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Barclays limits gains after PPI confession
Market Movers
techMARK 2,112.67 +0.19%
FTSE 100 5,917.05 +0.10%
FTSE 250 12,071.25 +0.21%
After
swinging between gains and losses for most of the session, UK stocks
finished flat on Thursday despite some robust growth figures from China
as some worse-than-expected jobless claims in the US and the EU summit
weighed on investors' minds.
Chinese gross domestic product
(GDP) grew at a 7.4% year-on-year rate in the third quarter of the year
as expected, down from the 7.6% in quarter two. While this was the
slowest rate of expansion in 12 years - except for that seen in the
first quarter of 2009 - economists reckons that they can see hopeful
signs which point to a stabilisation, such as a better tone to exports
and a progressive improvement in residential investment.
"China, one of the few global economies still experiencing strong growth
is very much viewed as one of the engines to keep global demand high,"
said trader Simon Furlong from Spreadex.
Stocks fell in afternoon trade after US weekly initial jobless
claims rose by 46,000 last week to 388,000, as the seasonal factors
evident in last week's data were unwound. Consensus estimates were for a
rise to 365,000.
Investors were also keeping a close eye on the EU summit in Brussels
today at which leaders are expected to discuss several topics such as
the bailout for Spain, the situation in Greece and the banking union
although only this last item is officially on the agenda.
Despite the enormous importance of the issues at stake, and as is often
the case, market expectations are low ahead of this meeting of the heads
of state of the 27 member countries. It's no wonder as there have been
some 22 summits since the crisis in Greece began to intensify in 2009,
including four already in 2012 alone.
In domestic economic news, UK retail sales volumes
rose 0.6% from August to September, according to the Office for
National Statistics. Consensus expectations were for a gain of 0.4%.
FTSE 100: Barclays drops into red after PPI revelation
Barclays
was unwanted after revealing a shock additional £700m provision against
payment protection insurance (PPI) compensation claims. Analysts
believe that this will lead the bank to unveil a third-quarter pre-tax
loss of at least £100m. Sector peer Lloyds also finished lower after Investec downgrade its rating for the stock from 'hold' to 'sell' as it trades at a 12-month high.
Airline group IAG
was a high flyer after the International Air Transport Association said
that premium traffic rebounded strongly in August, up 8.5%. Investec
retained its 'buy' rating on the stock today, saying that IAG has the
"management desire and ability to effectively transform the Iberia
business and drive margin and strategic improvements at BA."
Retail-focused real estate investment trust Capital Shopping Centres
was among the worst performers after Barclays placed shares in the
company, according to media reports that cite two people familiar with
the deal.
Miners were performing well this afternoon after the decent figures from China strengthened prices. Kazakhmys, EVRAZ, Rio Tinto and ENRC were all firmer by the close. Steel giant EVRAZ
was in demand even though it saw production decrease in the third
quarter while prices were hit by tough conditions in global steel
markets.
Supermarket giants Tesco, Morrison and Sainsbury's were on shopping lists this morning after the better-than-expected retail sales data.
Drinks giant SABMiller
was among the fallers this morning despite seeing good growth in lager
volumes shipped across most regions in the first half of its financial
year. Weighing on the shares was a ratings downgrade by Shore Capital to
'hold'.
Oil firm Royal Dutch Shell was also hit after
Goldman Sachs lowered its recommendation for the oil titan to 'sell' and
cut its target for the shares from 2,840p to 2,260p.
Sector peer BP was making gains after Rosneft offered $28bn in cash and shares for its 50% interest in Russian joint venture TNK-BP.
FTSE 250: Man down as funds flow the wrong way
Fund manager Man Group
dropped 10% today despite a 14% rise in funds under management in the
third quarter. The market was alarmed, however, to see net outflows in
the quarter increase to $2.2bn, compared with net outflows of $1.4bn in
the second quarter, although Man said these were concentrated in lower
margin product lines.
Credit Suisse reiterated its 'neutral'
stance on the shares today, saying that they trade "on an estimated 2013
fiscal year price-to-earnings multiple of 14.9-times which appears
fully valued, in our view."
Leading the upside on the second-tier index was cash and carry group Booker after saying that like-for-like sales rose 3.1% for the 24 weeks to September 14th.
Transport group Go-Ahead
also gained after reporting that bus operating profits should be £100m
by 2015/16, compared with the £64-70m range over the past five years.
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FTSE 100 - Risers
International Consolidated Airlines Group SA (CDI) (IAG) 163.80p +3.93%
IMI (IMI) 943.50p +3.51%
GKN (GKN) 214.00p +3.38%
Kazakhmys (KAZ) 780.50p +2.70%
Evraz (EVR) 258.90p +2.49%
Rio Tinto (RIO) 3,260.00p +2.39%
Eurasian Natural Resources Corp. (ENRC) 359.80p +2.16%
Weir Group (WEIR) 1,821.00p +2.02%
Resolution Ltd. (RSL) 222.10p +1.93%
Wolseley (WOS) 2,745.00p +1.82%
FTSE 100 - Fallers
Fresnillo (FRES) 1,918.00p -2.34%
Randgold Resources Ltd. (RRS) 7,570.00p -2.26%
British Sky Broadcasting Group (BSY) 733.50p -2.13%
SABMiller (SAB) 2,599.00p -2.09%
Capital Shopping Centres Group (CSCG) 333.40p -1.80%
Bunzl (BNZL) 1,082.00p -1.55%
Barclays (BARC) 240.70p -1.51%
Royal Dutch Shell 'B' (RDSB) 2,202.00p -1.37%
Smith & Nephew (SN.) 656.50p -1.28%
Reed Elsevier (REL) 610.00p -1.21%
FTSE 250 - Risers
Booker Group (BOK) 100.60p +6.62%
Brown (N.) Group (BWNG) 320.70p +6.54%
Go-Ahead Group (GOG) 1,365.00p +5.81%
Cookson Group (CKSN) 567.00p +4.23%
Dechra Pharmaceuticals (DPH) 618.00p +3.78%
Kenmare Resources (KMR) 42.34p +3.27%
Premier Farnell (PFL) 177.80p +3.25%
International Personal Finance (IPF) 343.20p +3.22%
Jupiter Fund Management (JUP) 272.00p +3.11%
Halfords Group (HFD) 335.40p +2.92%
FTSE 250 - Fallers
Man Group (EMG) 83.40p -9.89%
UBM (UBM) 696.50p -3.60%
Capital & Counties Properties (CAPC) 223.50p -3.58%
Petra Diamonds Ltd.(DI) (PDL) 100.40p -3.55%
Bumi (BUMI) 245.10p -3.50%
Stobart Group Ltd. (STOB) 113.40p -3.49%
Ophir Energy (OPHR) 553.50p -3.49%
F&C Asset Management (FCAM) 95.60p -3.34%
Jardine Lloyd Thompson Group (JLT) 750.00p -2.98%
PayPoint (PAY) 750.00p -2.79%
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European Markets Struggled To Find Direction Following Mixed U.S. Reports
The European markets ended
a choppy trading session with mixed results on Thursday. Afternoon
trading was impacted by some mixed economic reports from the United
States. The larger than expected increase in weekly jobless claims put
pressure on the markets, but then the strong Philly Fed report provided a
boost in late trade. Also, Spain sold more government bonds than its
maximum target on Thursday at lower cost, ahead of European Union
leaders gathering for a two-day summit in Brussels.
Moody's
affirmation of Spain's sovereign rating at investment grade and
expectations among investors that the nation is moving closer to a
bailout request helped to lower borrowing costs. Also, German Chancellor
Angela Merkel's comment in Parliament about stability taking hold as
well as creation of a new fund to finance ailing European economies
supported today's auction.
The benchmark 10-year bonds were sold at a yield of 5.458 percent, down from 5.666 percent on September 20.
The borrowing cost for July 2015 bonds fell to 3.227 percent from 3.68 percent on September 6. Likewise, the yield on 2016 bonds came in at 3.977 percent, down from 4.60 percent last time.
Bad
loans at Spanish banks surged to a new record high in August, the
latest figures from the Bank of Spain showed Thursday. The value of
loans at risk of not being repaid rose to EUR 178.6 billion or 10.5
percent of the total lending from EUR 173.2 billion in the previous
month.
German Chancellor Angela Merkel has proposed giving
stronger powers to the European Union to intervene in national budgets
while suggesting creation of a new fund to finance ailing European
economies, reports said Thursday.
Speaking at the lower house of
Parliament, ahead of the EU summit in Brussels, she recommended setting
up of a new aid fund at EU level to finance specific projects in
struggling nations.
Citing Cyprus's failure to clinch a timely
deal with the troika after officially requesting European financial
support in June, Standard and Poor's on Thursday downgraded the nation's
credit rating deeper into junk status.
Cyprus' long-term
sovereign credit rating was cut by three-notches to 'B' from 'BB', with a
'negative' outlook. S&P put much of the blame for not having a deal
on "domestic political constraints."
The Euro Stoxx 50 index of Eurozone bluechip stocks increased by 0.20 percent and the Stoxx Europe 50 index, which includes some major U.K. companies, advanced by 0.22 percent.
The DAX of Germany climbed by 0.58 percent and the CAC 40 of France gained 0.22 percent. The FTSE 100 of the U.K. rose by 0.20 percent, but the SMI of Switzerland declined by 0.07 percent.
In Frankfurt, ThyssenKrupp rose by 1.12 percent. Exane BNP upgraded its rating on the stock to "Neutral" from "Underperform."
In Paris, Remy Cointreau
dropped by 6.06 percent. The company's second quarter revenue growth
slowed from the strong results of the previous quarter. Shares of Pernod
Ricard also declined by 2.90 percent.
Total dipped by 0.34 percent, after Goldman Sachs reiterated its "Sell" rating on the stock. Alcatel Lucent climbed by 7.87 percent, after the company announced that it plans to cut 5,550 jobs.
In London, BP gained
1.05 percent. The company is reportedly nearing a deal to sell its 50
percent shareholding in troubled Russian oil producer TNK-BP to
Anglo-Russian state oil company OAO Rosneft.
Cairn Energy finished higher by 0.55 percent, after issuing an interim management statement.
Rolls-Royce
Holdings fell by 0.40 percent, despite winning a contract to supply its
Spinline digital safety instrumentation and control to the China
Guangdong Nuclear Power Corp.
SAB Miller lost 2.09 percent, following the company's half-year report. The report also showed that demand in Latin America has weakened.
Shares of Nestlé declined
by 1.69 percent in Zurich. The food and nutrition products giant
reported an 11 percent increase in sales for the nine-month period, with
an organic growth of 6.1 percent, helped by continuous growth in all of
its regions.
The French leading index improved for two
straight months, but the index's six-month growth rate remained just
moderately positive, the Conference Board reported Thursday. The leading
economic index rose 0.6 percent in August and gained 0.3 percent in
July. Although six of the seven components of the leading economic index
increased in August, the board said the weaknesses among the leading
indicators have remained widespread in recent months.
U.K. retail sales
growth exceeded economists' forecast in September on healthy clothing
and school uniform sales, boosting hopes of economic recovery in the
third quarter.
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Mixed Economic Data Leads To Choppy Trading On Wall Street
Stocks have
shown a lack of direction over the course of the trading day on
Thursday after trending higher over the past few sessions. The choppy
trading comes on the heels of the release of a mixed batch of economic
data.
The major averages are currently turning in a mixed performance, with the Nasdaq posting a modest loss. While the Nasdaq is down 4.08 points or 0.1 percent at 3,100.04, the Dow is up 25.19 points or 0.2 percent at 13,582.19 and the S&P 500 is up 2.17 points or 0.2 percent at 1,463.08.
Early
selling pressure was generated by the release of a report from the
Labor Department showing a bigger than expected rebound by initial
jobless claims.
The report showed that jobless claims jumped to
388,000 in the week ended October 13th after falling to a four-year low
342,000 in the previous week. Economists had been expecting jobless
claims to rise to 365,000 from the 339,000 originally reported for the
previous week.
The rebound from the four-year low set in the
previous week was partly due to the normalization of distortions caused
by seasonal adjustment challenges in California.
However, a positive reaction to a batch of largely upbeat Chinese economic data helped to limit the downside for the markets.
China reported
a 7.4 percent increase in third quarter GDP, which was slower than the
7.6 percent growth recorded in the second quarter but in line with
estimates. The communist country also reported stronger than expected
industrial production and retail sales growth in September.
Stocks
subsequently regained some ground following the release of a pair of
upbeat reports on Philadelphia manufacturing activity and leading U.S.
economic indicators.
The Philly Fed said its diffusion
index of current activity jumped to a positive 5.7 in October from a
negative 1.9 in September, with a positive reading indicating an
increase in regional manufacturing activity. With the increase, the
index returned to positive territory for the first time since April.
Separately, the Conference Board
said its leading economic index rose by 0.6 percent in September
following a revised 0.4 percent drop in August. Economists had expected
the index to edge up by 0.2 percent compared to the 0.1 percent dip
originally reported for the previous month.
Traders are also reacting to the latest batch of earnings news, including results from big-name companies such as Morgan Stanley (MS), Verizon (VZ), and Travelers (TRV).
Sector News
Despite the lack of direction being shown by the broader markets, gold stocks are seeing significant weakness on the day. Reflecting the weakness in the gold sector, the NYSE Arca Gold Bugs Index has fallen by 1.4 percent.
The weakness among gold stocks comes amid a decrease by the price of the precious metal, with gold for December delivery sliding $6.70 to $1,746.30 an ounce.
On the other hand, railroad stocks have shown a strong move to the upside on the day, driving the Dow Jones Railroads Index up by 1.3 percent. Union Pacific (UNP) has helped to lead the sector higher after reporting slightly better than expected third quarter earnings.
Housing stocks are also seeing considerable strength in mid-afternoon trading, adding to the standout gains posted in the previous session.
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Jefferies has maintained its 'hold' rating and 1,220p target for transport group Go-Ahead,
saying that while the new target for bus profits should be
well-received, there is still some uncertainty surrounding rail
franchises.
Go-Ahead said that bus operating profit should
grow to £100m by 2015/2016, which Jefferies says is "feasible" as long
as there is a "step change in performance".
Analyst Joe
Spooner said that this new target "should be well received as the
observation to date has been that the group has needed rail to provide
the cushion in its dividend cover, but rail faces the uncertainty of
expiring franchises. The new target implies existing rail profits will
be replaced by bus by FY16."
Panmure Gordon has retained its 'buy' rating for cash and carry chain Booker after the firm's better-than-anticipated interim results and synergies expected from the Makro deal.
The broker said that since returning to the stock market, Booker has
delivered strong earnings and dividend growth and cash generation. "We
think that the addition of Makro will enhance Booker's growth and we
remain buyers of the shares with a target of 108p."
Seymour Pierce has retained its 'sell' recommendation for baby and mother products retailer Mothercare despite the group's well-received second quarter trading update on Thursday.
"We do not believe Mothercare is an easy fix and brand repositions tend
to take longer than expected. It will be difficult to make Mothercare
relevant again for the modern mother as it has strong competition from
Amazon and the supermarkets."
Broker snap
Investec maintains positive outlook on IAG
Despite
reducing its full-year EBIT (earnings, before, interest and tax)
estimate, Investec has retained its buy recommendation for British
Airways owner International Consolidated Airline Group (IAG).
The company is reporting its third quarter figures on November 9th, and
the broker expects these to show EBIT of €227m (vs €363m a year
earlier), which factors in a predicted 17% year-on-year rise in fuel
costs to €1.60bn and losses from the disposal of the BMI airline earlier
this year (estimated at €60m), driving a 3.5 percentage point fall in
EBIT margin from 8.1% to 4.6%. The load factor is expected to improve by
one-fifth of a percentage point at 84.7%.
Investec believes
the full year will show an estimated loss of €64m versus previous
guidance of break-even, with the negative adjustment resulting from the
spot jet fuel price, which it believes is sufficiently above
expectations to justify the altered forecast.
However, the
broker has maintained its 'buy' recommendation and 190 price target,
saying: "We continue to believe that IAG has the management desire and
ability to effectively transform the Iberia business (securing a
material portion of the targeted €500m FY15E [full year 2015] synergies
programme) and drive margin and strategic improvements at BA."
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