Miners surge after US jobs figures beat forecasts
Market Movers
techMARK 2,161.02 +0.47%
FTSE 100 5,871.02 +0.74%
FTSE 250 12,061.35 +0.89%
The FTSE 100 index
finished the day with decent gains on Friday as some
better-than-expected employment figures from the US lifted sentiment
late on.
“A firmer but fairly lacklustre morning in Europe was
given fresh impetus this afternoon after the US September employment
report, saw the unemployment rate slide under eight per cent for the
first time since Obama became President,” said market analyst Michael
Hewson from CMC Markets.
US non-farm payrolls increased
by 114,000 in September, ahead of the previous gain of 96,000 and the
111,000 rise expected by analysts. The unemployment dropped to 7.8% from
8.1% due to a rise of 873,000 in the number of employed.
Analyst Michael Gapen from Barclays Research said that the
better-than-expected report is unlikely to alter the Federal Reserve’s
plans for more quantitative easing (QE): “We think the unemployment rate
would need to decline further from here in the October and November
reports before the Fed would think about not fully converting its
Treasury purchases under Operation Twist to open-ended purchases,” he
said.
According to German paper Handelsblatt, the International Monetary Fund (IMF) will reduce its global gross domestic product
(GPD) growth forecast to 3.3% this year, down from the prior 3.4%
estimate. In 2013, growth will accelerate to 3.6%, though still below
the prior expectation of a 3.9% rise.
Meanwhile, Greek
Prime Minister Antonis Samaras has signalled that his country could not
survive beyond November if it isn’t granted the next tranche of bailout
aid.
Spanish Minister of Economy Luis de Guindos has
insisted that his country doesn’t need to be bailed out at all as he
defended Spain’s progress on deficit reduction.
FTSE 100: Risk appetite benefits the miners
Mining
stocks were among the highest risers after the US employment report
from the States improved the demand outlook for commodities. ENRC, Kazakhmys, Evraz and Vedanta
were the top three performers by the close. Vedanta was making gains
even though its confirmed this afternoon that the mining ban in Goa was
still ongoing.
In contrast, Anglo American sank into
the red this afternoon after its 80%-owned platinum operation, Amplats,
was forced to sack around 12,000 striking employees from its Rustenberg
project in South Africa. Amplats has lost platinum production of 39,000
ounces since the industrial action began three weeks ago, which will
result in around 700m South African rand (nearly £50m) of lost revenue.
Luxury brand Burberry rose after Morgan Stanley upgraded the stock to 'overweight' this morning. Engineering group IMI was a high riser after Morgan Stanley and JPMorgan Cazenove both reiterated their 'overweight' ratings on the shares.
Oilfield services firm Wood Group
was in demand after saying that it is still confident in hitting
full-year profit targets, with conditions in energy markets remaining
favourable. "We anticipate strong operating cash flow in the second
half, and our strong balance sheet provides a robust platform for
growth," the group's interim management statement said.
Technology firm Smiths Group
was higher after saying that it will launch a $400m bond offering,
saying that the funds will be used for general corporate funding
purposes and to repay certain existing debt.
Supermarket group Tesco
continued to fall, extending losses after its profits disappointed the
markets on Wednesday. Shares are now down over 5% on the week. Both
Seymour Pierce and Espirito Santo reduced their target for the stock
this morning.
FTSE 250: KCOM drops 6.6% after downbeat trading update
Broadband and communications provider KCOM
has fallen following a downbeat trading statement prior to its
interims. It announced that it is trading “in line with expectations”,
but orders in its enterprise division have been below expectations.
Hunting was on the rise after Deutsche Bank initiated its coverage with a ‘buy’ rating, while Man Group was on the up following a ‘buy’ reiteration from Singer Capital Markets.
Utilities services provider Telecom Plus
also gained after dangling the prospect of a sharply increased interim
dividend in front of shareholders' eyes after a first-half surge in
profits. With the group's business proving to be less seasonal these
days the group is moving towards a more even split between its interim
and final dividend payments each year.
FTSE 100 - Risers
Eurasian Natural Resources Corp. (ENRC) 333.30p +5.91%
Kazakhmys (KAZ) 738.00p +4.46%
Evraz (EVR) 254.10p +3.67%
Rexam (REX) 456.50p +3.63%
Vedanta Resources (VED) 1,101.00p +3.38%
CRH (CRH) 1,210.00p +2.98%
Weir Group (WEIR) 1,852.00p +2.89%
Burberry Group (BRBY) 1,028.00p +2.80%
Wood Group (John) (WG.) 833.50p +2.77%
Hargreaves Lansdown (HL.) 666.00p +2.54%
FTSE 100 - Fallers
Old Mutual (OML) 172.40p -2.65%
BAE Systems (BA.) 328.10p -1.59%
Johnson Matthey (JMAT) 2,339.00p -1.27%
BG Group (BG.) 1,300.50p -1.10%
United Utilities Group (UU.) 728.50p -1.02%
Tesco (TSCO) 315.35p -0.88%
Morrison (Wm) Supermarkets (MRW) 278.20p -0.78%
Next (NXT) 3,564.00p -0.78%
Wolseley (WOS) 2,702.00p -0.77%
Smith & Nephew (SN.) 680.00p -0.73%
FTSE 250 - Risers
Homeserve (HSV) 229.40p +6.45%
Bumi (BUMI) 170.80p +6.09%
Perform Group (PER) 428.60p +5.85%
IP Group (IPO) 124.80p +5.32%
Man Group (EMG) 90.00p +5.26%
Essar Energy (ESSR) 124.00p +5.08%
Ferrexpo (FXPO) 207.10p +4.54%
Ocado Group (OCDO) 68.70p +4.49%
JD Sports Fashion (JD.) 760.00p +4.32%
Talvivaara Mining Company (TALV) 160.80p +4.15%
FTSE 250 - Fallers
KCOM Group (KCOM) 78.75p -6.64%
Atkins (WS) (ATK) 695.00p -4.66%
FirstGroup (FGP) 196.10p -2.24%
Investec (INVP) 383.70p -1.31%
Rank Group (RNK) 149.50p -1.25%
New World Resources A Shares (NWR) 272.60p -1.23%
Pace (PIC) 169.70p -1.22%
Telecity Group (TCY) 939.00p -1.16%
Berendsen (BRSN) 571.00p -1.04%
BTG (BTG) 369.20p -0.99%
| European broker round-up |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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European Markets Finished Solidly Higher After U.S. Jobs Report
The
European markets rallied higher on Friday, after a strong U.S. jobs
report for September. The U.S. jobs data overshadowed investor concerns
over the situation in Spain and in Greece. The Bank of Japan also
abstained from announcing further stimulus Friday, just as the European
Central Bank and Bank of England did on Thursday.
With employment
in the U.S. rising for the twenty-fourth consecutive month in
September, the Labor Department released a report on Friday showing that
the unemployment rate for the month fell to its lowest level in well
over three years.
The report showed that employment increased by
114,000 jobs in September following an upwardly revised increase of
142,000 jobs in August. Economists had expected employment to increase
by 113,000 jobs compared to the addition of 96,000 jobs originally
reported for the previous month.
The continued job growth pushed
the unemployment rate down to 7.8 percent in September from 8.1 percent
in August. The drop surprised economists, who had expected the
unemployment rate to come in unchanged.
The French economy
will stagnate in the second half of this year, extending the period of
stagnation to five consecutive quarters, reports said citing the latest
forecasts from statistical office Insee, published Thursday.
The
statistical office also forecasts the Eurozone economy to have entered
recession in the third quarter with the gross domestic product falling
0.2 percent quarter-on-quarter following a 0.2 percent contraction in
the second quarter. Recession is expected to continue in the fourth
quarter with GDP falling 0.1 percent.
Insee predicts the French economy to grow just 0.2 percent in 2012, below the government's forecast for a 0.3 percent expansion.
Spanish
Economy Minister Luis de Guindos on Thursday insisted that his country
does not need a bailout, despite rumors that the troubled euro member
may request European aid as soon as this weekend.
The minister's
remarks came a couple of days after Prime Minister Mariyano Rajoy denied
reports that Spain is planning to seek a bailout at the upcoming
meeting of Eurozone finance ministers on October 8.
Greece will
run out of cash in November without the next tranche of bailout fund,
Prime Minister Antonis Samaras said in an interview with German business
daily Handelsblatt.
According to an interview published by the
business daily on Friday, Samaras said the European Central Bank should
consider accepting lower interest rates on Greek debt holdings or
rolling over its debt holdings to give more time.
The International Monetary Fund has no fixed timeline for the troika report on Greece, IMF External Relations Department Director Gerry Rice said Thursday.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 1.78 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.94 percent.
The DAX of Germany rose by 1.27 percent and the CAC 40 of France advanced by 1.64 percent. The FTSE 100 of the U.K. climbed by 0.74 percent and the SMI of Switzerland gained 0.66 percent.
In Frankfurt, Air Berlin
gained 0.58 percent. Germany's second-largest airline, reported a
decline in passenger numbers and capacity for the month of September,
following its earlier decision to reduce capacity and fleet with a view
to bringing the company back to profitability.
Volkswagen climbed by 2.44 percent, BMW rose by 2.02 percent and Daimler gained 2.16 percent. Gerresheimer declined by 4.57 percent, after Cheuvreux reduced its rating on the stock.
In Paris, Sanofi rose
by 1.87 percent. The company reported clinical trial results which
showed that its diabetes drug, Lantus, is three times more likely to
maintain targeted blood sugar levels than standard care.
Societe Generale finished higher by 3.73 percent. BNP Paribas increased by 3.54 percent and Credit Agricole added 1.85 percent.
Bouygues lost 1.41 percent, after a broker downgrade. UBS added Air Liquide to its 'Least Preferred List." The stock finished higher by 0.80 percent.
In London, mining stocks turned in a strong performance. Eurasian Natural Resources climbed by 5.91 percent and Kazakhmys gained 4.46 percent. Vedanta Resources rose by 3.47 percent and Rio Tinto added 2.19 percent.
Barclays increased by 2.38 percent, Royal Bank of Scotland added 1.42 percent and HSBC rose by 1.18 percent.
Burberry finished higher by 2.80 percent, after Morgan Stanley upgraded it to "Overweigh" from "Equal weight."Experian climbed by 1.52 percent, after Credit Suisse upgraded its rating on the stock to "Outperform" from "Neutral."
Energy services company John Wood Group
said it continues to deliver good growth and is still confident of
achieving full-year performance in line with expectations. The stock
closed up by 2.77 percent.
Telecom Plus gained 2.29 percent. The
company expects first-half pre-tax profits and earnings per share firmly
ahead of last year.
KCOM Group sank by 6.64 percent,
after warning of macro-economic uncertainty in the second half. Givaudan
rose by 1.76 percent in Zurich. UBS added the stock to "Most Preferred
List'' in European chemicals.
Germany's factory orders declined
more than expected in August on weak domestic orders, suggesting that
the economy gained only limited support from private consumption. Orders
fell 1.3 percent from a month ago, when it rose 0.3 percent, the
Federal Ministry of Economics and Technology reported Friday. Bookings
were forecast to decline by 0.5 percent.
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| US Market Report |
Stocks Give Back Ground But Remain Mostly Positive
Stocks
remain mostly higher in mid-day trading on Friday, although buying
interest has waned from earlier in the session. While a positive
reaction to the monthly jobs report helped to drive stocks higher,
lingering economic uncertainty has limited the upside for the markets.
After
moving notably higher earlier in the session, the major averages have
given back ground but remain in positive territory. The Dow is up 53.07 points or 0.4 percent at 13,628.43, the Nasdaq is up 2.72 points or 0.1 percent at 3,152.18 and the S&P 500 is up 4.41 points or 0.3 percent at 1,465.81.
The
early strength on Wall Street came on the heels of the release of the
Labor Department's monthly employment which, which showed that continued
job growth pushed the unemployment rate down to its lowest level in
well over three years.
The report showed that employment
increased by 114,000 jobs in September, roughly in line with the
increase expected by economists.
Job growth in the previous month
was much strong than previously estimated, with employment rising by
142,000 jobs in August compared to the addition of 96,000 jobs
originally reported.
The continued job growth pushed the
unemployment rate down to 7.8 percent in September from 8.1 percent in
August. With the drop, the unemployment fell to its lowest level since
January of 2009.
The notable drop by the unemployment rate came as the volatile household survey said total employment rose by 873,000 jobs in September compared to the addition of 418,000 people to the workforce.
Peter Boockvar,
managing director at Miller Tabak, said, "Bottom line, the largest
increase in the household survey since 2003 is the main focus of the
markets due to the drop in the unemployment rate that it caused, thus
putting aside the lackluster gain in private sector payrolls for the 2nd
straight month."
Despite the strength in the broader markets,
shares of Zynga (ZNGA) have come under pressure after the online video
game company cut its full-year guidance. Zynga is currently posting an
18.4 percent loss.
Sector News
Housing stocks are
turning in some of the market's best performances in mid-day trading,
with the Philadelphia Housing Sector Index up by 1.7 percent. With the
gain, the index is poised to end the session at its best closing level
in almost five years.
Standard Pacific (SPF) and PulteGroup (PHM) are leading the housing sector, advancing by 3.3 percent and 2.3 percent, respectively.
Considerable strength has also emerged among trucking stocks, as reflected by the 1.6 percent gain being posted by the Dow Jones Trucking Index. The gain has lifted the index to its best intraday level in well over two months.
Defense, chemical, and railroad stocks are also posting notable gains on the day, while most of the other major sectors are showing more modest moves to the upside.
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| Broker tips |
Tesco, IMI, WS Atkins
The strategic problems at Tesco are getting worse, according to Investec, which still recommends to sell shares in the supermarket giant.
Investec said that Tesco's strategy needs a "major overhaul". The
broker has kept its 295p target on the shares, saying that the risk
remains on the downside.
Jefferies has reiterated its 'hold' rating and 930p target for engineering group IMI, saying that while it is a good business, there's still work to be done to satisfy 'near-term concerns'.
The broker explained: "Management are targeting 75% of sales in their
sweetspot (currently 55%) by 2017, and £20m of incremental year-on-year
investment maybe required over that period.
"Whether or not
the group will be spending £100m on this investment by 2017 clearly
depends on the progress they are making with the top line. We believe
they will have to manage this carefully in the near-term, especially
given the possibility of markets remaining challenging in the
near-term."
Shares in engineering and design consultancy WS Atkins were hit on Friday on concerns about the company's involvement in the high-profile West Coast franchising fiasco.
"Rail has accounted for c10% of group revenue and headcount in recent
years. It has been involved in a number of high-profile schemes so we do
not believe that this particular project will have a significant
negative financial impact," Brown said.
"The bigger hit is
likely to be on share price sentiment. This follows the uncertainty
created by Peter Brown and the cautious Q1 update."
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