London close: 'Fiscal cliff' hopes lift markets
Market Movers
- techMARK 2,128.24 +0.11%
- FTSE 100 5,924.97 +0.06%
- FTSE 250 12,190.58 +0.10%
- Fiscal cliff optimism increases ahead of FOMC
- German ZEW smashes expectations
- Tullow drops 8.4 per cent
After a weak start, the FTSE 100 finished Tuesday's session with slight
gains on the back of increasing optimism about the 'fiscal cliff', as
well as a better-than-expected reading of German sentiment.
"The improved sentiment in the markets today has been largely come from the US," said market analyst Craig Erlam from Alpari.
"It appears that negotiations over how to avoid the fiscal cliff at the
end of the year are actually starting to go somewhere. Details of the
discussions between Obama and Boehner haven't been released but it now
appears to be a case of deciding which entitlements to cut back on."
Meanwhile, the Federal Open Market Committee
(FOMC) meeting will conclude tomorrow with analysts expecting the Fed
to announce a new long-term bond purchase programme valued at $45bn per
month as "Operation Twist" comes to an end.
Stock markets across Europe pushed into the blue this morning after the German ZEW
Institute's economic sentiment index shot up to 6.9 points in December
from -15.7 the month before. The consensus estimate was for a slight
improvement to -11.5.
Analyst Thomas Harjes from Barclays
Research said that the results "bode well for our forecast of a rebound
in economic activity early next year even if further improvements in
investor expectations turn out to be more modest in coming months."
Also helping the mood this morning was a Spanish debt auction
which sold €3.89bn of 12- and 18-month bills, ahead of the €3.5bn
targeted. They were sold at lower yields than the previous auction.
FTSE 100: Tullow sinks after Ghanaian well update
Oil giant Tullow
tanked on Tuesday after revealing that its Okure-1 exploration well
offshore Ghana had encountered 'low net to gross oil bearing reservoir
in a secondary objective'. The markets seemed to shrug off its other
announcement that it plans to buy Norwegian exploration group Spring
Energy for $372m and dispose of its non-core gas assets in the North
Sea.
Costa and Premier Inn owner Whitbread topped the
risers following an in-line third-quarter trading update, in which it
revealed that total sales were up 14.4% year-on-year. Investors didn't
seem to mind that like-for-like sales growth had slowed to 3.3% from
4.3% in the first half.
Polymetal International was also a strong performer after saying that it has entered into a definitive agreement with AIM-listed Ovoca Gold to acquire the Russian legal entity Olymp, which holds the mining and exploration license for the Olcha gold-silver deposit.
Mining group BHP Billiton rose after Nomura named it as its preferred name in the global metals and mining industry. Sector peer ENRC
however dropped into the red after Citigroup downgraded its rating on
the stock to 'sell'. Citi expects that the company will be in breach of
its banking covenants in the first half which set out that it ought not
to have a level of net debt of more than three times EBITDA.
HSBC
was higher after reaching an agreement with US authorities in relation
to investigations regarding inadequate compliance with anti-money
laundering and sanctions laws. HSBC will make payments totalling
$1.921bn and take further action to strengthen its compliance policies
and procedures.
Johnnie Walker, Smirnoff and Guinness owner Diageo
was in the red after saying that it has called off talks to buy tequila
giant Jose Cuervo after being unable to "agree a transaction".
FTSE 250: Domino Printing and Victrex provide a drag
Industrial coding, printing and marking technology group Domino Printing was among the worst performers after reporting a small decline in annual profit as it battles against tough market conditions.
High performance polymer manufacturer Victrex
tanked after full-year revenues rose just 2% to £219.8m. Victrex was
also lower after Numis cut its rating for the stock to 'reduce'. In
contrast, chip specialist Imagination Tech gained after Deutsche Bank raised its recommendation to 'buy' ahead of tomorrow's first-half results.
Coal miner Bumi
was also on the rise on speculation that its Chief Executive Nalin
Rathod could resign from the board tomorrow amidst an investigation into
"potential financial irregularities" at its division, Bumi Resources,
in Indonesia.
Spread betting firm IG Group was out of
favour after revealing a 14% reduction in its revenue for the period
June 1st to November 30th, reflecting particularly tough comparators
with last year benefitting from high market volatility.
Bakery and hot snacks retail chain Greggs
was lower as investors continued to fret over the departure of its
Chief Executive Ken McMeikan who announced yesterday that he would be
leaving for catering firm Brakes Group.
FTSE 100 - Risers
Polymetal International (POLY) 1,116.00p +2.67%
Evraz (EVR) 252.30p +2.48%
Whitbread (WTB) 2,488.00p +2.47%
Weir Group (WEIR) 1,845.00p +1.77%
Pennon Group (PNN) 617.50p +1.73%
BHP Billiton (BLT) 2,054.50p +1.61%
CRH (CRH) 1,175.00p +1.56%
Sainsbury (J) (SBRY) 347.00p +1.49%
WPP (WPP) 870.50p +1.22%
Severn Trent (SVT) 1,573.00p +1.16%
FTSE 100 - Fallers
Tullow Oil (TLW) 1,150.00p -8.44%
Eurasian Natural Resources Corp. (ENRC) 266.10p -3.66%
Rolls-Royce Holdings (RR.) 871.00p -2.30%
IMI (IMI) 1,072.00p -1.83%
Diageo (DGE) 1,855.50p -1.64%
Experian (EXPN) 1,028.00p -1.25%
Tate & Lyle (TATE) 761.00p -1.04%
BG Group (BG.) 1,065.00p -0.98%
Burberry Group (BRBY) 1,304.00p -0.91%
Randgold Resources Ltd. (RRS) 6,330.00p -0.86%
FTSE 250 - Risers
Dechra Pharmaceuticals (DPH) 635.50p +6.09%
Sports Direct International (SPD) 404.00p +4.66%
Bumi (BUMI) 284.60p +4.63%
Shanks Group (SKS) 80.00p +4.58%
Imagination Technologies Group (IMG) 448.40p +4.45%
Intermediate Capital Group (ICP) 305.10p +3.28%
Petra Diamonds Ltd.(DI) (PDL) 107.20p +3.08%
Lonmin (LMI) 279.80p +2.87%
F&C Asset Management (FCAM) 98.80p +2.76%
Bwin.party Digital Entertainment (BPTY) 110.00p +2.71%
FTSE 250 - Fallers
New World Resources A Shares (NWR) 245.00p -9.29%
Domino Printing Sciences (DNO) 571.00p -6.39%
Victrex (VCT) 1,553.00p -5.07%
Ruspetro (RPO) 83.25p -3.25%
Greggs (GRG) 461.70p -2.29%
BH Global Ltd. USD Shares (BHGU) 11.14 -2.28%
IG Group Holdings (IGG) 427.20p -2.20%
Cairn Energy (CNE) 262.40p -2.16%
Supergroup (SGP) 596.50p -2.05%
COLT Group SA (COLT) 95.60p -2.00%
| Europe Market Report |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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Europe midday: Stocks rise on German economic confidence
-Confindustria lowers Italian 2013 GDP view
-RWI cuts German growth view
-Mixed newsflow out of the Eurozone periphery
-10 year Spanish bond yields down by 8 basis points to 5.49 per cent
FTSE-100: 0.13%
Dax-30: 0.71%
Cac-40: 0.76%
FTSE-Mibtel 30: 0.83%
Ibex 35: 0.18%
Stoxx 600: 0.22%
The main European equity benchmarks were standing moderately higher by
the midday point of the session, buoyed by a surprisingly large rise in
German economic sentiment - as measured by the well-known ZEW institute -
and the relatively respectable results seen at the latest Spanish
Treasury bill auctions this morning.
That following the slight
gains on Wall Street last night and despite the somewhat weaker than
expected money supply and bank lending figures out in China overnight.
The news-flow out of the Eurozone's periphery this morning was also somewhat mixed.
Thus, there were reports that Greece is very close to meeting its debt
buy-back targets, but the Spanish region of Catalonia has informed the
central government in Madrid that it will not meet this year's fiscal
targets.
Acting as a backdrop, the two day meetings of both the US Federal Reserve and OPEC were slated to start on Tuesday.
Large drops in KBC and Thyssen Krupp
Shares in Belgian lender KBC Groep
are moving lower after raising €1.25bn via a share sale. That was
necessitated by the need to maintain capital reserves while accelerating
reimbursements of state aid. The firm sold 58.8m shares at €21.25
apiece.
Germany's biggest steel maker ThyssenKrupp is
falling after announcing that its net loss widened to €4.7bn in the year
ended September 30th from €1.29bn euros a year ago. It has also
cancelled its annual dividend.
From a sector stand-point the
best performance on the DJ Stoxx 600 is now to be seen in the following
groups of shares: Automobiles (1.11%), Utilities (1.09%), and
Construction (1.03%).
German 2013 GDP forecasts lowered
The Germany's ZEW institute's economic sentiment index for the month of
December improved to 6.9 points after a reading of -15.7 in the month
before (Consensus: -11.5).
Some market commentary is calling
attention to the fact that according to the survey results just over 75%
of respondents were saying that they expected no change in the European
Central Bank's (ECB) main policy rate during the next six months.
Italian business lobby Confindustria has lowered its forecast for the
country's economic growth rate in 2013 to -1.1% from -0.6% before.
Single currency back at the 1.30 area
The euro/dollar is now rising again, by 0.34%, to the 1.2985 dollar mark.
Front month Brent crude futures are now rising by 0,813 dollars to the 108.20 dollar mark on the ICE
| US Market Report |
Stocks Rally On Upbeat German Data, Optimism On Fiscal Cliff
Stocks
have moved sharply higher over the course of the trading day on
Tuesday, adding to the modest gains posted in the previous session. The
markets have benefited from some upbeat German economic data as well as
optimism about the looming fiscal cliff.
The major averages have moved roughly sideways in recent trading, hovering near their best levels of the day. The Dow is up 120.59 points or 0.9 percent at 13,290.47, the Nasdaq is up 41.96 points or 1.4 percent at 3,028.92 and the S&P 500 is up 14.13 points or 1 percent at 1,432.68.
The
rally on Wall Street is partly due to the release of a report from the
Center for European Economic Research showing a bigger than expected
improvement in German investor confidence.
The report showed that the expectations index climbed
to a positive 6.9 in December from a negative 15.7 in November, turning
positive for the first time since May. The current conditions index
edged up to 5.7 from 5.4.
Positive sentiment has also been
generated by a report from the Wall Street Journal indicating that
negotiations between the White House and Republican House Speaker John
Boehner have progressed steadily in recent days.
Citing people familiar with the matter, the Journal said the talks have taken a marked shift recently, becoming more "serious."
The
reported progress on talks between Obama and Boehner comes as a number
of Republicans have indicated they would be willing to accept higher tax
rates on wealthy Americans in exchange for significant spending cuts
and reform to entitlement programs.
The strength on Wall Street also comes as traders look ahead to the
Federal Reserve's monetary policy announcement on Wednesday.
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.
Meanwhile, traders are also digesting a report
from the Commerce Department showing that the U.S. trade deficit came in
narrower than expected in the month of October.
The Commerce
Department said the U.S. trade deficit widened to $42.2 billion in
October from a revised $40.3 billion in September. Despite the increase
by the size of the deficit, it still came in narrower than the $42.8
billion deficit forecast by economists.
A separate Commerce
Department report said wholesale inventories increased by more than
expected in October, although wholesale sales showed a notable decrease.
Airline stocks are turning in some of the market's best performances in mid-day trading, with the NYSE Arca Airline Index up by 1.7 percent. With the gain, the index has risen to its best intraday level in well over a year.
Delta Air Lines has helped to lead the sector higher, jumping by 5.9 percent after announcing a deal to acquire a 49 percent stake in Virgin Atlantic for $360 million.
Significant strength has also emerged among semiconductor stocks, as reflected by the 1.9 percent gain being posted by the Philadelphia Semiconductor Index. Strong gains by Rubicon Technology and NXP Semiconductors have helped lift the index to a two-month high.
Reflecting strength throughout the technology sector, software, internet, and computer hardware stocks are also posting strong gains.
Most
of the other major sectors have also moved to the upside, with
considerable strength visible among biotechnology, brokerage, and steel
stocks.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Tuesday. Hong Kong'sHang Seng Index and Australia's All Ordinaries Index rose by 0.2 percent and 0.4 percent, respectively. However, Japan's Nikkei 225 Index bucked the uptrend and edged down by 0.1 percent.
The major European markets also moved to the upside on the day. The U.K.'s FTSE 100 Index inched up by 0.1 percent, while the German DAX Index and the French CAC 40 Index advanced by 0.8 percent and 0.9 percent, respectively.
In the bond market,
treasuries have come under pressure, more than offsetting the modest
gains posted in the previous session. Subsequently, the yield on the
benchmark ten-year note, which moves opposite of its price, is up by 3.6
basis points at 1.652 percent. |
| Broker Tips |
Broker tips: BHP Billiton, Tullow, Whitbread
Nomura has labelled BHP Billiton
as its preferred name in the global metals and mining industry,
reiterating its 'buy' recommendation and 2,350p target for the shares.
"We believe it is time for a change of mindset in terms of how many in
the market view the sector. Although we think trading short-term beta
rallies will still be a way to achieve returns, these will tend to be
short-term directional trades. Looking through these, we believe those
stocks that can reliably generate alpha will be the winners over the
longer term."
Jefferies has reiterated its 'buy' rating and 1,800p target for oil giant Tullow, after the acquisition of Norwegian explorer Spring Energy and its plans to dispose of its UK and Dutch North Sea gas assets.
The broker reckons that Tullow has an attractive 2013 drilling
programme with projects in its other high-value regions including Kenya,
Mauritania, Mozambique and now the Northern Atlantic.
Costa and Premier Inn owner Whitbread's
third-quarter trading statement received a warm welcome from the market
on Tuesday morning, but analysts have decided to stay cautious about
the stock despite the in-line results.
Panmure reiterated its
'hold' recommendation and 1,994p target, saying that it remains
"cautious on current trading and the increasing competitive environment
for budget hotels".
Investec chose to take a more
negative stance than Panmure though, maintaining its 'sell' rating and
1,650p target for the shares, saying that the stock "is pricing in an
outlook for substantial group returns improvements that, Costa-aside, we
do not think exists."
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