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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 falls as pound strengthens after Theresa May's Brexit speech The FTSE 100 closed in negative territory on Tuesday as the pound strengthened after Prime Minister Theresa May revealed the government's Brexit plans.
The index fell 1.46% to 7,220.38 points while the pound jumped 2.82% against the dollar to $1.2387 and gained 1.81% versus the euro to €1.1571.
Speaking in London, May said Britain will leave the European Union's single market but the government was looking to negotiate a free trade deal with the bloc.
May's confirmation of a 'hard' Brexit came as no surprise after weekend media reports stated the Prime Minister was likely to say Britain was leaving the single market in her speech.
The news was softened somewhat after May said both houses of parliament would get a vote on the final Brexit deal. A vote is expected in early 2019, towards the end of the two-year negotiating period after triggering Article 50 of the formal Brexit process.
Jasper Lawler, senior market analyst at London Capital Group, said the parliamentary vote will "keep the more enthusiastic Brexit ministers in check".
"The government deserves some applause for its expectations management," he added.
"The leaking of key details from the speech meant much of it was priced in, teeing up Theresa for a relief rally as she stepped on stage. To her credit, Theresa May came across as strong advocate for Britain. EU leaders would do well not to underestimate May as an adversary over the negotiating table."
Earlier in the session, traders were digesting the latest UK inflation figures. The Office for National Statistics revealed inflation surged more than expected as higher import costs - caused by a weaker post-Brexit sterling - were passed onto consumers.
The consumer price index rose to an annual rate of 1.6% in December compared to 1.2% in November, while the market had forecast a rise of 1.4%.
Month-on-month, CPI rose 0.5% in December from 0.2% in November, more than the consensus forecast for a 0.3% rise.
Core inflation, which excludes more volatile prices such as energy, food, alcohol and tobacco, rose to 1.6% from 1.4%, driven by a rebound in inflation in the services sector to 2.5% from 2.2% in November.
Economist Scott Bowman at Capital Economics said the pick-up in inflation should not worry the Monetary Policy Committee yet, though the input price pressures should continue to flow through to consumer prices and lift inflation above the BoE's 2% target in a few months' time.
Separate data from the ONS revealed UK house price growth picked up in November. ONS's House Price Index data, which is based on mortgage completions, showed house prices rose 6.7% year-on-year in November, having dipped to a 12-month low of 6.4% in October from 6.6% in September, 6.8% in August and 9.3% in June
Meanwhile, the Council of Mortgage Lenders said house purchasing lending in the UK rose 5% to £11bn in November from a month ago. Compared to the same month a year ago, borrowing rose 2% in November, totalling 60,800 loans.
Elsewhere, the dollar weakened as investors continued to mull US President-elect Donald Trump's remarks about the greenback being "too strong" after touching a more-than 14-year high about two weeks ago. In an interview with The Wall Street Journal on Friday, Trump said the currency had strengthened too much, particularly since the Chinese yuan is "dropping like a rock".
"Our companies can't compete with them now because our currency is too strong. And it's killing us," he told the newspaper.
In company news, aerospace and defence group Rolls-Royce was the standout gainer after agreeing to pay £671m to settle bribery and corruption cases with UK and US authorities.
Hargreaves Lansdown rallied after JP Morgan Chase upgraded the stock to 'neutral' from 'underweight' on valuation grounds.
Standard Chartered got a boost as Bank of America Merrill Lynch upgraded the stock to 'buy' from 'neutral' and lifted the price target to 900p from 735p, saying the bank was progressing towards reasonable returns.
On the downside, inspection, product testing and certification company Intertek was under the cosh as Credit Suisse downgraded the stock to 'underperform' from 'neutral' and cut the price target to 3,200p from 3,400p as it took a more cautious view on the rate of recovery in the resources operations and increased risk to its consumer and product divisions.
Miners were on the back foot as metals prices declined despite a weaker US dollar, with BHP Billiton and Anglo American in the red. |
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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) 7,220.38 -1.46%
FTSE 250 (MCX) 18,240.96 -0.36%
techMARK (TASX) 3,374.25 -1.13%
FTSE 100 - Risers
Rolls-Royce Holdings (RR.) 694.50p 4.44%
Hargreaves Lansdown (HL.) 1,329.00p 3.91%
easyJet (EZJ) 1,058.00p 3.42%
Standard Chartered (STAN) 744.70p 2.82%
Barratt Developments (BDEV) 521.00p 2.56%
Royal Bank of Scotland Group (RBS) 220.20p 2.47%
Taylor Wimpey (TW.) 173.00p 2.31%
International Consolidated Airlines Group SA (CDI) (IAG) 491.50p 1.99%
Persimmon (PSN) 1,995.00p 1.37%
Babcock International Group (BAB) 954.50p 1.33%
FTSE 100 - Fallers
British American Tobacco (BATS) 4,580.00p -3.83%
Carnival (CCL) 4,113.00p -3.50%
Intertek Group (ITRK) 3,449.00p -3.20%
Wolseley (WOS) 4,866.00p -3.16%
BHP Billiton (BLT) 1,434.00p -2.94%
Diageo (DGE) 2,131.50p -2.92%
Compass Group (CPG) 1,425.00p -2.73%
Burberry Group (BRBY) 1,593.00p -2.69%
Reckitt Benckiser Group (RB.) 6,772.00p -2.63%
Imperial Brands (IMB) 3,543.00p -2.53%
FTSE 250 - Risers
Dechra Pharmaceuticals (DPH) 1,422.00p 4.10%
International Personal Finance (IPF) 172.00p 3.68%
Capital & Counties Properties (CAPC) 280.60p 3.16%
Sports Direct International (SPD) 293.70p 3.05%
Morgan Advanced Materials (MGAM) 296.90p 2.98%
Ladbrokes Coral Group (LCL) 124.50p 2.81%
Pets at Home Group (PETS) 241.70p 2.59%
Aldermore Group (ALD) 222.00p 2.30%
Beazley (BEZ) 391.70p 2.19%
Wizz Air Holdings (WIZZ) 1,839.00p 2.11%
FTSE 250 - Fallers
Ferrexpo (FXPO) 125.00p -3.99%
Worldwide Healthcare Trust (WWH) 2,108.00p -3.91%
Vedanta Resources (VED) 1,001.00p -3.75%
PZ Cussons (PZC) 331.00p -3.48%
Kaz Minerals (KAZ) 412.80p -3.14%
Evraz (EVR) 219.50p -2.83%
JPMorgan American Inv Trust (JAM) 366.40p -2.55%
JPMorgan Indian Investment Trust (JII) 622.00p -2.51%
Rentokil Initial (RTO) 220.10p -2.44%
Foreign and Colonial Inv Trust (FRCL) 543.00p -2.34% |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Markets finish red on May's Brexit deliverance European stocks made a mild retreat on Tuesday, after UK Prime Minister Theresa May outlined the government's plans for Brexit in an eagerly-awaited speech.
The benchmark Stoxx Europe 600 index was last down 0.12%, while Germany's DAX was off 0.13% and France's CAC 40 was 0.46% weaker.
London's FTSE 100 was 1.46% lower.
In currency markets, the pound surged higher during the afternoon following May's speech, at $1.2389 versus $1.2185 just before she started speaking.
On Monday, sterling fell to its lowest level since the October 'flash crash' after a Sunday Times report suggested May was set to reveal plans for a 'hard' Brexit.
In her speech on Tuesday, May said she did not want partial membership of the EU.
"We seek a new and equal partnership - between an independent, self-governing, global Britain and our friends and allies in the EU.
"Not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out."
Nullifying the option for a 'Norwegian model' May said she was not seeking to adopt any model already enjoyed by other countries.
"We do not seek to hold on to bits of membership as we leave."
In addition, she confirmed that MPs and peers will get to vote on the final Brexit deal before it comes into place and said the Government will seek the greatest possible access to the single market, but not membership of it
In corporate news, aerospace and defence group Rolls-Royce advanced 4.77% after agreeing to pay £671m to settle bribery and corruption cases with UK and US authorities.
British American Tobacco reversed earlier gains to fall 3.46% after confirming it was acquiring the remaining 57.8% of Reynolds American it does not already own in an agreed cash-and-shares offer worth $49.4bn.
German online retailer Zalando slumped 5.98% despite reporting a rise in revenue and earnings for the fourth quarter.
Beiersdorf nudged up 0.21% after better-than-expected 2016 sales figures.
Standard Chartered rallied 3.4% on the back of an upgrade to 'buy' by Bank of America Merrill Lynch.
French retailer Casino Guichard Perrachon finished 3.59% firmer after saying 2016 trading profit came in a touch ahead of its €500m target.
French train maker Alstom declined 0.91% as it reported a 3.1% increase in sales for the months through to December, which marked a slowdown from the previous six months.
On the macroeconomic front, the latest survey from the ZEW Center for European Economic Research in Mannheim showed German economic sentiment improved less than expected in January.
The index of economic sentiment increased to 16.6 from 13.8 the month before, but this was below analysts' expectations for a reading of 18.3. |
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| | US Market Report | | US open: Stocks on the back foot as Trump rally loses steam US stock markets edged lower on Tuesday as traders returned to their desks after the long weekend, with earnings season back in focus as the Trump rally ran out of steam and the dollar slipped against the pound.
At 1520 GMT, the Dow Jones Industrial Average fell 0.08% to 19,869.43, the S&P 500 was 0.17% weaker at 2,270.78 and the Nasdaq was down 0.41% to 5,557.34. US markets were closed on Monday for Martin Luther King Jr Day.
Meanwhile, oil prices advanced, underpinned by a weaker dollar. West Texas Intermediate was up 0.69% to $52.99 a barrel, while Brent crude was 0.92% higher at $56.38.
Across the pond, UK Prime Minister Theresa May said Britain would seek to leave the European single market and the customs union of the European Economic Area in order to curb immigration from the EU and forge new trade deals. She also said that the final Brexit deal will be put to a vote in both houses of parliament.
The dollar was down 2.72% versus the pound, 1.01% against the euro and 1.02% versus the yen. The pound had fallen to its lowest level against the dollar since the October 'flash crash' on Monday after the Sunday Times said May was set to reveal plans for a 'hard' Brexit.
On Tuesday, however, the pound got a boost from May's speech and strong inflation data released earlier in the session.
Lukman Otunuga, research analyst at FXTM, said: "The swift change of events has turned the GBPUSD bullish on the daily charts with prices trading over 350 pips higher from Monday's three month low as of writing. A decisive breakout and daily close above 1.2350 could encourage a further incline higher towards the next relevant resistance level at 1.2500. A persistently weak dollar created from the rising Trump uncertainties could elevate the GBPUSD higher this week with technical traders carefully observing how prices react to 1.2350."
President-elect Donald Trump recently said that Brexit would end up a being a "great thing" for Britain and promised a "very quick" trade deal.
Back across the Atlantic, New York Federal Reserve president William Dudley said that a strong greenback would put downward pressure on prices and that inflation was "not a problem".
He said the risk that the Fed will "snuff out" economic expansion anytime soon seems low because "inflation is simply not a problem" and that the pressure on labour resources was increasing "quite slowly".
"The recent strengthening of the dollar will put downward pressure on import prices and limit the ability of domestic producers to raise their prices," he said.
On the data front, the Empire State manufacturing index came in at 6.5 in January from 7.6 in December, suggesting that business activity in the Big Apple grew modestly. This was below the 8.5 expected.
In corporate news, Morgan Stanley fell 1.8% despite reporting an 83% surge in fourth-quarter earnings, which beat expectations, as it benefited from increased trading after the presidential election. This was the bank's strongest fourth quarter since the financial crisis.
Elsewhere, United Health gained 7.5% as its fourth-quarter earnings beat analysts' expectations. |
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| | Broker Tips | | Broker tips: Ashtead, Intertek, StanChart Ashtead was given a boost on Tuesday after Deutsche Bank upgraded its rating on the equipment rental company to 'hold' from 'sell' at an unchanged target of 1,600p.
Deutsche Bank said its fears about the impact of macro-economic challenges have tempered following recent stronger data. The bank had previously expected a steady de-rating.
Last year US non-residential construction rose 3% in October and 4% in November after decelerating from 10% in January to 1% in September, the bank noted.
Deutsche Bank said it also recognises that following the election, US policy changes have the potential to stimulate growth. The bank's economists have materially upgraded GDP expectations since the election.
"We therefore push out our expectations of a de-rating, and no longer believe the market will imminently imply a slowdown in the Ashtead multiple," Deutsche Bank said.
"We also recognise that Ashtead's shares have some scarcity value for UK long only fund managers seeking exposure to US GDP and fiscal stimulus."
The bank has upgraded its forecasts for fiscal year 2017 earnings per share by 4.5% and 2018 EPS by 7.1%. However, Deutsche Bank said momentum can quickly change given the nature of Ashtead's end market.
"With consensus enterprise value/sales back at 3.0x, we consider it important to continue to monitor the end markets carefully. On a 24m view we remain cautious over valuation."
The third quarter results are due on 7 March and Deutsche Bank expects group adjusted pre-tax profit of £177m.
Credit Suisse has downgraded Intertek to 'underperform' from 'neutral' and cut the price target to 3,200p from 3,400p as it took a more cautious view on the rate of recovery in the resources operations and increased risk to its consumer and product divisions.
The bank said it expects organic growth to remain constrained in the shorter term with -0.2% organic growth in 2016 and 1.6% in 2017.
In the medium term, CS reckons organic growth can return to mid-single digit growth rates but said the path to this level of growth is likely to be constrained by the resources operations and rising risks related to geopolitical uncertainty.
"Given its operational exposure we think that Intertek is the most exposed of the major staffing companies if protectionist policies lead to indigestion in global trade routes. From a more positive perspective we think that Intertek can continue to add value and incremental growth from combining organic progression with further M&A."
The bank cut its earnings per share forecast for 2017 and 2018 to 179p from 180.8p and to 191.2p from 194.3p, respectively.
Standard Chartered got a boost on Tuesday as Bank of America Merrill Lynch upgraded the stock to 'buy' from 'neutral' and lifted the price target to 900p from 735p, saying the bank was progressing towards reasonable returns.
Merill upped its 2018 pre-tax profit forecast by 18% to reflect higher returns on StanChart's $140bn excess deposits and equity and a modest uplift for higher fixed income and FX trading.
BofA ML said it sees StanChart rebuilding profitability organically, with costs stable and income recovering to $17bn by 2020.
"This should offer an 8% return on tangible equity, re-geared to 9%," Merrill said, adding that this is still low, depressed by continued QE in Japan and rates still weighing on deposit earnings.
"We believe the market will support the group's independent strategy. However, in the event of disappointment, we believe the possibility of the end of the nine-year regulatory expansion and the new US administration open the potential for StanChart to seek a merger."
BofA ML pointed out that StanChart's market value is below 10% of its largest peers and its multiple is now an outlier at 0.7x tangible book. | | |
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