London close: Footsie rallies on US budget hopes
Market Movers
- techMARK 2,050.22 +1.43%
- FTSE 100 5,737.66 +2.36%
- FTSE 250 11,744.79 +1.45%
- Obama confident that 'fiscal cliff' will be dealt with
- Markets await Eurogroup meeting on Greece
- Banks and miners surge on increased risk
Stocks rallied on Monday after hitting a four-month low the previous
session on the back of increased hopes that the US can tackle the 'fiscal cliff' and sustain economic growth early next year.
The benchmark FTSE 100 finished at 5,606 on Friday, its lowest closing
price since July 26th when it closed at 5,573. Today, the index rose
2.36%, or 132 points, to 5,738.
Banks and mining stocks
were leading the risers in London today as risk appetite increased.
Just four stocks on the Footsie finished the day in the red.
Speaking to reporters in Bangkok yesterday, President Barack Obama
said: "I am confident we can get our fiscal situation dealt with." This
follows discussions between key members of Congress on Friday which
were labelled by all sides as "constructive".
"Europe's
markets have rebounded strongly today in the wake of the positive and
constructive noises coming out of the US with respect to a resolution on
the fiscal cliff question," said analyst Michael Hewson from CMC
Markets.
Nevertheless, he said: "Despite the rally seen today,
as with Friday's sharp sell-off, this rally also needs to be taken with
a pinch of salt, given that a lot of obstacles still remain with
respect to a final solution, not only in the US, but also in Europe, and
a solution to Greece's debt sustainability."
Investors were riding on hopes for a deal to be reached at Tuesday's extraordinary Eurogroup meeting so that Greece would receive the next tranche of its bailout programme.
However, Marianne Kothe, spokesperson for Germany's Finance Ministry,
told the German press that a decision on Greece's aid is not expected to
be made by Tuesday.
FTSE 100: Banks benefit from increased risk appetite
Global lender HSBC
rose after confirming press speculation that it is mulling a sale of
its minority stake in Chinese insurance giant Ping An Insurance. HSBC
holds a 15.57% stake in Ping An, China's second-largest insurance firm
by assets, which is worth an estimated $9.5bn. The stock was also given a
lift by Invtestec which raised its rating on the shares to 'buy' this
morning, saying that the downgrade cycle could finally be over.
Sector peer Barclays was performing well after Goldman Sachs upgraded its recommendation to 'buy'. Meanwhile, Lloyds
was making gains after announcing that it is selling a portfolio of
Irish commercial real estate loans as part of its strategy to de-risk
its balance sheet and reduce its non-core assets.
Resource stocks were also in demand today with ENRC, Randgold, Kazakhmys, Vedanta and EVRAZ putting in a good performance. Oil giant BP
was also a high riser on reports that it is considering a share
repurchase programme of around $4bn after it banks the proceeds of the
TNK-BP sale to Rosneft.
Financial services giant Old Mutual
was in demand after snapping up a majority stake in Latin American AIVA
Business Platforms in an effort to strengthen its distribution
capability in selected emerging markets.
Temporary power and temperature control giant Aggreko gained after winning a $75m contract in Cte d'Ivoire to provide short-term power supply.
Cruise operator Carnival
continued to rise after announcing Friday that it will be paying 50 US
cents a share to investors next month as a special dividend, in
additional to the previously-announced regular quarterly payout of $0.25
per share.
Quality and safety testing group Intertek
was among the few fallers after admitting that revenue growth slowed
down from 29.9% in the first half to 20.1% during the 10 months to the
end of October.
Security services firm G4S was also
lower after Credit Suisse downgraded its rating on the stock from
'outperform' to 'neutral'. Following the third-quarter IMS and the
announcement on UK prison outsourcing, the broker has cut its 2012-2014
earnings per share estimates by 2-7% for the firm.
FTSE 250: Ocado soars after finding more time and money
Online grocer Ocado
jumped after saying it had secured more time to pay off debts and would
raise 35.8m through a placing of shares. The firm said it would use the
extra time and money to increase its ranges, improve the customer
experience and go on a marketing drive.
Platinum miner Lonmin
was following close behind on continuing optimism after shareholder
Xstrata announced that it would take part in the firm's upcoming capital
call.
Siberian explorer RusPetro rose after reporting that increased oil production led to a 22% jump in revenue in the third quarter.
Outsourcing group Mitie was out of favour after seeing a decline in margins and profits in the first half, despite a 5.6% increase in revenue.
FTSE 100 - Risers
Barclays (BARC) 249.75p +6.64%
ARM Holdings (ARM) 747.00p +5.06%
Eurasian Natural Resources Corp. (ENRC) 272.10p +4.82%
Randgold Resources Ltd. (RRS) 6,655.00p +4.80%
Vedanta Resources (VED) 1,083.00p +4.54%
Kazakhmys (KAZ) 684.00p +4.51%
Burberry Group (BRBY) 1,214.00p +4.30%
Petrofac Ltd. (PFC) 1,553.00p +4.02%
HSBC Holdings (HSBA) 618.30p +3.78%
Evraz (EVR) 226.80p +3.75%
FTSE 100 - Fallers
Melrose (MRO) 206.90p -0.96%
G4S (GFS) 242.40p -0.70%
Pennon Group (PNN) 598.00p -0.25%
Shire Plc (SHP) 1,727.00p -0.12%
Intertek Group (ITRK) 2,836.00p 0.00%
Smith & Nephew (SN.) 641.50p +0.16%
Serco Group (SRP) 552.00p +0.36%
Reed Elsevier (REL) 605.00p +0.41%
Morrison (Wm) Supermarkets (MRW) 257.50p +0.51%
Rexam (REX) 432.90p +0.53%
FTSE 250 - Risers
Ocado Group (OCDO) 75.00p +23.86%
Lonmin (LMI) 515.00p +9.27%
Ferrexpo (FXPO) 213.70p +7.93%
Talvivaara Mining Company (TALV) 112.20p +6.15%
Essar Energy (ESSR) 126.10p +5.97%
London Stock Exchange Group (LSE) 987.00p +5.45%
Hochschild Mining (HOC) 493.00p +4.58%
Afren (AFR) 136.20p +4.45%
Fidessa Group (FDSA) 1,364.00p +4.36%
Hunting (HTG) 746.50p +4.26%
FTSE 250 - Fallers
Dunelm Group (DNLM) 641.50p -4.25%
Mitie Group (MTO) 280.00p -3.45%
Supergroup (SGP) 617.50p -3.29%
Raven Russia Ltd (RUS) 63.10p -2.62%
Stobart Group Ltd. (STOB) 108.40p -2.25%
Kenmare Resources (KMR) 33.90p -1.17%
Homeserve (HSV) 223.00p -0.89%
New World Resources A Shares (NWR) 233.00p -0.85%
Cranswick (CWK) 760.00p -0.72%
Menzies(John) (MNZS) 580.00p -0.68%
| Europe Market Report |
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Europe midday: Stocks bounce back sharply
-Diplomacy to avoid escalation in Gaza increases
-German economic outlook to worsen as year ends -Buba
-Germany says extra time to negotiate EU budget a possibility Bbg
-Holland says not to expect final decisions on Greece tomorrow -Bbg
-Spanish banks' bad loan ratio rose to 10.7 per cent in August from 10.52 per cent
FTSE-100: 0.99%
Dax-30: 1.61%
Cac-40: 1.68%
FTSE-Mibtel 30: 1.45%
Ibex 35: 0.82%
Stoxx 600: 1.31%
European equities are now bouncing back further, at the start of what
is to be a holiday shortened week Stateside, due to the Thanksgiving Day
celebrations.
Helping markets move higher today is a bevy of
positive news. Chief amongst these, over the weekend leading US
lawmakers waxed optimistic that a deal on avoiding the fiscal cliff will
be reached.
Furthermore, speaking to German broadcaster ARD the country's Finance Minister, Wolfgang Schaeuble,
indicated that an agreement on giving Greece access to the next tranche
of aid will be reached tomorrow. As well, and contrary to earlier
remarks, "he now appears to be open to adding about EUR 14 billion over
the next two years to the funds already committed to Greece, to close
the financing gap up to 2014," added economists at Barclays Research.
For her part, nevertheless, International Monetary Fund (IMF)
managing director Christine Lagarde said she will push for a permanent
solution to Greece's debts so as to avoid prolonged uncertainty.
Acting as a backdrop, the latest news reports point to increased
diplomatic activity aimed at avoiding an escalation in the recent
clashes between Israel and Palestinians in Gaza.
Santander will invest in Spanish "bad bank"
Shares of SAS AB are flying high after Scandinavia's largest airline got the backing of the majority of its unions for a cost-cutting plan.
Shares in German construction group Hochtief
are moving higher after the company announced the possible exit of its
Chief Executive officer, Frank Stieler, from the executive board, which
may herald an imminent move by parent company ACS to take over the
entire firm.
Spain's Santander is planning to invest in
the country's so-called "bad bank," which constitutes a positive sign
for the country's financial system.
Spanish oil major Repsol
hopes to reach an agreement with the Argentinian government regarding
compensation for the nationalisation of Repsol's YPF subsidiary,
according to published reports on Sunday.
ING is moving up by 2% after the commission extended the company's deadline to sell its insurance businesses.
From a sector stand-point the best performance is now to be seen in the
following sectors within the DJ Stoxx 600: Automobiles (2.88%), Banks
(2.23%) and Construction&Materials (1.95%). Foreign orders for Italian goods drop sharply
Italian industrial orders fell by 4% in September (Consensus: -1%),
after a decrease of 0.7% in the previous month, led by a 7.4% fall in
foreign orders.
Eurozone construction output fell by 1.4% month-on-month in September, after an 0.6% fall in the previous month. Crude rises on tensions in Gaza
The euro/dollar is now rising by 0.20% to the 1.2770 dollar mark.
Front month Brent crude futures are up by 0.928 to the 109.97 dollar mark on the ICE.
| US Market Report |
US pre-open: Stocks bounce back on supposed optimism
The
main US equity market averages are now being called to open higher by
1% on average, on the back of remarks by President Obama, last night,
regarding his optimism over on-going debt talks with Republicans in both
the House and the Senate.
Similarly, the news-flow coming out of the Eurozone today seems to have taken a turn for the better.
Of interest, the combination of falling stocks and rising profits as
the economy recovers has left the S&P 500's price-earnings ratio
below the ending level of eight of the nine bull markets since 1962 and
beneath the average of any since Ronald Reagan was in power, Bloomberg is reporting.
Meantime, and in stock specific news, Intel Chief Executive Officer Paul Otellini has announced his departure.
Cisco Systems will acquire Meraki for $1.2bn.
The latest quarterly results out from the likes of Lowe's have come in ahead of analysts' consensus forecasts.
Existing home sales data for the month of October is due to be released
at 3PM, along with the latest reading on the NAHB's housing market
index.
Front month West Texas crude futures are now rising by 1.7% to the $88.40 per barrel mark on the NYMEX.
10 year US Treasury yields are now 3 basis points higher, at 2.77%
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| Broker Tips |
Broker tips: HSBC, Serco, Ocado
Investec has upgraded its rating for global banking giant HSBC from 'hold' to 'buy', saying that the downgrade cycle could finally be over.
Investec has raised its target for the stock from 590p to 630p. "From here, we expect outperformance versus Lloyds ('sell') and RBS ('sell')."
Credit Suisse has lowered its recommendation for outsourcing group Serco from 'outperform' to 'neutral', highlighting limited upside for the stock.
The broker said that it has been prompted to reduce its rating "given
lower near-term visibility, a temporary moderation in Serco's organic
recovery and a 28% price-to-earnings ratio re-rating (on 2013 estimates)
in the year to date."
Jefferies labels Ocado's newly announced refinancing as a good move, though it has kept its 'hold' rating and 80p target for the stock.
The broker said that the extension of debt facilities and the placing
are a "good defensive move" and the news that trading momentum has
improved "is also of some comfort". However, a more positive fundamental
call on the stock still feels premature.
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