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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 finish higher as ECB extends QE programme London stocks finished in positive territory on Thursday after the European Central Bank announced a longer-than-expected extension to its quantitative easing programme.
The FTSE 100 closed up 0.42% to 6,931.55 points.
Oil prices also advanced ahead of a Saturday meeting in Vienna between OPEC and non-OPEC members which may result in a further cut in production.
Brent crude was up 0.91% to £53.49 per barrel while West Texas Intermediate gained 0.97% to $50.26 per barrel at 1643 GMT.
The ECB decided to extend its quantitative easing programme by nine months but at a tapered pace. It will continue its monthly asset purchases at €80bn until March 2017 before scaling back the programme to €60bn per month until the end of December.
Analysts were expecting the ECB to extend the programme for six months amid inflationary pressures and heightened political uncertainty.
The ECB decided, as anticipated, to keep benchmark interest rates, the marginal lending facility rate and the deposit facility rate unchanged at 0.00%, 0.25% and -0.40%, respectively.
ECB President Mario Draghi said if the outlook was to become "less favourable" or financial conditions worsened the Governing Council would consider increasing the quantitative easing programme in size or duration.
Draghi tried to reassure the market that the ECB's move should not be considered as tapering.
"The immediate reaction to the news was disappointment, since he also cut the monthly purchase level, but markets focused on the longer timeframe, and then got even more excited when the bank declared it would buy assets yielding below its deposit rate," said IG's Chris Beauchamp.
"He might have cut the amount of alcohol in the punch bowl, but the punch will be served for longer, while the choice of tipple on offer has been widened as well."
European stocks rallied at the close while the euro fell 1.38% against the dollar at $1.0605 and declined 0.96% versus the pound at £0.84355.
Elsewhere, trade data showed Chinese exports rose 0.1% in dollar terms in November, surprising analysts who had expected a 5% decline. Imports gained 6.7%, compared to estimates for a 1.9% drop. The trade surplus narrowed to $44.61bn from $49.06bn, missing forecasts of $46.90bn.
In the US, the Labor Department said initial jobless claims fell to 258,000 in the week to 3 December from 268,000 the previous week. Economists had expected 255,000 claims.
On the corporate front, Capita was a top faller as the company decided to offload the majority of its Asset Services division and a small number of other 'non-core' businesses in order to become leaner, cut debt and focus fully on business process outsourcing.
Sports Direct slumped as it reported a 57% drop in underlying profit before tax to £71.6m in the 26 weeks to 23 October.
TUI was a high riser as the travel group posted its full year results to 30 September with turnover from continuing operations softening slightly by 1.9% to €17.19bn, though at constant currencies it did improve 1.4%.
Glencore gained on reports it is part of a consortium that is poised to buy a 19.5% stake in Russia's largest oil company Rosneft for €10.2bn.
Evraz advanced as the price of Chinese steel rebar 25mm rose to $502.2 per tonne from $495.0/t.
Packaging specialist DS Smith was on the front foot as it posted its half-year results to 31 October on Thursday, with adjusted operating profit up 23% - or 9% at constant currency - to £226m.
IG Group's shares continued to slide after the Financial Conduct Authority recommended tighter rules on contract for difference products sold to customers, including spread bets. Numis upgraded IG Group to 'buy' from 'hold' but cut its target to 590p from 850p, saying it believes the spreadbetting firm is well placed to manage the proposed new regulations. |
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| Market Movers
FTSE 100 (UKX) 6,931.55 0.42%
FTSE 250 (MCX) 17,681.99 0.32%
techMARK (TASX) 3,240.08 0.31%
FTSE 100 - Risers
WPP (WPP) 1,723.00p 4.61%
TUI AG Reg Shs (DI) (TUI) 1,099.00p 3.29%
International Consolidated Airlines Group SA (CDI) (IAG) 448.50p 3.17%
Polymetal International (POLY) 775.50p 3.05%
AstraZeneca (AZN) 4,116.00p 2.72%
London Stock Exchange Group (LSE) 2,767.00p 2.68%
ITV (ITV) 181.50p 2.25%
Rio Tinto (RIO) 3,294.00p 2.25%
Sky (SKY) 789.50p 2.13%
Glencore (GLEN) 302.65p 1.99%
FTSE 100 - Fallers
Capita (CPI) 485.30p -13.95%
Standard Chartered (STAN) 666.40p -2.67%
Royal Mail (RMG) 461.40p -2.30%
Babcock International Group (BAB) 938.00p -2.09%
Rolls-Royce Holdings (RR.) 658.50p -2.08%
Next (NXT) 4,870.00p -1.77%
Prudential (PRU) 1,627.50p -1.30%
Dixons Carphone (DC.) 354.10p -1.09%
Direct Line Insurance Group (DLG) 357.70p -1.08%
SSE (SSE) 1,483.00p -1.00%
FTSE 250 - Risers
Evraz (EVR) 262.10p 9.71%
Berendsen (BRSN) 840.00p 8.46%
NMC Health (NMC) 1,462.00p 6.40%
Smith (DS) (SMDS) 419.10p 5.83%
Aggreko (AGK) 867.00p 4.77%
NCC Group (NCC) 209.00p 4.34%
Smurfit Kappa Group (SKG) 1,871.00p 4.10%
Pagegroup (PAGE) 387.00p 4.00%
Kaz Minerals (KAZ) 420.00p 3.99%
Elementis (ELM) 268.20p 3.31%
FTSE 250 - Fallers
CMC Markets (CMCX) 105.30p -9.61%
Sports Direct International (SPD) 288.80p -8.29%
IG Group Holdings (IGG) 478.80p -6.67%
William Hill (WMH) 292.70p -6.04%
Ocado Group (OCDO) 262.10p -5.44%
Aberdeen Asset Management (ADN) 262.50p -4.93%
Restaurant Group (RTN) 331.00p -4.09%
Big Yellow Group (BYG) 642.00p -3.82%
DFS Furniture (DFS) 224.30p -3.44% |
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| | US Market Report | | US open: Stocks rise as ECB extends QE US stocks ticked higher on Thursday following the prior day's record gains, while the European Central Bank announced it will extend its quantitative easing programme but taper its purchases after March 2017.
The Dow Jones Industrial Average rose 0.08% to 19,565.87 points, the S&P 500 was up 0.04% to 2,242.18 points and the Nasdaq gained 0.23% to 5,405.91 points, at 1542 GMT.
In commodity markets, oil prices advanced ahead of a Saturday meeting in Vienna between OPEC and non-OPEC members which may result in a further cut in production.
Brent crude was up 0.74% to $53.40 per barrel, while West Texas Intermediate rose 0.91% to $50.23 at 1431 GMT.
But gold on Comex was weaker by 0.33% to 1,173.60 per troy ounce at 1326 GMT.
In Europe, the continent's main indices were firmly in the green while the euro fell against the dollar as the ECB extended its bond-buying programme until December 2017, but will start to taper the scheme by scaling back quantitative easing from April to €60bn per month, down from €80bn.
It also left interest rates unchanged at 0.00%, while rates in the marginal lending facility and deposit facility were also maintained at 0.25% and -0.4% respectively.
Ranko Berich, head of market analysis at Monex Europe, said tapering appears to be the ECB simply turning monetary policy off its emergency setting to reflect the diminished risk of deflation.
"The bottom line remains that core inflation in the eurozone is not improving yet, as Mario Draghi himself clearly acknowledged. The ECB's staff projections underlined just how weak the outlook for inflation currently is. As such, monetary policy must remain exceptionally loose.
"The curve steepening seen across European sovereign yields shows the ECB did its job today, reassuring markets that although rates will be low in the medium term, this will restore growth and inflation in the long-term. The question, of course, is what happens if global inflation dynamics change in 2017, due to higher oil prices and a potentially big spending Trump administration?
"The Federal Reserve is likely to lead the monetary response to such a development due to the tight labour market in the US, but if the ECB has to deal with an improvement in the inflation outlook its response could prove far more significant globally."
In currency markets, the dollar jumped 1.06% to 0.9399 versus the euro, rose 0.4% to 114.22 against the yen and was up 0.18% to 0.7934 versus sterling.
Meanwhile, the Labor Department revealed that the number of Americans filing for first-time unemployment benefits fell last week after a five month high, suggesting that the economy is expanding.
US joblessness decreased by 10,000 to a seasonally adjusted 258,000 for the week ended 3 December.
In corporate news, Hovnanian Enterprises dropped 3.28% as the housebuilder reported a fall in fourth quarter earnings.
Profit tanked 12.6% to £22.29m, or 0.14 cents per share, compared to the same period last year. |
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| | Broker Tips | | Broker tips: Novae, IG Group, pubs Shares in Lloyd's of London insurer Novae Group plunged on Thursday as Canaccord Genuity downgraded its recommendation to 'hold' from 'buy' and cut the target to 800p from 900p..
The downgrade came after Novae warned that larger individual risk and catastrophe losses in the year would lead to its full-year underwriting contribution being lower than it expected.
The insurer has been hit by losses from interrupted production at Tullow Oil's flagship Jubilee oil field in Ghana, two product recalls, Hurricane Matthew, the New Zealand earthquake and a SpaceX rocket which burst into flames and destroyed a $200m satellite owned by Israel's Space Communication Ltd.
Shares fell 18.61% to 679.63p at 1027 GMT.
Novae expects a full year combined ratio in the range of 98-100%, compared to 96.1% at the first half. Canaccord predicts a full year combined ratio of 96.4%.
The broker also cut its 2016 estimate for earnings per share by 40%.
"While management has said that 2016 large losses will not impact on underwriting strategy going forward, we have assumed a 0.5% higher loss ratio going forward," Canaccord said.
"This impact has been partly offset by higher yields going forward, for a 3% cut to 2017 and 2018 EPS estimates. "
Canaccord added: "We believe it has been a bad, but not exceptional, year for large losses at an industry level. Novae is likely more exposed than quoted Lloyd's peers due to its narrower scope of business."
Numis has upgraded IG Group to 'buy' from 'hold' but cut its target to 590p from 850p, saying it believes the spreadbetting firm is well placed to manage proposed new regulations.
IG's shares took a tumble on Tuesday after the Financial Conduct Authority recommended tighter rules on contract for difference products sold to customers, including spread bets.
While Numis believes IG's revenues will be lower following the FCA's new rules, it said: "We believe IG is by far the best placed to manage the regulatory change with its historical focus on higher value customers where the CFD product is most appropriate. "
The broker has downgraded its earnings per share forecast for the year to May 2018 by 37.5% to 28.9p and predicts revenue per customer declines of 27.5% in both the UK and Europe. Numis said the 18% customer growth expected this year in the UK is likely to fall to zero next year.
"Overall our EPS forecast for this year remains unchanged but it declines 37.5% to 28.9p in 2018," Numis analysts said.
"We expect IG to pay-out its guided 70% this year and given its balance sheet strength and the expectation of a return to good growth in 2019 we have assumed the dividend is held until the cover is returned to target. Consequently IG will provide investors with a 6.7% dividend yield and it will be being valued at 16.8x 2018 earnings."
Deutsche Bank initiated coverage of JD Wetherspoon and The Restaurant Group at 'sell' and price targets of 600p and 290p respectively, in a note on pubs groups on Thursday.
With the outlook for the UK pubs and restaurant sector is uncertain and assumptions for next year becoming more cautious due to worries about consumer spending, Deutsche saw future pressure on both sales and profits and called time on the sector for now.
Noting that JD Wetherspoon's margins are an outcome of the company's sales activity and that its low cost model relative to peers is the "more susceptible to cost inflation", with food and staff cost inflation likely headwinds, along with business rates.
The ongoing competitive operating environment is highlighted by JDW's reduced new openings programme.
Casting its eye over The Restaurant Group, the arrival of a new CEO with significant multi-site retail experience is "reassuring", but there are multiple threats to the rating and earnings resurrection.
"Trading weakness in the core format; ongoing roll-out despite format underperformance; increased competition in leisure/retail parks driven by landlords seeking to fulfill consumer's wider-ranging aspirations; the cost of regaining lost customers; and, increased costs," said the note.
The bank is also concerned that the company's the core format, Frankie & Benny's, will continue to struggle as the market moves from being competitive due to increased supply, to competitive from lower consumer spending, which could lead to earning downgrades and sites closures.
DB's estimates are some 10% below consensus, reflecting its greater caution around the delivery of a turnaround and minimal recovery in the full year of 2017.
DB also initiated pubs Marston and Mitchells & Butlers at 'hold' with price targets of 145p and 245p respectively. It reiterated its 'buy' recommendations on Greene King and Enterprise Inns but lowered its price target for the former to 875p from 950p and maintained its price target of 170p for the latter. |
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