge, dollar slips US equity markets opened higher on Monday as oil prices surged, but the dollar fell back against other major currencies.
Trading was light as Thanksgiving approached on Thursday, with markets set to open for just a half-day on both 24 November and on the next day, Black Friday.
The Dow Jones Industrial Average was rising 0.27% to 18,918.20 points, the S&P 500 climbed 0.5% to 2,192.86 points, and the Nasdaq was up 0.68% to 5,357.74 points at 1450 GMT.
As of 1555 GMT, the US dollar spot index was off by 0.37% to 100.84.
Connor Campbell, financial analyst at Spreadex: said: "The Dow Jones also benefited from the dollar's dip this Monday, the greenback maintained its 0.3% loss against the euro, with the US index rising nearly 40 points. That leaves the Dow around 20 points from a fresh all-time peak, though without much actual momentum to push it any higher."
In commodity markets, gold on Comex was rising 0.46% to $1,241.30 per troy ounce at 1441 GMT.
Oil prices jumped amid expectations that OPEC members will agree to slash production at the cartel's next meeting on 30 November.
Brent crude was up 3.04% to $48.33 per barrel and West Texas Intermediate climbed 2.89% to $47.74 at 1442 GMT.
Meanwhile, Stanley Fischer, the Federal Reserve vice chair, said certain fiscal policies could support the US economy by boosting productivity growth.
Speaking to the Council on Foreign Relations, he said: "Some combination of improved public infrastructure, better education, more encouragement for private investment, and more effective regulation all likely have a role to play in promoting faster growth of productivity and living standards.
"By raising equilibrium interest rates, such policies may also reduce the probability that the economy, and the Federal Reserve, will have to contend more than is necessary with the effective lower bound on interest rates."
In corporate news, shares in Tyson Foods plunged 16.03% as the meat processor's quarterly revenue came in lower than expected and that its chief executive Donnie Smith is to step down at the end of the year.
Sales fell 12.8% to $9.16bn for the final quarter of the fiscal year, below expectations of $9.38bn, while it earned 96 cents per share missing the $1.17 forecast from analysts on Wall Street.
Shares in identity theft protection services company LifeLock soared 15.13% after Symantec Corp agreed to buy it for $24 per share, or $2.3bn in enterprise value.
Headwaters' shares also sprang 17.82% as Australia's Boral signed a $1.86bn deal to buy the US building products company. |
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| | Broker Tips | | Broker tips: European recruiters, Mitie, WS Atkins HSBC upgraded staffing groups Page, Hays and SThree to 'buy' ratings as the sector is seen as a key beneficiary of impending inflation.
Trading down at the low end of where they would expect to be in the cycle compared to industrial stocks, HSBC said recruiters are cheaper relative to others due to their strong cash flow and capital discipline in a slow growth environment.
"The current discount relative to industrials seems unwarranted. If there is inflation they may, again, prove operationally geared to increases in the value of sales," the bank said.
Most economists are confident the UK will see a significant rise in inflation in coming months, while in Europe the growth is likely to be more muted.
HSBC said staffers' low financial gearing and net positive cash on their balance sheets should help them sustain the current dividend levels even if inflation is minimal.
Analysts said they would not recommend staffers if there was a high risk of recession in labour markets, which data does not currently imply, with labour scarcity building.
"The correlation of staffing stocks, to bond yields, is striking, largely we believe because wage rate inflation has a geared effect on the P&L."
Growth and margin estimates were lifted for the recruitment companies in the fourth quarter and next year, which has lifted the earnings multiples for each of the stocks, with all of them moved from 'hold' to 'buy'.
Page Group's target was lifted to 440p from 385p; Hays' to 150p from 110p; and SThree to 320p from 270p.
Any major collapse in MITIE´s share price would provide a longer-term opportunity, but shorter-term there were various uncertainties which needed to be resolved, Cannacord Genuity said.
The company´s Facilities Management business was still attractive, and opportunities were still present for it to benefit from being the UK´s largest player in the space, alongside "significant scope" for self-help within the business.
The outsourcer´s average free cash flow of £50m per year over the past decade should underpin the stock to an extent once it exits its Care unit, analysts Matthew Walker and Aynsley Lammin said in a research report sent to clients.
A long-term margin of 5% also looked achievable, they said, so given that the shares were trading on an enterprise value-to-sales (ex Care) ratio of 0.5 "any major collapse in the shares does provide a longer-term opportunity".
However, there remained uncertainty around trading in fiscal year 2018, new management was likely to review its future strategy in early 2017 and speculation around the company´s leverage, given the potential cash costs of exiting its Care arm, left the analysts "less positive" in the short-term.
As an aside, Cannacord expected MITIE to set a full-year target of 2.1 for its earnings cover.
Hence their decision to cut their target on the shares from 270p to 195p, which was ten times´ their estimate for MITIE´s earnings per share in 2010, and to downgrade their recommendation from a 'buy' to a 'hold'.
WS Atkins was under the cosh as Liberum downgraded the stock to 'hold' from 'buy' and cut the price target to 1,600p from 1,720p after the company's first-half results last week.
The brokerage said first-half fully diluted earnings per share were exactly in line, with 13% EPS growth and £3.3m debt provisions above the line.
However, it cut its 2018 FD EPS estimate by 4%, mostly due to the lack of US pipeline and despite FX tailwinds.
It said the performance of the group's Projects, Products and Technology business was disappointing from an earnings and cash perspective.
Liberum increased its net debt estimate from £1m to £39m following a weak H1 and said the target cut reflects lower earnings expectations, a higher pension deficit and higher debt.
Still, the brokerage said there are plenty of opportunities for growth across the divisions. | | |
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