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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: Investors opt for caution ahead of Italian referendum London stocks slipped at the end of the week after a weak monthly US non-farm payrolls report and as investors sought out the safety of government bonds ahead of the coming weekend´s Constitutional referendum in Italy.
The FTSE 100 ended the session lower by 0.33% or 22.21 points to 6,730.72, having surrendered 110.03 points over the length of the entire week.
Employers in the States added 178,000 jobs in November (consensus: 180,000). However, the rate of growth in average hourly earnings fell back from a 2.8% year-on-year clip to 2.5%.
"Overall and in our view, this report easily clears the bar for a December rate hike and represents some of the continued progress towards the dual mandate that the committee desires. Of course, the committee could decide that the tightening of financial conditions since September are sufficiently large to forestall a hike but we consider that to be very unlikely at this point," Michael Gapen and Rob Martin at Barclays said in a research note sent to clients.
For their part, strategists at Credit Suisse appeared to be down right optimistic when it came to the possible implications of a 'soft-No'result in the upcoming Italian referendum.
"After a few days or weeks of uncertainty, we believe that the most likely outcome would be for the current government to be reconvened or - in the case of new elections by, say, mid-2017 - Renzi could be re-appointed with a clearer popular mandate.
"Overall, while we expect volatility in the short - term, we don't expect uncertainty to last for longer than a few weeks, in most scenarios - and we continue to view the risk of "Exitaly" to be close to 1%."
On this side of the pond, data showed the UK construction sector expanded further in November with business activity and incoming new work increasing at the strongest pace in eight months.
Back in the UK, Bank of England chief economist Andy Haldane said Bank Rate was now as likely to rise as too fall, given the resilience shown by the economy.
Nonetheless, he cautioned against the temptation of hasty rate increases.
"If the economy weakens and more stimulus is required, there is a risk that the so-called zero lower bound on interest rates may constrain room for maneuver, Haldane said. BOE staff have conducted simulations to assess the probability of this in the future and put it in the range of 15-40 percent," he explained.
Among corporate stocks, property shares were boosted by the better-than-forecast UK construction PMI data. Land Securities, British Land and Hammerson rallied.
Berkeley Group was also on the front foot after the property developer reported an increase in first half earnings and revenue that beat forecasts.
Heading in the opposite direction, Laird plummeted after proposing to raise £185m through a rights issue and scrapping its final dividend in a bid to strengthen its financial position.
Mining stocks were under the cosh, including BHP Billiton, Antofagasta and Rio Tinto, as copper and silver prices fell. As of 1715 GMT March 2017 copper futures on COMEX were down by 0.81% to $2.6215 per pound.
To take note of, referencing the latest CFTC data analysts at Morgan Stanley pointed out how net long positioning in copper had reached an all-time high of 3.3 standard deviations versus the three-year average. |
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| Market Movers
FTSE 100 (UKX) 6,730.72 -0.33%
FTSE 250 (MCX) 17,435.28 -0.35%
techMARK (TASX) 3,218.08 0.05%
FTSE 100 - Risers
Land Securities Group (LAND) 959.50p 2.18%
Randgold Resources Ltd. (RRS) 5,825.00p 2.10%
Royal Mail (RMG) 464.20p 1.98%
Barratt Developments (BDEV) 475.30p 1.67%
SSE (SSE) 1,478.00p 1.65%
BT Group (BT.A) 358.60p 1.53%
Imperial Brands (IMB) 3,395.50p 1.51%
Associated British Foods (ABF) 2,576.00p 1.38%
Fresnillo (FRES) 1,198.00p 1.35%
Capita (CPI) 542.00p 1.31%
FTSE 100 - Fallers
Royal Bank of Scotland Group (RBS) 193.40p -3.15%
Rolls-Royce Holdings (RR.) 661.00p -3.08%
Barclays (BARC) 212.95p -2.78%
BHP Billiton (BLT) 1,304.00p -2.61%
easyJet (EZJ) 970.50p -2.61%
TUI AG Reg Shs (DI) (TUI) 1,035.00p -2.17%
Glencore (GLEN) 277.90p -1.99%
CRH (CRH) 2,575.00p -1.90%
ITV (ITV) 166.90p -1.82%
Antofagasta (ANTO) 693.50p -1.70%
FTSE 250 - Risers
Berkeley Group Holdings (The) (BKG) 2,760.00p 8.45%
Hochschild Mining (HOC) 223.90p 4.92%
DFS Furniture (DFS) 223.60p 3.81%
Rank Group (RNK) 197.60p 2.92%
Hunting (HTG) 596.00p 2.76%
Kennedy Wilson Europe Real Estate (KWE) 993.00p 2.43%
Aberdeen Asset Management (ADN) 272.40p 2.33%
Acacia Mining (ACA) 400.70p 2.22%
BGEO Group (BGEO) 3,100.00p 2.04%
HICL Infrastructure Company Ltd (HICL) 162.70p 1.94%
FTSE 250 - Fallers
Laird (LRD) 138.10p -8.84%
Evraz (EVR) 228.90p -6.34%
Aggreko (AGK) 809.00p -4.32%
GVC Holdings (GVC) 629.50p -4.19%
Paysafe Group (PAYS) 359.90p -3.92%
Euromoney Institutional Investor (ERM) 1,144.00p -3.53%
Playtech (PTEC) 811.50p -2.76%
FirstGroup (FGP) 100.80p -2.61%
Dignity (DTY) 2,408.00p -2.55% |
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| | US Market Report | | US open: Stocks mostly higher as non-farm payrolls rise US stocks were mostly higher as data revealed that unemployment fell to its lowest level in nine years, with the Federal Reserve on course for an expected rate hike in a fortnight.
The Dow Jones Industrial Average was down 0.09% to 19,174.57 points, but the S&P 500 rose 0.2% to 2,195.39 points, and the Nasdaq was higher by 0.21% to 5,262.36 points at 1501 GMT.
The non-farm payroll showed that the economy added 178,000 new jobs in November, more than the 142,000 jobs created the previous month. The gain was not a far cry from the 180,000 consensus forecast.
The unemployment rate fell to 4.6% from 4.9% in October, which was the lowest level since 2007, while labour force participation rate slipped to 62.7% from 62.8%.
Hourly earnings were down 0.1%, weaker than 0.2% expected.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "On the face of it, the combination of falling unemployment and sluggish-looking wage numbers appears to support the idea that perhaps the Fed can allow the economy to run hotter for longer without taking undue inflation risks. But we are very skeptical."
He added: "The bottom line here is that these data don't change the outlook for the December Fed committee; rates will rise. But if unemployment really is at 4.6%, the next question is just how far wage growth will accelerate next year, and how much more the Fed will have to do in order to cap it."
Meanwhile in Europe the main indices were all in the red as investors grew jittery ahead of Sunday's Italian referendum on constitutional reform. Market participants are concerned that if the outcome is a 'no' vote, political uncertainty will ensue, making the task of sorting out non-performing loan issues at the country's banks more difficult.
Oil prices were slightly up on recovering from Wednesday's gains after OPEC agreed to cut production by 1.2m barrels a day to 32.5m for six months from January.
Brent crude nudged up 0.07% to $53.98 per barrel, while West Texas Intermediate crept 0.15% to $51.14 at 1452 GMT.
Gold on Comex ticked up 0.58% to 1,176.20 per troy ounce at 1456 GMT.
In currency markets, the dollar was slipped 0.61% against the yen to 113.40, edged lower by 0.62% against sterling to 0.7893, but was slightly higher by 0.1% against the euro to 0.9433.
In corporate news, Ulta Salon Cosmetics & Fragrance's shares were on the back foot by 1.22% after it lifted its outlook for the year late on Thursday.
Shares in Big Lots gained 1.85% as the discount retailer reported that third quarter sales were flat and revenue unexpectedly declined, but raised its profit outlook.
Sales were flat around 2%, while revenue slipped 1% to $1.11bn, just below the $1.12bn expected by analysts. It expects adjusted earnings per share to be between $3.55 to $3.60 in the final quarter. |
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| | Broker Tips | | Broker tips: Berkeley, Britvic EasyJet Berkeley Group’s shares rose as Numis raised its rating on the property developer to ‘buy’ from ‘add’ and reiterated a target price of 3,844p following better-than-expected first half results. In the six months ended 31 October, pre-tax profit gained 33.9% to £392m compared to the same period a year earlier, exceeding estimates of about £351.7m. Revenue rose 24.1% to £1.41bn, beating expectations of £1.31bn and driven by sales of new homes in London and the South East of England. Berkeley added that cash due of forward sales of £2.9bn, an estimated land bank gross margin of £5.9bn and net cash of £208m, meant the group is on target to deliver a new five-year target of at least £3bn pre-tax profit beginning 1 May 2016. It has previously indicated a three-year target for pre-tax profit of £2bn from 1 May 2015. However, Berkeley said Brexit, the US election and an increase in stamp duty in April had hurt transaction levels throughout 2016. Excluding a hiatus around Brexit, reservations for the period remain 20% down on the same period last year. Numis welcomed the group’s new pre-tax profit target. The broker said it is on track for more than £750m of pre-tax profit in 2017 and 2018 and at least £1.5bn in the three years to April 2021, or £500m per year. "Overall we think this is a decent update and the longer term guidance over PBT (being at least £500m per annum) should give comfort there is not a cliff edge in profits after the following two years," Numis analysts said. "Furthermore, the reservation number is consistent with what was previously announced and therefore this should also provide some comfort." Goldman Sachs downgraded drinks maker Britvic to ‘neutral’ from ‘buy’ and slashed the price target to 600p from 810p, removing the stock from its ‘conviction list’ following the full-year results earlier this week. It said that while the numbers were better than it had expected, it is concerned about the outlook going into full-year 2017, given rising input cost pressures. GS noted that since being added to the buy list on 4 December 2014, the shares are down 15.7% versus the FTSE World Europe up 5.5%. Since being added to the ‘conviction list’ on 29 January 2015, the stock is down 21% versus the FTSE World Europe up 3.7%. Goldman reckons this underperformance was driven by difficult trading conditions in GB, and health concerns around sugar. The bank cut its FY2017-19 earnings per share estimates by 4%, 8% and 8% to 46.67p, 47.91p and 50.97p, respectively. “We believe Britvic faces downside risks from input cost inflation in the UK, as well as the UK regulation on soft drinks with added sugar; this was indicated by the FY17 guidance, which implies flat performance versus the 52-week adjusted EBITA reported in FY16, although we still see upside from the US and Brazil businesses.” EasyJet flew lower as RBC Capital Markets cut its stance on the stock to ‘underperform’ from ‘sector perform’. The bank argued that without material and significant improvement in the fare/pricing outlook in the next three years, EasyJet shares might only deliver 1-2% total return compound annual growth rate. “If pricing stays weak for longer, we estimate that over five years the shares could see total return downside by 2020,” it said. RBC said that in order for it to work, EasyJet’s strategy needs fares to recover quicker than the rate of balance sheet deterioration. But if the group has misjudged its timing then equity shareholders risk being squeezed out of the embedded value before the pricing cycle recovers. “We this risk growing,” the bank said. It pointed out that EasyJet has a lower return on equity than peers Ryanair and Wizz Air, at a higher price-to-earnings ratio. In addition, it highlighted high exposure to the UK, with around 49% of its revenue derived from there, shrinking profits, negative equity free cash flow and rising debt/lease liabilities. RBC has a 900p price target on the stock. |
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