London close: Stocks dampened by global growth concerns
Market Movers
- techMARK 2,145.98 -0.70%
- FTSE 100 5,841.74 -0.50%
- FTSE 250 11,974.63 -0.72%
- Miners fall on global growth concerns
- Supermarkets perform well after broker comments
- World Bank cuts Chinese growth forecasts
Cyclical stocks suffered falls on Monday as growing uncertainty about
the Eurozone and concerns over global growth dampened the mood.
"Stocks traded lower today as investors risk appetite faded ahead of the US corporate earnings season,"
said market analyst Craig Erlam from Alpari. Aluminium giant Alcoa
kicks off results announcement after the close this evening.
Erlam said: "There is also growing fears in the Eurozone that progress
is not being made quickly enough to have any impact in the shorter term.
Spain has still shown no signs of requesting a bailout and Greece look no closer to agreeing another round of cuts with the Troika in order to receive the next tranche of the bailout."
Eurozone Finance and Economic Ministers are meeting in Luxembourg today
to discuss the region's top issues with Madrid and Athens at the top of
the agenda. European Central Bank (ECB) governing council member Jorg
Asmussen was cited over the weekend as saying that Greece cannot be
given more time by the ECB to meet its commitments as that would amount
to state financing.
A gloomy outlook from British Chancellor of the Exchequer George Osborne
also helped to weigh on sentiment today. Speaking at the Conservative
Party conference in Birmingham today, he said: "the future prosperity of
our country the stability of Europe is in question in a way it has not
been before in my lifetime."
The World Bank cut its
2012 growth estimate for China from 8.2% to 7.7%, saying that the
economy has been hit by weak export demand and investment growth.
"China's slowdown this year has been significant, and some fear it could
still accelerate," the World Bank said.
This follows the leaked estimates of the International Monetary Fund
(IMF) forecasts last week. The IMF is expected to announce tomorrow
that it has revised down its global growth expectations for this year
and the next.
FTSE 100: Miners drop as supermarkets gain
Steel giant Evraz
was a heavy faller after Nomura revised its steel demand growth
forecast from 3% to 0% for 2013, saying that it expects "further
weakness" in the sector. "We expect continued weakness in the sector as
investors are unlikely to buy the equities into what is already expected
to be a challenging 3Q results season," the broker said. Mining peers Vedanta, ENRC and Kazakhmys were also firmly out of favour.
Xstrata
also finished lower on reports that employees at its Eland platinum
mine in South Africa are on an "illegal strike". According to Reuters, a
company has said that the strikes begun last Friday and operations are
running on a skeleton staff.
Supermarket giants Tesco, Sainsbury and Morrisons
were among the few stocks to finish in the blue today after Panmure
Gordon said that the food retail sector is in for a re-rating "as it
becomes investable again". The broker said that it expects "significant,
unstoppable strategic changes to unfold over the next six to 12 months
in the food retail sector".
BP finished flat after
announcing that it is selling its Texas refinery and associated assets
to American peer Marathon Petroleum for a total of $2.5bn, as it
continues to reposition its business in the US.
Shares in BAE Systems
were slightly lower after its largest shareholder Invesco (which owns
13.3%) highlighted "significant reservations" it has about the group's
potential merger with aerospace giant EADS.
Imperial Tobacco
was trading lower after Nomura downgraded its rating on the stock from
'neutral' to 'reduce' as part of its sector review on the European
tobacco sector.
FTSE 250: Cookson drops on slowdown concerns; Halfords jumps
Cookson,
which provides materials and know-how to the steel production, foundry
castings and eletronics markets, has warned on full-year profits after a
sticky third quarter for its Engineered Ceramics division. Investec
said this morning that 10% downgrades to consensus earnings estimates
are now likely.
Halfords was continuing its impressive
rise after HSBC hiked its target for the stock from 215p to 330p,
keeping its 'neutral' rating. The share price is now up over a fifth
over the last week after announcing on Thursday that it had appointed
former Pets at Home CEO as its new frontman and full-year profits will
be at the top end of guidance.
Bacon and sausage supplier Cranswick
was lower after saying that sales were up just 5% in the first half as a
whole, down from the 7.4% growth seen in the first three months of the
year.
FTSE 100 - Risers
Morrison (Wm) Supermarkets (MRW) 283.90p +2.05%
Hargreaves Lansdown (HL.) 672.00p +0.90%
Carnival (CCL) 2,376.00p +0.68%
Tesco (TSCO) 317.35p +0.63%
BG Group (BG.) 1,308.00p +0.58%
Sainsbury (J) (SBRY) 355.00p +0.51%
Babcock International Group (BAB) 969.00p +0.47%
Pennon Group (PNN) 733.50p +0.34%
Unilever (ULVR) 2,327.00p +0.30%
Intertek Group (ITRK) 2,749.00p +0.29%
FTSE 100 - Fallers
GKN (GKN) 216.90p -4.15%
Evraz (EVR) 244.70p -3.70%
Melrose (MRO) 238.40p -3.25%
Croda International (CRDA) 2,290.00p -3.09%
BT Group (BT.A) 226.90p -3.03%
Vedanta Resources (VED) 1,068.00p -3.00%
Amec (AMEC) 1,113.00p -2.54%
Weir Group (WEIR) 1,806.00p -2.48%
Barclays (BARC) 222.35p -2.41%
IMI (IMI) 948.00p -2.37%
FTSE 250 - Risers
Halfords Group (HFD) 314.60p +3.97%
Oxford Instruments (OXIG) 1,390.00p +2.73%
Dixons Retail (DXNS) 21.53p +2.62%
Victrex (VCT) 1,411.00p +2.25%
Telecity Group (TCY) 957.00p +1.92%
Perform Group (PER) 436.00p +1.73%
Ted Baker (TED) 935.00p +1.52%
COLT Group SA (COLT) 120.70p +1.51%
Diploma (DPLM) 497.90p +1.43%
Rank Group (RNK) 151.40p +1.27%
FTSE 250 - Fallers
Cookson Group (CKSN) 539.00p -12.36%
Morgan Crucible Co (MGCR) 257.80p -7.76%
Lonmin (LMI) 516.50p -5.92%
Cranswick (CWK) 745.00p -5.87%
Yule Catto & Co (YULC) 167.40p -5.26%
Bodycote (BOY) 391.00p -4.89%
Ocado Group (OCDO) 65.60p -4.51%
Homeserve (HSV) 219.20p -4.45%
Hays (HAS) 75.20p -4.39%
IP Group (IPO) 119.40p -4.33%
| Europe Market Report |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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Weidmann (ECB): Monetary policy cannot address causes of debt crisis
-Buba´s Dombret believes IMF over-emphasizes role of monetary policy in crisis
-ECB says further major labour and product market reforms needed
-Asmussen (ECB): Calm on financial markets is deceptive
-Asmussen (ECB): Cannot give Greece more time
-Spanish 10 year bond yields up 3bp to 5.71%
FTSE-100: -0.50%
Dax-30: -1.44%
Cac-40: -1.46%
FTSE Mibtel: -1.98%
Ibex 35: -1.80%
Stoxx 600: -0.98%
Shares
have finished at their worst levels of the day as investors keyed in on
the prospects for economic growth and company profits world wide. Not
to be missed in that regard, Alcoa will kick-off the US quarterly
earnings season tomorrow.
Also contributing to the
above is the fact that in its semi-annual World Economic Outlook (WEO)
–which is slated for release tomorrow- the International Monetary Fund (IMF) is
expected to cut its forecast for world growth. This as some observers
worry that “global rebalancing” is proceeding too slowly.
In the same vein, much was made this morning of the fact that the World Bank has
cut its growth forecast for economic growth in “developing East Asia”
this year to 7.2% from 8.3% in 2011, its slowest pace since 2011 and
below the 7.6% forecast in May. Although similar downwards revisions for
growth in China were announced by the Asian Development Bank last
Wednesday investors chose to focus on market commentary regarding the
risks for a further slowing down in economic activity.
Of more immediate concern, investors were closely watching events in Greece and Spain.
More specifically, European Central Bank (ECB) governing council member
Jorg Asmussen was cited over the weekend as saying that Greece cannot
be given more time –by the central bank- to meet its commitments, as
that would amount to state financing (although Eurozone states do have
that option at their disposal).
Meantime, Merkel’s
chief spokesman, Steffen Seibert, reiterated that Greece must implement
the measures agreed with the IMF and EU within the established
timelines.
As if all of the above were not enough,
the Financial Times´ Wolfgang Munchau wrote today that Spain may well
follow in Greece´s footsteps as excessive austerity weighs on growth,
creating a negative feed-back loop.
That comes before German Chancellor Angela Merkel visits Greece tomorrow.
Greek banking M&A dominates headlines
Greek lenders National Bank of Greece and Eurobank Ergasias led gains this morning on reports of a possible merger.
From
a sector stand-point, and on the corporate front, the worst performance
was to be seen in the following industrial groups within the DJ Stoxx
600: Automobiles (-2.47%), Banks (-1.65%) and Construction (-1.36%).
German industrial production ahead of forecasts, but flat GDP expected
German industrial production fell by 0.5% month-on-month in August (Consensus: -0.6%). However, economists at Barclays Research had
this to say: "Today’s release, despite being better than expected,
mirrors the decrease in German factory orders in August as well as the
current deterioration of sentiment at a global level. Data in the coming
months will be crucial in order to access how well the German economy
is able to weather the generalised slowdown in activity and trade
expected in H2 12. We continue to forecast a flat reading for GDP in
Q3."
The Sentix survey of Eurozone investors´ confidence
has come in at -22.2 for November (Consensus: -20.9), versus -23.2 for
the month before.
The Swiss consumer price index
for the month of September has come in at -0.4% year-on-year, as
expected, and above last month´s reading of -0.5%.
The
French central bank´s business confidence index for the month of
September has come in at 92 points, versus 93 for the previous month
(Consensus: 91).
The German trade surplus for the
month of August rose to €16.3bn; ahead of the €15.3bn forecast by the
consensus, that on the back of a 2.4% month-on-month increase in exports
(Consensus: -0.5%).
Germany´s current account surplus on the other hand fell back towards €11.1bn in August, versus the €11.7bn seen in July.
Swiss unemployment remained unchanged at 2.8% in September.
Slight retreat in the single currency
The euro/dollar is now down by 0.47% to 1.2972.
Front month Brent crude futures are falling by 0.313 dollars to the 111.67 dollar mark on the ICE.
| US Market Report |
US pre-open: Global growth fears to weigh
Concerns about the global economy look set to weigh on US equities.
The World Bank has cut its 2012 growth estimate for China from 8.2% to
7.7%, saying that the economy has been hit by weak export demand and
investment growth. "China's slowdown this year has been significant, and
some fear it could still accelerate," the World Bank said.
This follows the leaked estimates of the International Monetary Fund
(IMF) forecasts last week. The IMF is expected to announce tomorrow that
it has revised down its global growth expectations for this year and
the next.
Car maker General Motors (GM) has added to
the air of gloom by revealing that its sales in September in China grew
at the slowest rate in eight months. Deliveries of GM cars and mini-vans
in the People's Republic rose 1.7% in September.
Social network giant Zynga could come under selling pressure early on after its downbeat trading update on Friday.
One bright spot could be media streaming firm Netflix which has been upgraded by Morgan Stanley to "overweight" from "equal weight".
Judging by spread betting quotes, the Dow Jones 30-share index could
open 50 points lower and the broader-based S&P six points easier.
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| Broker Tips |
Seymour Pierce has reiterated its 'hold' rating and 1,200p target price for luxury brand Burberry ahead of the group's pre-close trading update for the second quarter on Thursday.
"While
other luxury players have also spoken about a slowdown, there is
concern from some quarters that there is a brand issue and management
has pushed some of its prices too high," analyst Kate Calvert said.
"Ultimately,
this slowdown is nothing like the brick wall that impacted the sector
in 2008 when the financial crisis hit. Indeed, Burberry is in a much
stronger position, brand and infrastructure wise, to react to a slowdown
given recent systems investment so is unlikely to have the same stock
issues. However, we can not see Burberry’s shares performing until there
is better news on demand."
Panmure Gordon has retained its 'buy' rating and 163p target price for FTSE 250 mining group Aquarius Platinum (AQP),
but says that Monday's change in leadership presents a 'further
challenge for the company already facing difficult market conditions'.
Analyst
Alison Turner said that the company must "navigate the current
precarious labour relations environment and the pressures on its balance
sheet in the absence of a CEO".
Shares in Cookson sank
on Monday after the materials science group warned about weaker trading
in the Engineered Ceramics division, which will lead to consensus
downgrades, according to Investec.
"Ahead of a
conference call that could bring greater clarity, we estimate that
consensus EPS estimates are likely to fall by over 10% (but maybe by
less than 15%), which is likely to have a negative impact on valuation,"
the broker said. |
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