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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: Blue chips, mid caps end higher as miners rally with copper prices UK blue chips and mid caps chimed Monday's close on a positive note, with the latter at yet another record high, as mining-related stocks surged alongside the price of the industrial-favourite copper.
Prices for the 'red metal' pushed higher at the start of the week on expectations a strike at Chile's Escondida mine, the world's largest copper bore, might last longer than expected.
This as exports were halted from the second-largest mine on the planet, Grasberg in Indonesia.
Together these had a knock-on benefit for other industrial metals, while iron ore prices were on the front foot after an uptick in construction in China.
These factors helped propel the FTSE 350 indices for mining and separately industrial metals up by 2.15% and 3.57%, respectively.
Blue-chip stocks zipping north as a result included Anglo American, Rio Tinto, Glencore and Antofagasta. Other sectors prominently higher included financials, house builders and utilities.
Against that backdrop, the FTSE 100 ended just below a new record closing high, while the FTSE 250 once again ended the session in previously uncharted waters.
"A 20-month high for copper prices is emblematic of the move back to base metals amid expectations of rising economic growth, with gains for the FTSE 100 driven once again by the miners," said Chris Beauchamp, chief market analyst at IG.
"It is, admittedly, a slow news day, but the rash of new record highs in the US seems to have brought out the momentum players, who spent most of December and January on the sidelines."
Some ballast to the accelerating miners was provided by the European Commission revising its estimate for UK's economic growth in 2017 to 1.5%, from 1% previously and versus 2% in 2016.
The market was now focused on Tuesday's UK consumer-price index (CPI) reading, which was expected to near Bank of England's (BoE) targeted 2%.
"The prospect of such an upward CPI swing, and the potential ramifications this has for a BoE rate hike, has helped the pound hold off the dollar while nabbing nearly half a percent in growth from the euro," said Connor Campbell, financial analyst at SpreadEx.
"It has also prevented the FTSE from fully joining in with the day's rally. ... It (the FTSE's gain) doesn't compare to the gains seen in the Eurozone."
Back in London, generally positive investor sentiment was lent support by news from US President Donald Trump's meeting with Japanese leader Shinzo Abe over the weekend.
Trump reaffirmed the US' 'One China' policy in a telephone call with that country's leader.
Traders had fretted on whether the US would renege on its long-standing policy commitment to support to China's reunification, a key element of its Asia Pacific regional security strategy.
On a more sombre note, North Korea's latest and allegedly successful ballistic missile test over the weekend sparked closed consultations at the UN's Security Council on Monday.
The urgent diplomatic talks were called for by US, Japan and South Korea.
In the news, Glencore's share rose as it said it had purchased Fleurette Properties' remaining 31% stake in Mutanda Mining, and a roughly 10.25% stake in Katanga Mining.
Shares in Royal Bank of Scotland improved on the back of weekend reports it planned to axe about 15,000 jobs, which the lender denied ahead of its annual results next week.
Old Mutual has apparently received new approaches for its $900m controlling stake in its US asset management arm.
Finally, Capita and the Co-operative Bank have resolved contractual differences over claims the outsourcing firm withheld payments from the bank due to delays as it helped administer mortgages for Capita's clients. |
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| Market Movers
FTSE 100 (UKX) 7,278.92 0.28%
FTSE 250 (MCX) 18,768.89 0.29%
techMARK (TASX) 3,348.65 0.09%
FTSE 100 - Risers
Anglo American (AAL) 1,409.50p 4.21%
Rio Tinto (RIO) 3,679.50p 3.00%
Glencore (GLEN) 328.95p 2.56%
Royal Bank of Scotland Group (RBS) 234.60p 2.49%
Babcock International Group (BAB) 901.00p 2.27%
Hargreaves Lansdown (HL.) 1,394.00p 2.05%
Antofagasta (ANTO) 883.50p 2.02%
Hikma Pharmaceuticals (HIK) 1,975.00p 1.96%
Barclays (BARC) 232.35p 1.62%
Associated British Foods (ABF) 2,540.00p 1.60%
FTSE 100 - Fallers
Capita (CPI) 513.50p -2.38%
Fresnillo (FRES) 1,524.00p -1.99%
Direct Line Insurance Group (DLG) 360.70p -1.98%
Marks & Spencer Group (MKS) 335.10p -1.96%
Paddy Power Betfair (PPB) 8,560.00p -1.61%
Royal Mail (RMG) 408.30p -1.28%
Admiral Group (ADM) 1,880.00p -0.95%
Next (NXT) 3,931.00p -0.88%
Mediclinic International (MDC) 828.50p -0.84%
Standard Life (SL.) 367.40p -0.81%
FTSE 250 - Risers
Ferrexpo (FXPO) 175.00p 6.71%
Spectris (SXS) 2,424.00p 3.63%
St. Modwen Properties (SMP) 339.40p 3.38%
Vectura Group (VEC) 145.80p 3.26%
Aberforth Smaller Companies Trust (ASL) 1,203.00p 3.17%
Kaz Minerals (KAZ) 586.50p 2.80%
Wizz Air Holdings (WIZZ) 1,609.00p 2.42%
Ocado Group (OCDO) 258.20p 2.34%
Evraz (EVR) 253.90p 2.30%
Keller Group (KLR) 886.50p 2.07%
FTSE 250 - Fallers
NMC Health (NMC) 1,737.00p -3.02%
Greene King (GNK) 657.50p -2.81%
Debenhams (DEB) 54.10p -2.61%
Pets at Home Group (PETS) 185.00p -2.37%
Centamin (DI) (CEY) 174.20p -1.69%
Fidessa Group (FDSA) 2,363.00p -1.54%
OneSavings Bank (OSB) 351.20p -1.51%
AO World (AO.) 159.30p -1.48%
Clarkson (CKN) 2,535.00p -1.36%
Atkins (WS) (ATK) 1,469.00p -1.34% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Basic Resource shares pace gains European equity markets powered ahead at the start of the week, with basic resources spearheading the advance as copper prices rallied on supply worries, while the European Commission raised it growth forecast for the Eurozone.
The benchmark Stoxx Europe 600 index was up 0.75% to 370.13, Germany's DAX was 0.92% firmer at 11,774.43 and France's CAC 40 rose 1.24% to 4,888.19.
Meanwhile, oil prices pushed lower, with West Texas Intermediate down 1.82% to $52.90 per barrel and Brent crude off 2.05% to $55.56 a barrel.
Gold on Comex fell 0.88% to $1,225.00 per troy ounce.
Basic resources racked up healthy gains, with the Stoxx 600 sub-index for the sector ending the day 2.69% higher atop the 453.33 mark as prices for the 'red metal' jumped to a 20-month high on the back of supply concerns after BHP Billiton declared a 'force majeure' due to a strike at its copper mine in Chile.
Elsewhere, the governor of France's central bank Franois Villeroy de Galhau said the country' debt costs could rise by €30bn a year if France ditches the euro, a warning shot aimed at presidential candidate Marine Le Pen who plans to take the country out of the Eurozone if elected.
In other corporate news, Stada surged 13% after the pharmaceutical company said over the weekend that it has received two offers for its acquisition, one of which is from private equity group Cinven Partners LLP.
Royal Bank of Scotland was up 2.49% on reports it was planning to cut more than 800m of annual operating costs by slashing jobs and closing branches.
Heineken was little changed after agreeing to buy beer and soft drinks maker Brasil Kirin Holding from Japan's Kirin Holdings for €664m.
Software provider Fidessa erased 2.1% after it declared both a final and special dividend, with profits strongly boosted by the weak pound.
Lundin Petroleum was up 2.44% after it said it would spin off its non-Norwegian oil and gas assets into a separately-listed company.
Sanofi nudged up 0.29% as it agreed to sell a portfolio of five drugs in Europe to Ipsen for €83m to help pave the way for a takeover of certain assets from Germany's Boehringer Ingelheim.
Swedish defence company Saab fell 3.09% after it reported quarterly operating profit that missed analysts' expectations.
Spreadex's Connor Campbell said: "The Eurozone led the way this Monday, the DAX and CAC jumping 0.7% and 0.8% respectively following news that the European Commission had raised its growth forecasts for the region as a whole. For the next two years steady expansion is expected for all members of the EU, the first time the EC has been able to announce such a picture since 2008."
The EC's growth 2017 forecasts for the eurozone were revised higher to 1.6% from the previous 1.5%, with the 2018 forecast upped to 1.8% from 1.7% before.
Eurozone inflation is expected to climb to 1.7% in 2017, bumped up from a prior forecast of 1.4%, with the consumer price index projection for 2018 maintained at 1.4%. Unemployment in the single currency area was expected to fall to 9.6% in 2017, revised down from the previous 10%, with the 2018 number put at 9.1%. |
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| | US Market Report | | US open: Record highs as Trump appointments inspire gains US equity markets were sprouting green on Monday as new President Donald Trump inspired further gains and investors looked ahead with no fear for Federal Reserve chair Janet Yellen semi-annual testimony before Congress.
The Dow Jones Industrial Average bagged another record open, climbing 0.5% to 20,371.13, while the S&P 500 gained 0.39% to 2,325.02 and the Nasdaq was 0.48% higher to 5,761.68 at 1528 GMT.
This was in spite of a retreat by oil prices, with West Texas Intermediate down 1.46% at $53.08 a barrel and Brent crude falling 1.66% to $55.77.
Building on last week's optimism over Trump's "phenomenal" tax tease, where the populist billionaire said he was planning the most ambitious tax reform since the Reagan era in the coming weeks, a further boost on Monday came as ex Goldman Sachs top brass Steve Mnuchin moved to within hours of his confirmation as Treasury secretary.
Wall Street was buoyed as investors began to price in the benefits of a Goldman Sachs-led Treasury Department, said analyst Jasper Lawler at London Capital Group.
"Trump's agenda of financial deregulation will likely have another supporter in the form Mnuchin. Mnuchin and [director of the White House National Economic Council] Gary Cohn will be a more 'internationalist' influence on Trump, potentially putting a lid the President's penchant for currency wars and trade tariffs," Lawler said.
"The benefit to Wall Street of having an ex-Goldman Sachs banker as Treasury Secretary is pretty self-evident. In extension, it would make sense for Mnuchin to fill key positions at the treasury with his people, namely other Wall Streeters. Senior Goldman Sachs banker Jim Donovan as well as Justin Muzinich, a former Morgan Stanley worker are reportedly being considered for key positions."
Bank and industrial stocks were among the biggest gainers on Monday, with Goldman Sachs up 1.66% and JP Morgan Chase & Co climbing 1.36%, while Caterpillar added 1.42%.
Trump had also wrapped up a visit from Japanese Prime Minister Shinzo Abe last week and was preparing to meet Canadian Prime Minister Justin Trudeau later on in the day to discuss Nafta, which the president has called "the worst trade deal in history".
Michael Hewson, chief market analyst at CMC Markets, said: "The initial belligerence of the Trump administration towards China and Japan appears to have given way to a more practicable way of doing things, and while peace may not have broken out quite yet, some welcome pragmatism does appear to be taking hold in Washington.
"This change of tack along with the optimism about the reflation trade has given additional impetus to a trend that had been in danger of stalling as recently as a week ago. Investors hope that this theme continues when President Trump meets Canadian PM Justin Trudeau who hasn't been shy in expressing his opposition to some of Trump's recent policy pronouncements."
Meanwhile, investors were also preparing for Yellen testimony and key inflation data. Yellen will appear before the Senate on Thursday and the House on Friday, along with the publication of data on inflation, retail and employment.
The minutes of latest FOMC meeting when the Fed stood pat on interest rates will be published on 22 February.
In currency markets, the dollar was flat against the pound to 0.8005, rose 0.39% versus the euro to 0.9435 and was 0.7% stronger against the yen to 114.01.
In corporate news, Verizon Communications fell 1.16% after the wireless carrier started selling unlimited data plans again for the first time since 2011.
On the up side, Teva Pharmaceutical Industries was up 4.77% after quarterly revenue and earnings best analysts' expectations but swung to a loss.
BHP Billiton rose 0.82% after the miner declared a force majeure due to a strike at its copper mine in Chile, which sent copper prices hitting 20-month highs on supply concerns.
Dow Jones - Risers
Caterpillar Inc. (CAT) $98.54 2.32%
JP Morgan Chase & Co. (JPM) $88.47 1.69%
Goldman Sachs Group Inc. (GS) $246.60 1.60%
Boeing Co. (BA) $168.60 1.43%
Apple Inc. (AAPL) $133.66 1.17%
Pfizer Inc. (PFE) $32.67 1.00%
Microsoft Corp. (MSFT) $64.50 0.79%
Cisco Systems Inc. (CSCO) $31.75 0.76%
United Technologies Corp. (UTX) $111.81 0.69%
Unitedhealth Group Inc. (UNH) $161.68 0.58%
Dow Jones - Fallers
Verizon Communications Inc. (VZ) $48.54 -0.90%
Nike Inc. (NKE) $55.86 -0.64%
Home Depot Inc. (HD) $139.26 -0.42%
Travelers Company Inc. (TRV) $119.30 -0.36%
Wal-Mart Stores Inc. (WMT) $67.78 -0.35%
Procter & Gamble Co. (PG) $87.97 -0.00%
McDonald's Corp. (MCD) $125.98 0.13%
Walt Disney Co. (DIS) $109.54 0.26%
Coca-Cola Co. (KO) $40.69 0.26%
Visa Inc. (V) $86.16 0.30%
S&P 500 - Risers
United States Steel Corp. (X) $39.79 5.82%
Mosaic Company (MOS) $34.17 3.99%
Nucor Corp. (NUE) $63.19 3.61%
Regeneron Pharmaceuticals Inc. (REGN) $370.80 3.04%
Goodyear Tire & Rubber Co. (GT) $34.59 2.58%
Alcoa Corporation (AA) $39.24 2.45%
E*TRADE Financial Corp. (ETFC) $36.39 2.33%
Caterpillar Inc. (CAT) $98.54 2.32%
Macy's Inc. (M) $32.72 2.27%
CF Industries Holdings Inc. (CF) $36.61 2.15%
S&P 500 - Fallers
Gap Inc. (GPS) $23.46 -3.69%
Nvidia Corp. (NVDA) $110.30 -2.92%
Activision Blizzard Inc. (ATVI) $45.94 -2.72%
Nordstrom Inc. (JWN) $43.87 -2.51%
Kohls Corp. (KSS) $41.08 -2.28%
Occidental Petroleum Corp. (OXY) $67.10 -2.00%
EQT Corp. (EQT) $63.08 -1.97%
Southwestern Energy Co. (SWN) $8.85 -1.78%
Target Corp. (TGT) $64.62 -1.69% |
| | Broker Tips | | Broker tips: Glencore, AB Foods, Enquest Glencore got a lift on Monday as Morgan Stanley upped its stance on the stock to 'equalweight' from 'underweight' and bumped the price target up to 280p from 230p, saying financial risk has mitigated and it is now on par with peers.
"Reinvestment or return of excess cash is the key value driver ahead. Here, the group's options and track record are comparable to peers."
The bank said that the downside to its new price target and the risk reward skew is comparable also. It pointed out that Glencore's estimated 2017 free cash flow yield of 2.5% is similar to its diversified peers at 11.9% on spot.
"A payout ratio based dividend policy ensures the bulk of free cash flow will flow back to shareholders. It also has reinvestment opportunities to generate some growth. Finally, in 2015/16 the marketing division has demonstrated its countercyclical cash flows in a weak commodity price environment."
MS said it expects near-term earnings growth to be driven by extra volumes in African copper and global zinc.
It reckons that on spot prices, higher production from these assets will add $3bn and $0.75bn to earnings before interest, taxes, depreciation and amortisation, respectively, versus group EBITDA of $10bn in 2016.
Morgan Stanley also upgraded Associated British Foods to 'overweight' from 'equalweight' and lifted the price target to 2,800p from 2,650p.
Although the bank has not materially changed its valuation for Primark, of about 15bn, it has increased its valuation for the sugar business to reflect improving prospects. This leads to the target increase and with 12% implied upside potential, the bank has upped its rating on the stock.
MS said the share price drop of around 30% in the last 10 months was overdone. It noted the shares have fallen despite consensus earnings forecasts marginally increasing.
"Primark remains an excellent long-term international growth story and its margin problems are temporary, in our view. We think it very plausible that its profits could grow by more than 40% next year."
MS said investors have become too focused on Primark's like-for-like sales. It said although sales have slowed, it remains a very healthy business.
"Even without any online sales, its sales densities are 25% higher than those of Inditex and double those of H&M. And, unlike H&M, its densities aren't declining over time, so we don't see it at risk of operating deleverage."
MS said that if Primark continues to grow sales by 10% a year and its margins in FY 2017/18 recover to the same level as FY 2015/16, "it is a matter of simple mathematics" that its profits will grow more than 40% next year.
"We don't factor this degree of margin recovery into our base case forecasts yet, but we think it a plausible scenario (something very similar happened in FY 2012/13). And if it does happen, Primark's implied valuation multiples would suddenly look very low indeed."
Exploration and production group EnQuest got a boost as UBS upgraded the stock to 'buy' from 'neutral' and upped the price target to 65p from 60p.
The bank had downgraded its stance to 'neutral' in January, saying that although the company's cash flow was impressive, a 113% jump in the share price since the placing had left the Kraken start-up risk fairly price.
Since then, UBS noted that three things have happened: January's trading statement saw near-term production guidance disappoint; the shares are down more than 20%; and EnQuest has announced a highly accretive deal with oil giant BP.
"We think the shares overreacted to the trading statement and don't yet reflect the deal value potential" it said.
On 24 January, EnQuest announced an agreement to buy a 25% operated stake in BP's Magnus field, with options to acquire the remaining 75% and/or manage some of BP's decommissioning liabilities.
UBS said the deal makes clear financial and strategic sense. | | | | To advertise in the Euro Markets Bulletin please contact [email protected] |
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