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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: Sainsbury weighs on grocers, China on miners Weak full-year results from Sainsbury and worries about the outlook for growth in China weighed on London stocks as investors mulled reports that the European Union wanted to play hardball with Westminster, asking for up to €100bn in payments from the UK as the price of its Brexit divorce.
The FTSE 100 erased 0.21% to close at 7,234.53, while the second-tier FTSE 250 lost 0.62% to finish at 19,683.39.
Although the net bill to Britain would be lower than €100bn once the UK's rebate was taken into consideration, the gross amount mooted would be much more than the €60bn originally proposed by European Commission president Jean-Claude Juncker back in February, according to the Financial Times.
Acting as a backdrop, the US central bank was expected to publish its policy statement at 2015 BST. Analysts did not expect any policy changes, but were divided about if the Federal Reserve would signal a further small shift towards a tightening bias.
To take note of, despite the seeming calm in financial markets various analysts highlighted the unusually low levels of volatility, which are sometimes a harbinger of rougher seas ahead.
"A wait-and-see approach took hold in stock markets on Wednesday where modest losses unwound some of yesterday's gains. Stock market volatility remains close to the lowest ever and it's hard to imagine the Federal Reserve meeting later today will change that. Data from BOAML indicates S&P500 100-day volatility has only been lower 3% of the time since 1928," Jasper Lawler, senior market analyst at LCG commented to clients.
The French elections were also on investors' minds as presidential front-runner Emmanuel Macron got set to go head to head with Marine Le Pen in a televised debate on Wednesday evening before Sunday's runoff vote.
"This debate is a key milestone ahead of the vote between the two non-establishment parties. Given the vote takes place during a bank holiday weekend, there is a risk we could see higher-than-usual rates of abstention/nil votes, so both candidates will be especially keen to gain momentum," Francois Cabau and Philippe Gudin at Barclays Research wrote to clients.
"Together with the final results, it could also have crucial ramifications for the legislative election rounds, which remain highly uncertain according to estimates."
Grocers, miners move lower
In corporate news, supermarket chain Sainsbury's was under the cosh after it said full-year profit dropped 8.2%.
Sticking with supermarkets, data from Kanta Worldpanel revealed that shoppers spent £325m on Easter eggs over the last three months, helping the sector grow at its fastest rate for three and a half years, led by Morrisons.
Sales increased at all major grocers but the 'big four' grocers all lost market share as discounters continued their land grab.
Miners were also unwanted as iron ore and base metals' prices gave back ground. At the closing bell in London, July 2017 copper futures on COMEX were losing 3.49% to $2.5435/oz. amid 'market chatter' that Beijing's crackdown on so-called 'shadow financing' will weigh on speculative positions in commodity markets and real estate investment in the Asian giant.
Elsewhere, stock in broadcaster ITV slipped as chief executive Adam Crozier stepped down from his role after seven years, with no direct replacement appointed yet.
Paddy Power Betfair fell back despite posting an 87% rise in first-quarter earnings as revenues were boosted by the weaker pound and favourable results at Cheltenham, while Galliford Try slumped as it took a £98m hit for legacy contract costs.
Halfords Group retreated as it lost another chief executive to a larger retailer, with Jill McDonald poached by Marks & Spencer to be managing director of its non-food business.
Gold miner Centamin lost its shine as it said first-quarter pre-tax profit fell 28%.
Utility infrastructure company Pennon was under pressure after the Greater Manchester Waste Disposal Authority confirmed that it was looking to exit its recycling and waste management contract with Viridor Laing.
Imagination Technologies, whose chips are used by Apple, was in the red after the US technology giant said late on Tuesday that it sold fewer iPhones in the second quarter compared to a year ago.
Imperial Brands reversed earlier gains as it rolled another fat dividend for the first half of the year as earnings came out ahead of expectations despite continued tobacco volumes declines and a major increase in investment .
Burberry nudged lower after RBC Capital Markets cut the stock to 'underperform', while Aggreko and Spirax Sarco were hit by downgrades at Morgan Stanley and UBS, respectively.
Going the other way, Direct Line pushed higher as it said business continued to motor ahead during the first quarter of the year, driven by strong demand for its own brand motor insurance, with the company reiterating its guidance for key metrics in fiscal year 2017.
Software company Sage Group was on the front foot as it reported a rise in first-half profit as subscriptions grew and it said it expects to exceed its full-year revenue guidance.
Outsourcer Mitie surged after saying it will write down its balance sheet by £40m to £50m following an accounting review.
Pub operator JD Wetherspoon was trading higher as it said third-quarter like-for-like sales rose 4%, up from 3.8% growth the same time a year ago.
InterContinental Hotels was lifted by an initiation at 'outperform' by Bernstein. |
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| Market Movers
FTSE 100 (UKX) 7,229.52 -0.28%
FTSE 250 (MCX) 19,673.54 -0.67%
techMARK (TASX) 3,523.37 -0.03%
FTSE 100 - Risers
Sage Group (SGE) 704.00p 3.00%
Johnson Matthey (JMAT) 3,094.00p 2.86%
Pearson (PSON) 656.50p 1.70%
Micro Focus International (MCRO) 2,656.00p 1.68%
Next (NXT) 4,426.00p 1.47%
InterContinental Hotels Group (IHG) 4,164.00p 1.24%
Shire Plc (SHP) 4,707.00p 1.20%
Smurfit Kappa Group (SKG) 2,113.00p 1.20%
Admiral Group (ADM) 2,074.00p 1.17%
United Utilities Group (UU.) 994.00p 1.12%
FTSE 100 - Fallers
Sainsbury (J) (SBRY) 264.20p -5.47%
Paddy Power Betfair (PPB) 8,430.00p -3.93%
Glencore (GLEN) 286.90p -3.68%
Tesco (TSCO) 176.55p -3.52%
Anglo American (AAL) 1,046.00p -3.06%
Convatec Group (CTEC) 298.60p -2.89%
Rio Tinto (RIO) 2,963.50p -2.71%
Ashtead Group (AHT) 1,561.00p -2.56%
Antofagasta (ANTO) 788.00p -2.54%
Hikma Pharmaceuticals (HIK) 1,940.00p -2.17%
FTSE 250 - Risers
Mitie Group (MTO) 231.20p 9.37%
Cairn Energy (CNE) 195.20p 3.66%
PayPoint (PAY) 1,043.00p 2.86%
AO World (AO.) 142.60p 2.66%
Wetherspoon (J.D.) (JDW) 1,034.00p 2.38%
The Renewables Infrastructure Group Limited (TRIG) 111.30p 1.64%
Inmarsat (ISAT) 838.00p 1.51%
Ashmore Group (ASHM) 355.80p 1.43%
IWG (IWG) 334.70p 1.24%
Entertainment One Limited (ETO) 249.00p 1.22%
FTSE 250 - Fallers
Galliford Try (GFRD) 1,311.00p -10.33%
Centamin (DI) (CEY) 163.20p -5.94%
Carillion (CLLN) 217.00p -4.74%
Aggreko (AGK) 838.00p -4.39%
Indivior (INDV) 324.10p -3.94%
Thomas Cook Group (TCG) 91.10p -3.90%
Rotork (ROR) 240.00p -3.65%
Kaz Minerals (KAZ) 488.00p -3.08%
Pennon Group (PNN) 840.00p -2.89% |
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| | US Market Report | | US open: Investors brush aside good economic data ahead of Fed Wall Street is nursing slight losses roughly half an hour after the start of trading despite news that activity in the key services sector accelerated in April as a retreat in shares of Apple dragged on the main indices.
At 1505 BST, Dow Jones Industrial Average was off 0.13% or 27.21 points at 20,921.43 and the S&P 500 by another 0.23% to 2,385.61 while the tech-heavy Nasdaq Composite was down 0.43% to 6,069.30.
Stock in Cupertino, California-based Apple was down by 1.5% after the technology giant said late on Tuesday that it sold fewer iPhones in the second quarter compared to a year ago. The company posted a 4.6% jump in revenue to $52.9bn, which was below analysts' estimates.
The Institute for Supply Management's gauge of non-factory sector activity rose from a reading of 55.2 in March to 57.5 in April, beating forecasts for an improvement to 56.0.
In parallel, the ADP report published before the opening bell showed the economy created 177,000 new jobs in April, just a tad higher than the consensus forecast of 175,000.
However, economists expressed surprise at the fact that the March estimate was only revised lower from 263,000 to 255,000, versus the official preliminary estimate of just 98,000.
Still ahead on Wednesday lay the US central bank's policy announcement; although analysts did not expect any actual policy moves, they were split on whether the post-meeting announcement would sound a more dovish note or exactly the oppossite.
Craig Erlam, senior market analyst at Oanda, said: "While the Fed decision itself may not surprise anyone - with markets pricing in only a 5% chance of a rate hike this evening - the statement could offer important clues on the central banks intentions at upcoming meetings. In the absence of a press conference with Chair Janet Yellen, the statement is all we have to go off and if the Fed is aiming to raise rates again in June, it may signal its intention to do so."
"Fortunately, with markets already pricing in a June rate hike at 66%, the Fed doesn't have to work as hard to manage expectations as it did earlier this year and so any signal may be fairly subtle."
Meanwhile, oil prices were on the front foot ahead of the latest inventory data from the Energy Information Administration at 1530 BST. West Texas Intermediate was up 0.42% to $47.86 a barrel.
On Tuesday, the American Petroleum Institute's inventory data for the week ending 28 April showed a 4.16m barrel draw in US oil stockpiles, versus expectations for a smaller reduction of around 2.0m barrels.
In corporate news, Reynolds American posted a mixed set of first quarter financials, with earnings per share of 56 cents missing the median Wall Street estimate for 57 cents but with sales of $2.95bn slightly outpacing forecasts of $2.92bn.
Shares in KFC-owner Yum Brands on the other hand were on the frontfoot after posting a 2% rise in quarterly like for likes. |
| | Broker Tips | | Broker tips: Aggreko, BP, Burberry Casting its critical eye over the larger UK business services groups, Morgan Stanley advised clients avoid Aggreko, Berendsen, Adecco and Capita, recommending investors own DCC, AA, Experian and Rentokil instead.
Morgan Stanley, which downgraded Aggreko alongside Berendsen to 'underweight' from 'equal weight', said this pair had begun to offer fewer of the attributes analysts that would suggest they will outperform over the long term: "sustainable, high returns on capital, strong cash generation and attractive growth prospects, set within a framework that is aligned with shareholder interests".
Aggreko was viewed as a "challenged business with a strong management team".
While the temporary power group's current year is felt likely to see a recovery in its local rental businesses, "its core issue of not winning enough utility contracts to offset churn, while pricing remains under pressure, should lead the equity story from here", alongside a stuttering new fleet strategy.
Analysts at Barclays re-instated BP as their Top Pick in the European oils sector in anticipation of a "material and sustained" improvement in the oil major's free cash flow.
Key to the above, three project start-ups are imminent and momentum in upstream should only improve going into 2018, analysts Lydia Rainforth, Joshua Stone and Danni Li said.
Downstream, there is scope for the market to be positively surprised and an investor day on 14 June will afford management an opportunity to discuss its own growth ambitions in greater detail, they said.
"We continue to see this as an area where market forecasts are likely to prove too conservative and building credibility through detailed disclosure should also build confidence in the wider group aspirations on cash-flow."
RBC Capital Markets downgraded Burberry to 'underperform' from 'sector perform' and cut the price target to 1,530p from 1,620p.
The Canadian bank said it expects full-year 2018 to be another year of pedestrian sales and earnings growth for Burberry, materially below sector average.
"Low single-digit retail like-for-like growth should not be enough to generate meaningful operating leverage and this should put a lid on margin performance. Potential corporate activity and GBP changes are key risks to our thesis," it said.
RBC downgraded its pre-tax profit forecasts by FY18 and FY19 by 3% and 6%, respectively, putting it 6% below consensus on its new FY19 numbers. | | | | To advertise in the Euro Markets Bulletin please contact [email protected] |
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