Markets flat despite Chinese data
Market Movers
- techMARK 2,086.89 +0.17%
- FTSE 100 5,787.30 -0.18%
- FTSE 250 11,868.15 -0.19%
UK stocks failed to rebound from yesterday's steep sell-off despite
some upbeat economic data out from China overnight, as investors
continued to digest some disappointing corporate earnings the world
over.
"Continuing weak US corporate data with several top-tier companies projecting very challenging conditions in the months ahead and news out of Spain
where Moody's downgraded several key regions to junk resulting in
higher periphery yields has many investors worried that things might be
taken a turn for the worse again, especially with no visible progress in
the past few days what an aid package for Spain is concerned," said
Markus Huber, the head of German HNW Trading at ETX Capital.
HSBC's China purchasing managers' index
(PMI) for October ticked higher to 49.1 points from 47.9 in September,
the best reading for three months. "October's flash PMI reading
continues to recover for the second month, thanks in part to a gradual
improvement in the new orders index, which picked up to a six-month
high," said Qu Hongbin, chief economist for HSBC Holdings PLC's China
arm.
Markets will also be keeping an eye on the two-day Federal Open Market Committee
(FOMC) meeting in the US which comes to a close this evening. However,
with no change neither in rates nor in the wording of the FOMC statement
expected, "most are expecting it to be a non-event", according to ETX
Capital's Huber.
"Overall short-term sentiment remains negative,
further losses today would be considered especially damaging as many
indices are near the lower band of the most recent trading range, if
these major supports are being broken more losses in the next few days
are likely with a change in the overall positive trend possible," Huber
said.
FTSE 100: BATS and IHG disappoint after Q3 updates
Cigarette and tobacco giant British American Tobacco
(BATS) was under pressure after organic revenue growth and volumes were
worse than expected in the third quarter. On a reported basis, sales
fell 1% on the back of adverse exchange rate movements. Sector peer Imperial was in demand after Goldman Sachs upgraded the shares to 'neutral'.
Holiday Inn and Crown Plaza owner InterContinental Hotels Group (IHG) saw growth in US revenue per available room (RevPAR) moderate in the third quarter as a result of a seasonal impacts.
Information services provider Experian
was pulling back following yesterday's strong rise after it said it was
increasing its stake in Brazilian credit bureau Serasa from 70% to
99.6% for $1.5bn in cash. Jefferies labelled the stock as a "core
support services holding" but downgraded its rating on the shares from
'buy' to 'hold' on valuation grounds.
Meanwhile, media giant WPP
was being weighed down after UBS cut its recommendation on the shares
to 'neutral', saying that a "macro slowdown poses a risk to
expectations".
Chip designer ARM Holdings continued to
make gains after its impressive third-quarter results yesterday.
Meanwhile, the miners were also performing well on the back of the
decent Chinese data: Kazakhmys, EVRAZ, ENRC and Vedanta were among the best performers.
FTSE 250: Home Retail gains on Argos plans
Argos and Homebase owner Home Retail
jumped after announcing its decision to close 75 Argos stores over the
next five years. "We have concluded a comprehensive business review of
Argos which highlighted a clear opportunity to transform the business
through increased investment in digital technologies," the group said.
Sportswear and accessories retailer Sports Direct slipped after saying that revenue growth had slowed from 25.3% in the first quarter to 18.0% in the second.
Bus and train group National Express
gained despite saying that third-quarter trading remained resilient,
despite increasing austerity measures, with profit on target for the
year.
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| AIM/Small Cap Report |
FTSE 100 - Risers
ARM Holdings (ARM) 653.50p +2.11%
Petrofac Ltd. (PFC) 1,554.00p +1.04%
Shire Plc (SHP) 1,780.00p +0.79%
Compass Group (CPG) 676.00p +0.67%
Serco Group (SRP) 569.50p +0.62%
Croda International (CRDA) 2,273.00p +0.58%
Sage Group (SGE) 302.70p +0.56%
BP (BP.) 435.30p +0.47%
Associated British Foods (ABF) 1,351.00p +0.45%
Burberry Group (BRBY) 1,139.00p +0.44%
FTSE 100 - Fallers
Weir Group (WEIR) 1,658.00p -2.76%
Smiths Group (SMIN) 1,030.00p -2.55%
Lloyds Banking Group (LLOY) 39.57p -1.79%
British Sky Broadcasting Group (BSY) 708.00p -1.73%
Barclays (BARC) 228.95p -1.59%
Old Mutual (OML) 170.30p -1.45%
Experian (EXPN) 1,072.00p -1.38%
ITV (ITV) 85.60p -1.33%
Royal Bank of Scotland Group (RBS) 274.30p -1.22%
Rolls-Royce Holdings (RR.) 844.50p -1.11%
FTSE 250 - Risers
Home Retail Group (HOME) 109.00p +4.71%
Daejan Holdings (DJAN) 2,952.00p +4.46%
Grainger (GRI) 108.80p +3.52%
Lonmin (LMI) 496.90p +2.22%
Cranswick (CWK) 790.00p +2.20%
COLT Group SA (COLT) 120.90p +1.77%
Ocado Group (OCDO) 65.50p +1.31%
Interserve (IRV) 366.50p +1.13%
F&C Commercial Property Trust Ltd. (FCPT) 103.00p +1.08%
Essar Energy (ESSR) 134.10p +1.05%
FTSE 250 - Fallers
Ophir Energy (OPHR) 547.50p -5.77%
Salamander Energy (SMDR) 192.40p -5.17%
Savills (SVS) 396.30p -3.34%
Fenner (FENR) 349.40p -2.46%
Hansteen Holdings (HSTN) 75.90p -2.44%
Diploma (DPLM) 446.00p -2.43%
Wetherspoon (J.D.) (JDW) 492.00p -2.19%
Jupiter Fund Management (JUP) 261.40p -2.10%
National Express Group (NEX) 202.30p -2.03%
Perform Group (PER) 430.00p -1.71% |
| FX round-up |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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Gloomy earnings lift dollar
A
string of disappointing big name earnings fuelled interest in the safe
haven qualities of the dollar on Tuesday while the euro was hit by
persistent growth fears.
Uninspiring earnings reports from companies such as Caterpillar and DuPont sparked interest in the dollar and the yen.
The dollar index, which measures the US currency against a basket of six others, rose to 79.942 from 79.654 on Monday.
Meanwhile the tumbled
to a one week low against the dollar and fell against the yen as risk
appetite faded on jitters about a global economic slowdown. Traders also
took fright at a sharp rise in Spain's borrowing costs on Tuesday
following a ratings downgrade on the nation's five regions.
The euro traded at $1.2982 from $1.3046 the previous session. Against the yen, the euro fell 0.7% to buy around ¥103.52.
The greenback traded strongly against the yen in early trading before later losing grip on momentum to trade at ¥79.84, off 0.1% on Tuesday.
However the yen is expected to come under pressure ahead of the Bank of Japan's monetary policy meeting at the end of the month when it is widely expected the central bank will ease monetary policy.
Sterling
fell against the dollar as focus turned to third quarter UK growth data
on Thursday and whether the Bank of England will announce further QE.
The UK currency tracked a weak euro as rising Spanish bond yields wiped out demand for riskier currencies.
UK Event Calendar
INTERIMS
Home Retail Group, Lombard Risk Management, Volkswagen AG
INTERIM DIVIDEND PAYMENT DATE
Interserve, Invesco Perpetual UK Small Companies Inv Trust
INTERIM EX-DIVIDEND DATE
Capital
Lease Aviation, Goals Soccer Centres, Hansteen Holdings, Harvey Nash
Group, Hunting, Marshalls, Menzies(John), Octopus VCT , Old Mutual,
Rolls-Royce Holdings, Senior, Tullett Prebon, Walker Greenbank, William
Hill
QUARTERLY PAYMENT DATE
Assura Group Ltd.
QUARTERLY EX-DIVIDEND DATE
City of London Inv Trust
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Crude Oil Inventories (US) (15:30)
FOMC Interest Rate (US) (17:15)
House Price Index (US) (15:00)
IFO Business Climate (GER) (09:00)
IFO Current Assessment (GER) (09:00)
IFO Expectations (GER) (09:00)
MBA Mortgage Applications (US) (12:00)
New Homes Sales (US) (15:00)
Q3
Lilly (Eli) & Co, Reckitt Benckiser Group, Torchmark Corp.
ANNUAL REPORT
Hargreaves Lansdown, K3 Business Technology Group
IMSS
British American Tobacco
SPECIAL EX-DIVIDEND PAYMENT DATE
Bailey (C.H.)
EGMS
3D Diagnostic Imaging
AGMS
Avingtrans, Haynes Publishing Group, Impala Platinum Holdings Ltd.
TRADING ANNOUNCEMENTS
Sportingbet
UK ECONOMIC ANNOUNCEMENTS
CBI Industrial Trends Surveys (11:00)
FINAL DIVIDEND PAYMENT DATE
Brooks Macdonald Group
FINAL EX-DIVIDEND DATE
BlackRock
Greater Europe Inv Trust, British Sky Broadcasting Group, Edge
Performance VCT 'D' Shares, Edge Performance VCT 'E' Shares, Edge
Performance VCT 'F' Shares, Edge Performance VCT G Shares, Goldplat,
Impax Asian Environmental Markets, Interior Services Group, JPMorgan
Emerging Markets Inv Trust, Mcbride, Plexus Holdings, Smiths Group,
Thorpe (F.W.), Wetherspoon (J.D.)
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| US Market Report |
Stocks Close Sharply Lower On Disappointing Earnings News
After
ending the previous session slightly higher, stocks showed a
substantial move back to the downside during trading on Tuesday. The
sharp pullback by the markets reflected a negative reaction to the
latest batch of earnings news.
The major averages all ended the
day firmly in negative territory, more than offsetting Monday's modest
gains. The Dow plummeted 243.36 points or 1.8 percent to 13,102.53, the Nasdaq slid 26.50 points or 0.9 percent to 2,990.46 and the S&P 500 plunged 20.71 points or 1.4 percent to 1,413.11.
The
sell-off on Wall Street came on the heels of disappointing earnings
news from some big-name companies, including Dow components DuPont (DD)
and 3M (MMM).
Shares of DuPont tumbled by 9.1 percent
after the chemical giant reported weaker than expected third quarter
results. The company also unveiled plans to cut about 1,500 jobs and
issued a downbeat forecast for the full year.
3M fell by
4.1 percent after reporting third quarter earnings that matched analyst
estimates but on weaker than expected revenues. The diversified
manufacturer also lowered its full-year earnings outlook.
Peter Boockvar,
managing director at Miller Tabak, said, "Central bank money printing
can only suspend reality for so long as we've seen time and again that
economic growth is not driven by ever cheaper money when deleveraging
and policy incompetence rule the day."
"At least until the
November election, the earnings story will continue to drive markets as
it has since the Monday after the FOMC EQE (endless QE) news," he added.
Not all of the earnings news was bad, however, with online media giant Yahoo (YHOO) moving notably higher after reporting better than expected third quarter results.
Continued
uncertainty about the financial situation in Europe also weighed on
stocks, with traders digesting news of a 0.4 percent contraction in
Spanish GDP in the third quarter.
On an annual basis, the Spanish economy is
estimated to have contracted by 1.7 percent in the third quarter
compared to the 1.3 percent contraction in the second quarter, the Bank
of Spain said.
The release of the data comes amid recent
indications that Spain is close to requesting an international bailout,
with uncertainty about the timing of the request adding to the
uncertainty.
Sector News
With
DuPont helping to lead the way lower, considerable weakness was visible
in the chemical sector. The Dow Jones Chemicals Index fell by 3.1
percent to its lowest closing level since early August.
Dow Chemical (DOW) and Eastman Chemical (EMN) posted notable losses along with DuPont, sliding by 4 percent and 3.4 percent, respectively.
Gold stocks
also came under significant selling pressure on the day, moving lower
along with the price of the precious metal. With gold for December
delivery falling $16.90 to $1,709.40 an ounce, the NYSE Arca Gold Bugs
Index dropped by 2.8 percent.
Similarly, energy stocks
posted steep losses amid a sharp drop by the price of crude oil. In its
first day as the front-month contract, crude for December delivery
tumbled $1.98 to $86.67 a barrel.
Most of the other major sectors
also moved to the downside on the day, reflecting broad based weakness.
Steel, biotechnology, and computer hardware stocks posted notable
losses.
On the other hand, trucking stocks managed to buck the
downtrend, resulting in a 1.7 percent gain by the Dow Jones Trucking
Index. Ryder (R) posted a standout gain after reporting better than expected third quarter earnings and raising its full-year guidance.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday. While Japan's Nikkei 225 Index and Australia's All Ordinaries Index both closed just above the unchanged line, China's Shanghai Composite Index fell by 0.9 percent.
In the bond market, treasuries moved
moderately higher amid the weakness on Wall Street. Subsequently, the
yield on the benchmark ten-year note, which moves opposite of its price,
fell by 3.4 basis points to 1.764 percent.
Looking Ahead
Trading on Wednesday could be impacted by reaction to earnings news from Facebook (FB), Netflix (NFLX), Juniper Networks (JNPR), and Broadcom (BRCM), which are among the companies releasing their quarterly results after the close of today's trading.
Additionally, AT&T (T), Boeing (BA), and Delta Air Lines (DAL) are among the companies due to release their quarterly results before the start of trading on Wednesday.
On the economic front, the Commerce Department
is scheduled to release its monthly report on new home sales.
Economists expect new home sales to climb to an annual rate of 385,000
in September from 373,000 in the previous month.
The Federal Reserve
is also due to release its latest monetary policy statement, although
the central bank is not expected to make any major announcements
following last month's decision to launch a third round of quantitative
easing.
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| Wednesday newspaper round-up |
King, FTT, Spain
The
Bank of England’s unorthodox actions to turn around the UK’s flagging
economy were reaching the limits of their effectiveness, Sir Mervyn King
has warned that Britain faces a prolonged economic adjustment. In a
bleak assessment of the economy and the ability of monetary policy to
generate a strong recovery, the Bank governor urged Britain to be
“patient” in the face of a difficult global economic adjustment, which
may force younger generations to “live under its shadow for a long time
to come”. Sir Mervyn urged banks, in particular, to recognise the need
to accept many of their pre-crisis loans would ultimately go sour. “I am
not sure that advanced economies in general will find it easy to get
out of their current predicament without creditors acknowledging further
likely losses, a significant writing down of asset values and
recapitalisation of their financial systems,” he said. Sir Mervyn warned
there were limits to the Bank’s policy of quantitative easing, under
which it prints money and injects it into the economy by purchasing
bonds: “Printing money is not .... simply manna from heaven. There are
no short cuts to the necessary adjustment in our economy,” The Financial
Times explains.
The European Commission has backed plans for 10 countries to impose a financial transaction tax (FTT),
claiming the controversial levy will “raise billions of euros of
much-needed revenue”. Jose Manuel Barroso, president of the commission,
rebuffed complaints made by other member states – most vocally Britain –
and said he was “delighted” that the group was pushing ahead with the
plan. Mr Barroso said the legal requirements and conditions had been met
and he did not believe the tax would undermine the single market if it
were imposed across limited parts of the European Union. “I am delighted
to see that 10 member states have indicated their willingness to
participate in a common financial transaction tax,” he said. “This tax
can raise billions of euros of much-needed revenue for member states in
these difficult times,” The Telegraph writes.
BNM Mare
Nostrum, and other mid-tier "Group 2" banks such as Popular, Caja 3, and
Liberbank, have little chance of tapping the markets to cover most of
their capital deficits, according to Troika officials. They are also
losing patience with the glacial pace of cuts at Bankia and other
nationalised lenders such as Catalunya-Caixa and Banco Valencia,
according to the Spanish newspaper El Confidencial. Brussels fears a
repeat of the fiasco at Bankia, which had to be rescued just weeks after
its recapitalisation plans had been approved. "We have had too many bad
experiences with financial restructuring in Spain to be sure the plans will work this time," said one official, The Telegraph reports.
BAE Systems
has pledged to stand by chairman Dick Olver and ignore attempts by its
biggest shareholder Invesco Perpetual to oust senior management
following the failure of the defence company’s merger talks with EADS.
The company claimed in a statement that Invesco’s views “differ widely”
from the majority of the company’s principal shareholders and that the
board remains “fully supportive” of the directors, The Telegraph
explains.
Royal Bank of Scotland has come under further
pressure to sell its Citizens division in the US and make more cuts to
its investment banking business. The future of Citizens was re-ignited
yesterday after it emerged there had been talks between RBS and the
agency in charge of the taxpayers’ stake. Jim O’Neil, chief executive of
UK
Financial Investments (UKFI), told MPs: “I would confirm that among
the strategic issues we have discussed with management are the US
operations and the investment bank. “The investment bank shape and size
ultimately should be smaller than it is today.” O’Neil said that all
investment banks were dealing with the capital requirements of Basel III
and he felt that most of them would consequently be smaller over time,
The Scotsman reports.
A Chinese sovereign wealth fund is set to become a landlord in the UK’s most important office market: the City of London. China Investment Corporation (CIC),
the country’s $410bn fund, is in talks to buy Deutsche Bank’s UK
headquarters for £250m. According to people close to the situation,
Invesco, the asset manager, will buy the 312,000 sq ft office block on
behalf of CIC. Invesco declined to comment. The building, which produces
an annual rent of £14.3m, is being sold by Kanam, the German open-ended
real estate fund, which was left with the property when Malaysian fund
manager Permodalan Nasional Berhad (PNB) chose not to include it in a
portfolio it acquired from Kanam earlier this year, The Financial Times
says.
At a moment when many of its crisis-hit Eurozone partners are left counting their pennies, Germany is seeking to count its gold
bars. The German Federal Court of Auditors have called on for the
country’s central bank to carry out a physical inspection of the gold
reserves it stores at foreign central banks because the precious metal
holdings have never been fully checked. Germany's Bundesbank owns nearly
3,400 tonnes of gold. Like many central banks, it stores part of its
reserves in vaults at foreign central banks, including the Federal
Reserve Bank of New York, the Banque de France and the Bank of England,
The Daily Mail reports. Yesterday, Germany’s federal auditors said in a
report to the Bundestag lower house of parliament's budget committee
that the Bundesbank should, in accordance with commercial law, negotiate
the right to physically inspect its reserves with the three foreign
central banks. That leads the newspaper to ask if Germany knows
something that we do not.
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