Footsie at six-month higher after QE3
Market Movers
techMARK 2,147.78 +0.56%
FTSE 100 5,899.81 +1.37%
FTSE 250 12,046.99 +1.69%
Stock markets across Europe surged in early trading on Friday following last night's stimulus announcement from the Federal Reserve; increased risk appetite was benefitting the mining and banking sectors the most early on.
The Footsie, up 1.4% in the opening hour at 5,900, hasn't closed about this level since March 26th when it finished at 5,903.
The Fed announced that, in order to bolster the economy and make sure
that inflation stays close to its target, it would engage in a third
round of quantitative easing (QE3) by buying more mortgage-backed
securities at a pace of $40bn per month. It is also sticking with
Operation Twist, the programme where it swaps short-dated securities for
longer term securities.
The announcement last night prompted
the Dow Jones Industrial Average to rise by 206.51 points to its highest
level since late 2007, and the S&P 500 by 23.43 points to its
highest closing point since December of the same year.
"After
keeping the market guessing for months the Federal Reserve finally did
what the markets hoped they would do several months ago, and gave the
green light to further asset purchases," said senior market analyst
Michael Hewson from CMC Markets. He said that the committee "decided to
throw caution to the winds and dispense with worrying about appearing
political, in the lead up to the US election."
In other news, Japan
has cut its assessment for its economy, with the Cabinet Officer saying
that the "recovery appears to be pausing due to deceleration of the
world economy".
Meanwhile, Wolfgang Schaeuble,
Germany's Finance Minister, has cautioned Spain against asking for
further aid on top the €100bn for its financial sector: "I'm not in the
camp that says 'take the money'," he said.
“I don’t share the
view of those who say Spain is so much a focus of speculation in the
financial markets that we should advise the Spaniards to do anything
different from what they’re doing…I’m one of those who says we should do
everything possible to convince the markets that this speculation
against Spain is without any basis in reality, he said.
FTSE 100: Miners, banks give the Footsie a boost
Mining
stocks were putting in an impressive performance as metals prices
gained on a weaker dollar after the Fed announcement. Investors are
hoping that an improved US economy will boost the demand for
commodities. Kazakhmys, Evraz, Fresnillo, ENRC, Vedanta, Antofagasta and Anglo American all gaining over 6%
Analyst Patrick Jones from Nomura said this morning: "The US Federal
Reserve’s announcement of further quantitative easing could provide
support for commodity prices and the mining sector. During the 2010 QE2
rally, the copper spot price rose by ~50%, while copper equities doubled
on average." The broker said it continues to favour higher quality
copper miners over their higher beta peers.
Rio Tinto
this morning welcomed Australia's decision to re-examine allowing third
parties on a rail network in the Pilbara region which the miner believes
could seriously affect its operations.
Royal Bank of Scotland (RBS), Barclays and Lloyds
were also akin decent gains. RBS announced this morning that it is to
launch an initial public offering (IPO) of its Direct Line Insurance
Group, completing one of the conditions of its £45.5bn bailout from the
government in late 2008.
InterContinental Hotels
shareholders celebrated the news of the hotel group's special division,
which will be 108.4p per share. The Holiday Inns group announced on
August 7th that it planned to return $0.5bn of funds to shareholders via
a special dividend tied to a share consolidation, plus another $0.5bn
through a share buy-back programme, and it has now made good on that
pledge.
FTSE 250: Chemring, Wetherspoons gains after updates
Defence contractor Chemring
jumped after pushing back the deadline for The Carlyle Group to make an
offer, after not receiving word the US asset management group.
Pubs group JD Wetherspoon was in demand after its new financial year has got off to a flying
start, helped by a strong performance during the Olympic and Paralympic Games.
Second-tier miners were following their blue-chip peers higher, with Aquarius Platinum, Ferrexpo, Talvivaara, Lonmin and Centamin on the up.
FTSE 100 - Risers
Kazakhmys (KAZ) 739.50p +8.75%
Evraz (EVR) 282.00p +8.71%
Fresnillo (FRES) 1,840.00p +8.04%
Eurasian Natural Resources Corp. (ENRC) 353.60p +7.97%
Vedanta Resources (VED) 1,038.00p +7.96%
Antofagasta (ANTO) 1,330.00p +7.52%
Anglo American (AAL) 2,026.50p +6.16%
Rio Tinto (RIO) 3,250.00p +5.57%
Glencore International (GLEN) 371.00p +5.01%
GKN (GKN) 239.80p +4.95%
FTSE 100 - Fallers
Diageo (DGE) 1,670.00p -1.15%
GlaxoSmithKline (GSK) 1,429.00p -0.73%
British Sky Broadcasting Group (BSY) 739.00p -0.67%
AstraZeneca (AZN) 2,894.50p -0.62%
Tate & Lyle (TATE) 644.00p -0.54%
British American Tobacco (BATS) 3,167.50p -0.46%
Associated British Foods (ABF) 1,282.00p -0.39%
Intertek Group (ITRK) 2,721.00p -0.29%
BT Group (BT.A) 236.20p -0.25%
Reckitt Benckiser Group (RB.) 3,626.00p -0.22%
FTSE 250 - Risers
Aquarius Platinum Ltd. (AQP) 47.05p +14.48%
Ferrexpo (FXPO) 220.50p +12.50%
Petropavlovsk (POG) 408.90p +8.03%
Kenmare Resources (KMR) 42.70p +6.46%
Essar Energy (ESSR) 121.00p +5.49%
Fenner (FENR) 401.70p +5.29%
Hochschild Mining (HOC) 473.70p +5.27%
Centamin (DI) (CEY) 87.90p +5.27%
Talvivaara Mining Company (TALV) 165.00p +5.23%
Lonmin (LMI) 615.50p +5.12%
FTSE 250 - Fallers
RPS Group (RPS) 251.60p -1.26%
Stobart Group Ltd. (STOB) 115.19p -1.21%
Fidessa Group (FDSA) 1,467.00p -0.88%
BH Global Ltd. USD Shares (BHGU) 11.46 -0.78%
RIT Capital Partners (RCP) 1,180.00p -0.51%
BH Global Ltd. GBP Shares (BHGG) 1,155.00p -0.43%
Phoenix Group Holdings (DI) (PHNX) 515.00p -0.39%
TR Property Inv Trust (TRY) 162.00p -0.31%
Synergy Health (SYR) 921.00p -0.27%
HICL Infrastructure Company Ltd (HICL) 122.50p -0.24%
| European broker round-up |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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Antena3: Barclays raises price target to €3.75 from €3.25.
EADS: Commerzbank downgrades to HOLD from buy and lowers price target to €30 from €36.
Enel: AlphaValue upgrades to BUY from add and raises price target to €3.70 from €3.40.
LVMH: AlphaValue upgrades to BUY from add and lowers price target to €153.20 from €153.30.
Mediaset España: Barclays raises price target to €4.40 from €3.50.
UK Event Calendar
INTERIMS
M. P. Evans Group, Verona Pharma
INTERIM DIVIDEND PAYMENT DATE
4Imprint Group, Delcam, Japan Residential Investment Co Ltd., Moneysupermarket.com Group, Pearson, RM, Witan Inv Trust
QUARTERLY PAYMENT DATE
Anglogold Ashanti Ltd., Carnival, Energy XXI (Bermuda) (Di)
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Business Inventories (US) (13:30)
Capacity Utilisation (US) (16:15)
Consumer Price Index (EU) (10:00)
Consumer Price Index (US) (13:30)
Harmonised Index of Consumer Prices (EU) (10:00)
Industrial Production (US) (16:15)
Manufacturing Inventories (US) (15:00)
Retail Sales (US) (13:45)
Retail Sales Inventories (US) (15:15)
U. of Michigan Confidence (Prelim) (US) (15:00)
Wholesale Price Index (GER) (07:00)
FINALS
Wetherspoon (J.D.)
ANNUAL REPORT
Mwana Africa
AGMS
Avengardco
Investments Public Ltd GDR, Eastern European Property Fund Ltd., First
Property Group, Imaginatik, Imagination Technologies Group,
Immunodiagnostic Systems Holdings, Jupiter Green Inv Trust, Mwana
Africa, Plant Impact
TRADING ANNOUNCEMENTS
Wetherspoon (J.D.)
FINAL DIVIDEND PAYMENT DATE
JPMorgan Brazil Inv Trust , Latchways, New Century AIM VCT
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| US Market Report |
Stocks rocket on QE3 announcement
Dow Jones +207 at 13,540
Nasdaq +42 at 3,156
S&P 500 +23 at 1,460
US stocks soared on Thursday after the US Federal Reserve
announced that it will launch its third round of quantitative easing,
or QE3, by purchasing mortgage-backed securities ‘to support a stronger
economic recovery’.
The Fed announced that, in order to
bolster the economy and make sure that inflation stays close to its
target, it would step up “policy accommodation” by buying more
mortgage-backed securities at a pace of $40bn per month.
The
announcement prompted the Dow Jones Industrial Average to rise by 206.51
points to its highest level since late 2007, and the S&P 500 by
23.43 points to its highest closing point since December of the same
year.
The Fed said it will buy $40bn of agency mortgage-backed securities each month, starting this Friday.
It is also sticking with Operation Twist, the programme where it swaps short-dated securities for longer term securities.
As expected, there was no change to the Fed's low interest rates policy.
Jobless claims and inflation figures on the up
Initial jobless claims rose 15,000 to a seasonally adjusted 382,000
last week, according to the Labor Department. The consensus estimate was
for a smaller rise to 370,000.
“We do not interpret the
higher-than-expected outturn in claims as a sign that labor market
conditions are weakening since the Labor Department reported that claims
were pushed higher partially as a result of Tropical Storm Isaac and
the seasonal distortions associated with a shortened holiday work week,”
said analyst Michael Gapen from Barclays Research.
Meanwhile, the producer price index
rose 1.7% in August, the biggest rise in over three years and ahead of
the 1.2% increase that was expected, as gasoline and food prices gained
more than forecast.
Apple extends gains after iPhone 5 release
Tech giant Apple
closed at a record high of $682.98 after unveiling its newest toy, the
iPhone 5. With a four-inch 1136x640 pixel screen, the iPhone 5 is 18%
thinner and 20% lighter than the previous iPhone 4S, but lacks near
field communications and wireless charging technology available in
smartphone offerings from rival companies.
Analysts at Barclays Capital have raised their price target for the stock to $810 from $750 today.
Computer chip titan Intel slipped after Citigroup downgraded its recommendation from ‘buy’ to ‘neutral’, while sports apparel group Nike was lower after the same US broker also cut its rating.
Purification solutions provider Pall
cheered the market with fiscal fourth quarter earnings that were well
ahead of expectations at 86 cents per share. Analysts had been expecting
a figure around 77 cents.
Other markets
10-year US Treasuries were little changed after the Fed's big decision,
with the yield at 1.73%. The front month contract for West Texas
intermediate crude was up $1.30 at $98.31 a barrel at the close of
trading.
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| FX and Commodities round-up |
Dollar falls following Fed announcement
The dollar declined further on Thursday, its third consecutive fall, after the Federal Open Market Committee (FOMC) voted 11-to-1 in favour of a third phase of quantitative easing.
The Fed said it will buy $40bn of agency mortgage-backed securities each month, starting this Friday.
It is also sticking with Operation Twist, the programme where it swaps short-dated securities for longer term securities.
The euro climbed from $1.2894 on Wednesday to $1.2997 last night, notably close to the $1.30 mark.
The ICE dollar
index, which measures the greenback against a basket of six other major
currencies, declined from 79.686 immediately before the QE announcement
to 79.211 not long after, having initially risen higher.
Meanwhile, the pound traded
hands at $1.6158, compred to $1.6105 the previous evening, while the
euro climbed to buy 1.2163 Swiss francs and the Australian dollar rose
to exchange at $1.0555, against $1.0463 on Wednesday.
The pound was last night being traded at 1.2433 euro, compared to 1.2500 the evening before.
Oil and gold both rise on QE3 announcement
Oil futures
soared to a four-month high on Thursday after the Federal Open Market
Committee (FOMC) announced that it will launch its third round of
quantitative easing, or QE3, by purchasing mortgage-backed securities
‘to support a stronger economic recovery’.
October delivery oil futures rose
$1.30 or 1.3% to $98.31 per barrel on the New York Mercantile Exchange,
its highest level since around the beginning of May.
The commodity was also boosted by reports of unrest in the Middle Easdot.
Meanwhile, things were looking distinctly less rosy in other energy commodities, with heating oil settling down 0.12% at $3.21 per gallon, natural gas down 0.85% at $3.04 per million British thermal units, and unleaded gas down 1.31% at $2.96 per gallon.
In metals, gold climbed
2.21%, or $38.40, to $1,772.10 per troy ounce on the December delivery
contract, its highest level in almost seven months, boosted by the Fed's
plans.
The Fed said it will buy $40bn of agency
mortgage-backed securities each month, starting this Friday. It is also
sticking with Operation Twist, the programme where it swaps short-dated
securities for longer term securities.
Meanwhile, silver was 4.46% higher at $34.78 per troy ounce, while platinum gained 1.81% to $1,679.50 and copper climbed 0.47% to $3.71.
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