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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: Banks weaken ahead of BoE stress tests Stocks in London fell on Monday, dragged lower by weakness in the banking sector, as investors continued to keep an eye on oil ahead of the Organization of Petroleum Exporting Countries meeting later in the week.
At the closing bell, the FTSE 100 was down 0.6% or 41.28 points at 6,799.47.
In terms of sectors, bank stocks were on the back foot ahead of the Bank of England's stress tests on Wednesday, with RBS, Lloyds, Barclays, HSBC and Standard Chartered all in the red.
The Bank of England was scheduled to publish the results of its 2016 bank stress tests on Wednesday, alongside its biannual Financial Stability Report.
Some lenders might be set to fail this year because the tests had been made harder, Samuel Tombs, chief UK economist at Pantheon Macroeconomics said. To take note of, recent market events such as the large drop in the value of Sterling since Brexit had not been taken into account, Tombs added.
The 2016 edition of the BoE´s tests assessed whether lenders could survive a 10% drop in the UK´s gross domestic product when compared with the BoE´s own baseline forecasts, together with a jump in the unemployment rate to 9.5%.
Sharp falls in Italian bank stocks - amid concerns the country's upcoming referendum on constitutional reform could precipitate the fall of Prime Minister Renzi's government - also weighed on UK peers.
Meanwhile, crude oil futures had bounced back vigorously, with Brent crude up 2.64% to $48.52 a barrel.
Prices had fallen sharply on Friday after Saudi Arabia said it wouldn't meet with non-OPEC Russia ahead of the cartel's summit in Vienna as originally planned.
However, on Monday afternoon Iraqi oil minister Jabar Ali al-Luaibi said he was "optimistic" that OPEC would be able to reach a deal when it met on Wednesday.
IG's Chris Beauchamp said: "It's hard to feel sorry for OPEC, since they always seem to be the authors of their own misery. Having studiously managed, against all expectations, to get their ducks in a row and agree to some outwardly-impressive production freezes, they have now apparently blown apart this tenuous consensus.
"Rising oil prices thanks to the freeze have convinced some that the bad times are over, and that now they can go back to the good old days of arguing over market share. If they fail to come up with a new deal this week, OPEC will have, once again, snatched defeat from the jaws of victory."
Elsewhere, JD Sports Fashion rallied as it acquired outdoor pursuits retail chain Go Outdoors for £128.3m from owners that include private equity group 3i.
Antofagasta edged higher after agreeing to sell the Michilla mine to Chilean mining group Haldeman Mining Company for up to $52m following the closure of the mine at the end of last year.
Aberdeen Asset Management retreated even after its annual results printed in line with expectations and the company maintained its dividend.
Homewares retailer Dunelm ticked up after agreeing to buy the assets of the WS Group - which owns Worldstores, Achica and Kiddicare - for £8.5m.
Capital & Counties Properties was also on the front foot as it said it is on track to hit its estimated rental value target of £100m at Covent Garden by December next year as leasing activity has been positive.
Grainger advanced after agreeing to buy a private rented sector build-to-rent development in Bristol for £45.7m.
On the downside, Tesco fell following a report in The Times that investigators are looking into whether Tesco Bank ignored a warning about a security flaw in its payment system that allowed fraudsters to steal millions of pounds from the accounts of thousands of its customers. |
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| Market Movers
FTSE 100 (UKX) 6,799.47 -0.60%
FTSE 250 (MCX) 17,518.34 -0.48%
techMARK (TASX) 3,276.64 -0.80%
FTSE 100 - Risers
Randgold Resources Ltd. (RRS) 5,965.00p 4.28%
Fresnillo (FRES) 1,278.00p 3.73%
Polymetal International (POLY) 769.50p 3.22%
Centrica (CNA) 209.00p 2.60%
SSE (SSE) 1,495.00p 2.12%
United Utilities Group (UU.) 907.50p 1.45%
Bunzl (BNZL) 2,065.00p 1.13%
Rolls-Royce Holdings (RR.) 672.50p 0.98%
Intertek Group (ITRK) 3,250.00p 0.96%
Severn Trent (SVT) 2,231.00p 0.90%
FTSE 100 - Fallers
Next (NXT) 4,820.00p -2.65%
Royal Bank of Scotland Group (RBS) 196.20p -2.63%
BT Group (BT.A) 350.30p -2.38%
Sky (SKY) 769.00p -2.29%
CRH (CRH) 2,658.00p -1.96%
Burberry Group (BRBY) 1,408.00p -1.95%
Paddy Power Betfair (PPB) 8,440.00p -1.92%
Vodafone Group (VOD) 195.25p -1.86%
Royal Dutch Shell 'B' (RDSB) 2,072.00p -1.85%
Schroders (SDR) 2,819.00p -1.74%
FTSE 250 - Risers
Capital & Counties Properties (CAPC) 285.60p 8.06%
JD Sports Fashion (JD.) 332.50p 4.10%
AO World (AO.) 171.00p 3.64%
CYBG (CYBG) 280.60p 3.28%
Hochschild Mining (HOC) 215.50p 3.01%
Thomas Cook Group (TCG) 82.35p 2.43%
Marston's (MARS) 135.70p 2.26%
Centamin (DI) (CEY) 131.90p 2.09%
Lancashire Holdings Limited (LRE) 650.00p 1.96%
Pennon Group (PNN) 833.00p 1.96%
FTSE 250 - Fallers
Man Group (EMG) 118.10p -4.60%
Pets at Home Group (PETS) 213.40p -4.45%
Evraz (EVR) 243.80p -4.16%
Laird (LRD) 144.80p -4.11%
Aberdeen Asset Management (ADN) 274.80p -3.95%
International Personal Finance (IPF) 278.90p -3.69%
Ashmore Group (ASHM) 284.70p -3.62%
Halma (HLMA) 936.50p -3.45%
Inmarsat (ISAT) 709.00p -3.41% |
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| | US Market Report | | US open: Stocks a little weaker as investors keep an eye on oil US stocks edged lower in early trade, pulling back from the record highs hit last week, with oil prices firmly in focus ahead of a meeting of the Organization of the Petroleum Exporting Countries on Wednesday.
At 1525 GMT, the Dow Jones Industrial Average and the S&P 500 were both down 0.3%, while the Nasdaq was off 0.2%.
Meanwhile, oil prices were higher, bouncing back from the heavy losses suffered after Saudi Arabia said on Friday that it wouldn't meet with non-OPEC Russia ahead of the OPEC summit in Vienna as originally planned.
The meeting was called off after Saudi Arabia, which is the world's largest oil producer, said it wouldn't attend unless there was "a clear decision from OPEC" on production cuts.
West Texas Intermediate and Brent crude were up 2.2% to $47.09 barrel and $48.28, respectively, as investors eyed Wednesday's OPEC meeting, with sentiment getting a boost after Iraqi oil minister Jabar al-Luaibi said he was "optimistic" OPEC would reach an agreement that is acceptable to all this week.
CMC Markets said: "Overall, it looks like the Saudis are prepared to cut but want Russia, Iran and Iraq to cut as well not just freeze production. For the last several months Oil has been trading in a $40-50 range. Currently it's sitting near the middle but whether we end up with a deal or not could send oil to one end of the range or the other later in the week."
In currency markets, the dollar mostly eased back against its rivals, taking a breather after hitting 13-year highs last week, as investors booked some profits ahead of a data-packed week. The greenback was 0.5% firmer against the pound, but flat versus the euro and 0.7% lower against the yen.
In corporate news, Time Inc surged following reports the publisher has rejected a takeover bid from billionaire investor Edgar Bronfman Jr.
Schlumberger was a touch weaker after the oil driller signed a preliminary deal to study an Iranian oil field, while bookseller Barnes & Noble was on the back foot after announcing a 15% discount on online orders as part of Cyber Monday.
Samsung Electronics bucked the trend following reports it is considering splitting into two companies.
There are no US data releases of note due on Monday. |
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| | Broker Tips | | Broker tips: Man Group, Restaurant Group, TalkTalk Man Group slumped as Exane BNP Paribas downgraded the stock to 'neutral' from 'outperform'.
"We see scope for a slowdown in flows as a consequence of flagging performance at AHL and at GLG. Performance issues are also likely to impact the long term outlook for management fee margins."
The bank said the continued sluggish fund performance, impacting the outlook for performance fees and fund flows, prompts material downgrades to its earnings expectations, adding that the amount of surplus capital for materially accretive deals is limited.
Exane cut its earnings per share estimates for FY16 by 15% and for FY17 by 27% as it pointed to lower performance fees, negative performance contribution in the fourth quarter, softer Q4 flow expectations and the stronger US dollar.
"We estimate that AHL Diversified is down -8.1% year-to-date, AHL Alpha -3.5% YTD and AHL Dimension - 3.9% YTD.
"While the relative performance (second quartile) is still decent, this is a bleaker picture than at the half-year results when the same funds were up +5.4%, +0.6% and +0.1% respectively."
Exane highlighted Man Group's acquisition of Aalto Invest and said that while it is a good, well-structured deal, there is limited near-term earnings contribution.
Exane has a 120p price target on the stock.
HSBC initiated coverage of Restaurant Group at 'reduce' with a 290p price target, saying there is a gap between the current share price and the likely pace of recovery at the company.
The bank pointed out that Restaurant Group was one of the UK's most successful restaurant operators for almost a decade, but recent issues caused by pushing hard on prices, inconsistent service levels and a confused proposition have resulted in a series of profit warnings.
"Now, with a new management team in place, a recovery plan is taking shape, although the path is likely to be bumpy given that the restaurant operator has experienced a breadth of issues, along with near term cost and competitive headwinds also working against them.
"Given management's recovery plan, we expect the decline in like-for-like sales to ease over the next two years, though turning around the leisure estate will not be easy to do."
The bank - whose forecasts are 20% lower than consensus - expects full-year 2017 pre-tax profit to struggle to match 2016 due to food price inflation, the national living wage, a weaker pound and rising competition.
HSBC expects LFL sales to remain negative until 2018, recovering thereafter.
"Several industry experts and consultants are even more cautious on the timeline to recovery as the competition command greater brand presence which could eat into Restaurant Group's lunch," it said.
TalkTalk was under pressure as Citigroup cut its price target on the stock to 150p from 230p and kept the stock at 'neutral' saying it was still too risky.
The bank said the fall in the target was due to cutting cash flow forecasts given lower earnings before interest, taxes, depreciation and amortisation and higher capex, and as it takes into account higher net debt coming into the forecast period.
Citi said TalkTalk's first-half results showed net debt continuing to rise rapidly while revenue fell and shifted further into wholesale, undermining gross margin.
It pointed out that the group was forced to add a £75m receivables purchase agreement to improve its facilities headroom but noted the majority of its credit arrangements expire within three years.
"A lot now rests on its October consumer relaunch of more competitive plans for new customers alongside a chunky price rise for the base. We expect the dividend to halve year-on-year in FY18 and see downside risk to consensus." |
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