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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: Correction in stocks continues London stocks continued to come under pressure on Monday as investors fretted that the Federal Reserve might hike rates more than expected after last week's strong wage growth figures and following the release of disappointing UK services data. By the close of trading, the FTSE 100 was down 1.46% to 7,334.98, while the pound was off 0.66% against the dollar at 1.4029 and by 0.4% versus the euro to 1.1291, respectively. Stocks in the US tumbled on Friday, with the Dow dropping 666 points as yields jumped after data showed the strongest US wage growth in eight and a half years. Against that backdrop, data out on Monday morning showed growth from the UK's key services sector slowed at the start of the year. January's purchasing managers' index from IHS Markit/CIPS fell to 53.0 from 54.2 the month before, worse than the minimal declined to 54.1 that the market expected and a 16-month services sector low. A fall in the services PMI meant that all three of January's surveys had indicated a slowdown in growth and saw Markit's composite PMI slide to 53.5 from 54.9 in December and also below the 54.6 consensus estimate. This points to quarterly GDP growth of about 0.3%, much lower than the 0.5% outturn from the fourth quarter of last year. Earlier on Monday, the EY Item Club thinktank, which uses the same economic model as the Treasury, lifted its 2018 forecasts for UK growth to 1.7% from its previous 1.4% as it felt the economy is "over the worst". It also expected the Bank of England to increase rates twice this year as it moves "towards normalising monetary policy". Further weighing on sentiment, at the weekend ex-US Federal Reserve chair Janet Yellen told brodcaster CBS that stocks' price-to-earnings multiples were at the high end of their historical range. Looking ahead to the rest of the week, the Bank of England's latest rate announcement and Inflation Report are due on 'Super Thursday' and although the monetary policy committee is expected to leave rates unchanged this time, market participants have begun to price in two rate rises this year. Weaker sentiment at the start of 2018 will complicate the MPC assessment of the strength of the economy, said Barclays. "PMIs should provide some support to the doves on the committee, calling for moderation and time instead of rushing into the next hike. Strong employment data will likely, however, continue to fuel doubt regarding the outlook for productivity and possibly encourage other MPC members to hike sooner on the grounds that the UK's growth potential may be much lower than previously thought." In corporate news, Vodafone retreated, giving back gains made late on Friday when it confirmed it is in talks with Liberty Global about the acquisition of some assets in Europe. City analysts were optimistic however the talks could finally, having been off-and-on since 2015, lead to a concrete deal that would boost future earnings and cashflow. Budget airline Ryanair flew lower, dragging peer EasyJet down with it after it posted a 6% rise in third-quarter pre-tax profit and announced a surprise share buyback, but struck a cautious note on the outlook as it warned over disruption from talks with unions. Wizz Air was also in the red despite reporting a 24% jump in passenger numbers in January. Petrofac leaked lower after it said its directors and employees will be interviewed as part of an ongoing SFO investigation. Tesco edged down after confirming that Booker Group boss Charles Wilson will be appointed chief executive of the group's retail and wholesale operations in the UK and Ireland when the takeover is completed. Randgold Resources reversed earlier gains after saying it had increased annual gold production by 5%, while full year profits rose 14% to $335m. On the upside, B&Q owner Kingfisher was in the black after Australian retailer Wesfarmers wrote off competitor Homebase for $1bn, which is more than it bought it for two years ago, and said it could close between 20 and 40 stores. Shares in outsourcer Capita surged as a blog post on the Woodford Investment Management website suggested that its low valuation could make it a big target. In a blog dated 2 February, Neil Woodford said: "There are of course buyers of corporate assets that are not disciples of the momentum school of investing - I suspect that other businesses and private equity buyers will be circling Capita as I write." Electrocomponents gained after it said that its "strong" underlying revenue performance in the first half has continued into the first four months of the second half, with underlying revenue growth remaining stable at the 14% seen in the second quarter. |
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Markets begin week already battered and bruised The Wall Street-inspired selling carnage battered European markets throughout Monday’s session, after rolling through Asia overnight as global inflationary fears took hold. The pan-European Stoxx 600 was down 1.56% at 382.00, with Germany's DAX falling 0.76% to 12,687.49 and the CAC 40 slipping 1.48% to close at 5,285,83. In Spain, the IBEX 35 was off 1.44% at 10,064.50, while London's FTSE 100 was off 1.46% at 7,334.98 and the more domestic-focussed FTSE 250 slid 1.36% to 19,690.49. US stocks closed sharply lower on Friday to end a gloomy week as a strong non-farm payrolls report added weight to rate hike expectations. Stocks were hit by rising global bond yields and the downbeat tone in equity markets was only exacerbated after data revealed that US average hourly earnings surged in January as more jobs were added than expected, adding strength to the conviction that interest rates will be hiked three or even four more times this year. In corporate news, shares in UK defence contractor Babcock fell 0.67% ahead of a trading update this week and against a backdrop of budget pressures at the Ministry of Defence, the firm's largest customer. Ryanair shares were 1.71% lower in London, as the budget airline warned over potential industrial disputes with pilots. Chief executive Michael O'Leary stated that he would be prepared to take a hit from strikes rather than meet pilot demands over pay and conditions. The company posted a 6% rise in third-quarter pre-tax profit on Monday as revenue and passenger numbers jumped and a share buyback was announced, but the flying coach service struck a cautious note on the outlook as it warned over disruption from talks with unions. Electrocomponents shares rose 2.78% as the company said its "strong" underlying revenue performance in the first half has continued into the first four months of the second half, with underlying revenue growth remaining stable at the 14% seen in the second quarter. Also on the upside, B&Q owner Kingfisher was in the black by 2.26% after Australian retailer Wesfarmers wrote off competitor Homebase for $1bn, which is more than it bought it for two years ago, and said it could close between 20 and 40 stores. Shares in outsourcer Capita surged 7.27% as a blog post on the Woodford Investment Management website suggested that its low valuation could make it a big target. In a blog dated 2 February, Neil Woodford said: "There are of course buyers of corporate assets that are not disciples of the momentum school of investing - I suspect that other businesses and private equity buyers will be circling Capita as I write." |
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Top of the stocks Number of Deals Bought Number of Deals Sold |
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| | Cryptocurrencies Report | | Top Cryptocurrencies | # | Name | Market Cap($) | Price(%) | Change | Price Graph(3m) | | 1 |  | Bitcoin (BTC) | 120,691,122,683 | 7,028.8 | -14.26% |  | | 2 |  | Ethereum (ETH) | 68,964,211,946 | 692 | -16.12% |  | | 3 |  | Ripple (XRP) | 27,608,070,343 | 0.67573 | -16.97% |  | | 4 |  | Bitcoin Cash / BCC (BCH) | 15,575,821,132 | 908 | -21.47% |  | | 5 |  | Cardano (ADA) | 8,518,494,588 | 0.309 | -19.11% |  | | 6 |  | Litecoin (LTC) | 7,037,053,054 | 124.65 | -15.38% |  | |
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| | US Market Report | | US open: Selling on Wall Street carries over into another week Shares on Wall Street are trading lower on follow-through selling from the week before, with traders casting a cautious eye towards government bond markets as they try and anticipate how far and fast yields might rise. During the previous session, the S&P 500 gave back the most ground in a single day since September 2016 after the Department of Labor reported that wage growth in the US jumped past forecasts in January. Against that backdrop, Mark Haefele, global chief investment officer at UBS said in a research note sent to clients that: "We don't believe that now is a time to reduce exposure to stocks. As long as the recent rise in bond yields moderates, we are confident that market conditions will remain orderly." Furthermore, UBS said that drop had to be seen in the context of a more than year long advance on the S&P 500 with scant volatility. At 1630 GMT, the Dow Jones Industrial Average was down 0.68% or 176.19 points to 25,345.43, while the S&P 500 was down by 0.54% or 14.76 points to 2,747.29 and the Nasdaq Composite by 0.28% or 20.33 points to 7,220.95. In parallel, the yield on the benchmark 10-year US Treasury note was adding two basis points to 2.86%, with traders' attention fixed on the 3.0% level - the early 2014 highs - which some believed would see buyers step-in, albeit while other market participants saw that level as the proverbial 'red line in the sand' which would mark the start of a 'bear' market in US government bonds. Also, commenting on the price action at the start of the week, Craig Erlam at Oanda chipped in: "Markets now have three rate hikes this year more than 50% priced in and some people are even anticipating a fourth, which is unusually ahead of current Fed forecasts. "While Friday's declines were larger than we've become accustomed to and the biggest drop in the Dow since June 2016, I don't think it yet signals that a large correction is underway. Small corrections are normal in markets, even if we haven't experienced them as often in recent years." Weighing on government bond prices on Monday, the ISM's non-manufacturing PMI surged from a reading of 56.0 for December to 59.9 for January (consensus: 56.5). Meanwhile, in the corporate space, by industrial groups the biggest declines were being seen in Basic Resources (-4.59%), Oil equipment (-3.56%) and Gambling (-3.49%). Among individual stocks, Qualcomm was sharply higher following a Wall Street Journal report that Broadcom is planning to lift its hostile takeover bid for the company to $120bn. Elsewhere, Wells Fargo was under the cosh after it said Federal Reserve sanctions over its customer account scandals could dent profit by as much as $400m this year. Also trading lower were shares of Bristol-Myers Squibb even after the pharma giant posted better-than-expected fourth quarter earnings and sales. Corporate results were also due out later in the week from General Motors, Walt Disney, Tesla and Twitter. |
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| | Broker Tips | | Broker tips: Vodafone, Standard Chartered, Countryside Properties City analysts were optimistic that talks between Vodafone and Liberty Global could finally lead to a concrete deal that would quickly benefit the FTSE 100 group's cash flow and boost earnings before long. On Friday, confirming a newspaper article, Vodafone said it was in "early stage discussions" with John Malone's cable network owner regarding "the acquisition of certain overlapping continental assets owned by Liberty Global". The overlapping continental European assets would be Germany, Netherlands, Hungary, Czech Republic and Romania, together with an enterprise value of around $31bn. Credit Suisse said the size of this deal would allow Vodafone to pay a larger portion in cash, implying the accretion to free cash flow per share could be considerably higher than an acquisition of all of Liberty Global. An acquisition of only overlapping assets would likely be accretive to free cash flow already in year one, CS said. "It further reduces investor concerns that Vodafone would do a bigger dilutive deal." RBC Capital Markets said an all-cash transaction "is possible" with part payment in equity from the Ziggo joint venture, the cost to Vodafone would be €20.7bn minus €3.6bn Ziggo equity, so €17.1bn. Berenberg upgraded Standard Chartered to 'buy' from 'hold' and lifted the price target to 920p from 700p. It pointed out that StanChart is among the 25% of banks in its coverage trading below tangible book value and within this, the only risk-focused bank offering meaningful growth. It argued that this is unwarranted, hence the upgrade. Berenberg said StanChart's unique network enables superior growth and risk management versus peers. "This potential has recently been encumbered by actions to overcome legacy issues. With this process now largely complete, relationship managers can focus on growing the core business rather than exiting and renegotiating past business." As a result, the bank reckons around 5% annual revenue growth is achievable between 2017 and 2020. This reflects higher rates, US dollar weakness and improved growth from the network. "Standard Chartered's actions to improve asset quality are complete, in our view. The bank's loss rates in BOE stress tests are comparable with HSBC in key regions and are below UK banks' global average. This provides more than just stability. Managers can now focus on growing the core business, and client relationships will suffer less from decisions to end or reprice business. Risk-focused growth is now possible." Barclays upgraded Countryside Properties to 'overweight' from 'equalweight' and lifted the price target to 379p from 359p on the back of an increase in its valuation for the Partnerships division, as it took a look at UK housebuilders. "Partnerships, which currently delivers around half of the group's operating profit, lowers risks in myriad ways: phased viability (which confers the option, but not the obligation, to do future scheme phases); a much higher affordable homes content (which significantly reduces pricing exposure); and lower planning risks (no refusals to date)." It also said there is an opportunity to roll out the Partnerships division at low capital outlay, adding that the new Midlands division has made a strong start. Barclays pointed out that Countryside shares have been among the best performers in the sector in the last 12 months. Housebuilding fundamentals have been impacted by weak consumer confidence, the Brexit debate, November's 25 basis points rate hike - with the same again expected in the Autumn - and the sluggish second-hand market, it said. Nevertheless, the bank argued that it's still a good time to be a housebuilder. "Backed by Help to Buy, low mortgage rates and lenders that are open for business, it remains a good time to be buying land (high gross margins still available) and selling houses, apart from the higher price points (largely, though not exclusively, in central London) or where second-hand market reliance is significant (McCarthy & Stone the best example)." | | | | To advertise in the Euro Markets Bulletin please contact advertise@advfn.com |
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