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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: Pound rally on Brexit 'alignment' hits stocks, copper dents miners London equity markets pared early gains to finish lower on Tuesday as services data disappointed, mining stocks lurched lower and the pound made a late rally after more encouraging reports on Brexit negotiations. The FTSE 100 closed down 11.47 point or 0.16% at 7,327.50, while the pound reversed its earlier slump against the euro to put a 0.2% gain over the session to 1.1380, while falling 0.3% against the dollar at 1.3438. Brexit negotiations were the main cause of the pound's fluctuations. The rally against the euro came after Brexit Secretary David Davis told parliament that "regulatory alignment" with the EU is what the government wants for the whole of the UK after Brexit. He pointed out that alignment is not the same as harmonisation and that this "regulatory alignment" was intended to apply to the whole of the country, not just Northern Ireland. The UK Markit/CIPS services purchasing managers' index for November fell to 53.8 from 55.6 a month earlier, which was worse than the fall to 55.0 that the market had forecast. A PMI reading above 50 indicates growth in these widely followed surveys, though economists differ on how reliable this soft data is in predicting the official outcomes. There was also some disagreement also over whether Tuesday's services PMI pointed to gross domestic product growth remaining at 0.4% in the fourth quarter or slowing to 0.3%. Even after stronger readings from the manufacturing and construction surveys, the UK composite PMI for November fell to 54.9 when the previous month's six-month high of 55.8 had been expected to hold steady. The resurgent pound was the main drag on UK listed stocks, said analyst Chris Beauchamp at IG. "Coming off the back of a period of high volatility due to the sensitivity surrounding US tax reform developments, today has seen things calm down significantly amid a lull in newsflow. "Miners have been the clear underperformer today, as the deterioration in Glencore, Anglo American, Rio Tinto, and Antofagasta proved to be the undoing of an index which is heavily commodity weighted. Much of the deterioration in commodity stocks have come at the hands of a drastic devaluation of copper, with high grade copper falling into a two-month low." Supermarkets were the standout gainers on the corporate front, with Tesco and Morrisons boosted by upgrades from Goldman Sachs, and Sainsbury tagging along for the ride after the bank upped its price target on the stock but kept the rating at 'sell'. Goldman said margin pressure in the UK grocery market is easing, adding that while competitive intensity is still high, multiple data points suggest 2018 will see greater industry margin expansion than 2017. Housebuilders were also on the rise, with Persimmon and Taylor Wimpey lifted by upgrades to 'buy' at Canaccord Genuity, while Standard Chartered was higher on the back of an upgrade to 'overweight' at JPMorgan. Plumbing and heating products distributor Ferguson, formerly Wolseley, was in the black after saying said it was on track to meet annual profit expectations after strong growth in the US offset tough trading in the UK during the first quarter. Telecommunications giant Vodafone ticked higher after saying it has entered into a strategic alliance with SoftBank Corp, focussing on mobile services for enterprise customers. IG Group rallied after saying it saw growth slow in the second quarter after a barnstorming first, though revenues were still higher and costs lower than the same period last year. Budget carrier Wizz Air flew higher as it reported 22% growth in passenger numbers for November and the said the load factor ticked up to 88.3% from 86.8%, while British Airways and Iberia parent International Consolidated Airlines Group dipped after reporting a rise in traffic for November as it announced that its French airline OpenSkies will cease to operate at the end of next summer. On the downside, Provident Financial was under the cosh after it said its Moneybarn motor finance arm is being investigated by the financial watchdog, the second of the embattled sub-prime lender's businesses to be probed. Cineworld shares fell despite reaching an agreement to buy US rival Regal Entertainment Group for $3.6bn (£2.7bn), creating the world's second largest cinema operator. Victrex reversed earlier gains after its full-year numbers, despite the dividend coming in ahead of expectations, while Wood Group also gave up its earlier gains after it won a multi-million dollar contract to support GlaxoSmithKline in Germany. |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks end on mixed note, analysts as well European stocks ended on a mixed note but off their worst levels of the session on the back of a dip in the euro's value as recent buying in the US dollar continues, although City traders were cautious. By the closing bell, the benchmark Stoxx 600 was down by 0.19% or 0.73 points to 386.74, alongside a dip of 0.08% or 10.01 points to 13,048.54 for the German Dax. The Cac-40 also finished lower, retreating by 0.26% or 13.76 points to 5,375.53, although Milan's FTSE Mibtel gained 0.24% or 54.20 points to 22,416.31. In parallel, euro/dollar was down by 0.51% to 1.1807. "The DAX and CAC 40 are in the red as traders are still a bit nervy when it comes to the Continental markets. The German and French equity markets have been subdued for the past couple of weeks. Traders can't seem to make up their mind whether to buy back into the market, or cash in their positions before year-end," said David Madden at CMC Markets UK. On a related note, but on the subject of global markets, Michael Hartnett, head of Global Investment Strategy at Bank of America-Merrill Lynch, said: "Our overall outlook for the year ahead is macro bullish, so much so that we're ultimately market bearish. "Investors are chasing growth and high-yielding assets in a bull market that's been driven and enabled by central bank liquidity. We see an end to this Icarus trade and an aggressive downgrade of risk assets once profits peak, investor positioning becomes excessively enthusiastic and central banks start withdrawing liquidity as they scale back support." Nevertheless, BofA's 2018 target for the Stoxx 600 specifically was 430 points. Commenting on the outlook for European equities, BofA-ML added: "2017 has been unusually benign with the lowest daily price volatility, narrowest price range and sixth smallest drawdown in 30 years. We are in the fourth longest rally with no 10% correction since 1987. Volatility / corrections are more likely in 2018. Potential drivers include QE flows turning negative, higher bond yields and possibly inflation, macro data maxing out, credit market excesses unwinding or China/geopolitics tail risks." Economic data out on Tuesday revealed that the euro area's service sector continued to be in rude health, with IHS Markit's purchasing managers' index for November printing at 56.2, up from a reading of 55.0 in October, which was in-line with a preliminary estimate. However, according to Eurostat Eurozone retail sales volumes plummeted by 1.1% month-on-month in October (consensus: -0.7%). Spanish industrial production for October on the other hand surprised to the upside, with figures from the country's national statistics office, INE, showing growth of 0.6% versus September (consensus: 0.4%) and of 4.1% in comparison to the year-earlier level. Later in the day, at 1330 GMT the US Department of Commerce was set to release its foreign trade numbers for the month of October, followed by the ISM Institute's service sector purchasing managers' index for November at 1500 GMT. On the corporate front, Thyssenkrupp chairman Ulrich Lehner rejected calls from some investors for a break-up of the group, Handelsblatt reported. In France, Carrefour and FNAC Darty unveiled a purchasing alliance for white goods and consumer electronics. Elsewhere, Natixis reportedly said it was aiming to boost Asia's share of its corporate and investment banking sales to over 15% in the new few years. |
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| | Market Movers FTSE 100 (UKX) 7,327.50 -0.16%
FTSE 250 (MCX) 19,871.08 -0.33%
techMARK (TASX) 3,414.75 -0.31% FTSE 100 - Risers Standard Chartered (STAN) 749.20p 3.03%
Tesco (TSCO) 201.00p 3.00%
Sainsbury (J) (SBRY) 239.30p 2.75%
Whitbread (WTB) 3,710.00p 2.74%
Morrison (Wm) Supermarkets (MRW) 218.80p 2.24%
Hammerson (HMSO) 534.50p 2.10%
Sky (SKY) 976.00p 2.09%
Convatec Group (CTEC) 207.40p 1.57%
Persimmon (PSN) 2,602.00p 1.40%
Mediclinic International (MDC) 579.50p 1.31% FTSE 100 - Fallers Anglo American (AAL) 1,351.00p -2.45%
Glencore (GLEN) 334.00p -2.27%
St James's Place (STJ) 1,175.00p -2.08%
Rio Tinto (RIO) 3,468.50p -2.02%
Antofagasta (ANTO) 884.50p -1.67%
Babcock International Group (BAB) 676.50p -1.53%
ITV (ITV) 158.70p -1.43%
Barclays (BARC) 191.70p -1.31%
Prudential (PRU) 1,809.00p -1.17%
Mondi (MNDI) 1,699.00p -1.16% FTSE 250 - Risers Millennium & Copthorne Hotels (MLC) 584.00p 4.10%
TBC Bank Group (TBCG) 1,662.00p 3.88%
Capital & Counties Properties (CAPC) 268.00p 2.72%
Nostrum Oil & Gas (NOG) 340.00p 2.72%
LondonMetric Property (LMP) 179.90p 2.45%
Tullow Oil (TLW) 187.60p 2.35%
Rank Group (RNK) 246.40p 2.20%
Brewin Dolphin Holdings (BRW) 375.40p 1.73%
Spire Healthcare Group (SPI) 245.60p 1.70%
Booker Group (BOK) 222.90p 1.69% FTSE 250 - Fallers Provident Financial (PFG) 790.50p -10.17%
Sirius Minerals (SXX) 23.64p -4.44%
Inmarsat (ISAT) 475.30p -3.98%
Vedanta Resources (VED) 655.00p -3.69%
Acacia Mining (ACA) 165.30p -3.45%
Stagecoach Group (SGC) 177.20p -3.34%
Sophos Group (SOPH) 535.00p -3.33%
TalkTalk Telecom Group (TALK) 144.40p -3.28%
Kaz Minerals (KAZ) 713.50p -3.12% |
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| | US Market Report | | US open: Stocks little changed amid weak data Wall Street is trading on a mixed note as traders digest weaker-than-expected readings on service sector activity and foreign trade while scanning the headlines for news regarding the US tax reform proposals which were making their way through Congress. As of 1514 GMT, the Dow Jones Industrial Average was slipping 0.07% or 9.13 points to 24,280.65, alongside a gain of 0.07% or 1.83 points to 2,641.40 for the S&P 500, while the Nasdaq Composite was higher by 0.46% or 30.96 points at 6,806.68. Meanwhile, the US dollar spot index was edging up by 0.10% to 93.28, alongside an unchanged yield on the benchmark 10-year US Treasury note of 2.38%. On Monday, the Dow notched up a record close as investors cheered the passing of the US tax reform bill, but the rest of the market closed in the red, with technology stocks under the cosh. Jasper Lawler, head of research at London Capital Group, said: "Technology has been the most consensus, as well as the one of the best-performing trades of 2017. That combination is making investors nervous going into year-end and they are taking profits. After briefly reaching a three-day high on Monday, the tech-heavy Nasdaq 100 slammed back down to finish -1.17% and near its lows. "The idea that tech could be in for a bigger correction does have more merit with year-end repositioning so in the short-term, a clear break below 6,250 in the Nasdaq 100 could see the index fall to 6,100 then 6,000." Craig Erlam, senior market analyst at Oanda, said: "The passage of tax reform through Congress will likely be the key focus for US investors between now and year-end, with a rate hike this month almost entirely priced in. While these discussions take place though there is plenty of data to keep an eye on including of course this Friday's jobs report." In economic news, the ISM's non-manufacturing purchasing managers' index for November slipped from a reading of 60.1 for October to 57.4 in November (consensus: 59.0). The latest foreign trade numbers from Commerce weren't much better, with the US's shortfall on foreign trade widening from -$44.9bn in September to -$48.7bn for October (consensus: -$47.5bn), amid broad-based weakness in exports, according to analysts. Back in the equity space and from a sector standpoint, the best performing areas of the market were: Industrial suppliers (3.61%), Railroads (3.01%), Delivery services (2.94%), Apparel retailers (2.56%) and Industrial transportation (2.54%). More specifically, shares of payments company Mastercard were higher following the approval of a new $4bn share buyback programme and a dividend hike, while car parts seller AutoZone rallied after better-than-expected earnings. Regal Entertainment racked up strong gains after agreeing to be bought by UK cinema chain Cineworld for $3.6bn. Shares in Revance Therapeutics were also rocketing after disclosing positive results for its wrinkle-relaxing injection in two late-stage clinical trials. Amazon.com was also in focus after launching its first full offering in Australia. |
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| | Broker Tips | | Broker tips: IMI, Bodycote, IQE, Easyjet Deutsche Bank upgraded its stance on IMI on Monday and downgraded Bodycote as it took a look at the European capital goods sector. The bank expects sector growth to peak around the first quarter of 2018 as Chinese economic data show signs of weakening and comps get tougher for short-cycle businesses. "Given we already need to look beyond 2018 for valuation support, we expect later cycle companies with exposure to process/hybrid industries (international O&G, petrochem, copper mining, food & beverage, etc) to perform better," it said. Deutsche Bank upgraded its stance on IMI to 'buy' from 'hold' and lifted its price target to 1,475p from 1,285. The bank said it estimates around 40% of IMI is exposed to late cycle markets, predominantly at Critical, with this division bottoming in 2017 and offering scope for recovery surprise across margin and revenue as it rebounds over the next 18-24 months. In, addition, it pointed to an undemanding valuation versus sector, with 12-month forward price-to-earnings seeing no sector relative re-rating. It also said that M&A remains firmly on the agenda, which will supplement organic growth. It downgraded Bodycote to 'hold' from 'buy' but left the price target unchanged at 990p. Trading on 24 times' their estimates for its earnings per share in 2020, stock in IQE was on a 'premium' valuation but it did not look stretched, analysts at Barclays said. In particular, the sole supplier of epitaxial wafers to Apple was set to see "substantial" near-term growth in the market for 3D sensors, the analysts said. Reflecting that, the stock had run-up by 359% year-to-date. Even so, given their estimates for a compound annual rate of growth in EPS of nearly 40%, Barclays sounded a bullish note, initiating coverage at 'overweight' and setting a target of 210p. Analysts at Morgan Stanley hiked their target on Shares of Easyjet on the back of improved estimates for the airline's revenues per seat and higher projections for the cable exchange rate together with the impact from 'rolling forward' their valuation at improved multiples. In particular, Easyjet's RPS were now seen growing by 2% in fiscal years 2018 and 2019 while the pound was seen trading at an average level of 1.33 against the US dollar, up from 1.31 previously. Hence, the broker's estimates for the company's profits before tax in fiscal years 2019-2020 received a boost of between 2% to 5%. Morgan Stanley added: "With encouraging revenue trends as a result of capacity leaving the market, and solid ancillary growth, we roll forward our valuation from FY18 to FY19 and update our EV/EBITDAR multiple from 8xto 9x, now at the mid-point of its 10 year historic trading range." | | | | To advertise in the Euro Markets Bulletin please contact advertise@advfn.com |
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