London close: Markets pare gains as investors digest Greek deal
Market Movers
- techMARK 2,075.70 +0.54%
- FTSE 100 5,799.71 +0.22%
- FTSE 250 11,867.18 +0.20%
- Europe grants Greece more aid
- OECD cuts growth estimates
- Footsie comes off day's highs by the close
After a solid start for the Footsie following last night's Greek
bailout deal, gains were pared by the close of trade on Tuesday with
some saying that the agreement just kicks the can down the road for the
heavily indebted nation.
The FTSE 100 index finished the
session at 5,800, up 13 points on the day (+0.22%) but under the
intraday high of 5,822 reached this morning.
Eurozone finance ministers yesterday finally inked out an agreement on Greece,
giving the green light to the disbursement of the next €43.7bn bailout
tranche (€34.4bn will be issued next month and the remaining monies will
be disbursed in the first quarter of 2013).
Market strategist Ishaq Siddiqi from ETX Capital said that the deal was widely priced in
to markets given the subdued reaction. "Traders feel all EU leaders
have done here is kick the can way down the road with the measures
perhaps still not as affective to solve Greece's problems."
Similarly, the agreement was labelled a "new can-kicking world record"
by Societe Generale chief currencies strategist Kit Juckes. "The key
issue for Greece, as for the rest of the Eurozone, is the lack of
growth. Today's optimistic mood will in due course be reversed unless
someone comes along with a magic growth potion."
Also providing some downward pressure was the news that the OECD
has slashed its 2013 growth forecasts for the world's advanced
economies to 1.4%, from the 2.2% estimate in May. The OECD said that the
global economy is "expected to make a hesitant and uneven recovery over
the coming two years" and "decisive policy action is needed" in the
Eurozone and US.
Meanwhile, a barrage of broadly better-than-expected economic data Stateside
failed to give equities a boost this afternoon, with markets shrugging
off decent readings of consumer confidence, durable goods orders, retail
sales and home prices. Benchmarks on Wall Street opened more or less
flat.
FTSE 100: Banks lead the upside
Banking peers Royal Bank of Scotland, Lloyds and Barclays
were registering decent gains as investors built positions in 'riskier'
assets. RBS was benefitting from an rating upgrade by UBS to 'buy',
while Barclays Capital raised its target for both RBS and Lloyds.
In contrast, Aberdeen Asset Management was among the worst performers of the morning after Citigroup downgraded its recommendation for the stock to 'neutral'.
Pearson
shares dropped after Rona Fairhead, the Chairman and Chief Executive
Officer (CEO) of its subsidiary the Financial Times Group, announced
that she is to leave the firm next year. Fairhead, who has been with
Pearson for 12 years, is said to be pursuing "the next phase of her
career outside Pearson".
Vodafone, the telecoms giant
involved in the development of the M-Pesa service in Africa, rose after
announcing that from Tuesday 27th the service's Kenyan customers will
have access to interest bearing saving accounts and have the ability to
take out small loans through a new service, called M-Shwari.
Meanwhile, outsourcing giant Capita
rose after it said it was the preferred bidder for an educational
support services joint venture with Staffordshire County Council. The
joint venture, in which Capita will hold a majority stake, will
initially deliver a range of educational support services for schools
and academies in the Staffordshire region.
FTSE 250: Mitchells & Butlers sinks on poor outlook
Mitchells & Butlers,
the UK's largest operator of managed restaurants and pub, was unwanted
after noting it had made a slow start to the new financial year, partly
because of unseasonably warm weather in the same period in 2011.
India-focused Essar Energy was also lower as shares retreated after making strong gains on Monday on the back of a strong set of first-half results.
Broadband and communications provider KCOM
fell after reporting a slight fall in revenue and a large rise in net
debt in the first half, its first increase in net debt in four years
following seven consecutive six-month periods of reduction.
British defence-equipment maker Chemring,
which scaled back full-year profit guidance earlier this month, made
strong gains after saying that expectations for the full year remain
unchanged since its last update.
Business information and events group Informa was also higher after Morgan Stanley raised its target on the stock from 415p to 485p and upgraded it to 'overweight'.
FTSE 100 - Risers
Royal Bank of Scotland Group (RBS) 295.10p +3.51%
Capita (CPI) 751.00p +3.16%
Lloyds Banking Group (LLOY) 46.41p +2.92%
BAE Systems (BA.) 319.70p +2.47%
Aggreko (AGK) 2,235.00p +2.43%
ARM Holdings (ARM) 758.00p +2.36%
Intertek Group (ITRK) 3,023.00p +1.99%
Standard Life (SL.) 310.70p +1.50%
Barclays (BARC) 243.65p +1.31%
Tate & Lyle (TATE) 779.00p +1.30%
FTSE 100 - Fallers
Aberdeen Asset Management (ADN) 328.60p -2.20%
Pearson (PSON) 1,168.00p -1.35%
Johnson Matthey (JMAT) 2,269.00p -1.18%
BG Group (BG.) 1,060.00p -1.07%
Royal Dutch Shell 'B' (RDSB) 2,140.50p -0.67%
Eurasian Natural Resources Corp. (ENRC) 270.20p -0.66%
Antofagasta (ANTO) 1,238.00p -0.64%
Rio Tinto (RIO) 2,978.50p -0.52%
Royal Dutch Shell 'A' (RDSA) 2,072.00p -0.50%
Xstrata (XTA) 1,011.50p -0.49%
FTSE 250 - Risers
Kenmare Resources (KMR) 33.46p +5.52%
New World Resources A Shares (NWR) 252.30p +4.60%
Chemring Group (CHG) 238.20p +3.57%
St. Modwen Properties (SMP) 218.70p +3.11%
Domino Printing Sciences (DNO) 563.50p +2.83%
Pace (PIC) 182.30p +2.82%
Informa (INF) 416.80p +2.79%
Carpetright (CPR) 678.50p +2.73%
Bumi (BUMI) 265.00p +2.71%
Hunting (HTG) 789.00p +2.47%
FTSE 250 - Fallers
Mitchells & Butlers (MAB) 312.10p -5.71%
Man Group (EMG) 73.25p -4.68%
Essar Energy (ESSR) 122.00p -3.94%
Perform Group (PER) 380.00p -3.55%
Lonmin (LMI) 275.00p -3.34%
KCOM Group (KCOM) 69.45p -2.59%
Ocado Group (OCDO) 70.10p -2.37%
Petropavlovsk (POG) 350.60p -2.15%
Petra Diamonds Ltd.(DI) (PDL) 103.00p -2.09%
Raven Russia Ltd (RUS) 61.70p -2.06%
| Europe Market Report |
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Europe midday: Cool reaction from analysts to Greek agreement
-Cool reaction from analysts to Eurogroup agreement on Greece
-Greek 10 year bond yields fall 18bp to 16.45 per cent
-ECB's Hansson says worth examining a negative deposit rate
-Euro/dollar rebuffed at 1.30
FTSE-100: 0.41%
Dax-30: 0.50%
Cac-40: 0.29%
FTSE-Mibtel 30: 0.26%
Ibex 35: 0.27%
Stoxx 600: 0.39%
The main Eurozone equity benchmarks are now trading slightly higher
following the cool reaction from economists to the 'breakthrough'
achieved at last night's meeting of Eurozone finance ministers, the
so-called Eurogroup.
The 'deal' appears quite ambitious but
still faces various hurdles. The assembled ministers agreed to lower the
country's stock of debt to below 124% of gross domestic product (GDP)
by 2020. Furthermore, they agreed to bring Athens's mountain of
liabilities down to "substantially lower" than 110% of GDP in 2022.
Amongst the measures agreed on to achieve the above were: reductions on
the interest-rate paid on loans to Athens, the European Central Bank
(ECB) returning the profits earned on its holdings of Greek debt and a
buyback of Greek debt at sharply discounted prices.
It is the
success of the latter which seems to worry observers the most (although
it is not the only source of preoccupation), as the entire package - and
the International Monetary Fund's (IMF) involvement - seems to hinge on
it. Furthermore, without the IMF's backing Brussels could be left
scrambling to find how to plug another significant gap in the
Mediterranean nation's financing needs.
In that regard, Kathleen Brooks, Director of Research at Forex.com
had this to say: "As usual when it comes to meetings with European
Union (EU) officials, they tend to under-deliver. They didn't actually
reduce Greece's debt burden and no official holders of Greek debt like
the ECB or European governments have had to take haircuts on their debt
holdings. Thus, Greece's debt reduction is still reliant on its economic
performance, which remains dismal and is likely to continue to be
enveloped in recession for many more years."
In a similar vein, Fabio Fois from Barclays Research
remarked that: "some of the measures are steps in the right direction;
however, we think that, as they were announced last night, they will be
not sufficient to reduce public debt substantially and so to restore
debt solvency by 2020. We also found surprising the fact that no fresh
funds were committed, not even for the debt relief. On this specific
point, we think it is worth noting the comment made by Christine
Lagarde: "Once progress has been made on specifying and delivering on
the commitments made today, in particular implementation of the debt
buybacks, I would be in a position to recommend to the IMF Executive
Board the completion of the first review of Greece's program."
Carrefour planning foray into China
French spirits maker Remy Cointreau unveiled first-half operating profits from continuing operations of €141.5m, ahead of consensus estimates.
French supermarkets group Carrefour is higher on reports that it is to move into the Chinese market.
From a sector stand-point the best performance on the DJ Stoxx 600 is
now to be seen in the following groups of stocks: Banks (0.84%), Real
estate (0.73%) and Media (0.02%). French consumers hold up
INSEE's French consumer confidence gauge for the month of November has come in at 84, the same as last month (Consensus: 83).
Italian hourly wages rose by 0.2% month-on-month in October, following a gain of 0.1% in the previous month. Slight gains in single currency
The euro/dollar is now falling by 0.27% to the 1.2964 dollar mark.
Front month Brent crude futures are now rising by 0.090 dollars to the 111.02 dollar mark on the ICE.
| Broker Tips |
Broker tips: Tesco, IMI, Mitchells & Butlers
Credit Suisse has retained its 'neutral' rating and 350p target for supermarket behemoth Tesco ahead of the company's third-quarter results due on December 5th.
Analyst Andrew Kasoulis said in a research report on Tuesday morning:
"We do not expect quarter-on-quarter underlying improvement in key
regions, which has largely been already flagged by market share and
macro data."
Investec has maintained its 'buy' rating for industrial engineering group IMI
and raised its target for the shares from 1,100p to 1,140p, saying that
this month's third-quarter update showed the expected mixed of
"softness" and "resilience".
"IMI's Q3 IMS contained news of
softness where it was expected – in the truck sector and general
pneumatics within Fluid Power – and the recovery in Severe Service will
probably be less steep than we anticipated. Nevertheless, we do expect
steady progress from IMI and we believe that the shares are
undervalued."
Panmure Gordon has reiterated its 'sell' rating for pubs group Mitchells & Butlers after some worse-than-expected full-year results and a gloomy update on current trading.
The broker kept its 225p target for the shares, compared with Monday's closing price of 331p, implying 32% downside potential.
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