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'Fiscal cliff' concerns keep markets under pressure
Market Movers
techMARK 2,123.48 -0.40%
FTSE 100 5,929.61 -0.27%
FTSE 250 12,211.57 -0.10%
Stocks
markets across Europe took a breather on Thursday, following a strong
performance over the last month, as investors digested stimulus plans by
the Federal Reserve and ongoing developments in the Eurozone.
The Footsie finished the day slightly lower, pulling back after setting
a new nine-month high at 5,946 the day on Wednesday (the last time the
index closed higher was on March 19th at 5,961).
Market analyst Michael Hewson from CMC Markets said today that a “trifecta of positive factors” managed to underwhelm the market this afternoon:
“Three news items that ordinarily would have given markets a
significant boost appear to have done anything but today, despite the
Fed acting as expected by announcing a new round of asset purchases to
the tune of $45bn, and EU leaders agreeing a framework towards a banking
union inside their self-imposed deadline of year end, while Greece
finally had its long awaited aid tranche finally approved by EU
leaders,” Hewson said.
The Footsie staged a slight rally in afternoon trade following some better-than-expected jobless claims data Stateside.
However, as he often has done in the past few weeks, House Speaker John Boehner
dampened market sentiment before the close after attacking the Obama
administration, saying that the White House is not serious about cutting
spending to avert the ‘fiscal cliff’.
“Unfortunately, the White House is so unserious
about cutting spending that it appears willing to slow-walk our economy
right up to - and over - the fiscal cliff,” Boehner said in a press
conference this afternoon.
FTSE 100: Wood Group falls after mixed update
Energy services giant Wood Group
has said that it expects to deliver good growth this year, with overall
conditions in energy markets remaining 'favourable'. However, shares
were down over 4% in afternoon trade after the company reported mixed
conditions in its Engineering and GTS divisions.
Credit Suisse
said that it has cut its Wood Group forecasts for 2013 and expects
consensus forecasts to come down also, largely on softer profits from
its GTS division. The broker maintained its ‘neutral’ rating and 925p
target for the stock. Canaccord Genuity also provided some additional
downward pressure after reducing its target for the stock today from
920p to 900p, retaining its ‘hold’ recommendation.
AstraZeneca
fell after revealing that its experimental drug for rheumatoid
arthritis gave a disappointing performance during tests. The drug had
been widely expected to perform some kind of wonder treatment.
Burberry was lower on reports that it is planning to review its global media planning and buying account.
A decline in Evraz
shares appears to be linked to reports that the company has split its
iron ore and coal mining divisions. The shares are also settling
following decent gains the previous day.
Meanwhile, Tullow Oil
was recovering one day after Credit Suisse downgraded the stock from
'outperform' to 'neutral', saying that it may take some time for
investor confidence to return.
Barclays got a boost
after Deutsche Bank raised its target from 300p to 360p and maintained
its buy recommendation. The rise comes amid reports claiming that the
group is planning to cut 2,000 jobs, according to sources close to the
group.
FTSE 250: Centamin plunges on mine suspension
Egypt-focused gold mining company Centamin
saw shares tumble early on after saying that it has suspended
operations at its Sukari mine due to issues with fuel suppliers and
delays with gold exports. Canaccord Genuity downgraded the stock to
'hold' this morning and slashed its target from 110p to 40p.
Centamin said that it has received an "illegal" $65m retrospective claim
from a local fuel company, which is now refusing to supply more fuel to
Sukari until the claim is paid. In addition, the firm also announced
that its process of gold exports has been hit by delays due to "an
unforeseen and arbitrary request from customs officials" for the prior
approval from authorities.
High Street retailer Sports Direct fell despite delivering significant growth across the board in the first with with revenue up 22.5%.
Bus and train group National Express
gained after saying it is on target to deliver full-year results in
line with company expectations despite challenging conditions.
SuperGroup,
the owner of clothing retail brand SuperDry, continued to rise one day
after it posted a 16.2% rise in revenue for the first half of 2012
covering the 26 weeks to October 28th, according to its interim results
published on Wednesday morning.
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FTSE 100 - Risers
Tullow Oil (TLW) 1,216.00p +2.88%
United Utilities Group (UU.) 701.00p +1.67%
Aviva (AV.) 372.80p +1.61%
Shire Plc (SHP) 1,956.00p +1.09%
BT Group (BT.A) 237.40p +1.06%
Rio Tinto (RIO) 3,338.50p +0.83%
Hammerson (HMSO) 485.90p +0.77%
Admiral Group (ADM) 1,153.00p +0.61%
Capita (CPI) 758.50p +0.60%
Standard Chartered (STAN) 1,501.00p +0.60%
FTSE 100 - Fallers
Wood Group (John) (WG.) 733.50p -4.55%
AstraZeneca (AZN) 2,958.50p -2.76%
Burberry Group (BRBY) 1,262.00p -2.62%
Experian (EXPN) 999.00p -2.25%
Amec (AMEC) 1,020.00p -2.21%
Randgold Resources Ltd. (RRS) 6,220.00p -1.97%
Kazakhmys (KAZ) 744.00p -1.78%
Evraz (EVR) 259.10p -1.74%
BG Group (BG.) 1,047.00p -1.69%
Weir Group (WEIR) 1,836.00p -1.56%
FTSE 250 - Risers
Supergroup (SGP) 593.50p +6.55%
Ruspetro (RPO) 88.30p +5.12%
Man Group (EMG) 81.10p +4.51%
National Express Group (NEX) 187.90p +4.27%
Tullett Prebon (TLPR) 241.50p +3.12%
Homeserve (HSV) 236.80p +2.73%
Michael Page International (MPI) 386.90p +2.49%
Savills (SVS) 460.00p +2.36%
Intermediate Capital Group (ICP) 314.20p +2.21%
Dunelm Group (DNLM) 650.50p +2.12%
FTSE 250 - Fallers
Centamin (DI) (CEY) 27.70p -47.44%
Sports Direct International (SPD) 386.20p -5.64%
Dechra Pharmaceuticals (DPH) 601.50p -5.42%
New World Resources A Shares (NWR) 263.60p -4.84%
Imagination Technologies Group (IMG) 408.00p -4.00%
Kenmare Resources (KMR) 30.05p -3.59%
Heritage Oil (HOIL) 177.30p -2.64%
Restaurant Group (RTN) 376.60p -2.54%
Perform Group (PER) 350.00p -2.51%
Petropavlovsk (POG) 332.00p -2.47%
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European Markets Pulled Back On Fiscal Cliff Concerns
The European markets
finished in the red on Thursday, as concerns over the looming fiscal
cliff in the United States dominated trade. Comments made by Fed
Chairman Ben Bernanke at the conclusion of the FOMC's 2-day meeting
yesterday raised concerns regarding the potential damage that the
stalemate over the issue is causing.
The U.S. Federal Reserve,
at the end of the two-day meeting on Wednesday, said it would replace
its "Operation Twist" program, which expires at the end of the year,
with the purchase of longer-term Treasury securities at a pace of $45
billion per month. The central bank also said it would continue to
purchase additional agency mortgage-backed securities at a pace of $40
billion per month.
In a departure from its earlier pledge to keep
interest rates at historically low levels until mid-2015, the Fed will
hold off on rate hikes until the unemployment rate falls to 6.5 percent.
Policy makers do not see the unemployment rate falling to 6.5 percent
until 2015.
Fed Chairman Ben Bernanke warned that Fed
support cannot fully offset the downside risks presented by the
so-called fiscal cliff. Bernanke expects Congress to reach a deal, but
noted that inaction has already resulted in a troubling drop in business
confidence.
Finance ministers from the 27 European Union states
on Thursday finalized an agreement, giving the European Central Bank
more powers to oversee the functioning of banks in the crisis-hit
region. The decision came ahead of the two-day EU summit in Brussels
starting today.
The ministers plan to make the supervisory system
fully operational by March 2014 or 12 months after the entry into force
of the legislation, whichever is later, according to statement issued
after the meeting.
The Single Supervisory Mechanism (SSM)
will be composed of the ECB and national competent authorities. As the
chief watchdog, the ECB will be responsible for the overall functioning
of the SSM and will have direct oversight of Eurozone banks, but "in a
differentiated way and in close cooperation with national supervisory
authorities," the ministers said in the statement.
Eurozone
finance ministers, collectively known as the Eurogroup, finally approved
the release of a second disbursement of bailout funds to Greece on the
completion of the government's debt buyback operation.
At its
meeting in Brussels on Thursday, Eurogroup authorized the bailout fund,
the European Financial Stability Facility (EFSF), to release the next
installment for a total amount of EUR 49.1 billion. The disbursement
will be made in several tranches.
Greece will receive EUR 34.3 billion in the following days. The remaining amount will be disbursed in the first quarter of 2013.
Ernst
& Young on Thursday said the euro area will enter 2013 with a
brighter outlook than twelve months ago. The region is painfully
progressing to stability, E&Y commented.
According to E&Y
Eurozone Forecast, or EEF, the region will shrink 0.2 percent next
year, but there will be a modest pickup from 2014 to 2016 of 1.3 percent
a year. Similar growth rates are expected for the remainder of the
decade.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.27 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.44 percent.
The DAX of Germany fell by 0.43 percent and the CAC 40 of France decreased by 0.10 percent. The FTSE 100 of the U.K. dropped by 0.27 percent and the SMI of Switzerland finished lower by 0.57 percent.
In Frankfurt, RWE declined by 2.68 percent and peer EON lost 0.63 percent. Both stocks received negative broker recommendations. ThyssenKrupp fell by 1.21 percent, after Moody's placed it on review for a downgrade. Commerzbank and Deutsche Bank decreased by 0.35 percent and 2.71 percent, respectively. ProSiebenSat dropped by 2.75 percent, after Commerzbank downgraded its rating on the stock.
Delticom
retreated by 6.96 percent after a broker downgrade. Bucking the trend,
Hochtief climbed by 2.09 percent, after Berenberg upgraded the stock.
In Paris, GDF Suez fell by 0.71 percent. Nomura downgraded
the stock to ''Neutral'' from ''Buy.'' Renault climbed by 1.49 percent.
The car maker sold its remaining 6.5 percent stake in Swedish automaker
AB Volvo for 12.78 billion Swedish kroner or about $1.92 billion.
Dairy
giant Danone is preparing a cost reduction and adaptation plan. It will
be deployed over two years and is targeted at adjusting costs to
generate savings of some 200 million euros in Europe. The stock
increased by 0.75 percent.
In London, BG Group declined by 1.97 percent. The oil and gas explorer
appointed Chris Finlayson, currently Executive Director and Managing
Director of BG Advance, as chief executive officer of the company,
succeeding ailing Frank Chapman.
Tullow Oil gained 2.88 percent, after Goldman Sachs upgraded the stock to "Buy" from "Neutral."
AstraZeneca
finished lower by 2.76 percent. The company announced that its oral
treatment for rheumatoid arthritis, fostamatinib, failed to meet one of
the main objectives in a drug trial.
Energy services
company John Wood Group said conditions in energy markets remain
favorable and that it expects to deliver good growth for 2012 in line
with expectations. In the Canadian oil sands market, the company
anticipates some reduction in activity in 2013. The stock fell by 4.55
percent.
Sports Direct International dropped by 5.64
percent. The company reported a higher profit for its first half, but
has decided not to pay a dividend in respect of the half-year.
Centamin
has received a $65 million claim from the Egyptian General Petroleum
Corp. for diesel fuel supplied from December 2009 to January 2012. The
company said its mine will be put on care and maintenance until the
issues are satisfactorily resolved. The stock sank by 47.44 percent.
Deutsche Bank upgraded HSBC to ''Buy'' from ''Hold.'' The stock finished down by 0.06 percent. Nestle fell by 0.33 percent in Zurich. The stock was upgraded to ''Overweight'' from ''Equalweight'' at Barclays.
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Stocks Seeing Modest Weakness Amid Fiscal Cliff Worries
Stocks
have moved modestly lower over the course of the trading day on
Thursday after initially showing a lack of direction. Lingering concerns
about the looming fiscal cliff are weighing on the markets despite a
batch of largely upbeat economic data.
The major averages moved roughly sideways in recent trading, stuck modestly below the unchanged line. The Dow is down 24.96 points or 0.2 percent at 13,220.49, the Nasdaq is down 7.85 points or 0.3 percent at 3,005.96 and the S&P 500 is down 3.49 points or 0.2 percent at 1,424.99.
The
modest weakness on Wall Street comes as lawmakers in Washington
continue to struggle to reach an agreement to avoid the fiscal cliff.
House Speaker John Boehner,
R-Ohio, once again accused President Barack Obama of failing to provide
a serious offer, claiming that the White House is not offering enough
in spending cuts.
Boehner has made similar remarks for several
days, while Democrats continue to attack the GOP for being unwilling to
accept higher tax rates on wealthy Americans.
The worries about the fiscal cliff
have overshadowed some upbeat economic data, including a report from
the Labor Department showing that weekly jobless claims pulled back near
a four-year low.
The report showed that jobless claims fell to
343,000 in the week ended December 8th, a decrease of 29,000 from the
previous week's revised figure of 372,000. Economists had expected
jobless claims to come in unchanged compared to the 370,000 originally
reported for the previous week.
With the unexpected decrease,
jobless claims fell to their lowest level since dropping to a four-year
low of 342,000 in the week ended October 6th.
A separate report
from the Commerce Department showed weaker than expected retail sales
growth in the month of November, although a sharp drop in sales by gas
stations offset strength in other sectors.
The report showed that retail sales increased
by 0.3 percent in November following a 0.3 percent decrease in October.
Economists had been expecting retail sales to increase by about 0.6
percent.
Excluding a 4.0 percent drop in sales by gas stations,
retail sales rose by 0.8 percent in November compared to a 0.5 percent
drop in October.
Traders also continue to digest
yesterday's news that the Federal Reserve plans to replace its
"Operation Twist" program, which expires at the end of the year, with
the purchase of longer-term Treasury securities at a pace of $45 billion
per month.
Sector News
While many of the major sectors continue to show only modest moves, considerable weakness is visible among gold stocks. The NYSE Arca Gold Bugs Index is down by 2.1 percent, nearly offsetting the strong gain posted in the previous session.
The weakness among gold stocks comes
amid a notable decrease by the price of the precious metal, with gold
for February delivery sliding $17.80 to $1,700.10 an ounce.
Oil service, biotechnology, and natural gas stocks are seeing more moderate weakness, although selling pressure remains subdued.
Meanwhile, airline and networking stocks continue to see some strength on the day, with the NYSE Arca Networking Index and the NYSE Arca Airline Index both up by 1 percent.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. While Japan's Nikkei 225 Index surged up by 1.7 percent, Hong Kong's Hang Seng Index fell by 0.3 percent.
In the bond market, treasuries are
seeing modest weakness, extending the downward move seen following
yesterday's Fed announcement. Subsequently, the yield on the benchmark
ten-year note, which moves opposite of its price, is up by 2.3 basis
points at 1.72 percent.
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BG Group, Centamin, HMV
Nomura has reiterated its 'buy' rating and 1,600p target for natural gas giant BG Group, following the appointment of a new Chief Executive Officer (CEO) in Chris Finlayson.
"The timing of the announcement of a new CEO is in line with guidance
from BG’s Chairman earlier in the year. It removes uncertainty on an
issue that has been at the top of investor agenda’s over the past six
months and in particular after last month’s production downgrade,"
Nomura said.
Investec has reiterated its 'hold' recommendation for Egypt-focused gold miner Centamin,
saying that the ongoing bad news surrounding the company offsets the
stock's upside potential. This follows Thursday's revelation that the
company has been prompted to suspend operations at its Sukari mine.
The broker said: "CEY ended the 3Q12 with a healthy balance sheet that
included $125m in cash, amongst liquid assets totalling $182m. It
therefore has the capacity to withstand a sustained period of care and
maintenance. It appears to be suffering a run of very bad news, which
highlights the difficulties of operating in Egypt, where the political
environment remains volatile."
Panmure Gordon has maintained its 'hold' rating and eight-pence target for entertainment retailer HMV following the company's first-half results, in which it revealed that it would likely breach its banking covenants next month.
The broker said that it is difficult to ascribe an equity value to the
stock, given the "material uncertainties". "The group has a lot of
support from its various stakeholders, but its markets are extremely
unhelpful."
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