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Stocks rise as investors await the FOMC
Market Movers
techMARK 2,132.04 +0.18%
FTSE 100 5,945.85 +0.35%
FTSE 250 12,224.31 +0.28%
UK
stocks finished Wednesday's session with decent gains, extending its
recent winning streak into its sixth day, with investors widely
expecting the US Federal Reserve to reveal more stimulus measures in the
coming hours.
The Footsie closed at its highest level since March 19th when it finished the session at 5,961.
It is predicted that the Federal Open Market Committee
(FOMC) meeting will culminate with the announcement of a new long-term
bond purchase programme valued at $45bn per month as 'Operation Twist'
comes to an end.
Some 48 out of 49 analysts surveyed by
Bloomberg are expecting new stimulus on top of the $40bn monthly
mortgage-bond buying programme announced in September, commonly referred
to as QE3 (third round of quantitative easing).
While optimism over the 'fiscal cliff' has increased slightly over the last few days, House Speaker John Boehner, who has talked this week with President Barack Obama, said that their two parties still have “serious differences" on resolving the issue.
“His remarks, although not enough to send markets spiral downward, do
reinforce the discord between Republicans and the White House. The focus
is now on the US Fed’s policy to see if it could provide some joy – due
out after the European closing bell,” said market strategist Ishaq
Siddiqi from ETX Capital.
Helping provide a lift to sentiment this morning was positive employment data in the UK (jobless claims fell 3,000 in November, better than the 6,000 increase expected), while a bond auction in Italy went relatively ‘smoothly’ in spite of the current political uncertainty.
FTSE 100: Resources lifted by rising metal prices
Resource stocks
were leading the way, boosted by rising metal prices and hopes that US
law-makers can come to an arrangement over the impending 'fiscal cliff'.
Evraz, Tullow Oil, Polymetal International, and ENRC were all making decent gains.
Anglo was also given a lift by Barclays Capital which upped its recommendation for the shares to 'equal weight', while BHP Billiton
rose after selling its "non-strategic" interests in the East and West
Browse Joint Ventures (JV), offshore Western Australia, for $1.63bn.
Insurers
were also performing well, rising in part following a report out
yesterday which showed the biggest global insurers are less reliant on
short-term funding and not as connected with other financial
institutions than the biggest of the large banks. The research was
conducted by the Geneva Association, an insurance industry-funded think
tank. RSA and Admiral were among the best performers.
Meanwhile, defensive utility stock Severn Trent
was heading lower following a strong rise the previous day, as
investors' interest turned to riskier assets. Elsewhere, engineering
group Babcock was lower after going ex-dividend.
Costa and Premier Inn owner Whitbread
was in the red, pulling back after its strong rise yesterday on the
back of an in-line third-quarter trading update, in which it revealed
that total sales were up 14.4% year-on-year.
FTSE 250: SuperGroup dives as profits plunge
Trendy fashion retailer SuperGroup
was a heavy faller on the second-tier index after revealing a 31.5%
fall in first-half reported profit before tax (PBT). On an underlying
basis though, PBT was up 13.1%. Rik Thakrar, the risk manager and senior
dealer at Spread Co, said this morning: "Spread Co clients have
approached retail stocks with caution, and Supergroup is no exception in
this regard, with a clear 'sell into strength' the apparent strategy of
choice for this stock."
Bumi was also taking a hit
after saying that it plans to cut ties with the Bakrie family "as soon
as practical". Deputy Chairman Julian Horn-Smoth said in a statement:
"The independent non-executive directors are continuing to work through a
number of very complex issues as quickly as possible with a clear focus
on maximizing shareholder value."
Aerospace engineer Senior
also gained after saying that positive trading reported in October has
continued, with adjusted pre-tax profit in line with expectations in
both October and November.
| AIM/Small Cap Report |
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FTSE 100 - Risers
Evraz (EVR) 263.70p +4.52%
Tullow Oil (TLW) 1,182.00p +2.78%
Admiral Group (ADM) 1,146.00p +2.78%
Anglo American (AAL) 1,882.50p +2.70%
Polymetal International (POLY) 1,143.00p +2.42%
G4S (GFS) 255.30p +1.63%
Eurasian Natural Resources Corp. (ENRC) 270.10p +1.50%
Barclays (BARC) 252.60p +1.47%
Associated British Foods (ABF) 1,521.00p +1.40%
RSA Insurance Group (RSA) 124.00p +1.39%
FTSE 100 - Fallers
Morrison (Wm) Supermarkets (MRW) 266.80p -1.19%
Aggreko (AGK) 2,175.00p -1.14%
Whitbread (WTB) 2,461.00p -1.09%
Johnson Matthey (JMAT) 2,433.00p -0.98%
Intertek Group (ITRK) 3,072.00p -0.97%
BT Group (BT.A) 234.90p -0.76%
Amec (AMEC) 1,043.00p -0.76%
Reed Elsevier (REL) 642.00p -0.70%
Hargreaves Lansdown (HL.) 705.00p -0.70%
ARM Holdings (ARM) 759.00p -0.65%
FTSE 250 - Risers
New World Resources A Shares (NWR) 277.00p +13.06%
Ocado Group (OCDO) 78.00p +5.48%
Renishaw (RSW) 1,930.00p +4.66%
Telecity Group (TCY) 867.00p +4.27%
Dignity (DTY) 1,057.00p +3.73%
Hochschild Mining (HOC) 490.00p +3.59%
Phoenix Group Holdings (DI) (PHNX) 540.00p +3.45%
Senior (SNR) 208.50p +3.27%
IG Group Holdings (IGG) 439.60p +2.90%
BH Global Ltd. USD Shares (BHGU) 11.45 +2.78%
FTSE 250 - Fallers
Supergroup (SGP) 557.00p -6.62%
Imagination Technologies Group (IMG) 425.00p -5.22%
Marston's (MARS) 118.80p -4.96%
Bumi (BUMI) 270.80p -4.85%
Ophir Energy (OPHR) 495.00p -4.07%
Savills (SVS) 449.40p -3.35%
Centamin (DI) (CEY) 52.70p -2.68%
Talvivaara Mining Company (TALV) 93.50p -2.65%
Travis Perkins (TPK) 1,066.00p -2.47%
3i Infrastructure (3IN) 123.30p -2.38%
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European Markets Exercised Caution Ahead Of Fed Announcement
The European markets
largely ended Wednesday's session with modest gains, as investors
played it cautious ahead of the impending announcement from the Federal
Reserve in the U.S. European finance ministers are also meeting today to
discuss bank supervision and financial reform.
The Federal Open Market Committee
will conclude its 2-day meeting after the European close. The Fed is
expected to announce further stimulus, as Operation Twist is set to
expire after 2012. Investors will be watching what the Fed will say
regarding its forecast for economic growth, unemployment, inflation and
interest rates.
North Korea successfully launched a
satellite carrying rocket early Wednesday, which the West and several
other countries believe was aimed at testing a long-range missile. The
U.S., Japan and South Korea have called for a meeting of the U.N.
Security Council to discuss North Korea's defiance in launching the
rocket despite the international community's request to desist from the
move.
The stickiness in U.K. inflation may persist for a
while, Bank of England Chief Economist Spencer Dale said Wednesday. In a
speech in London, he said the stickiness of inflation is a by-product
of the real adjustment that economy has been forced to make and there is
no easy fixes to such real adjustments.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.23 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.16 percent.
The DAX of Germany climbed by 0.31 percent and the FTSE 100 of the U.K. rose by 0.33 percent. The CAC 40 of France gained 0.01 percent, but the SMI of Switzerland lost 0.21 percent.
In Frankfurt, ThyssenKrupp gained 3.90 percent. Jefferies upgraded the stock to ''Buy'' from ''Hold.''
Lufthansa climbed
by 2.16 percent. The airline on Tuesday reported a 1.3 percent decline
in passengers flown in November. Capacity for the month declined 2.4
percent, while passenger load factor rose 1.4 percentage points. The
company noted that the pricing environment remained positive.
Commerzbank
advanced by 2.89 percent, while Deutsche Bank dipped by 0.16 percent.
Credit Suisse downgraded E.ON and RWE. E.ON finished higher by 0.35
percent, while RWE added 0.03 percent.
Fraport dipped by
0.09 percent. The owner and operator of Germany's Frankfurt Airport
reported a drop in passengers served and aircraft movements at Frankfurt
Airport for the month of November.
In Paris, BNP Paribas increased by 0.13 percent. Credit Agricole gained 0.49 percent and Societe Generale added 1.03 percent.
Peugeot rose by 9.29 percent, after Bloomberg reported that the automaker plans to cut 1,500 jobs by 2014.
In London, Anglo American
gained 2.95 percent. Barclays upgraded the stock to ''Equal Weight''
from ''Underweight.'' BP increased by 0.63 percent. Russia's Rosneft
signed an agreement to purchase 50 percent stake in TNK-BP from the AAR
Consortium.
Tullow Oil climbed by 2.96 percent, despite a
downgrade by Credit Suisse to "Neutral" from "Outperform." Senior Plc
advanced by 3.27 percent, after issuing a trading update.
Imagination Technologies
declined by 4.75 percent, after reporting first-half results. Novartis
finished lower by 0.17 percent in Zurich, after Deutsche Bank reduced
its rating on the stock.
Industrial production in Eurozone
declined for a second consecutive month in October, but at a slower
pace compared to the previous month, data released by Eurostat showed
Wednesday. Production dropped 1.4 percent month-on-month in October
after a 2.3 percent fall in September. Economists expected no change in
production volume.
Germany's harmonized index of consumer prices
rose less than estimated in the preliminary report in November, final
figures published by the Federal Statistical Office showed
Wednesday. The HICP inflation was 1.9 percent in November, a tad below 2
percent reported initially. On a monthly basis, HICP fell 0.2 percent compared with 0.1 percent fall reported earlier.
France's
harmonized inflation eased more than expected in November on a renewed
drop in petroleum product prices, the statistical office Insee said
Wednesday. Inflation fell to 1.6 percent from 2.1 percent in October.
The inflation rate was forecast to ease to 1.8 percent.
France's
current account deficit narrowed in October, mainly due to increase in
surplus on trade in services, data from Bank of France showed Wednesday.
The deficit fell
to EUR 2.8 billion in October from EUR 3.4 billion in September.
According to the central bank, the improvement is mainly due to an
increase in surplus on services trade to EUR 2.8 billion from EUR 2.1
billion.
U.K. claimant count declined unexpectedly in November
and employment reached a record through the three months to October,
confounding the weakness in economic activity.
Claimant count dropped
by 3,000 month-on-month to 1.58 million in November, the Office for
National Statistics said Wednesday. Economists had forecast the figure
to rise by 7,000. Claims rose by 6,000 in October, instead of the
initially reported 10,100.
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Stocks Turning In Lackluster Performance Ahead Of Fed
With
traders reluctant to make any significant moves ahead of the Federal
Reserve's monetary policy announcement, stocks are turning in a
lackluster performance in mid-day trading on Wednesday after failing to
sustain an initial upward move.
The major averages currently continue to linger near the unchanged line, turning in a mixed performance. While the Nasdaq is down 3.21 points or 0.1 percent at 3,019.09, the Dow is up 4.23 points or less than a tenth of a percent at 13,252.67 and the S&P 500 is up 1.98 points or 0.1 percent at 1,429.82.
The
choppy trading on Wall Street comes ahead of the Federal Reserve's
latest decision on monetary policy, which is due to be announced at
about 12:30 pm ET.
Many analysts expect the Fed to announce a new
round of Treasury securities purchases to replace its "Operation Twist"
program, which expires at the end of the year.
Following the announcement, traders are likely to keep an eye on Fed Chairman Ben Bernanke's accompanying press conference.
Peter Boockvar,
managing director at Miller Tabak, said, "We'll hear again from the 4th
branch of government today, the Federal Reserve, to tell us their plan
to replace the upcoming expiration of Smother the Yield Curve."
"Between
Fed speeches and WSJ articles, it seems likely that we'll get $45
billion per month of unsterilized Treasury purchases, thus bringing the
monthly dose of electronically printed money to $85 billion including
the ongoing MBS program."
Traders are also keeping an eye on
developments in Washington, as lawmakers continue to struggle to reach
an agreement to avoid the looming fiscal cliff.
House Speaker John Boehner, R-Ohio,
accused President Barack Obama of failing to put forth a "balanced"
plan, while Senate Majority Leader Harry Reid, D-Nev., warned that the
U.S. will go over the cliff unless Republicans agree to raise tax rates
on wealthy Americans.
On the economic front, the Labor Department
released a report showing that U.S. import prices fell by much more
than anticipated in the month of November, with the decrease largely due
to a drop by fuel import prices.
Sector News
While
most of the major sectors are showing only modest moves, housing stocks
have shown a strong move to the upside on the day. Reflecting the
strength in the housing sector, the Philadelphia Housing Sector Index
has surged up by 1.9 percent.
Meritage Homes (MTH), Ryland Group (RYL), and Standard Pacific (SPF) are turning in some of the housing sector's best performances.
Health insurance stocks are
also seeing notable strength, resulting in a 1.2 percent gain by the
Morgan Stanley Healthcare Payor Index. The gain extends a recent upward
move by the index, which has risen to a seven-month intraday high.
Gold, financial, and railroad stocks have also moved to the upside on the day, while weakness is visible among electronic storage, trucking, and telecom stocks.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan's Nikkei 225 Index rose by 0.6 percent, while Hong Kong's Hang Seng Index advanced by 0.8 percent.
In the bond market, treasuries are
lingering near the unchanged ahead of the Fed announcement. As a
result, the yield on the benchmark ten-year note, which moves opposite
of its price, is up by less than a basis point at 1.657 percent.
| Broker tips |
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Tullow, Diageo, Imagination Technologies
Credit Suisse has downgraded its rating for oil giant Tullow from 'outperform' to 'neutral', saying that it may take some time for investor confidence to return.
"While we admire TLW’s ability to access acreage and its attractive
exploration portfolio, where we see several ‘big’ opportunities to
possibly come to fruition next year (e.g. Mauritania, offshore
Mozambique, Norway), it is unlikely until late 1Q13/early 2Q13 (with the
Sabisa well) at the earliest that sentiment will turn, in our view."
Nomura has cut its target for drinks group Diageo
following the cancelled talks with tequila maker Jose Cuervo, but has
retained its 'buy' recommendation, saying that the deal was dropped for
the right reasons.
Nomura said that although market
expectations for the Cuervo deal were high, Diageo has shown "capital
discipline in not over-paying or agreeing to uncommercial demands" from
owners, the Beckmann family.
Investec has reiterated its 'hold' recommendation and 498p target for chip specialist Imagination Technologies, saying that while the first-half revenue performance was strong, profits were weak.
Investec said
that revenues were strong, coming in at £71.4m, ahead of its £66.3m
estimate. However, profits were less impressive, with an in-line
Technology performance offset by a "disappointing" showing in the Pure
business. Adjusted operating profit came in at £16.7m below the £18.3m
forecast.
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