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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 gains as pound falls on hard Brexit plans The FTSE 100 closed higher on Wednesday as investors continued to digest the implications of a hard Brexit.
The index finished the session up 0.38% to 7,247.61 points while the pound dropped 0.74% versus the dollar to $1.2322 and declined 0.50% against the euro to trade at €1.1530.
It comes in contrast to Tuesday's session, when UK equities fell and sterling strengthened after May confirmed Britain would be leaving the European Union's single market but said parliament would get a vote on the Brexit deal.
Jasper Lawler, senior market analyst at London Capital Group said: "Trading on the FTSE was muted the day after suffering its biggest loss in six months. The British pound, drifting lower in a correction of its biggest daily gain since 2008, helped the UK equity benchmark to modest gains."
He added: "We view the move in the British pound following Prime Minister's speech as a game-changer and as such don't anticipate a near-term resumption of the record winning streak for the FTSE 100."
Investors were also analysing the latest UK jobs data from the Office for National Statistics.
Unemployment fell by 52,000 to 1.6m in the three months to November, though the headline rate remained at 4.8% as expected.
Employment also dropped slightly, falling 9,000 in the three months to November but the unemployment number climbed due to an 85,000 increase in inactivity levels.
Basic wage growth including bonuses rose to 2.8% from 2.5% in October, exceeding the consensus forecast of 2.6% and reaching a 14-month high. Excluding bonuses it accelerated to a 2.7% clip, ahead of the consensus estimate of 2.6%.
Economist Sam Tombs at Pantheon Macroeconomics said the combination of the pickup in the headline rate of wage growth and 14-month high, plus the sharp rise in inactivity "will fan fears that the economy is running in to supply side constraints, requiring the MPC to hike interest rates soon".
Across the Atlantic, US inflation rose in line with expectations in December. The consumer price index increased at an annual rate of 2.1% compared to 1.7% in November. Month-on-month, CPI rose 0.3% in December following a 0.2% gain the previous month.
Core inflation, which excludes volatile food and energy prices, rose at an annual rate of 2.2%, as expected, after 2.1% increase in November. Core inflation, on the month, was unchanged at 0.2%, also in line with forecasts.
"Overall, the relative stability of core inflation just above 2% throughout 2016 suggests that the Fed will be able to hold off raising interest rates again until the middle of this year," said Andrew Hunter, US economist at Capital Economics.
"That said, the economy appears to be close to full-employment and annual wage growth accelerated to a seven-year high in December."
The economist expects the Fed will raise interest rates to a range of 1.5%-1.75% by year-end following a sharp acceleration in inflation.
Meanwhile, oil prices fell on a stronger dollar and on concerns that rising US shale production may offset major producers' global supply cuts. The Energy Information Administration on Tuesday said US shale production is set to snap a three-month decline in February.
Brent crude dropped 0.61% to $55.13 per barrel and West Texas Intermediate declined 0.72% to $52.10 per barrel at 1657 GMT.
On the corporate front, luxury retailer Burberry rallied after it reported 4% growth in underlying retail sales for the third quarter, boosted by a return to growth for the Asia-Pacific region but with the Americas still in decline.
HSBC was a higher riser as it confirmed it will need to move roughly 1,000 London jobs to its Paris office due to Brexit.
Hikma Pharmaceuticals was on the front foot as it said US subsidiary Roxane Laboratories has received approval from the US Food and Drug Administration for its sodium oxybate oral solution for the treatment of cataplexy - sudden loss of muscle strength - and excessive daytime sleepiness in patients with narcolepsy.
InterContinental Hotels was higher after HSBC upgraded the stock to 'hold' from 'sell' and lifted the target to 3,700p from 2,900p.
JD Wetherspoon gained after saying sales slowed and profit margins narrowed in the second quarter but it expects full-year results to have "slightly improved".
On the downside, education publisher Pearson - which has already issued a string of profit warnings in recent years - tanked after it cut its profit forecast for this year and said the dividend will be lower.
Information services company Experian was weaker after it reported a 4% rise in third-quarter organic revenue as it maintained its guidance for the full-year.
Housebuilders were in the red following a strong bounce in the previous session when sterling rallied on the back of May's Brexit plan, with Persimmon and Barratt Developments sitting lower.
Outsourcer Mitie was under the cosh following its third profit warning since September and as it announced the appointment of a new finance director.
Inmarsat slipped after JPMorgan Cazenove downgraded the satellite company to 'neutral' from 'overweight' and cut the price target to 830p from 950p. |
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| | Share tips 2017 Prudential low risk International insurance and investment product supplier Prudential has had a successful 2016 with the company raising its dividend, reporting an increase in profits whilst all the time continuing to benefit from favourable structural opportunities in its key markets, particularly in Asia. Investors should appreciate that although the group’s Asian exposure is a risk due to the volatility of Asian markets, the demographics of many Asian regions, and the rise of the middle class, should provide a good growth story for Prudential for some time to come. Prudential believes it has adequate capital surplus to withstand further significant deterioration in the European market, which should provide some reassurance to investors. Furthermore, the group’s asset management business M&G continues its expansion into Europe and its retail funds are registered for sale in 20 regions. Ultimately, this is a company which has a good mix of business across a number of regions, with a long-term Asia growth story underpinning the investment case. Read More... Capital at Risk |
| Market Movers
FTSE 100 (UKX) 7,247.61 0.38%
FTSE 250 (MCX) 18,312.80 0.39%
techMARK (TASX) 3,378.86 0.14%
FTSE 100 - Risers
Antofagasta (ANTO) 747.00p 3.61%
Burberry Group (BRBY) 1,650.00p 3.58%
Rio Tinto (RIO) 3,499.00p 2.59%
Hikma Pharmaceuticals (HIK) 1,956.00p 2.19%
Wolseley (WOS) 4,972.00p 2.18%
InterContinental Hotels Group (IHG) 3,757.00p 1.93%
TUI AG Reg Shs (DI) (TUI) 1,128.00p 1.90%
HSBC Holdings (HSBA) 678.80p 1.78%
Whitbread (WTB) 4,118.00p 1.78%
Severn Trent (SVT) 2,236.00p 1.73%
FTSE 100 - Fallers
Pearson (PSON) 573.00p -29.08%
Capita (CPI) 504.00p -2.61%
Smurfit Kappa Group (SKG) 2,060.00p -2.37%
Barclays (BARC) 227.60p -1.73%
Next (NXT) 3,990.00p -1.72%
Experian (EXPN) 1,551.00p -1.71%
Sage Group (SGE) 649.00p -1.59%
Persimmon (PSN) 1,974.00p -1.05%
Prudential (PRU) 1,553.00p -1.05%
Relx plc (REL) 1,426.00p -1.04%
FTSE 250 - Risers
Ferrexpo (FXPO) 132.50p 6.00%
Nostrum Oil & Gas (NOG) 471.70p 4.78%
Evraz (EVR) 229.10p 4.37%
IP Group (IPO) 182.20p 4.35%
Wetherspoon (J.D.) (JDW) 937.50p 3.94%
Hochschild Mining (HOC) 241.40p 3.69%
Vesuvius (VSVS) 440.00p 3.41%
Just Eat (JE.) 536.00p 3.38%
Spectris (SXS) 2,488.00p 3.32%
Ladbrokes Coral Group (LCL) 128.50p 3.21%
FTSE 250 - Fallers
Inmarsat (ISAT) 663.50p -5.89%
Mitie Group (MTO) 195.80p -4.72%
Brown (N.) Group (BWNG) 204.10p -2.62%
Redefine International (RDI) 39.50p -2.23%
Marshalls (MSLH) 281.70p -2.19%
Ashmore Group (ASHM) 296.00p -2.12%
Crest Nicholson Holdings (CRST) 500.50p -2.05%
Savills (SVS) 780.50p -2.01%
Lancashire Holdings Limited (LRE) 680.00p -1.88%
AO World (AO.) 160.00p -1.84%
Market Movers
FTSE 100 (UKX) 7,247.61 0.38%
FTSE 250 (MCX) 18,288.79 0.26%
techMARK (TASX) 3,378.86 0.14%
FTSE 100 - Risers
Antofagasta (ANTO) 747.00p 3.61%
Burberry Group (BRBY) 1,650.00p 3.58%
Rio Tinto (RIO) 3,496.50p 2.52%
Hikma Pharmaceuticals (HIK) 1,956.00p 2.19%
Wolseley (WOS) 4,972.00p 2.18%
InterContinental Hotels Group (IHG) 3,757.00p 1.93%
TUI AG Reg Shs (DI) (TUI) 1,128.00p 1.90%
HSBC Holdings (HSBA) 678.80p 1.78%
Whitbread (WTB) 4,118.00p 1.78%
Severn Trent (SVT) 2,236.00p 1.73%
FTSE 100 - Fallers
Pearson (PSON) 574.50p -28.90%
Capita (CPI) 504.00p -2.61%
Smurfit Kappa Group (SKG) 2,055.00p -2.61%
Barclays (BARC) 227.60p -1.73%
Experian (EXPN) 1,551.00p -1.71%
Sage Group (SGE) 649.00p -1.59%
Next (NXT) 3,998.00p -1.53%
Relx plc (REL) 1,424.00p -1.18%
Persimmon (PSN) 1,974.00p -1.05%
Prudential (PRU) 1,553.00p -1.05%
FTSE 250 - Risers
Ferrexpo (FXPO) 132.10p 5.68%
Nostrum Oil & Gas (NOG) 470.20p 4.44%
Evraz (EVR) 229.10p 4.37%
IP Group (IPO) 182.20p 4.35%
Wetherspoon (J.D.) (JDW) 937.50p 3.94%
Hochschild Mining (HOC) 241.60p 3.78%
Vesuvius (VSVS) 440.00p 3.41%
Just Eat (JE.) 536.00p 3.38%
Spectris (SXS) 2,488.00p 3.32%
Ladbrokes Coral Group (LCL) 128.50p 3.21%
FTSE 250 - Fallers
Inmarsat (ISAT) 663.50p -5.89%
Mitie Group (MTO) 195.80p -4.72%
Brown (N.) Group (BWNG) 204.10p -2.62%
Redefine International (RDI) 39.50p -2.23%
Marshalls (MSLH) 281.70p -2.19%
Fidessa Group (FDSA) 2,259.00p -2.12%
Crest Nicholson Holdings (CRST) 500.50p -2.05%
Ashmore Group (ASHM) 296.60p -1.92%
Lancashire Holdings Limited (LRE) 680.00p -1.88% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks end on mixed note but at best levels of the day European stocks finished on a mixed note on Wednesday, albeit at their best levels of the day, as investors digested earnings from Pearson, ASML and Burberry and Eurozone inflation data.
The benchmark Stoxx Europe 600 index edged higher by 0.18% to 363.07, Germany's DAX added 0.51% to 11,599.39 and France's CAC 40 dipped 0.13% to 4,853.40.
Meanwhile, oil prices pushed lower, with West Texas Intermediate falling 1.25% to $51.83 a barrel.
Over in Brussels, the European Commission asked Italy to reduce its budget deficit by €3.4bn to avoid an excessive deficit procedure.
On the data front, Eurozone consumer prices were up 1.1% on the year in December, versus a 0.6% rise in November and matching an earlier estimate. On the month, consumer prices increased 0.5%.
Core inflation - excluding energy, food, alcohol and tobacco - edged up to 0.9% from 0.8% the month before, also in-line with previous estimates.
In the EU-28 group of nations, annual inflation came in at 1.2% in December, up from 0.6% the month before.
On the corporate front, Dutch semiconductor supplier ASML rallied after better-than-expected fourth-quarter reports, although Danish biotechnology firm Novozymes slipped after its own.
Meanwhile, fashion house Burberry edged higher after it reported 4% growth in underlying retail sales for the third quarter, boosted by a return to growth for the Asia-Pacific region but with the Americas still in decline.
On the downside, however, education publisher Pearson - which has already issued a string of profit warnings in recent years - tanked after it cut its profit forecast for this year and said the dividend will be lower. |
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| | US Market Report | | US open: Stocks little changed despite upbeat Goldman Sachs, Citi earnings US equity markets were little changed on Wednesday, even though banking heavyweights Goldman Sachs and Citi posted positive earnings, while the dollar rebounded from the previous session's Donald Trump inspired fall.
The Dow Jones Industrial Average and the S&P 500 were flat at 19,819.72 and 2,269.47 respectively, and the Nasdaq was up 0.19% to 5,549.12 at 1535 GMT.
Meanwhile, oil prices dropped on the strength of the dollar. West Texas Intermediate fell 1.86% to $51.52 per barrel and Brent crude was down 1.89% to $54.44.
The greenback was up 0.73% versus the pound to 0.8114, 0.19% against the euro to 0.9352 and 0.62% versus the yen to 113.32.
Goldman Sachs and Citi followed mostly positive quarterly earnings from its peers JP Morgan Chase, Bank of America, Wells Fargo and Morgan Stanley.
Goldman Sachs' quarterly profit surged as it benefitted from the increase in trading following Trump's surprise election victory and a hike in interest rates. The bank generated $2.15bn in profit, up from $574m in the same period in 2015, when it paid a $5bn legal settlement, while revenue rose by $900m to $8.17bn.
Citi also gained from a surge in trading, as it made $1.14 a share, which topped forecasts of $1.12, on revenue of $17.01bn, slightly missing expectations of £17.3bn. The bank's net income rose 7% to $3.51bn.
On the data front, the US consumer price index rose 0.3% in December, after a 0.2% gain in November. In the 12 months through to December, the index increased 2.1%, the largest year-on-year gain since June 2014.
The NAHB housing market index fell to 67 in December from a reading of 69 the previous months, which was revised down from 70. Analysts had expected a drop to 69.
Michael Hewson, chief market analyst at CMC Markets, said: "The latest inflation numbers for December showed that despite the higher dollar inflationary pressure has continued to build within the US economy, while investors will be looking keenly towards tonight's speech by Federal Reserve chief Janet Yellen, for any further clues as to how the Fed's thinking on what is likely to happen with the US economy over the next few months."
Yellen will make a speech on the goals of monetary policy at 2000 GMT.
In corporate news, uranium miner Cameco Corp plunged 14.17% after saying late on Tuesday that it will cut 10% of its workforce and warned on earnings.
Chip maker Qualcomm rose 2.03% as it emerged the Federal trade Commission filed a monopoly complaint against the company.
JP Morgan was up 0.78% as it denied any wrongdoing in the settlement of a case brought by the government that claimed the bank discriminated against black and Hispanic mortgage seekers. |
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| | Broker Tips | | Broker tips: Pearson, Inmarsat, Intercontinental Hotels Liberum said Pearson's major profit warning and accelerated plans to recover from the US higher education challenges to protect the dividend were "too little, too late".
The FTSE 100-listed company said it intended to exit from its 47% stake in Penguin Random House to beef up its balance sheet, announced it is expanding its US higher education rental offering and, "for the first time", Liberum said, explicitly recognised the structural problems in their US higher education market.
Pearson said it still expected to make £630 adjusted operating profits, but for 2017 guidance for adjusted EPS was slashed to 48.5p-55.5p, far below consensus 63.5p.
The broker felt the "key point" was that US higher education courseware fell 30% yoy in the fourth quarter and 18% for full year, estimating US higher ed is roughly 45% of profits.
"Our main area of concern has always been PSON's US Higher Education business and that students were no longer paying for expensive textbooks and moving to cheaper options, particularly book rentals," analysts wrote.
"This has now proven to be the case (despite Pearson citing inventory issues, which may be another way of explaining the problem) but it has taken PSON management several years to publicly accept the impact.
Analyst Ian Whittaker said reducing e-book rental prices by 50% might not be enough to take share and, as has been seen in the music industry, "there is a question of association for students between the publishers' title and the book they want to buy", while the new rental plan may put Pearson at odds with their important bookseller customers.
With the monetisation of PRH leading to significant earnings dilution, Liberum's 'sell' rating and 470p target since last year were looking ever more prescient.
JPMorgan Cazenove downgraded Inmarsat to 'neutral' from 'overweight' and cut the price target to 830p from 950p.
JPM said its buy case had been predicated on the belief that GX will unlock new revenue opportunities, and underpin a double digit earnings before interest, taxes and depreciation growth outlook.
"Whilst we remain confident in this mid-term thesis, the near-term story seems clouded by ongoing legacy pressures, a slower-than-hoped ramp-up in Aviation revenues and rising GX/aviation investment needs."
As a result, JPM's 2017E EBITDA estimate is now 8% below consensus and its 2018 revenue forecast is marginally below guidance.
"These overhangs lead us to move to neutral; however, we argue that once expectations rebase, investors may once again be drawn to Inmarsat's (still) enviable growth story and its now de-rated valuation."
Inmarsat is due to release its fourth-quarter results and full-year 2017 outlook in March and JPM expects management to refrain from providing any new mid-term revenue guidance.
HSBC on Wednesday upgraded InterContinental Hotels to 'hold' from 'sell' and lifted the target to 3,700p from 2,900p.
With macro-economic indicators improving, HSBC said it is "more optimistic" about global revenue per available room (RevPAR) trends in key markets such as the US, France, and the UK.
Purchasing mangers' index data across the globe is stronger, US economic growth has picked up and HSBC economists have raised developed market forecasts, the bank noted.
"With this improving backdrop and easier comparatives in 2017, we see upside versus expectations for all hotels in our coverage," HSBC said.
HSBC expects IHG's US business, which has been slowing for a number of quarters, to see RevPAR growth improve to over 2% in the fourth quarter from 1.4% in the third quarter. Fiscal year 2017 will benefit from the strengthening macro-economic conditions, improving oil markets, and easy comparatives.
The US hotel business may also benefit from US President-elect Donald Trump's infrastructure plans. IHG has a "buoyant" construction pipeline for the expansion of hotel rooms, HSBC said.
"For IHG, we think the market expectation of around 2.4% group RevPAR growth in 2017 is well underpinned," the bank added.
The strong US dollar against the pound also provides a tailwind. IHG's headquarters are based in the UK, which HSBC said means 50% of gross central overhead and 40% of European regional overheads are incurred in sterling, providing a boost to numbers. | | |
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