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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 after non-farm payrolls as traders eye US election London stocks retreated on Friday as the US non-farm payrolls report was seen to put the Federal Reserve on course for a December interest rate hike and amid US election uncertainty.
The FTSE 100 fell 1.43% to 6,693.26 points at the close.
The non-farm payroll rose by a seasonally adjusted 161,000 in October, the Labor Department revealed. While it was less than the 175,000 increase expected by analysts, September's figures were revised to 191,000 from a preliminary estimate of 156,000.
The unemployment rate also fell to 4.9% from 5.0%, as expected, while average hourly earnings grew at the strongest rate since June 2009. Earnings jumped 2.8% in October compared to a year earlier following a 2.7% increase in September and compared to estimates for a 2.6% increase.
"US non-farm payrolls missed headline forecasts, but a good rise in wages means that a December Fed move looks even more likely," said Chris Beauchamp, chief market analyst at IG.
However, the analyst said "nothing is certain" and a win by Republican presidential candidate Donald Trump at next week's US election might derail the hike.
Support for Democratic party contender Hillary Clinton is at 44.4% compared to 43.9% for Trump, according to the latest IDB/TIPP poll.
A RealClearPolitics average of polls showed Clinton's lead at 1.5 points early on Friday, up a touch from 1.3 points late on Thursday, but still lower than her seven point lead in mid-October.
Paul Sirani, chief market analyst at Xtrade, said: "Judging by the polls, Donald Trump has battled his way back into contention, and while a Hillary Clinton remains the most likely victor, a shock result on Tuesday could trigger another set of Brexit-style shudders through markets across the globe."
In other US news, the trade deficit dropped 10% in September to a 19-month low of $36.4bn from a revised $40.5bn in August, government data showed. Economists had expected the trade gap to total $36.9bn.
Among corporate stocks, Hikma Pharmaceuticals was under the cosh as Numis upgraded the stock to 'buy' from 'hold' but cut its target to 2,350p from 2,660p.
Dixons Carphone was on the back foot, giving back some of the gains from the previous session, when it was boosted by an upgrade to 'equalweight' by Morgan Stanley.
Housebuilders Taylor Wimpey, Persimmon and Crest Nicolson retreated. Mike van Dulken, head of research at Accendo Markets, attributed the decline to several factors including a weak pound sending the Bank of England's inflation expectations on Thursday through the roof.
"The potential for pressure on household financing could well hold back not only already very stretched first-time buyers but existing homeowners hoping to try and climb another rung on the UK's fabled win-win property ladder."
British Airways and Iberia parent International Consolidated Airlines Group flew lower after it cut its target for average annual earnings before interest, taxes depreciation, amortisation and rental costs to around €5.3bn from 5.6bn previously.
On the upside, Paddy Power Betfair was the standout gainer as it upped its guidance for underlying earnings this year to between £390m and £405m from £365m to £385m. The group also said on Friday that third-quarter sales were up 25% to £404m.
Tullett Prebon rose after reporting a 15% jump in third-quarter revenue as it got a boost from the weaker pound, as 60% of group revenues are denominated in US dollars.
Temporary power provider Aggreko advanced as Morgan Stanley upped the stock to 'equalweight' from 'underweight' and lifted the price target to 900p from 850p.
DFS shares slid as US private equity firm Advent International cut its stake in the furniture retailer by half. |
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| Market Movers
FTSE 100 (UKX) 6,693.26 -1.43%
FTSE 250 (MCX) 17,271.24 -1.77%
techMARK (TASX) 3,268.18 -1.20%
FTSE 100 - Risers
Paddy Power Betfair (PPB) 8,935.00p 4.14%
BAE Systems (BA.) 539.00p 0.84%
Rolls-Royce Holdings (RR.) 712.50p 0.71%
SSE (SSE) 1,574.00p 0.70%
United Utilities Group (UU.) 923.50p 0.16%
CRH (CRH) 2,552.00p 0.04%
Sky (SKY) 811.00p 0.00%
Informa (INF) 677.50p -0.22%
National Grid (NG.) 1,017.00p -0.34%
Burberry Group (BRBY) 1,415.00p -0.35%
FTSE 100 - Fallers
Hikma Pharmaceuticals (HIK) 1,626.00p -6.82%
Dixons Carphone (DC.) 323.70p -5.21%
Persimmon (PSN) 1,677.00p -4.61%
Royal Bank of Scotland Group (RBS) 185.00p -4.59%
Fresnillo (FRES) 1,625.00p -4.58%
Randgold Resources Ltd. (RRS) 6,790.00p -4.50%
Old Mutual (OML) 187.50p -3.85%
International Consolidated Airlines Group SA (CDI) (IAG) 434.70p -3.57%
Tesco (TSCO) 202.50p -3.57%
Taylor Wimpey (TW.) 141.90p -3.54%
FTSE 250 - Risers
Tullett Prebon (TLPR) 383.50p 4.33%
CYBG (CYBG) 282.40p 2.73%
Aldermore Group (ALD) 177.50p 2.48%
Aggreko (AGK) 807.00p 2.35%
Electra Private Equity (ELTA) 4,422.00p 1.84%
Entertainment One Limited (ETO) 239.60p 1.65%
F&C Commercial Property Trust Ltd. (FCPT) 129.90p 1.33%
Kennedy Wilson Europe Real Estate (KWE) 1,027.00p 1.18%
Shawbrook Group (SHAW) 245.00p 1.16%
Berendsen (BRSN) 949.50p 0.96%
FTSE 250 - Fallers
DFS Furniture (DFS) 238.50p -9.56%
Tate & Lyle (TATE) 757.00p -6.20%
Mitchells & Butlers (MAB) 266.20p -5.67%
Centamin (DI) (CEY) 156.90p -5.08%
Indivior (INDV) 350.50p -5.01%
Lancashire Holdings Limited (LRE) 720.00p -5.01%
Regus (RGU) 233.80p -5.00%
Just Eat (JE.) 553.00p -4.98%
Inmarsat (ISAT) 767.50p -4.72%
Carillion (CLLN) 242.80p -4.56% |
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| | US Market Report | | US open: Stocks rise on non-farm increase as presidential election looms US stocks were in the green as data revealed that hiring and wages surged in October but missed new job expectations, while the close-run presidential race entered the final few days.
The Dow Jones Industrial Average rose 0.12% to 17,951.53 points, the S&P 500 climbed 0.08% to 2,094.66 points and the Nasdaq increased 0.3% to 5,073.49 points at 1500 GMT.
Oil prices were down as growing tensions between Iran and Saudi Arabia could foil a potential deal to slash production.
Brent crude declined 0.73% to $46 per barrel and West Texas Intermediate slid 0.24% to $44.55 at 1458 GMT.
Data from the Labor Department showed that hiring rose in October as wage growth accelerated at its strongest pace since 2009.
Non-farm payrolls increased a seasonally adjusted 161,000 from an upwardly revised gain of 191,000 in September, while the jobless rate fell to 4.9% in October from 5.0% as the labour force contracted.
Analysts had expected 173,000 new jobs and a 4.9% jobless rate.
Average hourly earnings rose 2.8% in October compared to a year earlier following a 2.7% increase in September and compared to estimates for a 2.6% increase.
Alex Lydall, head of dealing at Foenix Partners, said the economy shifted up a gear on Friday with the slight miss on the payroll number unlikely to derail ambitions of a December Federal Reserve rate hike.
"Despite the pantomime-like affairs in the presidential race set to conclude next week, the modestly lower non-farm figure was coupled with a solid unemployment rate and a growing hourly wages level, likely to prevent a further sell-off in the greenback that we saw yesterday.
"Janet Yellen subtly hinted on Wednesday evening what most investors are forecasting - a December hike - and in the absence of any shock data in the coming weeks the path appears to be set. Markets are tentatively poised for the announcement of the next US president, with the poignant question being: is the reaction on currencies a move depicted in the greenback or more a risk-related asset move?"
A RealClearPolitics average of polls showed Democratic candidate Hillary Clinton's lead at 1.5 points early on Friday, up a touch from 1.3 points late on Thursday, but still lower than her seven point lead in mid-October.
"Political uncertainty has already taken its toll in the past few weeks, with the year's lowest trading levels reported in October and today's weaker than expected jobs market figures," Paul Sirani, chief markets analyst at Xtrade, said.
"We are now faced with an unpredictable period of market activity with a number of potential dangers on the horizon.
"Judging by the polls, Donald Trump has battled his way back into contention, and while a Hillary Clinton remains the most likely victor, a shock result on Tuesday could trigger another set of Brexit-style shudders through markets across the globe."
Meanwhile, the US trade deficit narrowed to $36.4bn in September from $40.5bn in August, which was a 19-month low after a fourth straight increase in exports which boosted the third quarter.
In corporate news, Starbucks' shares rose 2.65% as fourth-quarter results released late on Thursday said the coffee giant was ahead of estimates for earnings per share and revenue. |
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| | Broker Tips | | Broker tips: Aggreko, Hikma, Croda Morgan Stanley upgraded power generator company Aggreko from 'underweight' to 'equal weight' and bumped up its target from 850p to 900p, despite orders for diesel products falling.
"We retain our concerns over long-term pressures on the International power Projects (IPP) business model. However, we upgrade as the shares now trade almost two standard deviations below mid-cycle multiples, 2017 consensus estimates look supported, and we see signs that underlying trading and returns should improve in 2017," Morgan Stanley said.
Returns are falling due to lower utilisation in diesel, contract loss,and pricing and return on capital employed (ROCE) is below its target range.
The analysts however feel returns could bounce back in 2017 due to cost savings and the recent fall in share price discounts.
If the relationship between Warstilla solutions and IPP orders holds performance can improve from current levels after orders dropped in 2015. Trading profit for 2017 also suggests consensus of £279m should be supported.
Shares have fallen by 40% since the peak in July and now trade at 10.4 times price earnings and earnings before interest tax and amortisation of 8.6 times so valuation looks fair even thought out long term structural concerns on IPP persist.
Numis on Friday upgraded its rating on Hikma Pharmaceutical to 'buy' from 'hold' but cut its target to 2,350p from 2,660p.
Hikma's shares have fallen 35% over the past three months and significantly underperformed UK Mid-Cap Healthcare and Global Specialty Pharma, Numis highlighted.
"The key risk to the investment case following the downgrades in August to fiscal year 2016 forecasts are margin expectations from Generics that have disappointed since the acquisition of Roxane, which completed in early 2016," the broker said.
"A third quarter update is expected next week and in the short - term, a reduction to group revenue expectations for fiscal year 2016 would be a disappointment, but in the absence of competition for Glycopyrrolate, view this as unlikely."
Numis said a further reduction in margins for generic medicines in 2016 is "entirely possible" but argued this is now reflected in the price.
However, Numis is taking a "more cautious stance" on margins for generics into 2017, and reduced its earnings per share forecasts by 13% to $1.36.
The key drivers of 2017 include the relaunch of Bedford's injectable products, the maintenance of Injectables margins, the approval of a generic version of asthma treatment Advair and operating leverage in the generics business.
For 2016, Numis sees profit before tax falling to $315.5m after an "exceptional" year in 2015 at $355m. The broker expects to see a return to profit growth in 2017 with pre-tax profit of $413.6m.
However, the expected EPS of $1.36 in 2017 would compare to $1.42 in 2015. In 2016 EPS is forecast to fall to $1.11.
"The shares now trade on 16x our downgraded 2017 EPS forecast and offer 23% EPS growth, with peers trading on >21x for 20% growth."
Credit Suisse downgraded Croda International to 'neutral' from 'outperform' on valuation grounds, keeping the price target at 3,500p.
"We believe Croda now represents fair value trading on an average of specialty chemicals and staples customers multiples," the bank said.
"Croda has re-rated from around 9x to 15x EV/EBITDA over the last two years as management have restored earnings growth - we believe this now represents fair value with a neutral risk reward bias."
It expects near-term earnings headwinds in 2017/18 from upfront investment costs, product trimming and price pressure in Omega-3.
For Industrial Chemicals, CS cut its forecast earnings before interest and taxes from £6m to breakeven in 2016, given the ongoing weakness in by-product markets and continued organic sales declines in the third quarter.
In Performance Technologies, it factors in £3m headwind from ramp costs at the new Atlas Point facility plus an additional £1m of depreciation expense as the plant comes online in the fourth quarter of next year.
For Consumer Care, Credit Suisse factors in £1m headwind from ramp costs at the new Atlas Point facility and an additional £0.5m of depreciation expense as the plant comes online. |
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