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Jan 9, 2018

Evening Euro Markets Bulletin

 
ADVFN III Evening Euro Markets Bulletin
Daily world financial news Tuesday, 09 January 2018 20:23:51
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Share Tips for 2018

The Share Centre’s investment research analyst Ian Forrest, comments on five equities, an investment trust as well as an ETF that our expert research team think could flourish in 2018.  Read more. Capital at risk.


London Market Report
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London close: FTSE reaches record close as Morrisons leads retail rally

London stocks notched up a record closing high on Tuesday as retailers were boosted by a strong Christmas trading update from Morrisons and strong supermarket industry data.

The FTSE 100 closed 0.45% higher at 7,731.02, while the pound was down more than 0.3% versus the dollar at 1.3520.

Sterling was hit as EU Brexit negotiator Michel Barnier said the risk of a "disorderly Brexit" had increased, while a letter from Brexit Secretary David Davis to Theresa May revealed his concern that the EU "has adopted a number of measures that put agreements or contracts at risk of being terminated in the event of a 'no deal' scenario".

In corporate news, supermarket group Morrisons rallied as it reported a much stronger than expected Christmas period, boosted by the roll-out of its new wholesale operations.

The grocer's trading update has boosted other shares in the sector with Marks & Spencer actually rising ahead of the release of its own festive results on Thursday. Sainsbury's also made strides but Tesco was the odd one out in trading lower by around 1% despite industry data suggesting that it was the best performer of the 'big four' over the festive period.

"It has been a day of good news for retailers on both sides of the Atlantic, and in the US Target's forecast-busting numbers and upgrades to its outlook provided a reason for optimism where the US consumer is concerned. American retail spending looks more robust than its British counterpart, but with productivity in the UK now on the up, and wages perhaps looking better too, maybe the announcements from Debenhams and Mothercare will be the exception rather than the rule," said analyst Chris Beauchamp at IG.

Data from Kantar Worldpanel and Nielsen were also published, showing strong spending in UK supermarkets the three months to Christmas, while figures from the British Retail Consortium revealed that wider retail sales remained lacklustre in the industry's vital festive period due to non-food sales growth being the lowest in five years.

Sales increased 0.6% in December, the BRC found, the same as the month before, as price inflation drove a 2.6% rise in food sales that was all but wiped out by a 2.2% fall in non-food retail sales. High street sales in the three months to December of non-food items declined 4.4% on a like-for-like basis, which is the lowest rate since 2012, when the BRC's records began.

Elsewhere in corporate news, cigarette maker British American Tobacco was in the black as it said 2018 earnings would get a 6% boost from the recent US tax cuts "supporting our commitment to high single digit earnings growth and increased investment in the roll out of next generation products".

Pets at Home was the standout gainer as Stifel updated its estimates to reflect a recent trend toward improved merchandise sales growth and greater margin investment, hiking its price target on the stock to 175p from 172p. Similarly, Kaz Minerals racked up healthy gains as Goldman Sachs said it remains constructive on metals and mining, with Kaz, Glencore, ArcelorMittal and First Quantum its top ideas.

Veterinary drug specialist Dechra Pharmaceuticals rose after it reported a 10.5% jump in half-year revenue and said changes to US taxes are expected to have a positive impact on the group, while Safestore edged up as its full-year revenues and earnings beat expectations.

On the downside, the utilities sector suffered the most, in line with a trend across European bourses, with United Utilities, Severn Trent, Centrica, National Grid and SSE leading the FTSE 100 fallers.

A possible, though convoluted, reason for move was due to a rise in US treasury yields triggered by Japan's central bank trimming its government bond purchases. Tokyo's move fed a further small bounce in the US dollar index and triggered a six basis point move higher in yields on the benchmark 10-year US Treasury note to 2.54% - its highest mark since it hit 2.63% in March of the previous year. Long-term bond yields form the basis for companies' cost of debt, which hits utilities especially hard given their high gearing.

In slightly less abstruse news, housebuilder Persimmon slipped after saying it expected full year pre-tax profits would be "modestly ahead" of market consensus, inspiring a bit of profit taking after gaining more than 30% last year and tripling over the past five years.

Shares in Just Group slumped after European private equity firm Permira sold 50m shares in the retirement specialist at 157p each in a placing that represents a stake of around 5.3%.


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Hargreaves Lansdown

Top of the stocks

Number of Deals Bought

Place EPIC Equity name %
1 SOPH Sophos Group plc 3.28
2 LGEN Legal & General Group plc 2.11
3 BOO Boohoo.com 1.90
4 OXB Oxford Biomedica plc 1.16
5 GSK GlaxoSmithKline plc 1.10
6 SMT Scottish Mortgage Investment Trust 1.08
7 LLOY Lloyds Banking Group plc 1.05
8 SXX Sirius Minerals plc 0.96
9 XBT Provider AB 0.96
10 GGP Greatland Gold Plc 0.87

Number of Deals Sold

Place EPIC Equity name %
1 LLOY Lloyds Banking Group plc 2.14
2 BOO Boohoo.com 1.63
3 BP. BP Plc 1.14
4 GGP Greatland Gold Plc 1.09
5 GSK GlaxoSmithKline plc 0.87
6 PLUS Plus500 Ltd 0.87
7 SXX Sirius Minerals plc 0.84
8 BT.A BT Group plc 0.84
9 IQE IQE plc 0.82
10 XBT Provider AB 0.81

Cryptocurrencies Report

Top Cryptocurrencies

# Name Market Cap($) Price(%) Change Price Graph(3m)
1 Bitcoin (BTC) 250,817,621,363 14,685.65 -0.21%
2 Ethereum (ETH) 118,712,161,037 1,220.85 +10.38%
3 Ripple (XRP) 86,948,073,652 2.2 -8.02%
4 Bitcoin Cash / BCC (BCH) 40,778,385,871 2,391.08 +2.27%

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US Market Report

US open: Banks jump as Treasury yields head towards 2017 highs

Wall Street's main market gauges were trading mostly higher, propelled by an outsized move in lenders' shares as longer-term interest rates moved towards closer towards their 2017 highs after the Bank of Japan sprang a bit of a surprise overnight.

At 1639 GMT, the Dow Jones Industrials Average was 0.47% or 119.54 points higher, while the S&P 500 was tacking on 0.33% or 9.19 points taking it to 2,757, but alongside a dip of 0.12% or 8,62 points for the Nasdaq Composite to 7,166.

In an unexpected move, in auction overnight rate-setters in Tokyo trimmed the amount of government bond purchases.

That fed a further small bounce in the US dollar index and triggered a six basis point move higher in yields on the benchmark 10-year US Treasury note to 2.54% - its highest mark since it hit 2.63% in March of the previous year.

The pick-up in yields was reflected in gains for lenders' shares, with the KBW bank sector gauge jumping by 1.70% to 110.61 in response.

On a different note, Oanda analyst Craig Erlam said: "Friday marks the unofficial start of earnings season and given the relative lack of notable economic events at the start of the week, it's not surprising to see little movement so far. Equity markets in the US are trading at record highs and with high expectations for earnings season already baked in, there may be an element of caution among investors who will be eagerly anticipating the first batch of results."

Acting as a backdrop, JP Morgan boss Jamie Dimon went on a limb in an interview with Fox Business, predicting US GDP growth might reach 4% in 2018.

In corporate news, e-commerce company Alibaba was a little higher after founder Jack Ma said he would consider a Hong Kong listing.

Elsewhere, Intel shares were under pressure after chief executive Brian Krzanich delivered a speech at CES late on Monday in which he outlined advances in virtual reality and other technologies, but failed to take any blame for the recent security flaws recently detected in its chips.

On the data front, the National Federation of Independent Businesses' index of small business optimism fell to 104.9 in December from 107.5 the month before, missing expectations for a reading of 108.4.

Meanwhile, the Fed's JOLTS survey revealed that the number of job openings in the States reached a six-month low in November of 5.88m.

Looking ahead to the rest of the week, investors were watching out for consumer price inflation and retail sales figures for December due out on Friday.

"At a time when questions are being asked about whether the Federal Reserve should be pursuing such aggressive tightening, these numbers are very important in determining whether such a move is warranted or should be halted," said Erlam.

Related to the above, speaking on Tuesday Minneapolis Fed chief Neel Kashkari reiterated his dovish policy bias, telling an audience the main concern at present was that inflation was going to continue being low.


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Broker Tips

Broker tips: G4S, BP, Shell, Ashtead

Security services and solutions outsourcer G4S is approaching a trough in its growth profile thanks to its leadership position in the cash handling market, supported by quicker growth in emerging markets, analysts at UBS said.

On the back of all of the above, the Swiss broker lifted its target for the shares from 300p to 310p and raised its recommendation for the stock from 'neutral' to 'buy'.

In fact, excluding one-off installation work, growth had been relatively stable at between 2% and 4%, and as it began delivering on its pipeline of new cash solutions that would accelerate to between 5% and 6% over the second half of 2018, with an inflection point being reached during the second quarter, UBS said.

"Our detailed review indicates G4S's solution is more developed than those of its peers (bank agnostic). The growth should be a net positive for margins, given the high-margin service component: we forecast 15bps/10bps of margin expansion in 2018/19," Bilal Aziz, Rory McKenzie and Denis Moreau said in a research note sent to clients.

There was also upside to be had from consolidation in its industry given the structural trend towards lower rates of cash usage.

 

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