| | | | | Q2's Top 10 Stock Picks | | What trading opportunities do the next 3 months hold? Our latest quarterly stocks report unveils our Top 10 Stock Picks for Q2 as well as a review of the key Q1 stories & preview of the coming quarter's pivotal events, and analysis of the best, and worst, FTSE share price performances year to date. Losses can exceed deposits. Download Report | | |
| | London close: BP and Just Eat lead gains as pound sinks on weak data |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | London stocks just held onto gains on Tuesday as weak manufacturing data sent the pound sinking to its lowest level since early January. The FTSE 100 closed 0.15% higher at 7,520.36 as the pound dropped 1.1% against the dollar to 1.3618 and slipped 0.45% versus the euro to 1.1345 after data showed that growth in the UK's manufacturing sector fell to a 17-month low in April, further reducing the odds of an interest rate hike at the Bank of England's monetary policy meeting next week. Howard Archer, chief economic advisor to the EY ITEM Club, said it was a "disappointing survey that increases concerns that the UK economy has lost momentum and that the first-quarter GDP weakness was not just due to the severe weather". "This will fuel caution at the Bank of England and makes a May interest rate hike increasingly unlikely." The Markit/CIPS manufacturing purchasing managers' index fell to 53.9 from 54.9 in March, missing expectations for a reading of 54.8 but still above the 50 mark that separates contraction from expansion. The disappointing manufacturing reading comes just days after first-quarter GDP figures revealed that the UK economy practically ground to a halt in the first three months of 2018. Barclays' economist Fabrice Montagne said: "Although not outright weak, manufacturing is an increasing source of concern against a backdrop of construction recession and near service stagnation. April's manufacturing PMI and components have fallen to multi-month lows with weakness in employment and the consumer sector standing out. "As the Bank traditionally places significant importance on surveys and sentiment, the market could take today’s print as confirmation that a hike at the May MPC is now off the table." Meanwhile, figures from the Bank of England revealed that consumer borrowing slumped in March. Net lending to consumers dropped to £0.3bn from £1.7bn the month before. The figure for March was a fifth of the £1.5bn six-month average. The month-on-month increase was just 0.1% compared with 0.8% in February and 0.6% in January. The BoE figures also showed companies reining in their borrowing. Net finance raised by non-financial companies was zero in March compared with £2.6bn in February and a six-month average of £1.4bn. Investors were also digesting news that US President Donald Trump has given the EU, Canada, Mexico and other allies another 30-day reprieve from new steel and aluminium tariffs. The exemptions will now last until 1 June, giving the US and the exempted nations more time to work out deals. In corporate news, online takeaway food specialist Just Eat was the standout gainer as it said revenues rose 49% in the first quarter, fuelled by the recent acquisition of HungryHouse as it looks to outrun competition from Deliveroo and UberEats. Broker Numis was impressed with numbers beat the City analysts consensus and management reiterated their confidence in hitting full year targets. "The materially higher growth in revenue reflects the increase in average commission rates across the group and in the UK, the benefit from charging a universal 'service charge' that has replaced levies on debt and credit card transactions," analyst Richard Stuber said. Oil giant BP rose after posting a 71% jump in profit for the first three months of 2018 as its upstream business reported its strongest quarter for more than three years. Challenger bank Virgin Money racked up impressive gains after it reported a jump in first-quarter mortgage balances, deposit balances and credit card balances. Water company Severn Trent was boosted by an upgrade from Credit Suisse, along with peer United Utilities, to 'outperform'. “The tide is turning” for UK water utilities, analysts said, foreseeing "limited public support" for Labour's plan to renationalise the industry given the prohibitive cost. Ocado was up as fresh industry data showed it was the fastest growing company in the grocery market in recent weeks. Peel Huntalso lifted its price target on Ocado and reiterated its 'buy' rating. The supermarket sector data from Kantar Worldpanel and Nieslenshowed Sainsbury's and Asda continued to lose ground to their supermarket rivals, explaining baldly why the pair had announced a proposed merger a day earlier. Sainsbury's shares were up, with BoA Merrill Lynch issuing a 'buy' rating on the view that the Asda deal "will erode the long-term discount Sainsbury has faced versus the market as it is taken more seriously as a competitor willing to take action for survival". Shares in Tesco and Morrison were down in spite of the report showing they both held onto their market share in the face of the continued assault of the discounters Aldi and Lidl. Marks & Spencershares fell as Nielsen's numbers showed food sales fell 0.9%. Morrison was downgraded by BoA Merrill Lynch to “neutral” as heightened sector competition is expected to limit potential cash returns. British American Tobacco was bottom of the list after being cut to 'neutral' from 'overweight' at Piper Jaffray, while CMC Markets was under pressure after Morgan Stanley downgraded the stock to 'equalweight' from 'overweight'. Intu Properties was cut to 'underperform' from 'outperform' by Exane and Tullow Oil was downgraded to 'sector perform' from 'outperform' at RBC Capital Markets. On the upside, Compass was lifted by an upgrade to 'buy' from 'hold'. |
| | Market Analysis 01/05/2018 | | Trade Markets Your capital is at risk Today's highlights: Global markets mostly higher Wall Street closes nearly flat: The tech market pulled back on Friday, as... Read More.. |
| | Market Status | Top 10 FTSE 100 RisersTop 10 FTSE 100 Fallers |
| | Europe close: Stocks tick lower in very quiet trade; BP gains |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | European stocks ended a very quiet session a touch weaker on Tuesday, with markets in France, Germany, Italy and Spain closed for Labour Day. The benchmark Stoxx Europe 600 index finished 0.1% lower at 385.03. Investors were digesting news that US President Donald Trump has given the EU, Canada, Mexico and other allies another 30-day reprieve from new steel and aluminium tariffs. The exemptions will now last until 1 June, giving the US and the exempted nations more time to work out deals. Corporate news was scarce, although oil giant BP was a bright spot after posting a 71% jump in profit for the first three months of 2018 as its upstream business reported its strongest quarter for more than three years. Chris Beauchamp, chief market analyst at IG, said: "BP hit all the right notes in its morning update, but after a 20% gain over the past six weeks a 1% gain was all that could be hoped for. Compared to Shell, BP still has a few issues to work out, but the meaningful break of the 525p ceiling that has held for four years will be an encouraging sign that the market has more faith in the firm now that the Deepwater Horizon spill has now more or less receded from view." Elsewhere, Danish brewer Carlsberg ended in the black after it said sales in the first quarter fell 5% due to a negative currency impact and lower volumes in its key Russian market. After the close of US markets, tech giant Apple's quarterly earnings are due. London Capital Group analyst Jasper Lawler said: "The earnings reports from Apple later is set to attract significant market attention, particularly given the expectations for sluggish iPhone X sales at the world's largest company by market cap. Earning season so far has produced some solid results, even the market leaders, the FAANGS (Facebook, Amazon, Apple, Netflix and Google parent Alphabet) of those that have reported, they have updated with robust numbers for both top and bottom lines. Yet instead of the solid earnings season giving bulls fresh reason to take the markets higher, the US equity indices haven't benefited from such optimism. "What is clear is that the markets no longer assume that solid Apple results are the given that they once were. Investors have been on edge that Apple might not live up to expectations. As long as Apple doesn't give a downbeat guidance, the market should be able to take what Apple throws out. Given the negative bias to the markets, a downbeat guidance from Apple could prove too much." Investors will also be looking ahead to the latest policy announcement from the Federal Reserve on Wednesday. With no change to rates expected, they will be watching out for any clues on the outlook for rates. Another big focus for the week will be the release of the US non-farm payrolls report on Friday. |
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| | US open: Stocks drop as Pfizer, Under Armour disappoint; Fed announcement eyed | | Wall Street stocks suffered more losses at the open on Tuesday as investors digested uninspiring earnings from the likes of Pfizer and Under Armour and key readings on the US manufacturing sector ahead of results from tech giant Apple, with all eyes on the Federal Reserve's latest policy announcement. At 1530 BST, the Dow Jones Industrial Average had lost 0.84%, while the S&P 500 and Nasdaq were 0.30% and 0.01% lower, respectively. Connor Campbell, SpreadEx's financial analyst, said, "The Dow Jones really, really wasn't happy with the dollar's rediscovered hutzpah. Diving 200 points the Dow dropped under 24,000 to tease levels not seen in a month. And this is all before the week's dual main-events occur: Wednesday sees what will likely be a hawkish, if uneventful, Fed meeting, while Friday sees the non-farm jobs report, and with it the chance of the unemployment rate hitting 4.0%. The Dow, then, could do with a decent set of figures from Apple this evening." Investors were digesting news that Donald Trump has given the EU, Canada, Mexico and other allies another 30-day reprieve from new steel and aluminium tariffs. The exemptions will now last until 1 June, giving the US and the exempted nations more time to work out deals. Rabobank pointed out that this is the final temporary extension, which means it does little to lessen the unpredictability of the final outcome. It does, however, give the US more time to build a coalition with its key trading partners against China. Corporate news came thick and fast, with Boeing down 2.21% after announcing plans to buy plane-parts specialist KLX Inc for $3.2bn. Drugmaker Pfizer was also under the cosh after reporting a somewhat mixed quarter and sportswear brand Under Armour lost 5.18% after it posted stronger-than-expected sales for the first quarter, boosted by its international business and growth within the apparel category, but noted that weaknesses persist in the US market. Elsewhere, Tenet Healthcare surged 12.23% after better-than-expected quarterly earnings late on Monday, while US-listed shares of oil giant BP ticked up 0.74% after it posted a 71% rise in profit for the first three months of 2018 as its upstream business reported its strongest quarter for more than three years. After the closing bell, numbers from Apple, Mondelez and Snap are on tap. London Capital Group analyst Jasper Lawler said: "The earnings reports from Apple later is set to attract significant market attention, particularly given the expectations for sluggish iPhone X sales at the world's largest company by market cap. "What is clear is that the markets no longer assume that solid Apple results are the given that they once were. Investors have been on edge that Apple might not live up to expectations. As long as Apple doesn't give a downbeat guidance, the market should be able to take what Apple throws out. Given the negative bias to the markets, a downbeat guidance from Apple could prove too much." On the data front, Markit's manufacturing PMI rose to 56.5 in April from 55.6 in March, indicating the strongest manufacturing growth in over three-and-a-half years. Figures from the Institute for Supply Management were less rosy, however, with the ISM's headline manufacturing index down to 57.3 in April from 59.3 in March, missing expectations for a smaller drop to 58.3. Andrew Hunter, US economist at Capital Economics, said that while the drop was worse than the consensus forecast and echoes the recent weaker tone of some of the early regional surveys, it remains consistent with annualised GDP growth rebounding above 3% in the second quarter. "The press release suggests that uncertainty caused by the recent escalation of protectionist threats is weighing on some manufacturers. But with the temporary exemptions to the steel and aluminium tariffs having just been extended for another month, the trade restrictions actually implemented so far remain too small to have a major impact on the economy. "In any case, with global growth likely to hold up fairly well and the dollar's depreciation still supporting exports, there are good reasons to expect manufacturing activity to continue to expand at a healthy rate over the coming months." Meanwhile, data from the Commerce Department showed US construction spending unexpectedly fell in March. Spending fell 1.7% to a seasonally-adjusted annual rate of $1.28bn, missing expectations for a 0.5% increase. On the year, spending was up 3.6% to $1.24bn. Private sector construction spending dropped by 2.1% to a seasonally-adjusted annual rate of $987.5bn, marking the biggest drop since January 2011. Spending on residential construction declined 3.5% to $536.8bn and non-residential construction spending slipped 0.4% to $450.7bn. The Federal Reserve's two-day policy meeting will kick off later in the day, where the Fed is widely expected to leave interest rates on hold but investors will still be watching for any hints about an interest rate hike in June. |
| | Broker tips: Ocado, WPP, Sainsbury's, Tesco | Ocado got a boost on Tuesday as Peel Hunt reiterated its 'buy' rating on the stock and lifted the price target to 610p from 570p, saying it could benefit from Sainsbury's tie-up with Walmart's Asda. Peel said the key takeaway from Monday's news of a tie-up was the pressure they are facing from discounters and online, squeezing margins. As a result, they're promising further price competition, which could squeeze margins in the industry even further, Peel said. "The circa 10% price cut on popular products announced by Sainsbury’s post-completion, while positive for customers, will further intensify competition and increase the loss-making potential of online offerings further, pushing the new top three to focus on securing their traditional offline models. "Ocado should take advantage of this distraction. Moreover, smaller players such as Marks & Spencer and Co-op, not restricted by the Morrisons deal, should come on board with Ocado Solutions." Separately, the brokerage highlighted strong Glassdoor/Trustpilot performances from Ocado and said it was gaining more confidence in the operational leverage following a review of its deal model. Peel noted that 54% of Ocado Trustpilot reviews were "excellent" compared to 29% at Tesco and 15% at Asda, while Ocado had an overall score of 6.8 compared to 2.9 for Tesco and 1.1 for Asda. WPP’s problems are not over after sales beat expectations in the first quarter, according to analysts at Berenberg. The world’s biggest advertising company, which parted company with founder Martin Sorrell in April, left annual profit guidance unchanged on 30 April as it reported net sales better than analysts’ forecasts. Berenberg said the market’s positive response was understandable after 12 months in which WPP disappointed investors several times. But profit estimates will get worse before they improve, they said, maintaining a ‘hold’ recommendation and 1,275p price target for WPP. Recent results from WPP’s rival Publicis indicate advertising agencies are not in terminal decline, as some investors fear. But for WPP to start growing again it has to go through a hefty programme of restructuring, investment and disposals that will suppress earnings. "WPP is not out of the woods yet, with tougher UK comps to come, a weak US trend likely to continue (the company’s highest-margin region) and management admitting that no assumption has been made for any major client account losses (despite Ford’s global creative review being underway, among a number of others),” the analysts said in a note to clients. Heading back to the supermarket sector, there are too many uncertainties hanging over Sainsbury’s proposed acquisition of Asda to justify the price and Tesco is a better bet, JP Morgananalysts said. Sainsbury’s agreed purchase of Asda from Walmart, comprising £3bn cash plus shares, could be a good deal for both sides, the analysts said. But, after Sainsbury’s shares rose 15% following the announcement, the price assumes the deal is low-risk when it isn't, they said. The assumptions include: The deal gets regulatory clearance The combined company will not be forced to dispose of stores Management executes the deal with no mistakes Management achieves the target of £500m synergies by 2022 There is no certainty the Competition and Markets Authority will approve the deal and if the CMA requires store disposals there are no obvious takers, JP Morgan said. Timing is also an uncertainty because a full CMA inquiry could take 15-18 months, according to the analysts, who kept their 'underweight' rating for Sainsbury's and increased their price target to 260p a share from 200p. Tesco, whose takeover of Booker has been approved by the CMA, is a better bet for investors, JP Morgan said. "We would rather buy Tesco, where there is no CMA risk, there is a new addressable market/avenue of growth and the combined businesses are in better shape." | | | | To advertise in the Euro Markets Bulletin please contact advertise@advfn.com |
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