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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 on dollar dip, ex-divs and tendency to gold safety London equities limped to a lower close Thursday, pulled down by a trinity of factors including dollar weakness, a tendency to safe-haven gold and ex-dividend stocks.
These combined to see the FTSE 100 down 0.34% to 7,277.92, and the FTSE 250 down -0.65%% to 18,705.72. Both ladders were lower from the get-go, with ample evidence to suggest at least some profiteers were scooping their gains.
Falls of more than 1% by the FTSE 350 indices for aerospace & defence, oil & gas producers and automobiles & parts more than offset by gains from food producers and fixed-line telecoms.
More broadly, on Wall St the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite were all retreating, as were the Euro Stoxx 50, DAX and CAC 40 in Europe.
"At some points investors need to ask themselves how much the 'Trump Trade' is actually worth," said Michael Hewson, chief market analyst at CMC Markets UK.
"Is today the day when investors look at the gains seen since the 9th November and make a calculation as to how much is priced in relative to what President Trump can deliver?"
It was a factor also being mulled by FXTM vice president of market research Jameel Ahmad.
He noted investors were being enticed towards gold up 0.74% to $1242.2 an ounce at 16:16 GMT regardless of US stock markets maintaining their positions around record levels.
"Of course dollar weakness helps gold, but I am just wondering if investors are hedging towards the precious metal as a result of questions remaining in the background as to whether this stock-market rally can really continue," Ahmad pondered.
Oanda's Craig Erlam said the recent highs seen in equities markets appeared to be the trigger for some profit taking.
"There's also been a lot of economic data to take on board over the last couple of days but in the main, this has supported the hawkish argument with CPI inflation exceeding expectations and being above the Fed's inflation target and retail sales also outperforming," he said.
Also at 16:16 GMT, West Texas Intermediate was down 0.4% to $52.90 a barrel, while Brent was down 0.65% to $55.39 a barrel.
In terms of UK blue chips, AstraZeneca led the fallers as it, BP, Shell and Imperial Brands were among those ex-dividend.
Several banks and insurers eased, too, with both residential and commercial property outfits retreating throughout the course of the session.
Among these stocks were Standard Chartered, Royal Bank of Scotland, RSA Insurance, Legal & General, British Land and Barratt Developments.
There were no major UK data releases due on Thursday. In the US, data showed that US housing starts fell in January, while other numbers revealed manufacturing conditions in the Philadelphia region unexpectedly improved in February.
Finally, US initial jobless claims were up a less-than-expected 5000 to 239,00 last week, from the previous week's unrevised level. Analysts had expected claims to jump to 245,000. |
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| Market Movers
FTSE 100 (UKX) 7,277.92 -0.34%
FTSE 250 (MCX) 18,705.72 -0.65%
techMARK (TASX) 3,336.52 -0.63%
FTSE 100 - Risers
Coca-Cola HBC AG (CDI) (CCH) 1,912.00p 4.88%
Shire Plc (SHP) 4,763.00p 3.79%
Smurfit Kappa Group (SKG) 2,203.00p 2.04%
Associated British Foods (ABF) 2,568.00p 1.62%
Capita (CPI) 515.00p 1.48%
GlaxoSmithKline (GSK) 1,617.00p 1.41%
Hikma Pharmaceuticals (HIK) 2,015.00p 1.36%
Experian (EXPN) 1,597.00p 1.27%
Compass Group (CPG) 1,448.00p 1.12%
InterContinental Hotels Group (IHG) 3,875.00p 1.07%
FTSE 100 - Fallers
AstraZeneca (AZN) 4,524.50p -3.41%
Royal Dutch Shell 'A' (RDSA) 2,123.00p -2.19%
Royal Dutch Shell 'B' (RDSB) 2,225.50p -2.15%
Antofagasta (ANTO) 848.50p -2.02%
BP (BP.) 448.40p -2.00%
Anglo American (AAL) 1,369.50p -1.83%
Rolls-Royce Holdings (RR.) 693.50p -1.56%
Hargreaves Lansdown (HL.) 1,362.00p -1.38%
Johnson Matthey (JMAT) 3,072.00p -1.35%
Convatec Group (CTEC) 233.20p -1.31%
FTSE 250 - Risers
Lancashire Holdings Limited (LRE) 740.00p 8.74%
OneSavings Bank (OSB) 378.50p 3.05%
Shawbrook Group (SHAW) 267.50p 2.88%
Acacia Mining (ACA) 533.00p 2.60%
Aldermore Group (ALD) 233.50p 2.32%
Pets at Home Group (PETS) 185.10p 2.04%
Hochschild Mining (HOC) 274.30p 1.74%
Daejan Holdings (DJAN) 6,565.00p 1.55%
Electrocomponents (ECM) 494.90p 1.41%
Card Factory (CARD) 253.40p 1.16%
FTSE 250 - Fallers
Cobham (COB) 114.70p -15.29%
IP Group (IPO) 168.60p -7.31%
Drax Group (DRX) 359.00p -5.28%
SIG (SHI) 107.90p -4.34%
CLS Holdings (CLI) 1,617.00p -3.58%
PayPoint (PAY) 965.00p -3.50%
Brewin Dolphin Holdings (BRW) 305.80p -3.38%
Millennium & Copthorne Hotels (MLC) 428.50p -3.14%
Kaz Minerals (KAZ) 571.00p -3.06% |
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| | US Market Report | | US open: Stocks largely unchanged as investors mull potential March rate hike US equity markets struggled to find direction on Thursday, unable to maintain yesterday's record highs as investors mulled a potential interest rate hike by the Federal Reserve in March and the dollar weakened.
The Dow Jones Industrial Average and the Nasdaq were both flat at 20,605.61 and 5,819.17, respectively and the S&P 500 was down 0.15% to 2,345.73 at 1519 GMT.
Meanwhile, oil prices were mixed, with West Texas Intermediate up 0.18% to $53.21 per barrel and Brent crude down 0.05% to $55.72.
The main indices gained on Wednesday after Donald Trump said "massive" tax plans would be announced in the "not-too-distant future". In a meeting with retail executives, the US President said his plans would lower rates "substantially" for both individuals and businesses.
Jasper Lawler, senior market analyst at London Capital Group, said: "If investors were looking for signals of extreme sentiment, perhaps they needn't look any further than the US president himself. Trump tweeted about the confidence and optimism behind the new high in the stock market on Thursday, perhaps incidentally calling a short-term top in doing so."
While Craig Erlam, senior market analyst at Oanda, said rate hike expectations have become much more hawkish over the last couple of days, with expectations of a March hike rising to 31% on Wednesday from around 13%, and chances of a hike in May now above 50%.
Lawler added: "Odds of a US rate rise have improved to about 50/50 since Fed Chair Janet Yellen's testimony to congress. Nonetheless, the dollar looks a little top heavy and has rolled over in the past two days. Vice Chair Stanley Fischer was on the wires on Thursday, stating the US economy is headed toward the Fed's 2% target. US rate-setters haven't quite dispelled the idea that they are in wait-and-see mode over Trump's fiscal plans.
"So far so 2016; the Fed hikes in December, skips March, market volatility spoils plans to go in June, there are elections in autumn and another year has gone by."
In currency markets, the dollar was down 0.26% against the pound to 0.8003, fell 0.57% versus the euro to 0.9380 and was 0.59% weaker against the yen to 113.49.
In corporate news, Cisco Systems was 3.24% higher after it reported better-than-expected results late on Wednesday.
On the down side, media company CBS Corp shaved off 1.27% and food giant Kraft Heinz was 4.29% weaker after beating analysts' expectations.
Dean Foods dipped 8.02% after quarterly profit missed expectations and it posted a downbeat outlook for 2017.
Wendy's fell 5.72% after the fast food company's fourth quarter sales rose but profit fell.
On the data front, US initial jobless claims were up 5,000 to 239,00 from the previous week's unrevised level. Analysts had expected claims to jump to 245,000. The four-week moving average came in at 245,250, up 500 from the previous week's average, which was revised up from 244,250.
US housing starts fell 2.6% in January to a seasonally-adjusted annual rate of 1.25m from December's rate, which was revised up to 1.28m from 1.23m. Analysts had expected starts to come in at 1.23m. On the year, housing starts were up 10.5%. |
| | Banking Sector Outlook for 2017 | | In the first of a two-part series, this report covers the sector and its main players ahead of a barrage of full year results releases. We take an in-depth look at how US & UK Banks fared during 2016, reporting dates and forecasts for 2017, and what early US results have shown us. Get your copy of the Banking Sector Outlook for 2017 today! Losses can exceed deposits |
| | Broker Tips | | Broker tips: Qinetiq, challenger banks Canaccord Genuity downgraded defence technology specialist Qinetiq to 'hold' from 'buy' as it noted the company's solid third-quarter update on Wednesday but said shares were up with events.
The brokerage said that following recent strong trading, which saw the shares rise 17% over the last three months, Qinetiq is now valued in line with the sector on an EV/EBITDA basis and at a premium of around 10% on a price-to-earnings valuation.
"Given the company's solid track record, order visibility, balance sheet strength, and investment optionality we think a premium rating to peers is deserved. We also think there is further upside potential to our current forecasts with bolt-on M&A, increased capex, and contract extensions - all of which have been demonstrated recently - and view the more positive outlook for Global Products as encouraging."
However, Canaccord said another major earnings accretive M&A transaction is less likely in the near term given the likely focus on successfully integrating the Meggitt Target Systems business.
The brokerage expressed confidence that QinetiQ will continue delivering margins above the baseline profit rate, but said there is still some uncertainty as to the degree the Single Source Regulations Office will revise margins.
Canaccord maintained its 285p price target on the stock.
Challenger banks
Panmure Gordon initiated coverage on several challenger banks on Thursday, highlighting a preference for specialist lenders as they have avoided direct competition with large UK banks and offer high growth and returns at attractive valuations.
The brokerage started Aldermore, OneSavings, Shawbrook and Virgin Money at 'buy' with price targets of 285p, 390p, 355p and 400p, respectively.
It initiated coverage of CYBG and Metro Bank at 'sell' with 245p and 2,700p price targets, respectively
Shawbrook is the brokerage's top pick as it is the most specialised of the lenders and already operates as a major player in more niche markets, including structured & asset finance and consumer lending focused on home improvement loans.
"The bank focuses on lending to SMEs through a bespoke offering and has bucked the trend towards using intermediaries. Instead, around 75% of lending in Asset Finance is originated directly, enabling it to leverage on early investment and monitor underwriting closely."
It likes Aldermore for its relatively low risk diverse mix of mortgage and SME lending which serves a significant, structural market need and is supported by a scalable operating platform driven by a strong intermediary distribution channels.
The brokerage said the stock offers good value relative to the sector and its peers.
As far as OneSavings is concerned, Panmure said it reckons that despite buy-to-let market concerns, changing demographics and a focus on professional landlords will lead to continued strong loan growth. It added that the stock is undervalued.
Panmure argued that Virgin Money is more of a true challenger bank given its Northern Rock origin with its business model mirroring the high street banks.
"However, already generating double digit returns and a focus on higher margin credit cards, we believe that the market undervalues its return potential due to concerns about higher RWAs but we mitigate this by assuming low dividends and high capital buffers."
Panmure said it is not keen on CYBG as it reminds it of the low growth and returns and continual restructuring costs recently seen at large UK banks, or Metro Bank for its exorbitant 2017E P/TBV of 3.9 for no profits. | | | | To advertise in the Euro Markets Bulletin please contact [email protected] |
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