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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: FTSE closes higher as banking shares rally The FTSE 100 closed slightly higher on Tuesday as a rally in banking shares offset weakness in commodity stocks.
The London index finished up 0.49% to 6,779.84 points.
Oil prices dipped after Brent crude reached a 16-month high on Monday on the back of last week's landmark OPEC deal to cut production. Brent fell 1.6% to $54.79 per barrel and West Texas Intermediate was 1.9% lower at $50.80 per barrel at 1609 GMT.
Royal Bank of Scotland led the gains on the FTSE 100 a day after the lender settled with some shareholder groups over its 2008 rights issue.
HSBC advanced after Morgan Stanley upgraded the bank to 'equal weight' from 'underweight' and raised its price target to 645p from 550p.
Barclays gained on a sector-wide rally of European banks, supported by reports that Italy's government might bail out troubled Monte dei Paschi this week.
"Indeed, optimism about banks is driving markets in Europe firmly higher, on expectations that some sort of bail-in for Italian institutions is on the cards," said IG's Chris Beauchamp.
"This would provide a real boost to risk appetite, similar to that seen when the ECB first announced its QE programme, and would certainly do more than just a measly extension to the easing timeframe, which is quite possibly all that Mario Draghi can offer at the ECB meeting on Thursday."
Uncertainty about the future of the banking industry grew following the resignation of Italy's Prime Minister Matteo Renzi after the referendum on Sunday failed to go his way. Italian President Sergio Mattarella has accepted Renzi's resignation but has asked him to stay on to oversee the 2017 budget at the end of this week.
Meanwhile, mining shares were on the back foot due to softer oil prices and a decline in metal prices. Anglo American, BHP Billiton and Rio Tinto were among the biggest fallers.
Elsewhere, shares in spreadbetting firms IG, CMC Markets and Plus500 tumbled as the Financial Conduct Authority announced plans to tighten rules around contract for difference products.
Tullow Oil slipped as Goldman Sachs downgraded the stock to 'sell' from 'neutral' and cut the target to 221.8p from 247.2p.
Equipment rental company Ashtead edged higher as it said group rental revenue in the six months to the end of October rose 28% to £1.45bn, or 13% at the underlying level if the £53m currency benefit is ignored.
Power generation firm Drax rocketed after announcing a conditional agreement to buy Opus Energy for £340m and an agreement to acquire four open cycle gas turbine (OCGT) development projects for electricity generation, as it said full-year earnings were still likely to be at the bottom end of market forecasts.
In economic data, the final reading of Eurozone economic growth in the third quarter was unexpectedly revised higher. Eurostat raised its estimate on gross domestic product to year-on-year growth of 1.7% from a previous 1.6%. Second quarter growth was also revised higher by one tenth of a percentage point to 1.7%.
German manufacturing orders rose 4.9% on the month, according to Destatis, which was well ahead of the 0.6% increase economists had been expecting. Meanwhile, September's figure was revised down to show a 0.3% drop.
Closer to home, a survey showed UK retail sales continued to improve in November. The British Retail Consortium and KPMG found like-for-like retail sales were up by 0.6% in November compared to what was a decline seen in the same month last year, while total sales rose 1.3%.
In the US, the trade deficit widened to $42.6bn in October, from $36.2bn the previous month, and was larger than the $42bn expected.
Exports dropped by $3.4bn month-on-month to $186.4bn, as imports increased by $2bn to $229bn.
New factory orders in the US increased 2.7%, following an upwardly revised 0.6% rise in September, which was the biggest gain in 18 months. Economists had expected a 2.6% gain.
US durable goods orders were up 4.6% in October, from 4.8% the previous months, and well ahead o 3.4% consensus forecast.
Non-farm productivity, a measure of goods and services made per hour, was flat at a seasonally adjusted 3.1% in the third quarter, below the 3.3% consensus forecast. |
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| Market Movers
FTSE 100 (UKX) 6,779.84 0.49%
FTSE 250 (MCX) 17,452.09 -0.06%
techMARK (TASX) 3,222.94 -0.03%
FTSE 100 - Risers
Royal Bank of Scotland Group (RBS) 209.10p 5.71%
Barclays (BARC) 226.75p 4.59%
HSBC Holdings (HSBA) 654.00p 4.36%
Travis Perkins (TPK) 1,405.00p 3.54%
ITV (ITV) 175.00p 3.49%
Aviva (AV.) 464.40p 3.13%
Dixons Carphone (DC.) 351.70p 2.84%
CRH (CRH) 2,656.00p 2.51%
Capita (CPI) 553.00p 2.50%
Randgold Resources Ltd. (RRS) 5,765.00p 2.22%
FTSE 100 - Fallers
Anglo American (AAL) 1,194.50p -3.90%
Johnson Matthey (JMAT) 3,004.00p -2.88%
Paddy Power Betfair (PPB) 8,135.00p -2.57%
Sage Group (SGE) 619.50p -2.13%
BHP Billiton (BLT) 1,311.00p -2.13%
Legal & General Group (LGEN) 237.00p -1.94%
DCC (DCC) 5,885.00p -1.67%
Glencore (GLEN) 286.00p -1.46%
London Stock Exchange Group (LSE) 2,621.00p -1.32%
Shire Plc (SHP) 4,561.00p -1.28%
FTSE 250 - Risers
Drax Group (DRX) 311.20p 12.10%
OneSavings Bank (OSB) 339.50p 7.78%
AA (AA.) 276.50p 5.57%
Grafton Group Units (GFTU) 535.00p 3.97%
Berkeley Group Holdings (The) (BKG) 2,908.00p 3.78%
Thomas Cook Group (TCG) 88.85p 3.37%
UDG Healthcare Public Limited Company (UDG) 672.00p 3.31%
SIG (SHI) 92.50p 3.24%
Brewin Dolphin Holdings (BRW) 285.60p 3.22%
Victrex plc (VCT) 1,758.00p 2.93%
FTSE 250 - Fallers
IG Group Holdings (IGG) 485.10p -38.36%
CMC Markets (CMCX) 115.00p -37.64%
Berendsen (BRSN) 786.00p -7.15%
Tullow Oil (TLW) 311.00p -6.44%
Playtech (PTEC) 798.00p -3.51%
Evraz (EVR) 226.80p -3.49%
Indivior (INDV) 311.10p -2.93%
PayPoint (PAY) 957.50p -2.40%
Weir Group (WEIR) 1,880.00p -2.39%
Paysafe Group (PAYS) 353.40p -2.35% |
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| | US Market Report | | US open: Stocks mixed as Monte dei Paschi state bailout looms US stocks were mostly down on Tuesday, as investors monitored the plight of Italy's banks, while a state bailout for its oldest looms.
The Dow Jones Industrial Average was down 0.1% to 19,197.12 points, the S&P 500 slipped 0.01% to 2,204.45 points, but the Nasdaq gained 0.22% to 5,320.44 points at 1505 GMT.
Europe's main indices were on the front foot as banking stocks in Italy recovered from the heavy losses suffered on Monday after Prime Minister Matteo Renzi conceded defeat in the referendum and announced his resignation.
Milan's FTSE MIB index was up 2.03%, while Reuters reported that Rome was preparing a state bailout for the world's oldest bank Monte dei Paschi di Siena, which needs to raise €5bn by the end of December to avoid being wound down.
Michael Hewson, chief market analyst at CMC Markets, said: "Italy's largest bank Unicredit has resumed its upward momentum from last week despite concerns it may have to raise an extra €13bn in extra capital in the coming weeks, though Monte dei Paschi's share price remains under pressure. Banks across Europe have also enjoyed a similarly positive session as investors adopt a fairly sanguine outlook to events in Italy."
He added: "Though stock markets remain complacently untroubled bond markets are also showing signs of a slightly more sanguine outlook as well with Italian two-year yields slipping back another four basis points to their lowest levels in over a week."
On the data front, the US trade deficit widened to $42.6bn in October, from $36.2bn the previous month, and was larger than the $42bn expected.
Exports dropped by $3.4bn month-on-month to $186.4bn, as imports increased by $2bn to $229bn.
New factory orders increased 2.7%, following an upwardly revised 0.6% rise in September, which was the biggest gain in 18 months. Economists had expected a 2.6% surge.
Durable goods orders were up 4.6% in October, from 4.8% the previous months, and well ahead o 3.4% consensus forecast.
While non-farm productivity, a measure of goods and services made per hour, was flat at a seasonally adjusted 3.1% in the third quarter, below the 3.3% consensus forecast.
In currency markets, the dollar was trading up 0.37% to 0.9324 versus the euro. It was rose 0.19% to 114.07 against the yen but fell 0.03% to 0.7853 versus sterling.
In commodity markets, oil prices were softer following gains in the previous session after an agreement was reached for an OPEC-led production cut.
Brent crude was down 1.74% to $54 per barrel, while West Texas Intermediate was lower by 2.08% to $50.73 at 1446 GMT.
Gold on Comex slipped 0.06% to 1,175.80 per troy ounce at 1448 GMT.
In corporate news, Boeing fell 0.54% after President-elect Donald Trump tweeted that an order for a new Air Force One plane should be cancelled due to increasing costs. |
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| | Broker Tips | | Broker tips: HSBC, Tullow Oil, Barratt Developments Morgan Stanley upgraded HSBC to 'equal weight' from 'underweight' and raised its price target to 645p from 550p.
The broker upgraded the bank's stock as the revenue outlook has improved on better Asia pacific (APAC) loan growth and higher rates.
"We have had an underweight rating on HSBC as we were concerned around risks to the dividend and what we saw as too optimistic revenue assumptions from consensus given the Asian growth outlook and US rate picture."
After strong capital build in the third quarter, increased optimism around HSBC's APAC loan growth and a sharp increase in US interest rate expectations we are now modelling earnings ahead of consensus for 2016 to 2019 estimates. While we still see better value elsewhere we no longer see material downside risk to the share price from here, said the note.
Tullow Oil shares fell on Tuesday as Goldman Sachs downgraded the stock to 'sell' from 'neutral' and cut the target to 221.8p from 247.2p.
"Since the November 30 announcement of OPEC production cuts, the stock has rallied about 20%, in line with the front month of Brent, and we think it is now trading above the fundamentals of our long-term oil price assumption (US$60 per barrel)," Goldman said.
Goldman said it raises a note of caution on the reservoir performance of the Tweneboa, Enyenra, Ntomme (TEN) fields offshore Ghana. In a 9 November trading update, Tullow said production ramp-up at TEN was hurt by issues with water injection systems. The annualised gross production for TEN in 2016 is now expected to be 15,000 barrels of oil per day.
Goldman said while Tullow's management have done an "impressive job of steering the company through a very difficult year", the disappointment of the TEN project could offset the Jubilee's recent outperformance.
Based on the increase in the estimated net debt, owing to TEN expenditure and lower-than-expected Jubilee revenues, Goldman lowered its target. Tullow expects to exit the year with net debt at about $4.9bn.
However, if oil prices rise further, Goldman sees Tullow's shares continuing to outperform. The bank also believes the balance sheet is unlikely to be a "major cause of concern" for the company.
Liberum downgraded Barratt Developments to 'sell' as it took a look at the UK housebuilding sector.
The brokerage said it sees long-term value in some housebuilders as the valuation looks appealing and long-term fundamentals remain favourable.
It noted government support for the sector in the form of a more helpful planning system and the help to buy scheme.
In addition, it said the land market is very benign, and housebuilders are much more disciplined since the 2008 crisis, running more prudent balance sheets.
However, it noted near-term risks to share price performance such as slowing growth impacting house prices, which could put pressure on estimates and the threat of reflation without wage growth.
Liberum cut Barratt Developments to 'sell' from 'hold' as it sees relatively higher risks in its lower margins compared to peers, as well as it shorter landbank which could limit the sustainability of dividend payouts.
The brokerage's preferred stocks are buy-rated Bellway, Berkeley, Gleeson and Persimmon.
It highlighted Bellway's compelling valuation and said volume growth should be sustained, protecting profits if prices do fall a little as expected.
Liberum maintained its 'buy' on Berkeley in spite of the general caution around London, as the company has secured significant forward sales to protect prices and volumes and has successfully added value to sites.
As far as Gleeson is concerned, it said the unique business model gives it industry leading margins and excellent growth prospects with limited competition.
Liberum said it likes Persimmon for its high dividend at low risk. In addition, it expressed confidence that the company will achieve the payments pledged because of management's incentive scheme.
The brokerage kept Bovis, Redrow and Taylor Wimpey at 'hold'.
While Bovis looks cheap, Liberum has resisted the temptation to turn more bullish on the shares as its margin profile makes earnings most geared to downside risk.
As far Redrow is concerned, it said "risk aversion among investors may now limit appetite for investing in a housebuilder with a degree (even though comfortable) of debt". |
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