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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: Stocks stumble amid thin volumes, IMF downgrade London stocks dipped lower late on Wednesday amid thin trading volumes, a downgrade of UK growth forecasts from the International Monetary Fund and a mixed start on Wall Street. The FTSE 100 fell 0.25% to 7,525.22, with volumes on the index down 30% versus the 100-day average, while the pound was up 0.1% on the dollar at 1.3403 and down 0.2% against the euro to 1.1286. On the one hand, investors cheered progress on the US tax reform front after the Senate approved a tax bill that includes $1.5trn of tax cuts - the biggest tax overhaul in three decades - that will now go back to the House of Representatives for a final vote later in the day. Nancy Pelosi, House minority leader said it is "the worst bill in history. An all-out looting of America, a wholesale robbery of the middle class." She also went on to describe it as one of the most scandalous acts of plutocracy in the country's history. There some caution among analysts too. Marshall Gittler, head of strategy at ACLS Global, said: "There may also be some belated realisation that this bill won't necessarily boost the US economy that much but will cause the US budget deficit to ballon. Of course, that could be USD-positive if it pushes US bond yields higher, but at what cost? Higher bond yields stemming from faster economic activity are a plus for a currency, but are higher bond yields stemming from government profligacy really a positive?" Focusing on the UK, the International Monetary Fund downgraded its growth forecasts due to Brexit uncertainty. It now expects 1.6% growth this year, down from a previous estimate of 1.7% and 1.5% next year, down from 1.7%. In its annual update on the UK, the IMF said Brexit had suppressed domestic demand while the pound's post-referendum fall has pushed up inflation and squeezed real income and spending. Business investment has also been weaker than would be expected amid a global economic recovery. Oanda analyst Craig Erlam said: "The downward revision comes as little surprise to anyone that's seen the data this year and the ongoing impact that a combination of slow wage growth and high inflation will have on the consumer. "It's no surprise that the IMF cited Brexit as being behind the UK's disappointing growth, claiming the data has justified its "gloomy" forecasts prior to the vote, with the body having been among those lambasted for their dire predictions. While forecasts of recessions now appear to have been over the top, it seems clear that over the next couple of years, low levels of growth are to be expected until more clarity on the future relationship is known and the inflationary impact of the pound's depreciation passes." Elsewhere, figures from the Consortium of British Industry showed the balance of retail sales fell to +20 in December from +26 in November, in line with economists' expectations. CBI principal economist Alpesh Paleja said: "Retailers have seen decent growth heading into the vital Christmas trading period, although it was weaker than expected. It's clear that people are stocking up on food for their Christmas lunch, with grocers' sales driving most of the sales growth seen in December." In corporate news, Tesco edged up after its £3.7bn takeover of Booker was given final clearance from the Competition and Markets Authority. Booker was also trading higher. William Hill gained after announcing the appointment of Roger Devlin as its chairman-designate with effect from 1 February. Carillion rallied as it said its new chief executive will start 11 weeks earlier than planned. EasyJet flew higher after analysts at Panmure Gordon upgraded the stock to 'hold', while paper and packaging group Mondi was boosted by an upgrade to 'buy' by Goldman Sachs and Tullow Oil climbed higher after an upgrade to 'hold' at Jefferies. On the downside, some profit taking hit Gulf-focused healthcare provider NMC Health after it issued an in-line trading statement and a strategy update that broadens management's ambition to emerging markets as well as confirming its goal of creating a global IVF business. After seeing its shares triple over the last two years, some investors may have got cold feet about a veering onto new paths. London property developer Shaftesbury declined despite snapping up six buildings on Neal Street near Covent Garden for £24.6m, while Drax suffered heavy losses after it cut its full-year core earnings guidance by £10m following an unplanned outage at a rail unloading facility. Micro Focus International slipped after saying that John Schultz had left its board and will be replaced by an independent non-executive director. Bodycote was in the red after saying it has entered into a long-term agreement to provide Doncasters Group with its hot isostatic pressing and heat treatment requirements in the UK. |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks drop as traders book profits ahead of year-end Stocks on the Continent dropped as traders booked profits following approval of US Republicans' tax cut plans the day before and amid year-end book squaring. By the closing bell, the benchmark Stoxx 600 was off by 0.68% or 2.65 points at 388.37, alongside a retreat of 1.11% or 146.62 points to 13,069.17 on the German Dax and a drop of 0.74% or 165.32 points for the FTSE Mibtel to 22,109.65. In related price-action in other asset classes, euro/dollar was climbing 0.36% to 1.1886 as the yield on the benchmark 10-year Bund gained three basis points to 0.41%, with the latter extending the prior day's upward move. Overnight, both chambers of the US Congress passed Republicans' tax cut proposals, although the lower House would be forced to repeat its vote on Wednesday because its version of the bill hit a procedural snag. "European stocks have slid into the red as the bullish momentum has evaporated. Last night, the US House of Representatives voted in favour of introducing the new tax reforms, but due to a procedural snag, they will have to vote on it again today. "Investors have been looking forward to this day Donald Trump won the Presidential election, and now that it has arrived, traders are unwinding down their positions. Dealers are squaring up this books ahead of Christmas and some of the froth is being taken off of the top of the equity markets," said David Madden at CMC Markets UK. To take note of, following their meeting German Chancellor Angela Merkel's Conservatives and Social Democratic Party leaders said they would begin talks aimed at creating a 'grand coalition' on 7 January. On the macroeconomic front, producer prices in the euro area's largest economy slipped last month. The rate of advance in German factory gate prices slowed from a 2.7% year-on-year clip in October to 2.5% for November (consensus: 2.5%), according to the country's Ministry of Finance. Elsewhere, the European Central bank reported that the currency bloc's current account surplus shrank by €8.4bn in October to reach €30.8bn last month, mainly as a result of a large drop in the euro area's positive balance on foreign trade. German energy group Engie's chairman Peter Terium announced he would step down with immediate effect following what some market commentary said was a clash in the company's top ranks over the company's strategy. Three consortia, including France's Engie, Australian outfit Macquarie Group and the UAE's sovereign wealth fund, Mubdala Development, presented proposals for a Brazilian gas pipeline network that was owned by Petrobras, three persons with knowledge of the matter told Reuters. |
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| | US Market Report | | US open: Stocks flat ahead of second US tax cut vote Wall Street is trading roughly flat even as investors wait on a second vote in the US House of Representatives on the Republicans' tax cut plans, which is expected to hand President Trump the first major legislative victory of his administration. At 1701 GMT, the Dow Jones Industrial Average was ahead by 0.05% or 12.26 points at 24,765.21, alongside a gain of 0.02% or 0.69 points to 2,682.18 in the S&P 500 and a dip of 0.02% or 1.69 points to 6,962.26 for the Nasdaq Composite. From a sector standpoint, interest rate-sensitive sectors were among the weakest areas of the market, including: Tobacco (-2.46%), Mortgage REITs (-2.03%) and Multiutilities (-1.90%). In parallel, the yield on the benchmark 10-year US Treasury note was higher by two basis points at 2.48%. Both the House and the Senate passed the reconciled tax reform bill the day before, but the House was due to hold a second vote later on Wednesday due to some minor changes to the earlier version required by Senate Democrats in order to iron out some procedural irregularities. "These adjustments are, though, reported to be very minor in nature and, thus, are unlikely to represent much of an obstacle to the legislation making its way to President Trump before the week is out," Rabobank said. Oanda analyst Craig Erlam chipped in, saying: "US equities are a mixed bag today are traders await the re-vote in the House of Representatives. The tax reforms are expected to be passed again, and dealers are hoping there will be no snag this time round. "The changes to the tax system are tipped to be the deepest tax cuts to for the American middle class in 30 years. The corporate rate will be reduced to 21% from 35%, which is likely to halt American companies relocating overseas for tax purposes. We could also see US corporations repatriate funds, which could fuel stock buy-backs or perhaps mergers and acquisition (M&A) activity." Meanwhile, in the corporate patch, FedEx was on the front foot after releasing better-than-expected second-quarter earnings late on Tuesday, while chip company Micron Technology was also higher after its own forecast-beating quarterly numbers. Online clothing retailer Stitch Fix on the other hand was tumbling lower, despite its first quarterly earnings report as a publicly-traded company which beat analysts' expectations. General Mills shares were also wanted after the food manufacturer posted stronger-than-expected fiscal second quarter sales numbers. Dow Jones - Risers Home Depot Inc. (HD) $186.85 1.15%
Boeing Co. (BA) $298.89 0.93%
Wal-Mart Stores Inc. (WMT) $98.75 0.87%
Caterpillar Inc. (CAT) $151.98 0.71%
Chevron Corp. (CVX) $120.48 0.65%
Intel Corp. (INTC) $47.33 0.62%
Unitedhealth Group Inc. (UNH) $223.85 0.53%
Dowdupont Inc. (DWDP) $71.68 0.41%
Cisco Systems Inc. (CSCO) $38.44 0.37%
Coca-Cola Co. (KO) $46.09 0.35% Dow Jones - Fallers General Electric Co. (GE) $17.42 -1.89%
Goldman Sachs Group Inc. (GS) $255.57 -1.71%
McDonald's Corp. (MCD) $171.92 -1.31%
Nike Inc. (NKE) $64.01 -1.23%
Pfizer Inc. (PFE) $36.69 -1.17%
Visa Inc. (V) $112.46 -0.96%
Microsoft Corp. (MSFT) $85.07 -0.88%
American Express Co. (AXP) $98.99 -0.69%
JP Morgan Chase & Co. (JPM) $106.31 -0.61%
3M Co. (MMM) $237.02 -0.59% S&P 500 - Risers Darden Restaurants Inc. (DRI) $95.90 5.92%
Zimmer Biomet Holdings Inc (ZBH) $121.10 5.82%
Noble Energy Inc. (NBL) $27.75 5.55%
Centene Corp. (CNC) $103.36 5.54%
Alcoa Corporation (AA) $49.09 5.52%
Helmerich & Payne Inc. (HP) $60.85 4.94%
Marathon Oil Corp. (MRO) $16.18 4.88%
Newfield Exploration Co (NFX) $30.08 4.66%
Micron Technology Inc. (MU) $45.94 4.45%
Anadarko Petroleum Corp. (APC) $50.48 4.02% S&P 500 - Fallers Red Hat Inc. (RHT) $121.02 -6.50%
PPL Corp. (PPL) $31.97 -5.89%
Ventas Inc. (VTR) $60.80 -5.58%
Welltower Inc (HCN) $63.96 -5.02%
HCP Inc. (HCP) $25.88 -4.08%
NiSource Inc. (NI) $24.94 -4.00%
ProLogis (PLD) $63.31 -3.87%
SCANA Corp. (SCG) $41.36 -3.77%
Edison International (EIX) $68.46 -3.51%
Essex Prty Trust Inc. (ESS) $241.12 -3.50% Nasdaq 100 - Risers Micron Technology Inc. (MU) $45.94 4.45%
Biogen Inc (BIIB) $334.33 2.24%
Alexion Pharmaceuticals Inc. (ALXN) $118.01 1.98%
KLA-Tencor Corp. (KLAC) $113.80 1.95%
Lam Research Corp. (LRCX) $189.29 1.71%
Skyworks Solutions Inc. (SWKS) $97.30 1.69%
Wynn Resorts Ltd. (WYNN) $168.63 1.50%
Electronic Arts Inc. (EA) $108.46 1.36%
Verisk Analytics Inc. (VRSK) $97.04 1.08%
CSX Corp. (CSX) $55.44 1.07% Nasdaq 100 - Fallers Mercadolibre Inc. (MELI) $314.23 -4.57%
Shire Plc Ads (SHPG) $153.65 -2.54%
JD.com, Inc. (JD) $41.89 -2.51%
Western Digital Corp. (WDC) $82.31 -2.29%
Workday, Inc. (WDAY) $101.32 -1.56%
Seagate Technology Plc (STX) $41.60 -1.38%
Synopsys Inc. (SNPS) $87.18 -1.35%
Costco Wholesale Corp. (COST) $185.83 -1.33%
Twenty-First Century Fox Inc Class A (FOXA) $34.63 -1.24% |
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| | Broker Tips | | Broker tips: Shire, Tullow Oil, Easyjet Liberum has downgraded Shire to 'hold' from 'buy' and cut the price target to 4,100p from 4,200p, saying the risk/reward is more balanced. The brokerage noted that since upgrading the stock mid-November on valuation grounds, the shares are up 14% in dollar terms despite better-than-expected competitor haemophilia data and a small pipeline failure on Tuesday, when the company announced that clinical trials for a drug to treat Hunter syndrome in children, SHP609, failed to meet their primary and secondary endpoints. Liberum had pencilled in around $70m of risk adjusted peak sales for SHP609. Adjusting for the drug trial failure and FX moves - the impact of a stronger pound - Liberum cut its valuation to 4,100p a share, which now implies just 4.5% upside. "We still believe that, if handled right, the update on the neuroscience strategic review due by year end could be a catalyst for the shares, but with fundamental upside now limited the risk/reward is more balanced." Tullow Oil shares were boosted by an upgrade from Jefferies as analysts hiked their crude oil price forecasts for 2018, though Cairn Energy was downgraded due to its strong performance of late. Brent crude will average $63 a barrel in 2018, Jefferies forecast in a pair of Wednesday notes on oil companies, up from its previous $57 expectations, with the WTI forecast upped to $59 per barrel from $54. Analysts said they are "increasingly confident that the oil market will remain undersupplied through 2018" and that oil inventories will fall to five-year average levels in the third quarter of next year. "The incremental tightness in the market is more a function of robust demand that, while broad-based, is underpinned by accelerating Chinese growth," they wrote, expecting the market to remain tight. As a result of these crude price upgrades, forecasts for net asset values across its international exploration and production sector coverage increased on average 15%. Tullow Oil's successful refinancing without further equity dilution "removes a risk we were concerned about" and the new oil price forecast now suggests $741m free cash flow next year and so lifts Jefferies' target 3% to 180p. Tullow shares were therefore upgraded to 'hold' from 'underperform'. |
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