London close: Stocks surge after US data, Spanish stress tests
Market Movers
- techMARK 2,135.76 +0.96%
- FTSE 100 5,820.45 +1.36%
- FTSE 250 11,867.48 +1.14%
- US data beats forecasts in September
- Spanish stress tests lift sentiment
- Banks and miners rise strongly in London
Better-than-forecast manufacturing figures from the US and encouraging
newsflow from Europe drove impressive gains on stock markets on Monday,
with the FTSE 100 kicking off the fourth quarter with a bang and
finishing up 1.4 per cent on the day.
Economic figures from the US
came in above expectations this afternoon, driving strong gains on Wall
Street from the off. The ISM's manufacturing guage rose from 49.6 to
51.5 in September, its best level since May and above the 49.7 consensus
estimate.
"The number, at 51.5, shows significant growth
compared to forecasts, potentially illustrating a forthcoming uptick in
the broader US economy," said financial trade David White from Spreadex.
"Not surprisingly, then, high beta stocks have diverged from their
VWAPs [volume-weighted average prices], allowing the move to continue
into the European close."
Investors were seemingly shrugging off the news that both UK and Chinese manufacturing purchasing managers' indices (PMIs) remained below the 50-point mark in the same month, the level which separates contraction with expansion.
Friday's release by Oliver Wyman on the Spanish
financial sector was among the factors lifting sentiment on markets
today. The independent auditor estimated that banks would need €59.3bn
in funds in order to stay afloat, well within the €100bn limit given by
the European Union.
Meanwhile, media reports this weekend suggested that Greece
many receive a new tranche of international aid as European leaders
attempt to keep the country in the Eurozone. German magazine Focus said that Greece will receive an additional round of aid valued at €31bn.
FTSE 100: Banks and miners lead the rise
Banking stocks were in demand with Royal Bank of Scotland, Lloyds and Barclays benefiting from ratings upgrades from Liberum Capital, which lifted its recommendation on all three to 'buy'.
The big news of the day was that the so-called merger of equals between commodities trader Glencore and mining titan Xstrata
is back on after the independent directors of the latter agreed to
Glencore's terms. Jefferies reiterated its positive stance on both
stocks this morning, saying that they while they may underperform after
the shareholder votes later this year, the combined 'Glenstrata' entity
will be one of its top picks for the long term.
British Airways and Iberia owner IAG
was flying high after the International Air Transport Association
(IATA) lifted its profit forecast for the global airline industry for
this year by a third.
Supermarket group Sainsbury was in the red ahead of its second-quarter trading statement on Wednesday. Sector peer Tesco,
which reports its interim results on the same day, was also down after a
ratings downgrade from Seymour Pierce from 'hold' to 'reduce'; the
broker cited poor visibility as a reason behind the move.
Defence group BAE Systems
was wanted this morning after itself and aerospace titan EADS revealed
details of its proposed £28bn tie-up. "There comes a time when it is
right to seize the moment, and to create something that is even stronger
and better. We believe that time is now," the companies' CEOs said in a
joint statement.
Meanwhile, tobacco groups British American and Imperial
were up after some positive comments from Investec today. "The NHS
wants us to stop smoking for October. We respond by going long on UK
tobaccos," said analyst Martin Deboo. The broker has raised its rating
on BATS from 'hold' to 'buy' and renewed its 'buy' recommendation for
IMT.
Shares in drugs giant AstraZeneca were hit in
afternoon trading after the company revealed that it has suspended its
share repurchase programme. The company has repurchased a net $0.7bn of
shares since the end of the first half, bringing the year-to-date total
to $2.3bn. The group's initial full-year target for repurchases stands
at $4.5bn.
FTSE 250: SuperGroup continues to be super
SuperGroup
continues to extend gains after its impressive results announced last
month, in which it reported a 10% increase in total sales in the first
quarter. Including today's near-9% rise, shares have gained 35% in the
past month.
Shares finished the day around technical
resistance (at 650p) with the next key level being at 700p, according to
technical analysts at Digital Look. "There does not seem to have been
any fundamental trigger for the move, although shares had been 'thrown
back' towards technical support at 600p," they said.
House builder Taylor Wimpey was a high riser after Citi upgraded its rating on the stock. Sector peer Barratt Developments was also on the up.
International investment group Caledonia rose after buying a portfolio of five industrial business from US-based operating company Latshaw Enterprises for $42m.
FTSE 100 - Risers
Anglo American (AAL) 1,891.00p +4.07%
Polymetal International (POLY) 1,125.00p +3.69%
Royal Bank of Scotland Group (RBS) 266.40p +3.66%
IMI (IMI) 932.50p +3.61%
International Consolidated Airlines Group SA (CDI) (IAG) 154.30p +3.56%
Schroders (SDR) 1,572.00p +3.56%
Barclays (BARC) 222.35p +3.49%
Croda International (CRDA) 2,501.00p +3.13%
Lloyds Banking Group (LLOY) 39.98p +2.95%
Kazakhmys (KAZ) 712.50p +2.89%
FTSE 100 - Fallers
AstraZeneca (AZN) 2,925.00p -1.02%
Sainsbury (J) (SBRY) 345.80p -0.49%
Babcock International Group (BAB) 922.50p -0.49%
Morrison (Wm) Supermarkets (MRW) 283.90p -0.46%
CRH (CRH) 1,187.00p -0.42%
Glencore International (GLEN) 342.00p -0.32%
Tesco (TSCO) 331.00p -0.30%
Kingfisher (KGF) 264.00p -0.08%
G4S (GFS) 266.00p +0.11%
Intertek Group (ITRK) 2,746.00p +0.22%
FTSE 250 - Risers
Supergroup (SGP) 649.00p +8.62%
NMC Health (NMC) 195.70p +8.12%
Pace (PIC) 169.90p +6.65%
Morgan Crucible Co (MGCR) 278.10p +5.30%
Spectris (SXS) 1,810.00p +4.93%
Jupiter Fund Management (JUP) 254.20p +4.31%
Rank Group (RNK) 150.80p +3.93%
Hochschild Mining (HOC) 505.00p +3.91%
Rotork (ROR) 2,351.00p +3.89%
ICAP (IAP) 333.00p +3.71%
FTSE 250 - Fallers
WH Smith (SMWH) 625.00p -3.33%
Stobart Group Ltd. (STOB) 114.00p -3.14%
Telecom Plus (TEP) 821.00p -3.01%
Talvivaara Mining Company (TALV) 148.90p -2.30%
Ruspetro (RPO) 105.20p -1.68%
Fidessa Group (FDSA) 1,447.00p -1.63%
Computacenter (CCC) 374.70p -1.39%
Provident Financial (PFG) 1,355.00p -1.31%
London Stock Exchange Group (LSE) 933.00p -1.06%
Ladbrokes (LAD) 171.00p -1.04%
| Europe Market Report |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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European Markets Rally After Strong ISM Manufacturing Report
The
European markets finished solidly in the green at the beginning of the
new trading week. The markets began the session in positive territory,
as they staged a recovery from Friday's losses. The markets received a
tremendous boost in the afternoon, after the U.S. ISM manufacturing
result came in much higher than expected.
The International
Monetary Fund and the European Central Bank backed the Spanish bank
stress test results, saying the publication of the results will
strengthen the viability of confidence in the Spanish banking sector.
Moody's Investors Service, however, said in its credit outlook today
that the planned recapitalization of struggling Spanish banks may not
restore market confidence fully.
The euro Stoxx 50 index of Eurozone bluechip stocks increased by 1.90 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 1.38 percent.
The DAX of Germany rose by 1.53 percent and the CAC 40 of France advanced by 2.39 percent. The FTSE 100 of the U.K. gained 1.37 percent and the SMI of Switzerland added 1.77 percent.
In Frankfurt, Bayer climbed
by 2.74 percent and Evotec gained 5.87 percent. The companies have
entered into a five-year, multi-target collaboration with the goal of
developing three clinical candidates for the treatment of endometriosis.
SAP AG rose by 0.18 percent, after the U.S. Department of Justice approved its acquisition of Ariba Inc.
Commerzbank rose by 3.10 percent and Deutsche Bank added 2.55 percent.
In Paris, Credit Agricole S.A.
increased by 7.36 percent. The French lender has entered into exclusive
negotiations with Alpha Bank to acquire the entire share capital of
Emporiki.
Societe Generale gained 3.85 percent and BNP Paribas added 3.49 percent.
In London, BHP Billiton finished
higher by 2.57 percent. The mining giant projected its copper
production to grow at a compound annual growth rate of 10 percent up to
end fiscal 2015.
Xstrata climbed by 2.35 percent, after the company agreed to a revised $33 billion takeover bid from Glencore International. Shares of Glencore finished with a loss of 0.32 percent.
Barclays rose by 3.49 percent and Royal Bank of Scotland gained 3.66 percent. HSBC finished higher by 2.48 percent and Lloyds Banking Group added 2.95 percent.
The euro area
unemployment rate was unchanged at a record high in August as firms
continued to scale back their operations in response to weak demand,
data released by the statistical office Eurostat showed Monday.
The
seasonally adjusted unemployment rate was 11.4 percent in August,
unchanged from July and June that were revised from 11.3 percent. The
latest figure was the highest on record and matched economists'
expectations. Activity in the Eurozone manufacturing sector in September
decreased at a slightly slower pace than estimated earlier, final data
from a survey by Markit Economics showed Monday.
The seasonally
adjusted purchasing managers' index for the manufacturing sector came in
at a six-month high of 46.1 in September, slightly higher than 46
recorded in the preliminary estimates. In August the reading was 45.1.
Germany's
manufacturing contracted at a slower pace in September due to slower
reductions in output and new orders as well as a stabilization of
manufacturing employment levels, survey data from Markit Economics
showed Monday. The final seasonally adjusted Markit/BME Germany
Purchasing Managers' Index rose to 47.4 from 44.7 in August.
The
French manufacturing conditions worsened in September, but at a slightly
less than initially estimated pace, survey data from Markit Economics
showed Monday. The Purchasing Managers' Index plunged to 42.7 in
September, the lowest since April 2009, from 46 in August. The flash
reading for September was 42.6.
U.K. manufacturing sector
continued to contract in September on lackluster order inflows and
mounting job losses amid a prolonged recession, a closely watched survey
revealed Monday.
The seasonally adjusted Purchasing Managers'
Index dropped unexpectedly to 48.4 from 49.6 in August, results of a
survey by the Chartered Institute of Purchasing & Supply and Markit
Economics showed.
After three consecutive months of contraction,
activity in the U.S. manufacturing sector unexpectedly expanded in the
month of September, according to a report released by the Institute for
Supply Management on Monday.
The ISM said its purchasing
managers' index rose to 51.5 in September from 49.6 in August, with a
reading above 50 indicating an expansion in manufacturing activity.
Economists had expected the index to show a much more modest increase to
a reading of 49.7.
Construction spending in the U.S.
unexpectedly decreased in the month of August, according to a report
released by the Commerce Department on Monday, with the report showing
drops in spending on both public and private construction.
The
report said construction spending fell 0.6 percent to an annual rate of
$837.1 billion in August after falling by a revised 0.4 percent to
$842.0 billion in July. The drop came as a surprise to economists, who
had expected spending to increase by 0.6 percent.
| US Market Report |
US mid-morning: ISM provides unexpected fillip for stocks
-Williams (Fed) says far too many people out of wiork
-Evans (Fed) has not seen inflation concerns
Dow Jones: 1.05%
Nasdaq Comp.: 0.41%
S&P 500: 0.79%
Wall Street is holding higher on the first trading day of the new
quarter, following the release of a better than expected ISM
manufacturing report which climbed back above the psychologically
important 50 point mark. Worth highlighting, the ability of this
economic report, in particular, to move markets.
Significantly, as well, data out from China, overnight, is being
described by some market commentary as stable albeit at low levels.
Meanwhile, the Bank of Japan's quarterly Tankan survey for large
manufacturers fell from -1 to -3 in September, its fourth negative
reading. Nevertheless, it was 'in-line' with consensus expectations.
On the corporate front, technology names are some of the biggest movers today. Thus, shares in Blackberry smartphone maker Research In Motion
are continuing to enjoy a bounce after sales figures released last week
were stronger than expected. The shares rose 5.04% on Friday.
Oracle is higher after inaugurating its its annual OpenWorld conference over the weekend.
Hewlett-Packard -the PC maker- is also gaining, ahead of a meeting with analysts on Wednesday
Analysts at Oppenheimer have lowered their price target on Facebook to $27 from $41, but while at the same time keeping their outperform rating on the stock.
Goldman Sachs is advancing after Barron's reported that the stock will rise as much as 25% within a year as capital markets improve.
3M has agreed to buy Ceradyne for $860m.
Monster Worldwide, the Internet recruiting service that is exploring a sale, is up on reports that it is in talks with a private equity bidder.
ISM manufacturing back above 50
The
ISM manufacturing sector purchasing managers' index for the month of
September has come in at 51.5 (Consensus: 49.7), following on from 49.6
for the month before.
S&P 500 Uptrend still intact
This is the way that technical analysts at Charles Stanley
see things for the S&P 500: "(…) The weekly line chart for the
index demonstrates that its long-term uptrend remains very much intact,
but that its 14-week RSI has run into resistance in the form of the
highs that were reached in March (and in April of 2011); such price
action strongly suggests that prices are going to struggle to make much
more headway in the near-term and that further weakness has become
possible." However, they add that, "Given that the S&P is still less
than 2% from the top it is clear that traders are going to require a
strong signal that the rally is failing and, at the very least, they are
probably going to need to see a retreat through the index's 50-day
moving average (at 1411 or so)." Slight gains in other asset classes
10 year US Treasuries are now rising by 2/32 dollars with yields at 1.62%.
The November contract for West Texas sweet light crude is up 68 cents at $92.87 a barrel. |
| Broker Tips |
Jefferies has reiterated its 'buy' ratings for potential merger partners Glencore and Xstrata after the companies announced on Monday morning that they had reached agreement on the final terms of a tie-up.
Jefferies
said that both Xstrata and Glencore shares may underperform for a short
period after these votes, but the combined 'Glenstrata' will be one of
its top picks for the long-term.
The broker said it
expects the combined entity to be "highly disciplined with respect to
capital allocation, and we expect industry leading dividend growth to
lead to a premium equity valuation and the ability to make accretive
acquisitions for the merged company."
Seymour Pierce has downgraded its rating for supermarket giant Tesco from 'hold' to 'reduce' ahead of the group's first-half figures this week, saying that visibility remains poor.
"While
the valuation is not the most demanding given longer term growth
potential, it is hard to see the shares performing while there is no
visibility on UK profitability and whether management actions will
reinvigorate the business," the broker said.
Investec has upgraded its recommendation for British American Tobacco (BATS) and reiterated its positive stance on sector peer Imperial Tobacco (IMT) after the stocks' recent underperformance.
"The NHS wants us to stop smoking for October. We respond by going long on UK tobaccos," said analyst Martin Deboo.
"While we are not starry-eyed about the outlook, fundamentals, plus a spot of chartism, argue for upside from here." |
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