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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 mixed after UK inflation, Yellen testimony UK stocks ended Tuesday's see-saw session on a mixed note as less-than-enthusiastic investors scrutinised UK inflation data and after US Federal Reserve chair Janet Yellen's words to the Senate banking committee.
At the close in London, the FTSE 100 was down 0.14% to 7268.56 and the FTSE 250 was up 0.15% to 18,787.5, the latter further extending its run of record closes.
FTSE 350 indices notably lower included tobacco, household goods, aerospace & defence, construction & materials and chemicals, all by at least 1%.
"The FTSE 100 was little changed with early gains in connection with a weaker pound wiped out by a weak start on Wall Street," said London Capital Group senior market analyst Jasper Lawler.
Blue chips were led lower by Rolls-Royce after its full-year record £4.6bn pretax loss. Underlying profits were better than expected and its transformation programme was underway.
By contrast, TUI's first-quarter loss narrowed and revenue grew as the Anglo-German travel group said this left it confident of growing underling earnings 10% for the full year.
These results were overshadowed by inflation data. The UK consumer-price index for January came in at 1.8%, below both the 1.9% expected and Bank of England's targeted 2%.
SpreadEx financial analyst Connor Campbell commented that this data saw sterling react poorly.
"The FTSE couldn't make the most of this dip, however," said Campbell.
Accendo Markets research analyst Henry Croft said sterling's slip boosted the majority foreign earning FTSE 100.
However, he observed that a "marginally weaker" 'flash' Eurozone GDP reading saw the pound halt its sell-off. This was followed later by Yellen's testimony.
Campbell continued: "Yellen largely maintained the same tone seen in the (US) central bank's January meeting, claiming that a rate hike would be appropriate if inflation and wage growth matches the its current expectations."
Yellen also hinted that US President Donald Trump's fiscal policies could change the course of the Federal Reserve's 2017 journey.
Others, such as Pantheon Macro chief economist Ian Shepherdson, summed up Yellen's testimony in one line: "No real surprises; waiting for clarity on fiscal policy."
Against this backdrop, key US stocks indices such as the S&P 500 and Nasdaq were softer, although those across Europe were mixed. The Dax fell, but the CAC 40 and Stoxx 50 rose.
Another drag on positive sentiment was new Trump's national security adviser, Michael Flynn, had stepped down amid allegations of improper contact with the Russian embassy in Washington DC before he took up his new position.
His resignation came as the new and controversial US administration was in the midst of preparations of key summits with other countries, beginning with Europe.
In other news, miner Anglo American said its Kumba Iron Ore operation would report underlying full-year earnings of $438m, from $238m. The operation was put up for sale last year.
Retailer Next has said John Barton would retire as non-executive chair, stepping down from 1 August and succeeded by Michael Roney, the former chief executive of Bunzl. |
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| Market Movers
FTSE 100 (UKX) 7,268.56 -0.14%
FTSE 250 (MCX) 18,787.52 0.15%
techMARK (TASX) 3,342.49 -0.18%
FTSE 100 - Risers
TUI AG Reg Shs (DI) (TUI) 1,218.00p 5.27%
Royal Bank of Scotland Group (RBS) 241.00p 2.73%
Capita (CPI) 527.00p 2.63%
International Consolidated Airlines Group SA (CDI) (IAG) 503.00p 1.76%
HSBC Holdings (HSBA) 697.20p 1.32%
Barclays (BARC) 235.25p 1.25%
Persimmon (PSN) 2,012.00p 1.05%
Pearson (PSON) 657.50p 1.00%
Lloyds Banking Group (LLOY) 66.49p 0.97%
GKN (GKN) 348.30p 0.90%
FTSE 100 - Fallers
Rolls-Royce Holdings (RR.) 710.50p -3.99%
Reckitt Benckiser Group (RB.) 6,926.00p -2.11%
CRH (CRH) 2,733.00p -1.87%
BAE Systems (BA.) 605.50p -1.70%
Micro Focus International (MCRO) 2,218.00p -1.60%
Compass Group (CPG) 1,427.00p -1.31%
Anglo American (AAL) 1,391.00p -1.31%
British American Tobacco (BATS) 4,930.00p -1.24%
Johnson Matthey (JMAT) 3,115.00p -1.24%
Sage Group (SGE) 637.50p -1.16%
FTSE 250 - Risers
Acacia Mining (ACA) 502.00p 8.03%
Virgin Money Holdings (UK) (VM.) 345.00p 4.86%
Entertainment One Limited (ETO) 246.00p 3.67%
Thomas Cook Group (TCG) 89.60p 3.34%
Spectris (SXS) 2,490.00p 2.72%
RPC Group (RPC) 936.00p 2.52%
Nostrum Oil & Gas (NOG) 473.10p 2.38%
Hansteen Holdings (HSTN) 115.40p 2.12%
Henderson Group (HGG) 220.00p 1.80%
Grainger (GRI) 249.60p 1.67%
FTSE 250 - Fallers
Evraz (EVR) 246.40p -2.95%
Euromoney Institutional Investor (ERM) 1,088.00p -2.77%
Vectura Group (VEC) 142.10p -2.54%
Mitchells & Butlers (MAB) 250.60p -2.22%
Daejan Holdings (DJAN) 6,460.00p -2.12%
Dunelm Group (DNLM) 637.50p -2.07%
Tullow Oil (TLW) 274.10p -1.97%
AO World (AO.) 156.20p -1.95%
Greggs (GRG) 1,013.00p -1.94%
Victrex plc (VCT) 1,925.00p -1.79% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks end on mixed note after Yellen European stocks finished on a mixed note on Tuesday after data showed that the Eurozone economy grew less than expected in the final quarter of 2016 and US Federal Reserve chair Janet Yellen kept the door open to another interest rate hike, even at one of the central bank's next meetings.
The benchmark Stoxx Europe 600 index edged higher by 0.02% to 370.20, Germany's DAX drifted lower by 0.02% at 11,771.81 and France's CAC 40 was up 0.16% to 4,895.82.
Oil prices were a little firmer, with West Texas Intermediate up 0.69% to $53.30 per barrel and Brent crude jumping 0.89% to $56.09.
"Waiting too long to remove accommodation would be unwise," Janet Yellen said in prepared remarks for a speech before the US Senate Banking Committee.
"At our upcoming meetings, the committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate," she said.
Meanwhile, Eurozone gross domestic product rose 0.4% compared to the previous quarter, down from the 0.5% estimated back in January and in line with the third quarter figures. Analysts had expected 0.5% growth.
On the year, GDP grew by 1.7%, down from the 1.8% increase estimated last month and from the 1.8% rise in the third quarter. In the EU-28 group of nations, GDP rose by 0.5% on the quarter and 1.8% on the year.
Chris Williamson, chief business economist at IHS Markit, said: "Eurozone economic growth was revised down in the final quarter of last year, but the region still enjoyed a decent, steady pace of expansion that looks set to be sustained in the first quarter of 2017."
"However, there are clearly many risks to the outlook further ahead, notably including elections in the Netherlands, France, Germany and possibly Italy, as well as Brexit and Italy's banking problems, all of which have the potential to create additional economic uncertainty and subdue growth. It therefore seems likely that the Eurozone will struggle to see 2017 GDP growth match the 1.7% expansion recorded in 2016."
Eurozone industrial production fell 1.6% from November, which was a touch steeper than the 1.5% drop expected by economists. The production of capital goods declined by 3.3%, energy by 1.4%, non-durable consumer goods by 1.2% and intermediate goods by 0.2%, while production of durable consumer goods rose by 2.9%.
The German economy also grew less than expected in the fourth quarter. Gross domestic product rose 0.4% on the previous quarter on a seasonally-adjusted basis, missing economists' expectations of 0.5% growth.
German investor sentiment deteriorated more than expected in February. The headline ZEW expectations index fell to 10.4 from 16.6 the month before, missing expectations for a reading of 15.0. The current situation index declined to 76.4 from 77.3 in January, undershooting analysts' forecasts of 77.2.
In corporate news, engineering firm Rolls-Royce fell 3.31% after it posted a record annual loss of £4.6bn following a £671m corruption fine and amid the collapse of the pound.
HeidelbergCement was down 3.77% despite saying earnings and sales rose sharply in the fourth quarter.
On the upside, TUI advanced 1.74% as it reported a narrower loss for the first quarter.
Credit Suisse gained 2.30% ground despite reporting a bigger-than-expected loss for the fourth quarter following its settlement with US authorities, as it announced plans to cut 5,500 jobs. |
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| | US Market Report | | US open: Stocks fall after Yellen speech, while dollar strengthens US stocks opened lower and the dollar rallied on Tuesday as Federal Reserve chair Janet Yellen told Congress that interest rate hikes could rise gradually in 2017.
The Dow Jones Industrial Average was down 0.08% to 20,395.61, the S&P 500 fell 0.21% to 2,323.26 and the Nasdaq was 0.21% weaker to 5,752 at 1548 GMT.
Meanwhile, oil prices were firmer, with West Texas Intermediate up 1.04% to $53.49 a barrel and Brent crude up 1.22% to $56.28.
Yellen, who was testifying to the Senate Banking Committee and will also appear before the House Financial Services panel Wednesday, put a potential March hike back on the table and raised expectations of a possible three hikes over the course of the year.
She said that the Federal Open Markets Committee expects the US economy "to continue to expand at a moderate pace, with the job market strengthening somewhat further and inflation gradually rising to 2%".
She said that changes in US fiscal and other policies, the future path of productivity growth, and developments abroad were sources of uncertainty, and said that more interest rate hikes may be appropriate in upcoming meetings if employment and inflation continues to evolve in line with the Fed's expectations.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "No surprises in Yellen's testimony, though we expected her to be a bit more blunt on the question of fiscal easing, which she has previously said the economy doesn't need right now. Instead, she merely said that she hoped any easing would be 'aimed at improving productivity', but 'it is not my intention to opine on specific tax or spending proposals'.
On comments that Fed will evaluate the incoming data and potential fiscal policy changes "at upcoming meetings", Shepherdson said this mean all meetings were 'live'.
"We note that Yellen argued that 'wage growth has picked up', with no reference to the weak-looking Jan reading, which we think is a one-time fluke. This suggests that the Fed is reasonably confident that the trend is rising," he added.
Earlier, Richmond Fed president Jeffrey Lacker called for "significantly" higher interest rates. The central bank's current rate target lies between 0.5% and 0.75% after raising rates twice last year and said there would three further hikes in 2017.
In currency markets, the dollar was up 0.58% against the pound to 0.8029, rose 0.26% versus the euro to 0.9462 and gained 0.54% against the yen to 114.35.
On the corporate front, Molson Coors Brewing was up 1.76% despite posting a fall in revenue and that profit missed expectations.
T-Mobile US rose 1.61% as it beat quarterly revenue and profit forecasts.
Dr Pepper Snapple fell 1.43% after a fall in quarterly profit, hampered by the fluctuating Mexican peso against the yen.
Communications and video-chip maker GigPeak surged 12.73% after IDT Inc said late on Monday that it will buy the group in an all-cash $250m deal.
US-listed shares of Credit Suisse were up 1.35% despite the bank reporting bigger-than-expected loss for the fourth quarter following its settlement with US authorities, and announcing plans to cut 5,500 jobs.
After the close, numbers are due from American International Group and Fossil.
On the data front, the producer price index rose 0.6% in January from 0.2% the month earlier and well above the 0.3% consensus forecast. Excluding food and energy, the index rose 0.4% from 0.1% in December 2016 and above the 0.2% expected.
Dow Jones - Risers
JP Morgan Chase & Co. (JPM) $88.98 0.94%
Goldman Sachs Group Inc. (GS) $248.49 0.90%
Nike Inc. (NKE) $56.35 0.46%
Wal-Mart Stores Inc. (WMT) $68.01 0.36%
Unitedhealth Group Inc. (UNH) $162.43 0.27%
Travelers Company Inc. (TRV) $120.01 0.25%
Apple Inc. (AAPL) $133.62 0.25%
Home Depot Inc. (HD) $140.21 0.24%
E.I. du Pont de Nemours and Co. (DD) $77.94 0.15%
3M Co. (MMM) $181.03 0.01%
Dow Jones - Fallers
Chevron Corp. (CVX) $111.93 -1.74%
Caterpillar Inc. (CAT) $97.38 -1.14%
Verizon Communications Inc. (VZ) $48.00 -1.13%
Procter & Gamble Co. (PG) $87.35 -1.09%
Microsoft Corp. (MSFT) $64.14 -0.90%
Exxon Mobil Corp. (XOM) $82.31 -0.84%
Pfizer Inc. (PFE) $32.42 -0.57%
Coca-Cola Co. (KO) $40.40 -0.53%
Intel Corp. (INTC) $35.64 -0.45%
Cisco Systems Inc. (CSCO) $31.83 -0.42%
S&P 500 - Risers
Hanesbrands Inc. (HBI) $21.07 3.03%
Kohls Corp. (KSS) $42.35 2.44%
Endo International Plc (ENDP) $12.40 2.44%
Signet Jewelers Ltd (SIG) $74.86 2.40%
PVH Corp. (PVH) $90.95 2.27%
Dun & Bradstreet Corp. (DNB) $104.58 2.22%
Nordstrom Inc. (JWN) $45.30 2.12%
Best Buy Co. Inc. (BBY) $44.82 1.93%
Universal Health Services Inc. (UHS) $120.08 1.87%
Staples Inc. (SPLS) $9.37 1.85%
S&P 500 - Fallers
Micron Technology Inc. (MU) $22.80 -4.62%
SCANA Corp. (SCG) $67.45 -3.68%
Hologic Inc. (HOLX) $38.63 -3.49%
Western Digital Corp. (WDC) $76.20 -2.89%
Apache Corp. (APA) $55.63 -2.71%
Martin Marietta Mtrl (MLM) $225.35 -2.61%
Centerpoint Energy Inc. (CNP) $25.98 -2.61%
Discovery Communications Inc. Class A (DISCA) $28.31 -2.48%
Noble Energy Inc. (NBL) $37.58 -2.29% |
| | Broker Tips | | Broker tips: Drax, Virgin Money and Mitchells & Butlers Drax
JPMorgan Cazenove has moved to an 'overweight' rating on Drax, which was previously not rated, and rated at 'neutral' before that.
It said a new strategy, the acquisition of Opus Energy, and State aid approval for its biomass CfD by the European Commission put Drax on a path to a more sustainable, predictable and profitable future.
JPM said that according to its analysis, the recently-approved acquisition of Opus Energy is accretive to earnings and valuation and refreshing its estimates gives rise to earnings per share upgrades of around 30% on average from 2017.
"In particular, putting to rest the debate over Drax's strategic direction breathes new life into a company which has borne the brunt of UK decarbonisation policy in recent years.
"Following a period of restriction, we are moving to an overweight recommendation and December 2017 price target of 420p from Not Rated (Neutral and Jun-17 price target of 370p prior to restriction), based on our expectations that the stock re-rates as the company shifts its focus from its biomass conversion programme to an integrated customer growth strategy."
In addition, JPM said that with earnings and free cash flow on a much firmer footing, it sees diminished risk of balance sheet stress despite the increase in net debt arising from the Opus transaction.
Virgin Money
RBC Capital Markets has given the previously unrated Virgin Money an 'outperform' along with a 415p price target, as it thinks that consensus estimates are too bearish on the bank's margins, growth and cost of risk.
RBC believes that Virgin Money can take market share and outperform in the uncertain economic environment as it has low interest rate sensitivity and risk profile.
It added that Virgin Money "is a unique investment opportunity with positive characteristics of a large cap bank and a small growth stock" which it thinks will "fare well in a lower for longer uncertain economic environment".
It said that even as the UK slows, Virgin Money's market share gains would be able to drive growth and maintain a double digit return on tangible equity.
According to RBC's analysis Virgin Money trades at 0.9 times the 2019 estimated tangible book value and 6.9 times the price/earnings ratio.
Mitchells & Butlers
Pub group Mitchells & Butlers was under pressure after Canaccord Genuity downgraded the stock to 'hold' from 'buy' and cut the price target to 285p from 350p.
The brokerage said M&B's reasonable return on invested capital and balance sheet strength rankings are not enough to offset poor free cash flow conversion and earnings growth scores, which result in a bottom quartile ranking on its investment screen.
"Nascent recovery could get blown away by rising headwinds; it is the most food-led of the pubcos which leaves its profit before tax and ambitious capex plans vulnerable to rising costs and competition.
"Accordingly, we move our recommendation to hold."
Canaccord pointed out that M&B is in the first year of a plan to reduce the investment cycle to 6-7 years/pub from the current 10-12 years. It will spend £200m a year refurbishing 300 sites a year. | | | | To advertise in the Euro Markets Bulletin please contact [email protected] |
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