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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: Jitters around Greece weigh on stocks ahead of Fed meeting Stocks dropped ahead of tomorrow’s policy decision from the US Federal Reserve as nervousness surrounding Greece continued to simmer, despite another drop in Greek sovereign bond yields after Athens bowed to pressure to re-jig the team in charge of negotiating with its international creditors. Speaking in the afternoon, Greek Prime Minister Alexis Tsipras said an initial agreement with the nation’s creditors may be reached by the end of the week. However, in a research note e-mailed to clients analysts at Capital Economics wrote: “Rising expectations of a Greek exit from the euro-zone are still not prompting contagion effects or more general concerns about the Eurozone economy. We fear that the markets are too relaxed.” The Footsie ended the day lower by 73.45 points or 1.03% to 7,030.53 points. Greek 10-year bond yields fell by 66 basis points to 10.99%. That came after a very weak reading on first quarter economic growth in the UK which sawBarclays put “under review” its forecast for a first increase in Bank Rate in the fourth quarter of 2015. The British economy grew just 0.3% quarter-on-quarter in the first three months of the year, as the services sector “slowed down markedly”. In parallel, investors were continuing to keep close tabs on the results of the latest election polls in the UK. Nate Silver, the American statistician who forecast the result of the last two US presidential elections with great precision, believes the result of Britain’s general elections will be “incredibly messy”, the BBC reported. However, miners got a boost from a report in The Wall Street Journal according to which the People’s Bank of China was set to launch its own brand of quantitative easing. In the next couple of months the Chinese central bank will allow the country’s lenders to swap local-government bonds for loans as a way to bolster liquidity and boost lending, according to local officials cited by the newspaper. Astrazeneca proves a drag Drugmaker Astrazeneca was near the bottom of the pile after the results of a study showed US rival Merck's diabetes drug met heart-safety requirements. The British drug-maker's own treatment for that chronic disease was recently required by US authorities to carry information about the risk of heart failure. Total revenues from Standard Chartered fell 4% to $4.4bn, a 6% miss versus consensus forecasts of $4.7bn. Customer loans rose by 2% quarter-on-quarter after a 4% decline in the second half of 2014. "On one level, the market may be mildly relieved by today’s numbers," said broker Investec, "but we think that STAN’s Q1 2015 IMS offers a preview of the unpalatable impact of planned deleveraging (now underway)." Centrica's chairman was quoted saying the company has made preparations in case it receives a takeover offer. BP has posted an underlying replacement cost profit decline of 20% on an annualised basis for the three months to end-March, though the figure was 15% higher on the previous quarter. In a trading statement on Tuesday, the oil giant said profit for the last quarter came in at $2.6bn compared with $3.2bn for the same period in 2014, and $2.2bn for the fourth quarter of 2014. Costa Cofee and Premier Inn owner Whitbread served up impressive results for the year to 26 February but announced that chief executive Andy Harrison will retire by the end of the current financial year. Revenue rose 13.7% to £2.61bn and underlying profits before tax by 18.5% to £488.1m, leading to a 19.4% increase in earnings to 213.67p per share, well ahead of the consensus forecast. Fund management group Henderson saw record net inflows of £3.6bn in the first three months of the year, which contributed to a 10% rise in assets under management to reach £89.4bn. Chief executive Andrew Formica said: “Evolving client needs have driven us to develop a broad range of investment capabilities over the last few years which has enabled us to deliver market share gains in all of our major markets.” After a bitter battle, Dundee-based Alliance Trust has reached a "compromise" with its activist major investor Elliott Advisers, allowing two of the US hedge fund's partners onto the board. Elliott, which had criticised the board for its under-performing investments and over-inflating their pay, has in exchange agreed to withdraw its three resolutions proposing new members to be added to the board of Alliance ahead of the companies annual general meeting this week. Wealth management group St James's Place has posted a 22% increase in funds under management, according to its latest interim statement. Giving details on Tuesday, St James's Place said funds under management had risen to £55.8bn for the three months March end, up 22% from £45.8bn in 2014, and 7% since the beginning of the year. |
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| | Market Movers
techMARK 3,223.73 -1.35%
FTSE 100 7,030.53 -1.03%
FTSE 250 17,659.39 -0.70% FTSE 100 - Risers
Anglo American (AAL) 1,129.00p +2.31%
Centrica (CNA) 275.30p +2.30%
Fresnillo (FRES) 743.00p +2.13%
Marks & Spencer Group (MKS) 555.00p +1.37%
BHP Billiton (BLT) 1,589.50p +1.31%
Randgold Resources Ltd. (RRS) 5,035.00p +1.00%
Glencore (GLEN) 314.90p +0.86%
Hargreaves Lansdown (HL.) 1,224.00p +0.74%
Smiths Group (SMIN) 1,157.00p +0.70%
Old Mutual (OML) 232.00p +0.69% FTSE 100 - Fallers
St James's Place (STJ) 875.50p -3.42%
AstraZeneca (AZN) 4,548.00p -3.35%
Carnival (CCL) 3,056.00p -3.23%
Standard Chartered (STAN) 1,080.00p -3.18%
Barratt Developments (BDEV) 520.00p -3.17%
Shire Plc (SHP) 5,395.00p -3.14%
ARM Holdings (ARM) 1,156.00p -2.86%
Babcock International Group (BAB) 995.00p -2.83%
Whitbread (WTB) 5,300.00p -2.57%
TUI AG Reg Shs (DI) (TUI) 1,210.00p -2.26% FTSE 250 - Risers
Centamin (DI) (CEY) 62.85p +3.71%
Tullow Oil (TLW) 425.50p +3.70%
Acacia Mining (ACA) 297.00p +3.66%
Drax Group (DRX) 409.40p +3.07%
Ophir Energy (OPHR) 170.90p +2.58%
AL Noor Hospitals Group (ANH) 915.50p +2.58%
Premier Oil (PMO) 177.10p +2.37%
Lonmin (LMI) 147.90p +2.28%
Interserve (IRV) 584.00p +2.01%
Polymetal International (POLY) 551.50p +1.94% FTSE 250 - Fallers
Berkeley Group Holdings (The) (BKG) 2,512.00p -4.30%
Pace (PIC) 413.60p -3.54%
Man Group (EMG) 204.00p -3.36%
Home Retail Group (HOME) 167.30p -3.29%
Greggs (GRG) 1,076.00p -3.15%
Synergy Health (SYR) 2,275.00p -3.11%
Allied Minds (ALM) 677.00p -3.01%
Bank of Georgia Holdings (BGEO) 1,823.00p -2.98%
Bellway (BWY) 1,977.00p -2.71%
Smith (DS) (SMDS) 357.50p -2.69% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Equities in the red after worse-than-forecast slowdown in UK GDP European equities were in the red after official figures showed UK economic growth slowed more than expected in the first quarter.
Gross domestic product (GDP) rose 2.4% year-on-year in the first three months of the year, easing back from 3% growth the previous quarter, the Office for National Statistics revealed. Economists had predicted a 2.6% gain.
"With the general election just days away, the news that the economic recovery slowed sharply in the first quarter clearly won't help the Coalition parties," said Vicky Redwood, chief UK economist at Capital Economics. "However, we expect the slowdown to be only temporary."
Barclays Research revised down its annual GDP forecast from 2.7% to 2.3% and put its call for a rate hike by the Bank of England under review.
Ahead of the Federal Reserve's policy announcement, a report showed US consumer confidence fell unexpectedly in April. The sentiment index dropped to 95.2 this month from 101.4 a month earlier, surprising analysts who had projected a reading of 102.5.
Greek bond yields declined after Prime Minister Alexis Tsipras said an initial agreement with creditors could be reached by the end of next week. His remarks came after the government reshuffled its negotiating team, effectively sidelining finance minister Yanis Varoufakis who has been criticised for his lack of progress in making a deal with creditors.
Eurogroup head, Jeroen Dijsselbloem, however, told RTL Nieuw in a televised interview that the shake-up would not necessarily resolve the deadlock between Greece and its creditors.
"Rising expectations of a Greek exit from the Eurozone are still not prompting contagion effects or more general concerns about the Eurozone economy. We fear that the markets are too relaxed," said Jonathan Loynes, chief economist at Capital Economics.
In China, the central bank is set to launch further monetary policy easing measures in a bid to ease debt restructurings, according to The Wall Street Journal.
The plan, expected to be in place in the next couple of months, will allow Chinese banks to swap local-government bailout bonds for loans as a way to boost liquidity and lending.
StanChar slides
Standard Chartered slipped after reporting a drop in first quarter revenue that missed the consensus forecast.
Orange plunged after reporting a drop in quarterly sales and earnings, reflecting stiff competition in its European markets.
Commerzbank AG slumped after saying it plans to sell €1.4bn of shares to boost capital after a US fine reduced its buffers.
Total increased after reporting earnings that smashed forecasts, driven by higher production. |
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| | US Market Report | | US open: Dow drops just under 30 points, as Apple opens at highest-ever level US stocks slid early on Tuesday, as investors remained jittery ahead of the Federal Reserve's two-day meeting.
Just after 15:00 BST, the Dow Jones Industrial Average was down 29 points, while the S&P 500 and the Nasdaq fell by two and nine points respectively.
The Federal Reserve Open Market Committee begins on Tuesday and investors will closely monitor the interest-rate statement, which is released at 19:00 BST on Wednesday.
"September is looking like the earliest date for an interest rate raise," said Connor Campbell, financial analyst at Spreadex.
"However, the consistently soft nature of the USA's recent data could see the return of a more 'patient' Fed, despite the door being opened for a 2015 rate rise."
US consumer fell unexpectedly in April, as a slowdown in hiring and lower expectations on economic growth weighed on sentiment.
On Tuesday, the Conference Board said the index dropped from a revised 101.4 to 95.2 this month, reaching its lowest level since December and falling short of analysts' expectations of a 102.5 reading.
Meanwhile, the US Case-Shiller index, which monitors house prices in 20 different cities, advanced 0.5% in February
In corporate news, Apple fell 1.18% after changing hands at their highest-ever level, following strong first quarter results late on Monday.
The iPhone-maker reported earnings of $2.33 per share, beating estimates by 17 cents, while revenues for the period jumped 24% year-on-year to $58bn against consensus of a $56.1bn.
Following the results, analysts at Cantor Fitzgerald raised their target on the stock from $180 to $195, while economists at Morgan Stanley lifted their outlook for 2015.
"We see a broadening portfolio of services and the Apple Watch as drivers of are-rating more in-line with technology platform peers," they said in a note, describing the stock as "Morgan Stanley Best Idea."
Home-appliances maker Whirlpool tumbled 7.75% after the company slashed its full-year earnings guidance, while automotive giant Ford Motor edged forward 0.06% despite reporting a drop in first quarter profit.
Bio-pharmaceutical group Pfizer gained 0.61% after announcing early on Tuesday that revenue had topped estimates, but lowered its outlook because of the impact of the strengthening dollar.
The earnings season continues on Tuesday with Twitter, GoPro and Kraft Foods set to publish results after the close.
The dollar declined 0.16% against the yen and fell 0.63% and 0.75% against the pound and the euro respectively, while gold futures slid 0.03% to $1,202.80. |
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| | Broker Tips | | Broker tips: AMEC, BHP Billiton, Supergroup The oil services sector has performed well recently on the back of the sharper-than-expected rebound in oil prices, but more is needed for the sector to achieve a fundamental improvement in its pricing power versus exploration and production customers, analysts at Exane BNP believe.
Indeed, companies in the space have moved closer to capitulation - accepting that "difficult conditions" are here to stay - and progress has been made on the capacity-cut front. As well, the short-term demand/supply outlook for oil has improved.
Nonetheless, in a research note e-mailed to clients the broker stresses that the entire cost curve is seeing a reduction, and hence the relative position of offshore developments has not yet improved - even if further gains in the oil price could see stocks move higher.
In the case of offshore contractors, the analysts are concerned by the fact that reworking/efficiency can lead to deflation and hence lower revenues in the medium-term.
However, "in seismic, we see the first steps towards recovery in a world where exploration is still needed for new discoveries, but headwinds remain significant," the broker wrote in a research note e-mailed to clients.
Aker remains a favoured name in the oil services patch while Seadrill and Saipem are their least preferred names. They like Wood Group "but see near-term uncertainties on shale and the shares have been strong versus the sector."
Lastly, Exane BNP has moved to upgrade AMEC to neutral from underperform.
BHP Billiton's third quarter results revealed the weak performance of assets that the mining group will be spinning off into its South32 business, said Investec.
The demerger, which will include a collection of aluminium, coal, nickel, manganese, silver, lead and zinc assets, will cost the company $641m after tax, plus $60m a year for South32 to set itself up for independent life.
Investec said the weakness of the assets in the third quarter results were hidden by the overall good performance of BHP with iron ore production up 20% year-over-year to 58.98m tonnes.
"With shareholder approval of the spin-off due in just over a week, such relative performance has important ramifications for the NewCo, as shareholders in South32 could see, in our view, weaker multiples and therefore potential erosion of shareholder value. This could play into the hands of an acquirer," said analysts Hunter Hillcoat, Marc Elliot and Jeremy Wrathall.
The broker gave the company a 'sell' rating and price target of 1,329p.
Berenberg has chosen Supergroup as its top pick in the retail sector as the SuperDry street fashion label moves from being "a business with significant potential to one which is starting to deliver".
With a 'buy' recommendation and a 1,160p price target, a 17% premium to the share price, the German bank said time spent "on the road with the company" had persuaded it of the upside potential from both the significant self-help opportunities in the business and from the North America expansion.
Berenberg believes the company's volatile performance history since its March 2010 IPO, perceived execution risk and comparison with US peer Abercrombie & Fitch (ANF) due to the pair's one-brand strategy have overshadowed the stock.
"However, the recent strengthening of management will reduce volatility in our view, while we believe there are key differences between the SGP and ANF business models."
New chief executive Euan Sutherland has added a longer-term strategic focus and is strengthening the business operationally in Berenberg's view, with simple improvements such as a move to a single stock pool, direct sourcing and greater integration between retail, wholesale and e-commerce that together "provide the foundations to take the business to the next level".
These changes, analyst Michelle Wilson believes, should leverage the current cost base to drive like-for-like growth and significantly reduce the execution risk of international expansion.
Wilson said she also believes management guidance of a full year 2016 loss and a 2017 breakeven on the rejigged North American business "could be conservative" due to the significant near-term revenue potential from wholesale and e-commerce sales channels.
Investor concerns about execution risk are being swept aside by Sutherland's decisive actions since appointment late last year and his former experience as COO of Kingfisher.
A significant differences between Supergroup's business model and that of ANF, the analyst argued, is that the UK company's principle that every individual store must be profitable.
Moreover: "ANF's struggles have been well documented and it seems that some investors believe SGP will ultimately follow the same path. However, we believe a lot of ANF's downfall has been self-inflicted."
Finally, on valuation, Berenberg noted that Supergroup share currently trade at an 8% discount to the sector versus a historical 8% premium. | | |
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