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Losses erased after 'optimistic' fiscal cliff comments
Comments
from US Republican Speaker of the House John Boehner about the 'fiscal
cliff' saw the FTSE 100 rally in afternoon trading to finish broadly
flat.
Markets got off to a poor start this morning after
Nevada Democrat Harry Reid said that “little progress” has been made so
far on avoiding the fiscal cliff by year-end.
However, stocks
pared losses after Boehner said that he was “optimistic that we can
continue to work together to avert this crisis sooner rather than
later.” He said that Republicans were willing to put “revenue on the
table” as long as it is accompanied by spending cuts.
Market
analyst Craig Erlam from Alpari said: “In the grand scheme of things
this comment makes very little difference to people’s perceptions, but
on a day when so little has happened in the markets, it has helped trim
earlier losses.”
Erskine Bowles, co-Chairman of Obama’s 2010
fiscal commission, had said earlier in the day that it would be unlikely
that the government will reach an agreement on the ‘cliff’ by the end
of the year.
FTSE 100: United Utilities gains after results; Burberry higher on Chinese hopes
Water and sewage services group United Utilities
made decent gains after reporting that revenue in the first half rose
from £793m to £823m as regulated prices increases offset reduced
commercial volumes and lower property sales associated with the water
business.
Luxury brand Burberry was higher after
Chinese Commerce Minister Chen Deming said that China will definitely
hit its growth target of at least 7.5% this year. The company is heavily
exposed to the Chinese market - one of its highest growth regions - and
its share price often sensitive to swings in the economic outlook for
the nation.
High Street giant Marks & Spencer also
jumped after announcing that its pension deficit at March 31st was at
£290m. "This represents a substantial reduction in deficit from £1.3bn
as at March 31st 2009," the group said. The news prompted a revival of
recent takeover talks.
Chip designer ARM Holdings moved
higher after the Daily Mail reported about a possible 1,200p bid from
US tech giant Intel. That compares with yesterday's close of 758p.
Distribution and outsourcing group Bunzl was leading the fallers after Citigroup cut its target from 1,250p to 1,190p, and kept a ‘neutral’ rating.
AMEC, Johnson Matthey, National Grid and Tate & Lyle were also registering losses today after going ex-dividend.
Medical technology group Smith & Nephew
fell after announcing that it is to buy the assets of US-based
Healthpoint Biotherapeutics for $782m in an attempt to bolster its
position in advanced wound care. Analysts at Investec said that the
acquisition takes the company into "riskier areas' where future
performance will be linked to the outcome of clinical trials.
Asset manager Schroders was lower after announcing that its Chief Financial Officer Kevin Parry would step down next year.
FTSE 250: Invensys jumps 27% after Rail disposal, capital return
Industrial technology group Invenysys
rocketed late on after saying that it has agreed to dispose of Invensys
Rail to Siemens for £1.74bn and will return £625m in cash to
shareholders. The sale will creates a “more focused industrial software,
systems and control equipment business with significant exposure to
higher margin and higher growth markets, and funds to invest in them,”
the company said.
Kenmare Resources, the titanium
feedstock miner, was down after warning that as a result of production
issues, it expects its full-year production to be lower than previous
guidance of 630,000 tonnes of ilmenite and 50,000 tonnes of zircon.
Nickel miner Talvivaara
disappointed after re-assessing its production targets following the
gypsum pond leakage which stopped operations earlier this month. The
company now expects full-year output to reach 13,000t of nickel, well
below the previous 17,000t estimate.
Insurance group Lancashire Holdings was another heavy faller after going ex-dividend.
| AIM/Small Cap Report |
FTSE 100 - Risers
United Utilities Group (UU.) 689.00p +2.99%
Burberry Group (BRBY) 1,268.00p +2.26%
Marks & Spencer Group (MKS) 386.00p +1.93%
Capita (CPI) 760.00p +1.20%
Aberdeen Asset Management (ADN) 332.10p +1.07%
ARM Holdings (ARM) 764.50p +0.86%
Kingfisher (KGF) 277.90p +0.72%
Severn Trent (SVT) 1,565.00p +0.71%
Reed Elsevier (REL) 629.50p +0.64%
Next (NXT) 3,639.00p +0.64%
FTSE 100 - Fallers
Evraz (EVR) 227.30p -5.09%
Bunzl (BNZL) 1,029.00p -4.19%
Eurasian Natural Resources Corp. (ENRC) 261.30p -3.29%
National Grid (NG.) 695.00p -2.46%
Amec (AMEC) 1,003.00p -2.43%
Polymetal International (POLY) 1,053.00p -2.41%
Lloyds Banking Group (LLOY) 45.31p -2.37%
Vedanta Resources (VED) 1,042.00p -2.25%
International Consolidated Airlines Group SA (CDI) (IAG) 166.50p -2.17%
Fresnillo (FRES) 1,938.00p -2.12%
FTSE 250 - Risers
Ultra Electronics Holdings (ULE) 1,577.00p +3.07%
TalkTalk Telecom Group (TALK) 219.10p +2.86%
New World Resources A Shares (NWR) 259.00p +2.66%
Menzies(John) (MNZS) 588.00p +2.62%
JD Sports Fashion (JD.) 718.50p +2.28%
Stagecoach Group (SGC) 281.20p +2.07%
Debenhams (DEB) 115.80p +2.03%
BBA Aviation (BBA) 207.00p +1.97%
Ruspetro (RPO) 86.50p +1.94%
Big Yellow Group (BYG) 337.90p +1.72%
FTSE 250 - Fallers
Kenmare Resources (KMR) 30.47p -8.94%
Lancashire Holdings (LRE) 785.50p -7.97%
Centamin (DI) (CEY) 55.50p -7.04%
Lonmin (LMI) 255.80p -6.98%
Talvivaara Mining Company (TALV) 93.50p -5.94%
Intermediate Capital Group (ICP) 285.80p -3.97%
Petropavlovsk (POG) 337.00p -3.88%
Dialight (DIA) 1,067.00p -3.18%
Mitchells & Butlers (MAB) 303.00p -2.92%
Dixons Retail (DXNS) 26.15p -2.79% |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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European Markets Finished Mixed On Fiscal Cliff Concerns
The European markets
have ended Wednesday's trading session with mixed results. The looming
fiscal cliff debate in the United States was a source of weakness in
early trade. Statements made yesterday by Harry Reid led many to worry
that the U.S. could potentially go over the fiscal cliff, which could
push the U.S. economy back into recession. However, the markets came off
their early lows after statements made today by John Boehner, which
helped to reassure investors that a deal can be reached.
Senate Majority Leader Harry Reid, D-Nev.,
said Tuesday that lawmakers have made "little progress" on addressing
the fiscal cliff, while his Republican counterpart Mitch McConnell,
R-Ken., accused Democrats of remaining in campaign mode. However, U.S.
House Speaker John Boehner stated today that he is optimistic that a
deal on the fiscal cliff can be reached. Boehner reiterated that
Republicans are willing to put revenues on the table, as long as
Democrats agree to spending cuts.
The European Commission on Wednesday approved restructuring plans of four nationalized Spanish banks namely Bankia, NCG Banco, Catalunya Banc and Banco de Valencia and paved the way for more aid from Eurozone.
The
approval of the restructuring plans is a milestone in the
implementation of the Memorandum of Understanding between euro area
countries and Spain, EU Competition Commissioner Joaquin Almunia said.
Today's EU approval allows Spanish banks to receive aid from the European Stability Mechanism
(ESM) in the context of the financial assistance programme to
recapitalize the banking sector. The nation was earlier given consent to
access up to EUR 100 billion from euro area's permanent bailout fund.
The European Central Bank
is ready to buy government bonds of Eurozone countries that agree to
fiscal adjustment, Executive Board member Benoit Coeure said Wednesday.
The debt deal struck by Eurozone finance ministers and the International Monetary Fund
earlier this week to stabilize the situation in Greece was the best of
all other alternatives, European Central Bank Governing Council Member
Ewald Nowotny reportedly said Wednesday.
"I believe in such a
difficult situation as we see in Greece, there are no ideal solutions,
but it is probably a solution that is better than all alternatives,"
reports said citing his interview with Austrian radio station OE1.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.22 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.21 percent.
The DAX of Germany rose by 0.15 percent and the FTSE 100 of the U.K. advanced by 0.06 percent. The CAC 40 of France climbed by 0.37 percent and the SMI of Switzerland gained 0.67 percent.
In Frankfurt, Deutsche Bank dropped by 1.90 percent and Commerzbank lost 1.17 percent. Jungheinrich decreased by 0.61 percent. Cheuvreux upgraded the stock to ''Outperform'' from ''Underperform.''
In Paris, Lafarge dropped by 1.76 percent. Berenberg downgraded the stock to ''Hold'' from ''Buy.'' UBS added Alcatel Lucent to its ''Least Preferred List'' in telecom equipment. The stock finished up by 0.11 percent.
LVMH gained 1.63 percent, after a positive broker recommendation.
In London, Smith & Nephew
fell by 1.21 percent. The company announced an agreement to acquire
Healthpoint Biotherapeutics for an all-cash offer of $782 million.
Vodafone finished up by 0.86 percent, following a broker downgrade.
Tour operator Thomas Cook reported
a wider loss for the year, as revenues dropped in an unfavorable
currency translation environment and the company incurred hefty fuel
costs. However, the company said it is optimistic about future. The stock climbed by 4.17 percent.
United Utilities
gained 2.91 percent. The water utility reported a higher first-half
profit, as revenues grew by regulated price increase. The firm said it
is on track to deliver its 2010-15 regulatory outperformance targets.
Peer Severn Trent added 1.54 percent.
Swiss Life currently
expects net profit in double-digit millions for fiscal year 2012. The
company will cut 300 to 400 jobs in Germany and Switzerland over the
next three years. The stock decreased by 1.04 percent in Zurich.
Eurozone broad monetary aggregate M3 grew at a faster pace of 3.9 percent in October from a year ago, the European Central Bank
said Wednesday. The increase follows a 2.6 percent rise in September.
The annual rate was forecast to accelerate to 2.8 percent.
Germany's
EU measure of inflation slowed in November, in line with economists'
expectations, preliminary data from Destatis showed Wednesday.
The
harmonized index of consumer prices rose 2 percent annually, following
October's 2.1 percent increase. The index, however, declined 0.1 percent
from the previous month, which also matched expectations.
New home sales
in the U.S. unexpectedly showed a modest decrease in the month of
October, according to a report released by the Commerce Department on
Wednesday, with the report also showing a substantial downward revision
to the data for September.
The report said new home sales
edged down 0.3 percent to a seasonally adjusted annual rate of 368,000
in October from the revised September rate of 369,000. The annual rate
of new home sales in September was downwardly revised from the
previously reported 389,000, which had represented a two-year high.
Economists had been expecting new home sales to inch up to 390,000 from the 389,000 originally reported for the previous month.
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Stocks Nearly Flat Amid Focus On Washington
Reflecting
the focus on developments in Washington due to the looming fiscal
cliff, stocks bounced well off their early lows following optimistic
comments by House Speaker House John Boehner. Buying interest has waned
since then, however, and the markets are nearly flat.
The major averages have moved roughly sideways in recent trading, lingering near the unchanged line. While the Dow is up 13.63 points or 0.1 percent at 12,891.76, the Nasdaq is down 2.09 points or 0.1 percent at 2,965.70 and the S&P 500 is down 0.92 points or 0.1 percent at 1,398.02.
The
early weakness on Wall Street reflected lingering concerns about the
fiscal cliff amid indications that lawmakers are encountering familiar
disagreements over taxes on the wealthy and entitlement reform.
Senate Majority Leader Harry Reid, D-Nev.,
said Tuesday that lawmakers have made "little progress" on addressing
the fiscal cliff, while his Republican counterpart Mitch McConnell,
R-Ken., accused Democrats of remaining in campaign mode.
However, stocks staged
a notable recovery following remarks by Speaker Boehner, who said he
was "optimistic" that a deal could be reached to avert the crisis.
Boehner
continued to express opposition to higher U.S. income tax rates but
once again expressed a willingness to consider increasing revenues if
accompanied by spending cuts.
"You're not going to grow the
economy if you raise tax rates on the top two rates," Boehner said.
"We're willing to put revenue on the table, as long as we're not raising
rates."
As a result of the focus on the negotiations in
Washington, traders have largely shrugged off a report from the Commerce
Department that unexpectedly showed a modest drop by new home sales in
the month of October.
The report said new home sales edged
down 0.3 percent to a seasonally adjusted annual rate of 368,000 in
October from the revised September rate of 369,000. The annual rate of
new home sales in September was downwardly revised from the previously
reported 389,000, which had represented a two-year high.
Economists had been expecting new home sales to inch up to 390,000 from the 389,000 originally reported for the previous month.
Sector News
Most
of the major sectors are showing only modest moves, contributing to the
roughly flat performance by the broader markets in recent trading.
While some strength is visible among brokerage and retail stocks, housing and computer hardware stocks have moved to the downside on the day.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 1.2 percent, while Hong Kong's Hang Seng Index fell by 0.6 percent.
In the bond market, treasuries continue to see modest strength but have pulled back well off their highs for the session. Subsequently, the yield on the benchmark ten-year
note, which moves opposite of its price, is down by 2.2 basis points at
1.623 percent after hitting a low of 1.601 percent.
| Broker tips |
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Smith & Nephew, Resolution, Compass
Investec has kept its 'hold' rating and 670p target for medical technology group Smith & Nephew following Wednesday's proposed acquisition of Healthpoint Biotherapeutics.
The broker said that the purchase is a "good fit" but raises the risk
profile of the company as a whole. "For us, whilst the acquisition is
broadly about strategy, expanding S&N’s wound business, it takes
S&N into riskier areas, with future performance linked to the
outcome of clinical trials," Investec said.
Shares in insurance giant Resolution
were in the red on Wednesday morning after UBS cut its rating on the
stock from 'buy' to 'neutral', citing a 'less compelling' valuation.
The broker said: "Resolution’s disappointing nine-month trading, EV
write-downs, UK restructuring charges, and recent share-price
performance all point to a downgrade to 'neutral'.
Jefferies has upgraded its rating for contract caterer Compass Group from 'underperform' to 'hold', saying that last week's full-year results offset some concerns.
"Compass's £400m share buyback reload, 10% dividend increase and
reiterated guidance for FY13E exudes confidence," the broker said in a
research report on Wednesday.
Broker snap: Credit Suisse singles out Rio as preferred large cap
In a report on the mining sector, Credit Suisse has singled out Rio Tinto for its growth potential, keeping its 'outperform' rating for the stock with a price target of 3,500p.
Analysts at the Swiss broker labelled Rio Tinto as the preferred large
cap company for the first half of 2013, pointing to leading growth
driven by the start-up of massive iron ore growth projects from late
2013 and recovery from its copper mines.
"Our analysis shows
that while prices are the dominant driver of overall sector performance,
volume growth is an important driver of relative stock performance,"
they explained.
Credit Suisse went on to explain that large
caps provide the best risk-reward on growth delivery and cash flows and
that "investors should remain underweight companies with low or long
dated growth and weak cash flows."
Shares of Rio Tinto were down 0.32% to 2,970p during mid-day trading on Wednesday.
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