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Stocks end flat after BoE and ECB decisions
Market Movers
techMARK 2,150.84 +0.40%
FTSE 100 5,827.78 +0.03%
FTSE 250 11,954.42 +0.69%
The
Footsie swung between gains and losses for most of Thursday’s session
but finished the day broadly flat following a busy day on the global
economic calendar, which saw policy decisions in the UK and Europe, a
news conference with Mario Draghi and some better-than-expected economic
figures from the US.
At midday, the Bank of England’s
Monetary Policy Committee (MPC) maintained the Bank Rate at 0.5% and the
asset purchase programme at £375bn. The decision was more or less as
expected, though many analysts are expecting the Bank to embark on
further easing and possibly a rate cut in November.
The European Central Bank
(ECB) also remained in ‘wait-and-see’ mode this afternoon, leaving its
key interest rate at 0.75% after it was cut by 25 basis points earlier
in the year. In the following press meeting with ECB President Draghi,
he said the "euro is irreversible" and explained that last month’s
decision to announce a bond-buying programme will act as an effective
backstop for the Eurozone.
Analyst Craig Erlam from Alpari
said this afternoon: “It’s very difficult to argue with this point, all
you have to do is look at the borrowing costs of the peripheral
countries to see that investors are much more comfortable with the
situation in the Eurozone than they were a few months ago.”
Stateside,
initial weekly jobless claims increased to 367,000 last week, more than
the 363,000 recorded the week before but under the 370,000 expected by
the consensus. Factory orders fell by 5.2% in August, the second fall in
three months, according to the Commerce Department. This was better
than the 5.9% decline forecasted.
In Eurozone news, Spain's Treasury
sold €3.99bn in two-, three- and five-year debt, the top end of its
targeted range. While bid-to-cover ratios fell across all maturities, so
did the yields on offer. Meanwhile, the Troika has said it expects the Greek economy
to contract by 5% in 2013, notably worse than the 3.8% fall in gross
domestic product (GDP) expected by Greece's own government.
FTSE 100: Retailers mixed; Tesco continues to fall
Supermarket groups Tesco and Sainsbury
were stuck in the red today after announcing interim results and a
trading update (respectively) yesterday. Both Exane BNP Paribas and
Credit Suisse reduced their target prices for Tesco’s shares today.
Retailing peers Next, Kingfisher and Marks & Spencer
were heading the other day, with Next topping the risers list on the
Footsie after an upbeat broker note from Nomura. The broker said that
cotton prices should start to benefit clothing retailers: “We believe
retailers will start to benefit from lower input costs over the next few
quarters, from a lagged benefit from the fall in cotton prices, and
also increasing productivity levels in Chinese factories.”
BHP Billiton
is among the companies talking to Petrobras about buying a stake in its
Gulf of Mexico oilfields. The miner was trading in the red today after
analysts at Morgan Stanley lowered their price target for the shares
from 2,180p to 2,100p.
Pharmaceuticals behemoth GlaxoSmithKline
gained after saying its joint venture company, Shionogi-ViiV
Healthcare, has completed an initial clinical registration package for
dolutegravir, its treatment for HIV patients.
Sweeteners and food products group Tate & Lyle
was the high riser after Credit Suisse raised its rating for the stock
from 'neutral' to 'outperform'. The broker said: "There is no easy way
to value Tate & Lyle, but it does seem to us to be a better business
for all the changes we have seen and that this is not reflected in the
share price (which is down 8% year to date versus a staples sector up
18%)."
FTSE 250: Halfords accelerates after impressive Q2
Car and bike parts retailer Halfords
jumped after appointing a new Chief Executive Officer following the
abrupt departure of David Wild in the summer, as it revealed that
full-year profits would be at the top end of guidance after a strong
second quarter.
The company expects pre-tax profit to be in
the region of £40-42m in the first half on the back of its second
quarter performance and an acceleration of operating cost investment.
The consensus estimate prior to the announcement stood at £35.8m. Both
Panmure Gordon and Seymour Pierce raised their target prices for the
shares today.
Transport company FirstGroup was firmer
following the 20.7% drop the day before after the Department for
Transport cancelled the decision to award the group the West Coast rail
franchise. UBS this morning has upgraded the stock from 'sell' to
'neutral' after yesterday's big fall, but said that there are still
"major challenges ahead". Morgan Stanley also raised its rating to
'equal weight', while HSBC downgraded to 'underweight'.
FTSE 100 - Risers
Next (NXT) 3,592.00p +2.66%
Weir Group (WEIR) 1,800.00p +2.16%
Tate & Lyle (TATE) 687.00p +1.85%
InterContinental Hotels Group (IHG) 1,669.00p +1.83%
Pearson (PSON) 1,252.00p +1.79%
Tullow Oil (TLW) 1,420.00p +1.72%
Aggreko (AGK) 2,347.00p +1.65%
Carnival (CCL) 2,350.00p +1.60%
Kingfisher (KGF) 268.70p +1.59%
Smiths Group (SMIN) 1,055.00p +1.54%
FTSE 100 - Fallers
Tesco (TSCO) 318.15p -2.99%
Xstrata (XTA) 948.30p -2.08%
Johnson Matthey (JMAT) 2,369.00p -1.99%
Lloyds Banking Group (LLOY) 38.02p -1.98%
BHP Billiton (BLT) 1,912.50p -1.57%
Morrison (Wm) Supermarkets (MRW) 280.40p -1.54%
G4S (GFS) 264.30p -1.38%
Croda International (CRDA) 2,380.00p -1.20%
CRH (CRH) 1,175.00p -1.18%
Royal Dutch Shell 'B' (RDSB) 2,200.00p -1.10%
FTSE 250 - Risers
Halfords Group (HFD) 303.50p +14.10%
Sports Direct International (SPD) 382.80p +6.33%
Bwin.party Digital Entertainment (BPTY) 116.10p +6.22%
Rentokil Initial (RTO) 87.25p +5.12%
New World Resources A Shares (NWR) 276.00p +3.72%
FirstGroup (FGP) 200.60p +3.72%
Victrex (VCT) 1,380.00p +3.68%
Imagination Technologies Group (IMG) 496.20p +3.59%
Workspace Group (WKP) 281.90p +3.37%
PayPoint (PAY) 765.00p +3.24%
FTSE 250 - Fallers
Petra Diamonds Ltd.(DI) (PDL) 113.40p -2.49%
Heritage Oil (HOIL) 186.90p -2.10%
IP Group (IPO) 118.50p -1.66%
NMC Health (NMC) 191.50p -1.64%
Afren (AFR) 139.50p -1.62%
Bovis Homes Group (BVS) 493.90p -1.32%
Euromoney Institutional Investor (ERM) 774.50p -1.27%
Kenmare Resources (KMR) 39.70p -1.12%
Essar Energy (ESSR) 118.00p -1.09%
Tullett Prebon (TLPR) 293.90p -1.08%
| Europe Market Report |
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European Markets Finished Mixed After Central Bank Announcements
The European markets
ended Thursday's session with mixed results. Investors exercised
caution ahead of the interest rate decisions by the central banks and
Friday's upcoming U.S. jobs report. Both the European Central Bank and
the Bank of England decided to leave interest rates unchanged. There was
no news with regards to the delayed bailout request from Spain.
The European Central Bank
adopted a wait-and-watch stance on Thursday while leaving euro area
interest rates unchanged, amid uncertainty regarding a Spanish request
for bailout and its fallout. The central bank of 17 nations held the
refinancing rate unchanged at 0.75 percent for a third consecutive
month, following the Governing Council meeting in Ljubljana, the capital
of Slovenia.
The decision was in line with economists' expectations. The central bank also kept its deposit rate at zero and the marginal lending facility rate at 1.50 percent.
The U.K. central bank also
refrained from a quantitative easing increase, as a slight economic
improvement eased the pressure on policymakers to expand the ongoing
stimulus at this stage.
The Monetary Policy Committee of the Bank
of England headed by Governor Mervyn King retained the size of the
quantitative easing programme at GBP 375 billion. The asset purchases,
which were last initiated in July, will continue until early November.
The European Banking Authority
(EBA) has asked banks in the European Union to hold on to more than EUR
200 billion capital buffer raised between December 2011 and June 2012,
given the still challenging market environment.
Disclosing the
final report on its EU-wide recapitalization exercise and the data on
all individual banks on Wednesday, the EBA said 27 banks with an initial
shortfall that submitted capital plans have strengthened their capital
position by 116 billion euros.
Spain successfully raised EUR 3.99
billion from bond auction on Thursday amid continuing uncertainty
whether the nation seek a bailout or not. The auction met the upper end
of the EUR 3 billion to EUR 4 billion target range, the Madrid-based
Treasury said. The average yield on the new three-year benchmark debt
rose to 3.956 percent from 3.845 percent at the prior auction on
September 20.
Portugal on Wednesday announced a number of
austerity measures, including higher tax on incomes, to help the
government achieve the deficit target in 2013, despite mounting
opposition to the ongoing fiscal consolidation efforts.
Finance
Minister Vitor Gaspar said the tax measures, which the finance ministry
termed as "enormous", included an additional 4 percent surcharge on
annual income in 2013.
The Euro Stoxx 50 index of eurozone
bluechip stocks decreased by 0.32 percent, while the Stoxx Europe 50
index, which includes some major U.K. companies, lost 0.24 percent.
The CAC 40 of France dropped by 0.14 percent and the DAX of Germany fell by 0.23 percent. The FTSE 100 of the U.K. climbed by 0.03 percent and the SMI of Switzerland gained 0.41 percent.
In Frankfurt, Deutsche Telekom declined by 4.50 percent. Deutsche Bank upgraded its rating on the stock.
Volkswagen climbed by 2.90 percent, BMW gained 3.44 percent and Daimler rose by 1.27 percent.
Gerresheimer dropped by 2.27 percent, after reporting a 25 percent drop in third-quarter profit.
In Paris, EDF fell
by 0.71 percent. The utility announced plans to recruit around 6000
people in 2013, including more than 1,700 engineers / managers to
support its development and future challenges.
Societe Generale climbed by 1.73 percent, BNP Paribas gained 0.62 percent and Credit Agricole added 1.47 percent.
In London, mining stocks were under pressure. BHP Billiton fell by 1.57 percent, Antofagasta lost 0.23 percent and Eurasian Natural Resources declined by 0.51 percent.
Energy stocks also turned in a negative performance. Royal Dutch Shell dropped by 0.85 percent and BP decreased by 1.10 percent.
Barclays rose by 1.04 percent, Royal Bank of Scotland gained 0.66 percent and HSBC added 0.87 percent.
Tate & Lyle climbed by 1.85 percent, after Credit Suisse upgraded it to "Outperform" from "Neutral."
Halfords
Group, whose new CEO Matt Davies assumed office today, surged by 14.10
percent. The automotive products retailer reported a 6.2 percent
increase in second-quarter revenues, with 5.6 percent growth in
like-for-like revenues.
Nobel Biocare dropped by 2.14 percent in Zurich, after the company issued a profit warning.
The
downturn in Germany's construction activity eased in September, helped
by an upturn in home-building, survey data from Markit Economics showed
Thursday. The Construction Purchasing Managers' Index rose to a
five-month high of 48.6 in September from 47.8 last month.
House
prices in the U.K. declined for a third consecutive month in September
and are expected to remain broadly stable over the rest of the year and
into 2013, a survey by Lloyds Banking Group's Halifax division showed
Thursday.
The house price index declined unexpectedly by
0.4 percent in September from a month ago. This was the third
consecutive monthly fall. Economists had forecast no change in prices
after a 0.5 percent drop in August.
| US Market Report |
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Stocks On The Upside Ahead Of Monthly Jobs Report
Stocks
continue to see some strength in mid-day trading on Thursday, although
buying interest has remained relatively subdued. Uncertainty about
tomorrow's monthly jobs report has helped to limit the upside for the
markets.
The major averages are currently all in positive territory, although the tech-heavy Nasdaq is up only 1.92 points or 0.1 percent at 3,137.15. The Dow is up 64.97 points or 0.5 percent at 13,559.58 and the S&P 500 is up 7.02 points or 0.5 percent at 1,458.00.
The
strength on Wall Street is partly due to a positive reaction to the
latest batch of U.S. economic data, including a report from the Labor
Department showing that initial jobless claims rose by less than
expected in the week ended September 29th.
While jobless claims
edged up to 367,000 from the previous week's revised figure of 363,000,
economists had expected jobless claims to climb to 370,000.
Peter Boockvar,
managing director at Miller Tabak, said, "Bottom line, it's encouraging
to see the pace of firing's moderate over the past 2 weeks but we'll
see tomorrow how the recent pace of hiring's are going."
A separate report from the Commerce Department
showed a notable decrease in factory orders in the month of August,
although orders actually rose when excluding a steep drop in orders in
the volatile transportation sector.
Traders have also
reacted positively to comments from European Central Bank President
Mario Draghi, who spoke following the central bank's widely expected
decision to leave interest rates unchanged.
Draghi said
the ECB is prepared to start buying government bonds and said the
decision to institute the bond buying program has helped to alleviate
tensions in euro area financial markets.
The ECB President also
said the risks to the outlook for the European economy continue to be on
the downside but said the risks to the outlook for inflation continue
to be broadly balanced.
Sector News
While many of the
major sectors are showing only modest moves in mid-day trading,
considerable strength remains visible among gold stocks. Reflecting the
strength in the gold sector, the NYSE Arca Gold Bugs Index is up by 1.8 percent.
The strength among gold stocks
comes amid an increase by the price of the precious metal, with gold
for December delivery climbing $13.70 to $1,793.50 an ounce.
Banking stocks are also holding on to strong gains, resulting in a 1.6 percent advance by the KBW Bank Index. Regions Financial (RF) and Bank of America (BAC) are turning in two of the banking sector's best performances.
Brokerage,
steel, and railroad stocks also continue to perform well, while
considerable weakness has emerged among networking stocks. The NYSE Arca Networking Index is down by 1.2 percent, falling to a nearly two-month intraday low.
Healthcare provider stocks have also come under pressure over the course of the trading day, dragging the Morgan Stanley Healthcare Provider Index down by 1 percent.
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Tate and Lyle, Halfords, FirstGroup
Credit Suisse has raised its recommendation for sweeteners and food products group Tate and Lyle from 'neutral' to 'outperform' and raised its target from 700p to 750p despite leaving its forecasts unchanged.
Credit Suisse said: "Tate has spent a few years getting its house in
order, disposing large tranches of the more cyclical/commodity earnings
and investing behind the added-value operations (now 60% of profits
versus 38% in 2007). Despite this the shares have seen no rating change,
still trading 11-12x earnings.
"Perhaps the market requires
evidence of growth to see this re-rating? Tate is investing for that
right now. Certainly it looks to us that the business is in better shape
and is being set up to deliver growth – there is rather more going on
in the business than might be apparent from the P&L."
Seymour Pierce has raised its target for car and bike parts retailer Halfords
from 300p to 340p and reiterated its 'buy' rating following the
appointment of a new Chief Executive Officer (CEO) and
better-than-expected trading in the second quarter.
The broker
said that the valuation remains undemanding - shares are trading at 9.3
times full-year earnings on new numbers - given the "profit recovery
potential of the business".
UBS has upgraded its rating for FirstGroup from 'sell' to 'neutral' following Wednesday's steep sell-off on the back of the failure to secure the West Coast franchise.
The broker said that firm needs to up investment to improve long-term
profitability and cash generation; this, along with the loss of cash
inflows from West Coast means that there is an increased risk to the
dividend. Meanwhile, the IAS 19 pension adjustment and UK Bus disposals
are also highlighted as "headwinds".
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