Markets celebrate ECB bond-buying plan
Market Movers
techMARK 2,116.90 +1.44%
FTSE 100 5,777.34 +2.11%
FTSE 250 11,676.44 +2.01%
Global stocks markets rocketed higher on Thursday afternoon after European Central Bank (ECB) President Mario Draghi revealed details of the bank’s bond-buying plan.
London’s Footsie jumped over 2%, the CAC in Paris and DAX in Frankfurt both rose 3%, while Madrid’s IBEX and Milan’s FTSE MIB ended the day between 4% and 5% higher.
“On a day that many traders would have been looking towards in their
diaries this week it would appear that the detail that was needed in
exactly how the ECB would tackle the crisis was finally made available,”
said sales trader Matthew Nelson.
Just one month after
promising to do “whatever it takes to preserve the euro”, Draghi
announced that the ECB would embark on an unlimited bond purchase programme
of notes on the secondary market with maturities between one and three
years. They would be ‘sterilised’ so as to avoid the inflationary
pressures which excessive growth in the money supply is thought to
engender in the long-run.
Speaking after the ECB maintained
its key interest rate at 0.75%, Draghi said that the purchases, known as
Outright Monetary Transactions, will “enable us address severe
distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro.”
Economic data from the US
also helped to lift markets this afternoon: weekly jobless claims were
below expectations; the ISM non-manufacturing index surprised to the
upside in August; while the ADP employment report beat forecasts.
In other news today, the UK's Monetary Policy Committee
did what was largely expected and maintained its Bank Rate at 0.5% and
asset purchase programme at £375bn in its policy announcement at noon.
The Bank of England injected £50m of additional quantitative easing in
July which is not due to be completed until the end of October.
Evraz, Polymetal, Vedanta, Antofagasta, Randgold and ENRC were among the best performing resource stocks today and Lloyds and Barclays led the banks on hopes over the global economy.
Helping gains today for miners were gold futures which jumped to
$1,716.90 the highest level since March. According to Jeffrey Currie,
the head of commodities research at Goldman Sachs, prices will rise to
$1,840 by the year-end.
Hotel, restaurant and Costa coffee owner Whitbread
jumped after reporting second-quarter sales growth of 14.8%, up from
13.9% in the first three months of the year. Investec said that the
Whitbread "offers compelling value for a stock with impressive roll-out
potential, strong asset backing and impressive trading momentum."
Supermarket group Morrisons
also rose after pre-tax profits in the first half came in 3% ahead of
consensus estimates. Jefferies said this morning that the stock is
trading at an "unjustified" discount to supermarket peers in the UK and
Europe.
Just a handful on the Footsie were in the red today with Imperial Tobacco
extending losses from yesterday when it was reported that France may be
considering a plain packaging law and price hikes for cigarettes
packets.
FTSE 250: Lonmin leads miners higher after accord with strikers
South Africa-focused platinum miner Lonmin
rose strongly on reports that it has reached a 'peace accord' with its
striking miners following a wave of protests over the last few weeks
which resulted in the deaths of around 40 people. Mining peers
Hochschild Mining, Centamin and Aquarius Platinum were all registering
decent gains in afternoon trade.
AG Barr was in demand
after Societe Generale upgraded the shares to ‘hold’ and lifted its
target price from 370p to 440p, one day after the group announced it is
in discussions about an all-share merger with soft drinks peer Britvic. The latter was in the red today after both Societe and Bank of America Merrill Lynch cut their recommendations on the stock.
Electrical retailer Dixons
was higher after saying it made an "encouraging" start to the year with
decent growth in the UK, Ireland and Northern Europe, though trading in
Southern Europe continues to be tough. Seymour Pierce raised its rating
on the stock today to ‘buy’, saying that it was “reassured by this
trading update that underlying momentum is set to continue within its
two core businesses driven by both market consolidation and plenty of
innovation”.
easyJet gained after reporting that it
carried 6% more passengers in August. Yesterday the firm also announced
that it would introduce allocated seating in its planes.
FTSE 100 - Risers
Evraz (EVR) 226.70p +7.19%
Lloyds Banking Group (LLOY) 36.20p +6.69%
Polymetal International (POLY) 1,020.00p +6.58%
Barclays (BARC) 193.05p +6.10%
Vedanta Resources (VED) 928.00p +5.82%
Antofagasta (ANTO) 1,157.00p +5.57%
Aviva (AV.) 344.90p +5.31%
Whitbread (WTB) 2,210.00p +5.29%
Randgold Resources Ltd. (RRS) 6,795.00p +5.27%
Kazakhmys (KAZ) 599.00p +5.09%
FTSE 100 - Fallers
Imperial Tobacco Group (IMT) 2,344.00p -2.58%
Tate & Lyle (TATE) 640.50p -1.69%
Burberry Group (BRBY) 1,312.00p -1.13%
Reed Elsevier (REL) 604.00p -0.17%
FTSE 250 - Risers
Gem Diamonds Ltd. (DI) (GEMD) 170.80p +9.42%
New World Resources A Shares (NWR) 294.00p +8.13%
Lonmin (LMI) 568.00p +7.27%
Barr (A.G.) (BAG) 481.60p +6.97%
Hays (HAS) 73.05p +6.49%
Yule Catto & Co (YULC) 170.00p +5.92%
Centamin (DI) (CEY) 81.85p +5.21%
Aquarius Platinum Ltd. (AQP) 36.29p +5.19%
Rathbone Brothers (RAT) 1,370.00p +5.14%
Man Group (EMG) 76.50p +4.94%
FTSE 250 - Fallers
Ruspetro (RPO) 119.30p -2.93%
Daejan Holdings (DJAN) 2,935.00p -2.62%
Britvic (BVIC) 363.00p -1.87%
Ted Baker (TED) 961.50p -1.28%
Rank Group (RNK) 129.10p -1.07%
PayPoint (PAY) 702.50p -0.71%
Beazley (BEZ) 168.50p -0.47%
F&C Asset Management (FCAM) 88.90p -0.34%
Soco International (SIA) 333.00p -0.30%
UK Commercial Property Trust (UKCM) 68.00p -0.29%
| Friday preview |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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Industrial production to rebound
Compared to some of its peers in the recruitment sector, SThree
had a commendable first half in tough market conditions, but those
conditions have shown no signs of improvement in the last two months, so
Friday's interim management statement may be one of no more than quiet
satisfaction.
France and Germany notched up year-on-year increases in gross profit of 23% and 17% respectively in the first half of 2012.
"The outlook remains bleak, however, and we still expect global
macro-economic uncertainty to weigh on candidate and employer confidence
– we think it’s unlikely that France and Germany can carry on at those
rates of growth," comments Peel Hunt. "The best indicator we have of how
the company sees the outlook is the headcount, which was down 2.2% in
H1 [the first half]," the broker added.
Switching to the economy, Credit Suisse thinks it likely that UK industrial production rebounded in July, following the collapse caused by the Queen's Diamond Jubilee celebrations in June.
Purchasing Managers' Index data suggest that underlying industrial
production could be weak, Credit Suisse avers, "but it seems likely that
the noise from the Jubilee will work to override any informational
content in this month’s release."
Credit Suisse is predicting a
return of the industrial production index to April levels, which would
give a monthly growth rate of 1.5% and an annual growth rate of -2.7%.
Charles Stanley is a bit more bullish, predicting a 1.8% rise in July, giving a year-on-year decline of 2.4%.
Charles Stanley forecasts that producer input prices
rose 1.5% in August, following July's 1,3% increase. That would take
the index to a level 1.0% higher than a year earlier, representing a
turnaround from the 2.4% year-on-year decline seen in July.
Core output prices are seen edging up 0.1% in August (+1.3% year-on-year), after holding steady (+1.3% year-on-year) in July.
INTERIM DIVIDEND PAYMENT DATE
Avon Rubber, BG Group, Blackrock Income And Growth Investment Trust, CSR, Dialight, Foreign and Colonial Inv Trust, Jupiter Fund Management , Porvair, Puma VCT V
QUARTERLY PAYMENT DATE
Barclays, Boeing Co
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Trade (GER) (07:00)
Current Account (GER) (07:00)
Industrial Production (GER) (11:00)
Non-Farm Payrolls (US) (13:30)
Retail Price Index (GER) (07:00)
Unemployment Rate (US) (13:30)
ANNUAL REPORT
MDM Engineering Group Ltd. (DI)
IMSS
SThree
AGMS
BlueStar SecuTech Inc. (DI), Latchways, Oilex Ltd., Small Companies Dividend Trust
UK ECONOMIC ANNOUNCEMENTS
Industrial Production (09:30)
Manufacturing Production (09:00)
Producer Price Index (09:30)
FINAL DIVIDEND PAYMENT DATE
Ashtead Group, Cranswick, iEnergizer Ltd., Prosperity Minerals Holdings Ltd., QinetiQ Group, RPC Group |
| US Market Report |
Stocks Seeing Substantial Strength In Mid-Day Trading
Stocks
have moved sharply higher over the course of the trading day on
Thursday after ending the previous session nearly flat. The markets have
benefited from a positive reaction to the latest news out of the
European Central Bank along with a batch of upbeat U.S. economic data.
The major averages have moved roughly sideways in recent trading, hovering near their best levels of the day. The Dow is up 232.57 points or 1.8 percent at 13,280.05, the Nasdaq is up 60.08 points or 2 percent at 3,129.35 and the S&P 500 is up 26.07 points or 1.9 percent at 1,429.51.
The
rally on Wall Street is partly due to a positive reaction to comments
from European Central Bank President Mario Draghi, who outlined the
central bank's highly anticipated bond purchasing program.
Draghi
said the program would enable the ECB to address severe distortions in
government bond markets and called it a "fully effective backstop to
avoid destructive scenarios with potentially severe challenges for price
stability."
The central bank will consider a bond
purchase only when there is a request from a country. The size of the
purchase is unlimited and sovereign bonds with maturities up to three
years would qualify.
The markets have also benefited from the
release of some upbeat U.S. economic data, including a report showing
stronger than expected private sector job growth.
ADP said
private sector employment increased by 201,000 jobs in August following a
revised increase of 173,000 jobs in July. Economists had expected
employment to increase by about 149,000 jobs compared to the addition of
163,000 jobs originally reported for the previous month.
The Labor Department released
a separate report showing a bigger than expected drop in first-time
claims for unemployment benefits in the week ended September 1st.
The
release of the upbeat jobs data has generated some optimism about the
outlook for the Labor Department's monthly jobs report, which includes
government jobs. The report is expected to show an increase of about
125,000 jobs in August..
Additionally, the Institute for Supply
Management released a report showing that the pace of service sector
growth accelerated by more than anticipated in August.
The ISM said
its non-manufacturing index rose to 53.7 in August from 52.6 in July,
with a reading above 50 indicating an increase in activity in the
service sector. Economists had been expecting the index to show a more
modest increase to a reading of 53.0.
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| Broker tips |
Lloyds, Whitbread, Morrisons
Investec says that the news of another regulatory fine at Lloyds
should only have a little impact, seeing as though the banking group
still has a lot of mis-selling issues hanging over its head. The broker has maintained its 'hold' rating and 36p target price for the stock.
He said: "The cost of redress for Lloyds’s market-leading role in the
mis-selling of financial products over the past two decades – e.g.
pensions, endowment mortgages and PPI to mention just a few - will dwarf
any fresh regulatory fine, alongside the gaping hole left in the Other
Income line by lost PPI revenues that it is unable to fill."
Nomura has reiterated its 'buy' rating and 2,220p target price for Whitbread, saying that its second-quarter trading statement shows 'solid trading' at Premier Inn and a 'strong performance' in pubs/restaurants and Costa.
"We believe it offers compelling value for a stock with impressive roll-out potential, strong asset backing and impressive trading momentum."
Supermarket group Morrisons
is trading at an 'unjustified' discount to its peers, according to
Jefferies which was maintained its 'buy' rating and 350p target price on
the stock after the firm's strong set of interim results.
Morrisons is trading at nine times prospective earnings which equates to
a 10% discount to its UK supermarket peers and a 20% discount to the
pan-European sector. "This ignores industry leading returns, self-help
opportunities, lower leverage and higher property ownership." |
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