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Stocks rise on hopes for the US economy
Market Movers
techMARK 2,066.71 +1.13%
FTSE 100 5,685.77 +1.01%
FTSE 250 11,085.68 +0.60%
After a tentative start, stocks rallied on Wednesday afternoon on the back of some upbeat comments from Ben Bernanke,
the Chairman of the US Federal Reserve. Meanwhile, markets gave a
rather muted reaction to the minutes of the latest policy-making meeting
in the UK.
Bernanke, speaking on the second day of the Fed’s semi-annual policy report to Congress, said that he does not expect the US economy
to slip back into recession. European markets were initially dampened
on Tuesday after Bernanke failed to hint at injecting extra stimulus in
the near term but said that the central bank was ready to act.
Seven out of the nine policy makers at the Bank of England (BoE) voted
in favour of increasing the asset purchase programme by £50bn to £375bn
at the last meeting, while the Monetary Policy Committee (MPC) were
unanimous in their decision to maintain the Bank Rate at 0.5%. However,
the MPC said that new initiatives, such as the BoE's Funding for Lending
Scheme (FLS), which offers cheap funding to banks to encourage lending,
could make a case for an interest-rate cut in the future.
Analyst Philip Shaw from Investec said: “Overall we suspect that QE will
remain the authorities’ principal stimulus weapon and that the MPC will
look through the volatility of the economic data (very weak in Q2,
stronger in Q3) and sanction another £50bn of asset purchases later
during the year."
In other news, UK unemployment fell by
65,000 to 2.58m in the three months to May, according to the Office for
National Statistics. The jobless rate dropped from 8.3% to 8.1%, better
than the consensus estimate of 8.2%. Nevertheless, the number of people
claiming jobless benefits rose by more than expected.
FTSE 100: Tullow pleases with Wawa-1 well update
Oil and gas giant Tullow
made gains after finding oil and gas-condensate at its Wawa-1 well
offshore Ghana, likely to reassure shareholders who were disappointed on
Monday after the firm plugged and abandoned a well in Guyana due to
safety concerns. Credit Suisse raised its target price on the stock to
and maintained its ‘outperform’ rating on the shares.
Fund managers Ashmore and Schroders
were high risers of the day after Goldman Sachs upgraded its ratings on
the stocks to 'buy' and 'conviction buy', respectively. In contrast,
Scottish engineering firm Weir was one of the weakest performers
after Nomura initiated coverage with a 'reduce' recommendation and a
price target of 1,350p, some way below the current share price.
Publisher Reed Elsevier was friendless after the European Commission lent its weight to calls for free access to publicly funded research.
Real estate group Land Securities
fell despite saying that it has seen "good momentum" on lettings across
all schemes in the first quarter. Land Secs and sector peer Hammerson were being pressured lower after Barclays Capital downgraded the stocks to 'equal weight'.
Security solutions group G4S
was performing well as it attempts to claw back some of the losses it
has incurred over the last week - including today's gain, the stock is
still down nearly 15% on last Wednesday. The group said on Monday that
it will take a £35-50m loss on its Olympics contract.
FTSE 250: Homeserve surges on M&A speculation
Homeserve, the troubled emergency home repairs company , jumped despite denying it is in talks about a possible takeover. Wireless technology and computer chip company CSR
was in the red, pulling back after gaining over 30% the day before as
it announced the sale of its handset connectivity technology business to Samsung. UBS downgraded the stock from 'buy' to 'neutral' this morning.
FTSE 100 - Risers
Hargreaves Lansdown (HL.) 575.50p +4.16%
Aggreko (AGK) 1,995.00p +3.48%
Tullow Oil (TLW) 1,428.00p +3.33%
Johnson Matthey (JMAT) 2,168.00p +3.09%
Burberry Group (BRBY) 1,232.00p +3.01%
Antofagasta (ANTO) 1,072.00p +2.68%
Ashmore Group (ASHM) 330.30p +2.58%
InterContinental Hotels Group (IHG) 1,554.00p +2.57%
Capital Shopping Centres Group (CSCG) 335.30p +2.41%
Standard Chartered (STAN) 1,485.00p +2.38%
FTSE 100 - Fallers
Reed Elsevier (REL) 524.50p -1.59%
Land Securities Group (LAND) 775.00p -0.77%
Weir Group (WEIR) 1,491.00p -0.73%
Hammerson (HMSO) 464.00p -0.64%
Imperial Tobacco Group (IMT) 2,534.00p -0.43%
Eurasian Natural Resources Corp. (ENRC) 386.00p -0.36%
HSBC Holdings (HSBA) 545.70p -0.31%
Tate & Lyle (TATE) 669.00p -0.30%
United Utilities Group (UU.) 696.00p -0.29%
Lloyds Banking Group (LLOY) 29.77p -0.28%
FTSE 250 - Risers
Homeserve (HSV) 187.00p +11.98%
Ruspetro (RPO) 139.00p +6.92%
Kenmare Resources (KMR) 33.66p +6.62%
Yule Catto & Co (YULC) 138.50p +6.13%
Imagination Technologies Group (IMG) 468.70p +5.68%
Elementis (ELM) 187.60p +4.80%
Hays (HAS) 69.50p +4.67%
Booker Group (BOK) 89.90p +4.23%
NMC Health (NMC) 200.00p +3.63%
Inchcape (INCH) 370.50p +3.20%
FTSE 250 - Fallers
Talvivaara Mining Company (TALV) 124.30p -5.19%
Morgan Crucible Co (MGCR) 260.30p -3.31%
Petropavlovsk (POG) 415.60p -3.01%
Melrose (MRO) 218.70p -2.80%
Dixons Retail (DXNS) 15.56p -2.57%
CSR (CSR) 284.50p -2.57%
Dechra Pharmaceuticals (DPH) 484.00p -2.32%
COLT Group SA (COLT) 121.00p -2.26%
Daejan Holdings (DJAN) 2,800.00p -2.13%
Howden Joinery Group (HWDN) 127.20p -2.08%
| Europe Market Report |
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European Markets Bounced Back On Earnings Strength Wednesday
The European markets
finished in positive territory on Wednesday, rebounding from
yesterday's sluggish performance. Tuesday's disappointment over Ben
Bernanke's testimony before the Senate was replaced by excitement over
some strong earnings results. However, investors continued to watch the
U.S Federal Reserve Chairman's testimony on Wednesday, hoping for some
hint regarding plans for a third round of quantitative easing. The
unexpected dip in the U.K.'s unemployment rate was another welcome
development. The European markets received further support in the
afternoon, from the positive performance of the U.S. stock markets.
Federal Reserve Chairman Ben Bernanke
warned lawmakers they may push the U.S. economy into recession unless
they back away from an impending "fiscal cliff." The fragile recovery,
already showing obvious signs of weakness, will be severely damaged by
spending cuts and tax increases that will automatically kick in at the
start of 2013, the nation's top central banker told the House Financial
Services panel Wednesday morning.
Congress must act now to
restore confidence amid a worrisome drop in business spending and new
hiring, according to the Fed chief. Bernanke assured that the Fed has
further easing measures at its disposal, but cautioned that any
additional support would be wasted unless Congress can reach a
compromise.
Germany sold its 2-year treasury notes at negative
yield for the first time on Wednesday as investors continued their
flight to safety, reports said citing Bundesbank data. The country
raised EUR 4.173 billion from the sale of its June 2014 treasury notes,
also known as Schatz. The target set for the auction was EUR 5 billion.
The yield on the debt was -0.06 percent, down from 0.10 percent in the
previous sale on June 20.
Bank of England policymakers raised
the size of economic stimulus by GBP 50 billion this month through a
split vote as Spencer Dale and Ben Broadbent voted to retain it at GBP
325 billion, the minutes of the meeting revealed Wednesday.
At
the meeting held on July 4 and 5, seven members of the Monetary Policy
Committee including Governor Mervyn King sought an increase in
quantitative easing to GBP 375 billion. All nine of the members voted to
hold the interest rate at a record low 0.50 percent.
European Central Bank Executive
Board member Joerg Asmussen said Tuesday that a deeper economic union
may require further sharing of sovereignty. "It means endowing the euro
area with the power to effectively prevent and cor¬rect unsustainable
policies in every euro area Member State," he said during a policy
briefing at the European Policy Centre, Brussels.
This would
imply that a euro area authority would have compe¬tence to limit
countries' ability to issue debt and have intervention rights into
national budgets, and to compel Member States to cor¬rect their
policies, be that in the fiscal, struc¬tural and financial fields, he
added.
The French economy can grow at least 1 percent next
year if the government sticks to deficit reduction measures and
reforms, European Central Bank Governing Council member Christian Noyer
said in an interview on Wednesday.
There should be a gradual
recovery in the second half of this year, which could help the economy
to surpass the IMF's estimate of 0.8 percent growth in 2013, Noyer, who
heads Bank of France, told Europe 1 radio.
Spanish banks' bad
loans increased to 8.95 percent of total lending in May, the Bank of
Spain reported Wednesday. The bad-loan ratio rose from 8.7 percent in
April. Bad loans rose to EUR 155.84 billion in May, the highest since
April 1994.
Portuguese recession could prove more protracted than
currently envisaged, though the government has implemented the fiscal
reforms as planned, the International Monetary Fund has warned.
"Export
growth has been a bright spot, offsetting weaker domestic demand
conditions and supporting output. But if conditions in the euro area
weaken further, this would affect the growth outlook," the fund said in a
report on Tuesday.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 1.36 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 1.04 percent.
The DAX of Germany climbed by 1.62 percent and the CAC 40 of France gained 1.84 percent. The FTSE 100 of the U.K. rose by 0.92 percent and the SMI of Switzerland finished up by 1.02 percent.
In Frankfurt, shares of Puma dropped
by 4.90 percent. The company said it expects a decline in profits for
the first half of the year due to a slowdown of business, particularly
in Europe.
In Paris, Alcatel-Lucent fell by 0.88 percent, extending Tuesday's steep slide after issuing a profit warning.
Accor SA
closed higher by 0.72 percent. The French hotel group announced a
decline in revenues for the second quarter, hurt mainly by changes in
scope of consolidation. On a like-for-like basis, the company reported a
3.1 percent rise in revenues.
In London, BHP Billiton
increased by 1.82 percent. The mining giant reported a 15 percent
year-over-year increase in iron ore production for the fourth quarter,
and 8 percent growth from the previous third quarter.
Fresnillo gained 1.49 percent, after reporting gold production results for the second quarter.
Ashmore Group finished higher by 2.73 percent. Goldman Sachs upgraded its rating on the stock to "Buy" from "Neutral."
Shares of Credit Suisse
rose by 4.00 percent in Zurich, after the investment bank unveiled
plans to boost its capital in preparation for Basel III regulatory
requirements.
| US Market Report |
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Wall Street Continues To Benefit From Rally By Tech Stocks
Stocks have
moved notably higher over the course of the trading day on Wednesday,
extending the upward move seen in the previous session. The markets are
benefiting from considerable strength that has emerged among technology
stocks.
The major averages are all in positive territory, although the tech-heavy Nasdaq
is outperforming its counterparts. While the Nasdaq is up 33.25 points
or 1.1 percent at 2,943.29, the Dow is up 76.03 points or 0.6 percent at
12,881.57 and the S&P 500 is up 7.77 points or 0.6 percent at 1,371.44.
Much
of the strength that has emerged on Wall Street stems from the rally by
tech stocks, which have moved sharply higher despite disappointing
guidance from semiconductor giant Intel (INTC).
While Intel
reported better than expected second quarter earnings after the close of
trading on Tuesday, the company also reported weaker than expected
revenues and lowered its full year revenue growth outlook. Nonetheless,
shares of Intel have risen by 3.1 percent.
Tech stocks may
be benefiting from bargain hunting following recent weakness in the
sector, with the gain by Intel extending a recovery from the six-month
closing low it set last Thursday.
Buying interest may also
have been generated by a report released by the Commerce Department
before the start of trading showing a bigger than expected rebound in
housing starts in the month of June.
The report showed that
housing starts jumped 6.9 percent to an annual rate of 760,000 in June
from the revised May estimate of 711,000. Economists had expected
housing starts to climb to 745,000 from the 708,000 originally reported
for the previous month.
On the other hand, building permits, an
indicator of future housing demand, fell by 3.7 percent to an annual
rate of 755,000 in June from the revised May rate of 784,000.
Traders
are also keeping an eye on Federal Reserve Chairman Ben Bernanke's
second day of testimony on Capitol Hill, with the Fed Chief facing
questions from the House Financial Services Committee.
Bernanke's prepared remarks were unchanged from those he delivered to the Senate Banking Committee on Tuesday.
Sector News
While
significant strength is visible throughout the tech sector,
semiconductor stocks are posting particularly strong gains. The
Philadelphia Semiconductor Index has surged up by 3.4 percent, bouncing
off a seven-month closing low.
NXP Semiconductors (NXPI), Nvidia (NVDA), and Cree (CREE) are turning in some of the semiconductor sector's best performances.
Networking and computer hardware stocks
are also seeing considerable strength, with the NYSE Arca Networking
Index and the NYSE Arca Computer Hardware Index advancing by 3 percent
and 2.9 percent, respectively.
Outside of the tech sector, health insurance stocks
have shown a strong move to the upside on the day, driving the Morgan
Stanley Healthcare Payor Index up by 1.7 percent. Defense, trucking, and
oil service stocks are also posting notable gains.
Meanwhile, gold stocks have
come under pressure amid a decrease by the price of the precious metal.
With gold for August delivery sliding $10.90 to $1,578.60 the NYSE Arca
Gold Bugs Index is down by 1.1 percent.
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| Wednesday newspaper round-up: HSBC, China, Fed |
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Credit Suisse ups Tullow target after Wawa discovery
While Tullow Oil’s Wawa-1 exploration well offshore Ghana was smaller than expected, Credit Suisse has raised its target price on the stock from 1,803p to 1,796p.
Tullow announced on Wednesday morning that it had made a discovery at
Wawa-1, after the well encountered 13m of net oil pay with samples
showing good quality oil (33-44 API) and 20m of gas-condensate in
Turonian-aged reservoirs. Credit Suisse says that the
discovery is smaller and more gassy than pre-drill estimates and has
lowered its recoverable resource estimate to 60m barrels of oil
equivalents (boe) from 150m boe. However, the ‘de-risking’ of Wawa adds
seven pence per share to the broker’s risked net asset value estimate.
The broker also said that today’s news is “helpful” to the TEN complex:
“the discovery is a separate and distinct accumulation from the TEN
complex - 10km north of Enyenra-3A – and tested the previously
undrilled, updip portion of the license. “While the Plan of
Development (PoD) for the TEN complex is likely already finalised for
submission or already submitted, we think the TEN development has been
designed to have capacity for tie-ins. This is how we expect Wawa to be
treated.” Credit Suisse says that the TEN complex is a
candidate for a partial farm-out. Nevertheless, the group has not said
that it is actively seeking to farm-out TEN; “it has funds to develop it
and with that it will be a better seller, in our view, if it chooses
the part of a partial sale,” the broker said. “This strategy
is important, in our view, to keep the gearing to the drill-bit high
(and unlock value earlier) as typically oil companies tend to underperform during the development phase.” Credit Suisse has maintained its ‘outperform’ rating on the stock. By 15:41, shares were trading 1.65% higher at 1,812.5p. |
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