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Stocks fall on concerns over Eurozone
Market Movers
techMARK 2,112.79 +0.01%
FTSE 100 5,896.15 -0.35%
FTSE 250 12,074.30 +0.03%
The FTSE 100 index had sunk firmly into the red by the close on Friday as investors awaited further news from the European summit. Aggreko and Bunzl were registering heavy losses in London after disappointing updates, while banking stocks were also out of favour.
So far, European leaders have announced that they would set up a
Eurozone bank supervisor run by the European Central Bank (ECB) by the
end of the year. “We have a date in place now for the legislative
framework, which we didn’t have before – and that in itself is an
important step forward," said European Council President Herman Van
Rompuy.
"Global markets rode cautiously today as investors
rejected the proposal by the EU to create a single Eurozone banking
supervisor to aid struggling banks and provide them with access to the
European bailout fund, if need be," said financial trader Shavaz Dhalla
from Spreadex this afternoon.
"It seems investors are becoming
frustrated with the continuous proposals outlined by EU policy makers
to resolve the debt crisis but failing to provide investors with
specific information regarding how the fund will operate, the time scale
involved and perhaps more crucially, how much funds will be needed."
Markets have also been dampened by worse-than-expected third-quarter
results from some US heavyweights over the past 24 hours, including
fast-food chain McDonalds, tech giant Microsoft and American conglomerate General Electric.
In domestic news, UK public sector borrowing was £12.8bn in September, below the £13.5bn registered in the same month of 2011 and under consensus estimates.
FTSE 100: Aggreko and Bunzl disappoint
Shares in temporary power and temperature controls group Aggreko
tanked after a more or less 'in-line' third-quarter statement was
dampened by some disappointing guidance with extra bad debt provisions
and adverse foreign exchange rates expected to dent its bottom line.
Although many analysts chose to remain upbeat about Aggreko's long-term
potential - Investec, Seymour Pierce and Jefferies all maintained their
'buy' ratings on the stock - shares were down nearly 8%.
Distribution and outsourcing group Bunzl
was a heavy faller after the third quarter saw a moderation in the
underlying revenue growth rate, particularly in North America, where the
company is going up against tough comparatives. Oriel Securities cut
its view on the stock to 'hold' this morning.
Barclays
continues to trade lower after announcing last night that it has set
aside a further £700m in provisions against the possible costs
associated with compensating customers for mis-sold payment protection
insurance (PPI), taking it total provisions to £2bn. Meanwhile,
according to reports, the bank is planning to cut around 10% of its
staff from its EMEA equities division in an effort to reduce costs,
according to reports.
Sector peers RBS and Lloyds were
also out of favour, with the latter being weight down by a ratings cut
from JPMorgan Cazenove to 'underweight'. Insurance giant Standard Life was also lower after being hit by a downgrade from Berenberg to 'sell'.
In contrast, shares in luxury fashion group Burberry
were registering gains after Investec returned to its bullish stance on
the stock and upgraded its rating from 'hold' to 'buy'. Analyst Bethany
Hocking said: "The Burberry brand is far from broken, operational
leverage should come through, and, whilst volatility will remain, we see
long-term value here."
FTSE 250: Spectris jumps after "resilient" performance
Specris
saw a robust performance in the final quarter of its financial year and
while like-for-like (LFL) sales growth had slowed from the first half,
analysts said that this was as expected. The instrumentation and
controls company said that reported sales during the last quarter were
up 12%.
House-builder Redrow was leading the downside
after Chairman Steven Morgan last night ditched his plan to buy the
company, bringing seven weeks of takeover talks to an end after falling
four of Takeover Panel regulations.
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FTSE 100 - Risers
Johnson Matthey (JMAT) 2,329.00p +1.84%
Hammerson (HMSO) 483.40p +1.53%
Hargreaves Lansdown (HL.) 753.00p +1.41%
SABMiller (SAB) 2,633.50p +1.33%
Wood Group (John) (WG.) 875.50p +1.21%
Tate & Lyle (TATE) 719.50p +1.20%
Reckitt Benckiser Group (RB.) 3,701.00p +0.98%
United Utilities Group (UU.) 729.00p +0.97%
Polymetal International (POLY) 1,166.00p +0.95%
Pennon Group (PNN) 734.50p +0.69%
FTSE 100 - Fallers
Aggreko (AGK) 2,137.00p -7.17%
Evraz (EVR) 248.30p -4.09%
Bunzl (BNZL) 1,038.00p -4.07%
Lloyds Banking Group (LLOY) 40.49p -3.30%
Eurasian Natural Resources Corp. (ENRC) 348.90p -3.03%
Barclays (BARC) 233.85p -2.85%
Vedanta Resources (VED) 1,135.00p -2.49%
CRH (CRH) 1,138.00p -2.48%
ITV (ITV) 89.55p -2.34%
Aviva (AV.) 337.20p -2.26%
FTSE 250 - Risers
Spectris (SXS) 1,779.00p +11.61%
Oxford Instruments (OXIG) 1,336.00p +6.62%
TalkTalk Telecom Group (TALK) 187.50p +4.92%
Perform Group (PER) 450.00p +4.65%
Bumi (BUMI) 255.60p +4.28%
William Hill (WMH) 357.50p +4.11%
PayPoint (PAY) 777.50p +3.67%
Ophir Energy (OPHR) 573.50p +3.61%
Centamin (DI) (CEY) 107.30p +3.17%
Mitchells & Butlers (MAB) 324.50p +2.46%
FTSE 250 - Fallers
Ted Baker (TED) 920.00p -6.50%
Ferrexpo (FXPO) 198.00p -5.76%
Ruspetro (RPO) 105.00p -4.55%
Premier Oil (PMO) 367.00p -3.88%
Redrow (RDW) 156.40p -3.75%
Lonmin (LMI) 498.10p -3.38%
Talvivaara Mining Company (TALV) 137.20p -3.18%
Drax Group (DRX) 532.50p -3.18%
Dunelm Group (DNLM) 670.00p -3.18%
Man Group (EMG) 81.00p -2.88%
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| Europe Market Report |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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European Markets Dragged Lower By Weak Earnings Friday
The European markets
finished in negative territory on Friday. The trading week in Europe
has been particularly strong this week, so some profit taking should
come as no surprise. The European summit in Brussels resulted in a bank
deal, but overall failed to make much of an impression on the markets.
Financial stocks turned in a weak performance Friday, especially shares
of the major banks.
The markets were under pressure Friday
due to weak earnings reports both in Europe and the United States. The
weak reports from major technology companies, such as Google and
Microsoft, were in focus.
European Union leaders have
agreed to establish a single supervisor for banks in euro area and to
put in place the required legal framework by the end of this year, so
that it can be phased in next year.
In a statement after
Thursday's meeting in Brussels, the European Council said a specific and
time-bound roadmap for the plan will be presented at the European
Council's December 2012 meeting. The meeting acknowledged the need to
"break the vicious circle between banks and sovereigns."
French President Francois Hollande
reportedly said Friday that the European Union meeting in Brussels did
not discuss a potential aid request from Spain. Hollande warned against
imposing more austerity on Spain, if the country were to ask for a
bailout. He said that Spain is making all the necessary efforts to get
its public finances back in order.
European Commission President Jose Manuel Barroso on
Friday stressed on the need for deeper integration of Europe,
particularly the euro area, and called for stronger and more binding
framework for the implementation of key economic policies.
"The
Commission is a strong advocate of deeper integration, in particular for
the Euro area. This is urgent," he said at a press conference following
the first session of the European Council meeting.
Italy's
budget program is on track, but the country may need to introduce
another round of spending cuts next year, La Stampa reported Friday
citing a European Commission document.
The Commission feels that
the government's decision to postpone an increase in the Value-Added Tax
is "understandable" but posed risks, according to an October 15,
19-page document by the Economic and Monetary Affairs Commissioner Olli
Rehn.
Italy's reform efforts, so far, were "ambitious" and
"appropriate," but still, the work is not done, the document noted.
Further action on the expenditure side will be evaluated in 2013, it
said.
The Euro Stoxx 50 index of eurozone bluechip declined by 1.45 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.80 percent.
The DAX of Germany fell by 0.76 percent and the CAC 40 of France finished lower by 0.87 percent. The FTSE 100 of the U.K. dropped by 0.35 percent and the SMI of Switzerland decreased by 0.38 percent.
In Frankfurt, Deutsche Bank declined by 3.75 percent and Commerzbank lost 5.62 percent. Siemens fell by 1.18 percent, after Nomura initiated the stock with a "Neutral" rating.
Delticom dropped by 10.11 percent, following a downgrade by Commerzbank. Rheinmetall closed down by 3.48 percent, after Commerzbank reinitiated the stock with a "Hold" rating.
In Paris, Alstom dropped by 3.58 percent, after Nomura initiated the stock with a "Reduce" rating. Air Liquide declined by 2.51 percent, after Societe Generale downgraded the stock to "Hold" from "Buy."
Societe Generale fell by 2.52 percent, BNP Paribas lost 2.36 percent and Credit Agricole
decreased by 2.20 percent. Carrefour surged by 5.85 percent. The
retailer has agreed to sell its Colombian operations to Chilean retail
group Cencosud SA for an enterprise value of $2.61 billion.
In London, Aggreko sank by
7.17 percent. The temporary power provider said margins and returns for
the year will be lower than 2011 due to high mobilization costs in
Mozambique contract and increase in bad debt provision.
Burberry climbed by 0.68 percent, after Investec Securities upgraded the stock to "Buy" from "Hold."
Bunzl dropped by 4.07 percent, after an interim management statement. Lloyds Banking
declined by 3.30 percent, after JP Morgan downgraded the stock to
"Underweight" from "Neutral." Barclays fell by 2.85 percent and Royal Bank of Scotland lost 2.09 percent.
The euro area
current account surplus increased to a seasonally adjusted EUR 8.8
billion in August from EUR 8.1 billion in July, the European Central
Bank said Friday.
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Stocks Falling Sharply As Earnings News Disappoints
Stocks
have moved sharply lower over the course of the trading day on Friday,
adding to the losses posted in the previous session. A negative reaction
to the latest batch of earnings news has generated broad based selling
pressure.
The major averages have seen some further downside in recent trading, falling to new lows for the session. The Dow is down 156.43 points or 1.2 percent at 13,392.51, the Nasdaq is down 53.94 points or 1.8 percent at 3,018.93 and the S&P 500 is down 17.66 points or 1.2 percent at 1,439.68.
The
weakness on Wall Street comes as traders digest the latest earnings
news, including disappointing quarterly results from big-name companies
such as Microsoft (MSFT), General Electric (GE), and McDonald's (MCD).
After
the close of trading on Thursday, Microsoft reported fiscal first
quarter earnings that fell year-over-year due in part to the deferral of
some revenue related to the upcoming release of its Windows 8 operating
system. The software giant also reported revenues that fell by more
than expected.
Shares of Microsoft are down by 2.7 percent on the heels of the news after hitting a four-month intraday low earlier in the session.
Diversified conglomerate General Electric
reported adjusted earnings that came in line with analyst estimates but
on weaker than expected revenue growth. GE is currently posting a 2.9
percent loss.
McDonald's reported third quarter earnings that
fell year-over-year and came in below analyst estimates. The fast food
giant also reported weaker than expected sales. Shares of McDonald's are
down by 3.5 percent.
Adding to the negative sentiment, the
National Association of Realtors released a report showing a drop in
existing home sales in September, with sales pulling back off the
two-year high set in the previous month.
NAR said existing home sales
fell 1.7 percent to a seasonally adjusted annual rate of 4.75 million
in September from an upwardly revised 4.83 million in August. With the
drop, the annual rate matched the expectations of economists.
Sector News
Semiconductor stocks
are turning in some of the market's worst performances, resulting in a
2.4 percent drop by the Philadelphia Semiconductor Index. Within the
sector, Marvell Technology (MRVL) and Advanced Micro Devices (AMD) are
posting substantial losses.
Marvell Technology is down by 13.9 percent after lowering its third quarter revenue outlook and announcing the resignation of its CFO, while AMD is down by 14.5 percent after reporting a third quarter loss compared to a year-ago profit.
Considerable weakness has also emerged among brokerage stocks, as reflected by the 2 percent loss being posted by the NYSE Arca Broker/Dealer Index. ETrade (ETFC) is leading the sector lower after reporting an unexpected third quarter loss.
Airline stocks have
also shown a notable move to the downside, dragging the NYSE Arca
Airline Index down by 1.6 percent. With the loss, the index is pulling
back off the three-month closing high that it set on Thursday.
Networking, steel, biotechnology, and chemical stocks are also posting steep losses amid the broad based weakness on Wall Street.
Other Markets
Meanwhile, the major European markets all moved to the downside on the day. The U.K.'s FTSE 100 Index dipped by 0.4 percent, while the German DAX Index and the French CAC 40 Index fell by 0.8 percent and 0.9 percent, respectively.
In the bond market, treasuries have
moved back to the upside after coming under pressure in recent
sessions. Subsequently, the yield on the benchmark ten-year note, which
moves opposite of its price, is down by 4.1 basis points at 1.785
percent.
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| Friday broker round-up |
Aggreko:
Jefferies keeps buy rating and 2,800p target; Seymour Pierce keeps buy
rating and 2,500p target; Panmure Gordon cuts target from 2,228p to
2,159p, hold rating unchanged. Alliance Pharma: umps upgrades to buy, target lifted from 32p to 37p. Avacta: Panmure Gordon keeps buy rating and 1.75p target. Barclays: Nomura keeps reduce rating and 210p target. BP: Deutsche Bank raises target from 480p to 500p, buy rating kept. Bunzl: Oriel Securities downgrades to 'hold', 1,200p target kept; Seymour Pierce retains hold rating and 1,000p target. Burberry: Investec upgrades from hold to buy, target lifted from 1,140p to 1,300p. Capita: Morgan Stanley downgrades to equal weight, target lifted from 760p to 780p. Chariot Oil & Gas: Merchant Securities keeps hold rating and 34.6p target. CRH: Deutsche Bank cuts target from 1,300p to 1,275p, hold rating kept. Debenhams: Seymour Pierce raises target from 100p to 110p, hold rating maintained. Dechra Pharmaceuticals: Panmure Gordon ups target from 550p to 600p, hold rating kept. Drax: HSBC downgrades to 'neutral', target cut from 600p to 580p. EMIS: Merchant Securities raises target from 900p to 1,050p, buy rating kept. Go-Ahead: UBS ups target from 1,200p to 1,250p, neutral rating kept. Imperial Tobacco: Panmure Gordon maintains buy rating and 2,900p target. Inmarsat: Jefferies keeps buy rating and 660p target. Johnson Service: Shore Capital upgrades to buy. Jupiter Fund Management: JPMorgan Cazenove ups target from 260p to 299p, overweight rating kept. Keller: Jefferies keeps buy rating and 651p target. Lancashire Holdings: JPMorgan Cazenove cuts target from 550p to 540p, overweight rating kept. Lloyds: JPMorgan Cazenove downgrades to 'underweight, target raised from 30p to 38p. Man Group: JPMorgan Cazenove ups target from 45p to 63p, neutral rating kept; UBS cuts target from 110p to 100p, buy rating kept. McBride: Panmure Gordon lifts target from 140p to 150p, buy rating kept. Morrison: Barclays Capital downgrades to underweight, target cut from 300p to 250p. Rank Group: Panmure Gordon maintains hold rating and 160p target. Redrow: Jefferies keeps hold rating and 152p target; Panmure Gordon keeps hold rating kept. Rockhopper Exploration: Merchant Securities keeps buy rating and 258p target. Royal Bank of Scotland: JPMorgan Cazenove ups target from 250p to 270p, neutral rating kept. Sinclair IS Pharma: Investec raises target from 36p to 40p, keeps buy rating. Spectris: Jefferies keeps buy rating and 1,925p target. St James's Place: Panmure Gordon maintains buy rating and 425p target. Standard Life: Berenberg downgrades to 'sell', target lifted from 275p to 290p. UBM:
Panmure Gordon maintains sell rating and 620p target; JPMorgan Cazenove
cuts target from 815p to 800p, overweight rating kept. Vertu Motors: Panmure Gordon raises target from 50p to 55p, buy rating kept. Whitbread:
JPMorgan Cazenove ups target from 2,400p to 2,500p, overweight rating
kept; Panmure Gordon ups target from 1,916p to 1,994p, hold rating
kept. William Hill: Panmure Gordon maintains buy rating and 350p target.
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