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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: Footsie gains as pound drops, Wall Street hits fresh highs The top flight index recovered some ground on Friday, but mostly on account of weakness in Sterling after German Chancellor Angela Merkel reportedly echoed other European Union officials, saying "the most difficult phase is ahead of us". The FTSE 100 ended up by 0.57% to 7,490.57, while the pound was down 0.87% versus the dollar at 1.3313 and 0.85% weaker against the euro at 1.1306. The matter to be discussed as early as next week will be the terms of a transition period after the UK leaves in March 2019, which European Commission President Jean-Claude Juncker also warned would be a "significantly harder" process. Nevertheless, Markus Huber, a trader at City of London Markets, said the drop in sterling was most likely down to profit-taking. "Obviously this move by the EU has been expected for a couple of days now and therefore pretty much been priced into the GBP, almost a typical buy the rumour sell the fact situation." Meanwhile, in the States Wall Street's main stockmarket gauges were all in record territory as investors reacted to news that Republicans on the Hill were busy tweaking their tax cut proposals, in order to secure their passage in the face of opposition from two Senators from within their own ranks, Marco Rubio and Mike Lee. Likely to irk the Bank of England a little, in parallel the yield on the benchmark 10-year Gilt dropped further below technical support, slipping two basis points to 1.15%. In corporate news, Standard Life Aberdeen edged higher after the group's first update since its merger was finalised, with outflows lessening year on year. Sky and BT were both in the black after reaching a deal to sell their channels on each other's platforms, while Segro was boosted by an upgrade to 'buy' from 'hold' at Liberum. Tritax Big Box edged up after the real estate investment trust agreed terms to extend the maturity on its existing loan facility with Landesbank Hessen-Thüringen Girozentrale. On the downside, Persimmon retreated after the housebuilder said chairman Nicholas Wrigley will retire following a dispute over an incentive scheme for executive pay. Aveva stock nudged higher after saying its £3bn agreed merger with Schneider Electric was expected to gain final regulatory approval by mid-February, though the industrial software group was disappointed by a UK tax ruling on the deal. |
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| | US Market Report | | US open: Stocks jump as Republicans move to secure passage of tax cuts Wall Street is heading higher again on Friday amid news that Republicans were tweaking their proposed tax cuts in order to secure prompt passage of the US tax bill. At 1607 GMT, the Dow Jones Industrial Average was higher by 0.58% or 142.82 points at 24,651.48, alongside a gain of 0.76% or 20.13 points to 2,672.14 for the S&P 500 and an advance of 0.74% or 50.68 points to 6,907.20 in the Nasdaq Composite. From a sector standpoint, the best performance was seen in the following industry groups: Paper (2.94%), Food&Drug retailers (2.91%) and Food Retailers (2.41%). Lenders' shares were also putting in a solid performance, with the closely-followed KBW gauge of lenders' shares jumping 1.40% to 106.44. In parallel, the yield on the benchmark 10-year US Treasury note was three basis points higher to 2.38%. Stocks ended in the red a day earlier after Republican Florida senator Marco Rubio said he would not vote for the package without changes to some tax credits, prompting concerns that the tax plan being drafted may be about to unravel. That prompted IG analyst Joshua Mahony to say: "The US tax reforms are back in the headlines, with the Republican majority margins being squeezed thanks to the unexpected loss in Alabama by Senate nominee Roy Moore earlier this week. "Meanwhile, with Senator Marco Rubio insisting that he would only endorse the reforms if the child tax credit element was amended, there are clear hurdles that still need to be overcome. Interestingly, while many of Trump's policies have hit resistance, the tax reforms aimed at benefitting rich US Republican donors are seemingly being pushed through at a lightening pace, with the Republican majority gained in both house and senate proving pivotal." "While the expectation of lower corporation taxes has boosted US stocks to record highs, the unchanged FOMC estimates for economic growth in the long term highlights that the economic boost to such measures could be short-term in nature." Hwoever, on Friday afternoon news broke that Republicans had agreed to changes in the child tax credit in order to appease Rubio and Utah Senator Mike Lee. In corporate news, Adobe Systems was up following the release of better-than-expected earnings late on Thursday. Stock in rival Oracle on the other hand was moving sharply to the downside on heavy trading volumes after the company missed the Street's estimates for revenues from the cloud and so-called SaaS for the second quarter of its fiscal year. Guidance for third quarter earnings per share was also a tad lower than analysts had foreseen. Costco Wholesale was also in focus after the retailer posted strong first-quarter numbers. Heading the other way, stock in CSX Corp. plummeted after its chief executive officer took a medical leave of absence. |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks slip as traders mull ECB's next move Stocks finished lower, tracking a weak start to trading on Wall Street and on the back of a mixed batch of economic data out of China overnight and a tweak in monetary policy by the People's Bank of China - a timely reminder perhaps of the potential ripple effects of US policy decisions and vice-versa. As of the closing bell, the benchmark Stoxx 600 was down by 0.46% or 1.79 points to close at 388.91, alongside a fall of 0.44% or 57.56 points to 13,068.08 in the Dax and a 0.78% or 42.31 point dip for the Cac-40 to 5,357.14. The European Central Bank kept all its main policy rates unchanged, as expected, and projected that Eurozone consumer prices would continue to fall short of its target in 2020, a dovish signal. Nonetheless, in his post-meeting press conference ECB chief Mario Draghi indicated he was more confident than just a couple of months ago that prices were headed in the right direction. "President Draghi did not give much details during the Q&A session on the current state of the debate within the GC, which was highlighted in the minutes of the October meeting showing that dissenting views were emerging about QE and the forward guidance. He did not elaborate either on possible financial stability risks stemming from low rates and ample liquidity for a long time, arguing that it was not up to monetary policy but to macro-prudential policies to be adjusted accordingly. "We maintain our out-of-consensus view that the ECB will likely end QE by Q4 18 and negative rates by the end of Q1 19," commented analysts at Barclays Research. In the background, on Wednesday evening, rate-setters in the States tightened policy yet again, as expected, raising the target range for the main policy rate by 25 basis points to between 1.25% and 1.50%, as expected. However, two top officials dissented from the decision, saying instead that they would prefer to keep rates on hold. They were backed up to an extent by a rather glum assessment from outgoing Fed chair Janet Yellen regarding the potential impact that Republican's proposed tax cuts would have on economic growth. Meanwhile, the latest readings on Chinese industrial production, fixed asset investment and retail sales for November came in roughly as economists had projected - except for the latter. Yet looking at the figures in greater detail some economists continued to see signs of an impending slowdown in the near-term. On top of that, in reaction to the Fed's decision the PBoC raised two of its secondary lending rates slightly higher. That prompted analysts at Capital Economics to tell clients: "Our best guess is that they are doing the minimum possible in order to still be seen as 'following the Fed' with the goal of supporting sentiment on the renminbi, which has weakened during the past 24 hours in response to Fed tightening. "Indeed, for this reason we still think that Chinese monetary conditions are more likely to end next year looser than they are now rather than tighter." On a positive note on the other hand, IHS Markit's composite euro area purchasing managers' index jumped from a reading of 57.5 for October to 58.0 in November (consensus: 57.2) - an 82-month high. Airbus continued to be on traders' radar, with Reuters reporting that according to two people familiar with the matter Delta Air Lines had "looked closely" at putting in an order for 100 Airbus A321neo jets. |
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| | Broker Tips | | Broker tips: Lloyds, Barclays, Entertainment One Goldman Sachs reiterated its 'sell' recommendation on shares of Lloyds and Barclays, placing both stocks on its list of 'UK Sell Ideas' for 2018. Analysts at the investment bank pointed to evidence of lower margins on mortgages and intensifying competition on deposits as reflected in the lenders' latest third quarter financials as the main cause of their 'bearishness'. Those pressures would continue in 2018, they said, as rival HSBC increased its share of the UK mortgage market via increased use of the intermediary channel and as the drawing window for the Term Funding Scheme closed shut in February. Making matters worse, the Bank of England's latest set of stress tests showed the lender now had reduced headroom than in 2016 and the 2018 edition of the stress tests would include a roughly 200 basis point D-SIB buffer. As a result, Goldman said: "Investors are therefore increasingly focused on whether the group will be permitted to continue operating in line with its current target capital level (a c.13% CET1 ratio). In our view, upward pressure on capital could in turn impact the group's potential for dividend growth." |
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