London close: Markets in bullish mood ahead of US election results
Market Movers
techMARK 2,111.86 +0.77%
FTSE 100 5,884.90 +0.79%
FTSE 250 12,081.55 +0.42%
- Markets gear up for climax of presidential race
- Economic data disappoints
- Corporate earnings impress, Resolution leads risers after upgrade
The UK stock market shrugged off some disappointing economic data to
finish Tuesday's session with decent gains as a barrage of updates and
results from some heavy hitters impressed.
However, the mood was cautious with all eyes turning to the eagerly-awaited presidential election which comes to an end today. Polls show a tight race between current Democratic President Barack Obama and Republican candidate Mitt Romney. Whoever wins will have to urgently address the 'fiscal cliff' as spending cuts and tax increases are scheduled to come into effect in the next few months.
Jason Hollands, the Managing Director at Bestinvest, said that the
conclusion of the election could herald the first step towards "renewed business confidence".
He said: "A resolution of the 'fiscal cliff' would create the potential
for a relief rally in US equities. We think a deal will ultimately
happen: probably by reinstating Bush-era tax cuts. Much US business
activity has simply been put on hold for months, from hiring through to
M&A activity.
"With high levels of cash on their balance
sheets, US companies look well positioned to either engage in corporate
activity once some of the political and economic uncertainty is removed.
If they can't find better uses for their cash, then expect a continued
improvement in dividend pay-outs, which makes the US a potentially more
interesting place for income seekers."
UK and European data paints a gloomy picture
UK industrial production
registered a contraction of 1.7% month-on-month in September (-2.6%
year-on-year), missing consensus estimates for a fall of just 0.6%m/m
(-1.6% y/y). Meanwhile, UK retail sales rose by 1.5% m/m in
October, but fell by 0.1% y/y, in value and like-for-like terms,
according to the latest data from the British Retail Consortium (BRC).
Meanwhile, the Eurozone service-sector PMI
fell from 46.2 to 46.0 in October, below expectations of a flat
reading. Meanwhile, the composite PMI, which measures services and
manufacturing combined, fell from 45.8 to 45.7.
Market analyst
Michael Hewson from CMC Markets said: "Given that most of today's
European
economic data has been nothing short of woeful you could be
forgiven for thinking that markets would be trading lower today.
"Fortunately investors appear to be focusing on the
better-than-expected performances of companies that have been reporting
their latest numbers today with the stand-out performer being BMW
latest numbers as the company posted a record Q3 profit, boosted by
sales in China and Japan. Better-than-expected numbers from high street
retailers Marks & Spencer and Primark have also helped."
FTSE 100 - Risers
Resolution Ltd. (RSL) 236.60p +6.96%
Evraz (EVR) 255.80p +5.57%
Lloyds Banking Group (LLOY) 44.91p +4.80%
G4S (GFS) 270.00p +3.53%
Legal & General Group (LGEN) 144.20p +2.78%
Marks & Spencer Group (MKS) 398.70p +2.78%
International Consolidated Airlines Group SA (CDI) (IAG) 175.00p +2.52%
Barclays (BARC) 242.55p +2.13%
ARM Holdings (ARM) 709.50p +2.09%
Croda International (CRDA) 2,220.00p +2.07%
FTSE 100 - Fallers
Babcock International Group (BAB) 954.50p -3.49%
Eurasian Natural Resources Corp. (ENRC) 316.90p -1.37%
Admiral Group (ADM) 1,053.00p -1.31%
Standard Chartered (STAN) 1,468.50p -0.98%
Tullow Oil (TLW) 1,429.00p -0.69%
Weir Group (WEIR) 1,824.00p -0.38%
Wood Group (John) (WG.) 859.00p -0.29%
Petrofac Ltd. (PFC) 1,566.00p -0.25%
Tate & Lyle (TATE) 736.50p -0.20%
British Sky Broadcasting Group (BSY) 750.00p -0.20%
FTSE 250 - Risers
Savills (SVS) 425.50p +4.14%
Man Group (EMG) 87.20p +3.93%
JD Sports Fashion (JD.) 774.50p +3.82%
Homeserve (HSV) 235.30p +3.57%
Michael Page International (MPI) 374.50p +3.42%
Yule Catto & Co (YULC) 153.30p +3.30%
Hikma Pharmaceuticals (HIK) 758.00p +2.99%
F&C Asset Management (FCAM) 102.80p +2.80%
PayPoint (PAY) 847.50p +2.79%
New World Resources A Shares (NWR) 264.50p +2.64%
FTSE 250 - Fallers
Smith (DS) (SMDS) 206.60p -3.82%
Stobart Group Ltd. (STOB) 110.40p -2.82%
London & Stamford Property (LSP) 114.00p -2.56%
Interserve (IRV) 383.10p -2.47%
Spirent Communications (SPT) 140.70p -2.22%
Bank of Georgia Holdings (BGEO) 1,142.00p -2.14%
Premier Oil (PMO) 352.60p -2.08%
Kentz Corporation Ltd. (KENZ) 405.60p -1.84%
RPS Group (RPS) 238.20p -1.77%
Carpetright (CPR) 677.00p -1.74%
| Europe Market Report |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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Europe midday: Markets rebound as investors await US election results
FTSE-100: +0.62%
Dax-30: +0.56%
Cac-40: 0.48%
FTSE Mibtel 30: +0.55%
Ibex 35: +0.14%
Stoxx 600: +0.52%
European equities manage to rebound after yesterday's 1% drop as markets take a "wait and see" approach to the day's session.
Headlines are filled with the US elections that get in full-swing
tonight and bets are equal on which candidate will walk away with the
presidency. The latest poll posted in The Wall Street Journal shows Barack Obama with a slight lead over Republican rival Mitt Romney of 48.8% to 48.1%.
It's clearly anyone's race and European markets "should" awake tomorrow with the results in hand. However, The New York Times'
warning is well worth noting: "should there be delayed counts, recounts
and court challenges, Election Day becomes Election Week or — gasp! —
Month."
Speaking of waiting, events in Athens are at a
standstill as Greeks have begun a two-day strike to protest reforms. The
Hellenic Parliament is expected to vote on the austerity package
tomorrow and then the 2013 budget on Sunday. Yesterday afternoon reports
indicated that nothing would go through in time for the meeting of
Eurozone finance ministers on Monday.
Meanwhile, Spain, the
other major player in the current chapter of the European debt crisis,
has also decided not to give any new information for the markets to
digest. At the same time that reports indicate that the European
Commission will be officially announcing tomorrow much direr forecasts
for the peripheral country, Prime Minister Mariano Rajoy seems content
to stand pat. In an interview this morning, he simply repeated that
deficit reduction was Spain's first priority and his government has yet
to make a decision about requesting a bailout.
Eurozone services sector continues to contract
The
latest data on the Eurozone's service sector released on Tuesday
morning shows that the European economic slowdown continues its course.
The Eurozone's Purchasing Managers' Index (PMI) for the services sector, compiled by Markit Economics fell to 46.0 points in October from 46.2 points, remaining below the 50-point threshold that indicates recession.
It's also worth mentioning that region's heavyweights Germany and
France showed deterioration while peripheral countries such as Spain and
Italy managed a slight improvement.
Other markets
The euro/dollar managed a slight rebound (+0.08% to the 1.2808) after recent losses.
Front month Brent crude futures currently trade up by 0,80% to $108.59. |
| US Market Report |
Stocks
have moved to the upside in early trading on Tuesday, adding to the
gains posted in the previous session. The major averages have all
climbed into positive territory, further offsetting last Friday's
substantial losses.
The major averages have recently pulled back off their highs for the young session but are currently holding on to gains. The Dow is up 60.27 points or 0.5 percent at 13,172.71, the Nasdaq is up 2.93 points or 0.1 percent at 3,002.59 and the S&P 500 is up 4.76 points or 0.3 percent at 1,422.02.
The
early strength on Wall Street comes despite continued uncertainty about
the outcome of today's elections, although trading activity is likely
to be relatively subdued as voting gets underway.
The outcome of
the presidential race between President Barack Obama and Republican Mitt
Romney as well as key congressional races will not be known until much
later tonight at the earliest.
A lack of major U.S. economic data
may also keep traders on the sidelines, although some investors will be
willing to make bets on particular sectors based on their expectations
for the outcome of the elections.
A win for Obama is expected to
be good news for the alternative energy, telecom, and housing sectors,
while a win for Romney could benefit the defense, resource, and
financial sectors.
Steel stocks are seeing notable strength in early trading, with the NYSE Arca Steel Index up by 1.2 percent. AK Steel(AKS) and U.S. Steel (X) are turning in two of the sector's best performances.
Natural gas, tobacco, and banking stocks are also seeing early strength, although most of the major sectors are showing only modest moves.
Among individual stocks, Intel (INTC) is moderately lower on the heels of a report from Bloomberg News indicating that Apple (AAPL)
is preparing to replace Intel processors in its Mac personal computers
with a version of its own chip technology used in the iPhone and iPad.
Shares of CVS Caremark (CVS)
have also moved to the downside even though the drugstore operator and
pharmacy benefits manager reported better than expected third quarter
results. The company also raised its full-year earnings guidance.
On the other hand, Office Depot (ODP)
is posting a strong gain after the office supplies retailer reported
adjusted earnings that exceeded analyst estimates but on weaker than
expected revenues.
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday. While Australia's All Ordinaries Index inched up by 0.2 percent, Japan's Nikkei 225 Index dipped by 0.4 percent and Hong Kong's Hang Seng Index edged down by 0.3 percent.
Meanwhile, the major European markets have all moved to the upside on the day. The French CAC 40 Index has risen by 0.4 percent, while the U.K.'s FTSE 100 Index and the German DAX Index are both up by 0.6 percent.
In
the bond market, treasuries have given back some ground after moving
notably higher over the course of the previous session. Subsequently,
the yield on the benchmark ten-year note, which moves opposite of its
price, has edged up by 1.4 basis points to 1.698 percent. |
FTSE 100: Resolution gets boost from Merrill Lynch
Resolution
was the standout performer in the sector today after Bank of America
Merrill Lynch raised its rating on the stock from 'neutral' to 'buy'.
The US broker cited an attractive dividend yield as one of the reasons
behind the move. Sector peer Admiral has continued to lose steam after disappointing with its third-quarter revenues at the end of last week.
Lloyds
was also rising on the back of reports the company is looking to sell
its 60% stake in St James's Place, a move that would raise around £1bn.
Security group G4S
was in demand after saying its financial position continues to be
strong and it "remains on track to meet its cash conversion target of
85% of PBITA [profit before interest, tax and amortisation] for the full
year."
Chip designer ARM jumped after saying that it
is leading a consortium which is to acquire the patent portfolio of MIPS
Technologies, the US semiconductor design company, in order to reduce
the risk of expensive patent infringement suits in the chip design
industry.
Babcock's share price took a hit today
despite the engineering support services group reporting a solid set of
broadly 'in-line' first-half numbers. With shares performing extremely
well in the year-to-date, analysts believe that the stock is now up with
events.
High Street bellwether Marks & Spencer
rose after announcing that second-quarter revenue gained 2.5%, driven by
a strong performance from food sales and a handy contribution from the
group's international stores.
Emerging markets bank Standard Chartered
was a heavy faller after Credit Suisse downgraded the stock from
'neutral' to 'underperform' and cut its target from 1,460p to 1,340p.
FTSE 250: Hikma rises on Panmure upgrade
Hikma Pharmaceuticals
got a boost after Panmure Gordon upgraded the stock from 'hold' to
'buy' and lifted its price target from 720p to 825p. Jefferies kept its
'buy' rating on the stock and retained a 890p target.
Recycled packing firm DS Smith
dropped despite saying it continues to expect substantial year-on-year
EPS growth and views the remainder of the year with confidence. Investec
this morning downgraded the stock to 'hold', saying that while its
recent strong share price performance was warranted, it's time to "pause
for now".
Talvivaara continued to fall following its
announcement on Monday that is has suffered a leakage in the gypsum pond
at its mine site, meaning that metals production is temporarily
suspended.
Stobart Group was also moving lower, despite the fact it is going ex-dividend on Wednesday.
London & Stamford Property
dropped after announcing that it is in 'advanced discussions' to merge
with Metric Property Investments. The FTSE-250 property company has
offered an all-share deal for Metric, which has a market cap of £176m.
| Broker Tips |
Broker tips: M&S, Babcock, DS Smith
Seymour Pierce has raised its target for High Street retail giant Marks & Spencer from 325p to 265p after a better-than-expected set of interim figures.
However, with the stock having outperformed the FTSE All Share index by
almost 20% this year, the broker keeps its 'hold' rating on the shares.
Babcock's share price took a hit on Tuesday morning
despite the engineering support services group reporting a solid set of
broadly 'in-line' first-half numbers.
With shares performing
extremely well in the year-to-date, analysts believe that the stock is
now up with events. Investec has downgraded its rating on the stock from
'buy' to 'hold' but has maintained its long-term positive stance on the
business.
Investec has also downgraded its rating for industrial group DS Smith from 'buy' to 'hold', saying that while its recent strong share price performance was warranted, it's time to 'pause for now'.
"Whilst DS Smith offers excellent EPS [earnings per share] growth and
potential upside, we think after the strong run the stock has had, it is
likely to pause for breath until the pre-close update during April
2013."
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