Investors take profits ahead of Christmas
Market Movers
techMARK 2,126.82 -0.24%
FTSE 100 5,939.99 -0.31%
FTSE 250 12,362.38 -0.49%
While
stocks managed to stage a small comeback in afternoon trade, the UK
market finished the week on a dull note, with ‘fiscal cliff’ fears
dampening the festive cheer ahead of Christmas.
“Traders have
spent much of the day taking profits ahead of the weekend as the last
full trading week of 2012 draws to a close,” said senior sales trader
Toby Morris from CMC Markets.
“With uncertainty about the
outcome of the fiscal cliff talks higher than ever after the fiasco of
last night’s cancellation of the Republican vote, investors have adopted
a safety first approach, with last night a stark reminder that the
current political uncertainty from the US can still lead to erratic
moves in a thin market.”
Last night, Republican House speaker John Boehner
was forced to withdraw his “Plan B” for dealing with the fiscal cliff
due to a lack of support in the House of Representatives.
Boehner had thought that the Republican majority in the lower house
would be enough to push through his proposal to avoid the impending
automatic spending cuts and increase in taxes despite opposition from
President Barack Obama and Democrats.
However, hard-line
Republicans refused to support concessions on tax increases that left
Boehner’s plan with insufficient votes to push the measure through even
through just the House.
Speaking at a news conference today, Boehner said he would not walk away from negotiations over the fiscal cliff.
Economic data fails to give markets a boost
Further dampening the mood this morning was the news that UK gross domestic product
(GDP) in the third quarter expanded at a 0.9% rate from the preceding
three months. This final estimate was worse the initial 1% increase
forecasted.
UK public sector net borrowing
was weaker than expected in November, fuelling fear that Britain is
moving closer to losing its treasured AAA credit rating. Borrowing came
in at £17.5bn in November, £1.2bn higher net borrowing than a year
before and above expectations of £16bn
Two surveys of consumer confidence
also disappointed this morning: the GfK consumer confidence survey in
the UK fell from -22 to -29 in December, missing the -25 forecast; while
the forward-looking German GfK survey fell from 5.8 to 5.6 for January,
missing the 5.9 estimate.
Meanwhile, the Chinese MNI flash business sentiment indicator fell from 53.78 to 52.23 in November.
FTSE 100: Miners and financials in the red
Miners
and financial stocks were bearing the brunt of the bearish mood on
markets on Friday as investors cut positions in riskier assets on
concerns over the US economy. However, Randgold Resources was bucking the trend as gold prices advanced.
Banks
were under the weather after a new report said that government plans to
create a ‘ring fence’ between banks’ retail and investment operations
fall well short of what is required. The Parliamentary Commission on
Banking Standards has called on the government to "electrify" the ring
fence to stop banks taking advantage of loopholes. Lloyds and Barclays were both under the weather.
ENRC was being weighed down by a ratings cut by Goldman Sachs to 'neutral' this morning. Meanwhile, insurance giant Aviva
fell after selling Aviva USA Corporation - its life, annuities and
asset management business - to life insurance holding company Athene
Holiding for $1.8bn.
Xstrata was broadly flat despite
saying that it is set to boost ore production by a further third at its
Lady Loretta mine in north-west Queensland, Australia.
BAE Systems fell
as investors shrugged off a £2.5bn deal with the government of Oman to
supply of Typhoon and Hawk Advanced JetTrainer aircraft. This comes two
days after the company warned that full-year underlying earnings could
be hit by three pence per share if it cannot agree on pricing on a large
Saudi Arabian Typhoon aircraft contract.
Water providers Severn Trent, United Utilities and Pennon were making gains after regulator Ofwat backed down over changes to water company licences.
Carnival
was a high riser too, rebounding after a heavy fall yesterday when the
cruise company reported a fall in full-year revenues after what it
called its most challenging year ever.
FTSE 250: Regus gains after acquisition
Office space provider Regus gained after launching a fresh bid for smaller peer MWB Business Exchange (MBE) at a much lower price, a year and a half after it withdrew its initial offer.
Through its subsidiary Marley Acquisitions Limited (MAL), Regus is
making a cash offer for 61.576p per share of MBE, valuing the company at
£40m. Back in May 2011, Regus had made an indicative offer for MBE at
92.36p per share, valuing the company at a much higher price of £60m.
Jefferies said in a research report: "We view this as a strategically
sensible transaction for Regus, cementing its leading market position in
the UK serviced office market, with considerable potential
cross-selling synergies."
High Street betting shop William Hill was under the weather after Numis Securites downgraded its rating for the stock to ‘reduce’.
In contrast New World Resources was on the up, shrugging off a downgrade from Goldman Sachs to ‘sell’.
| AIM/Small Cap Report |
FTSE 100 - Risers
Randgold Resources Ltd. (RRS) 6,125.00p +2.68%
Severn Trent (SVT) 1,610.00p +2.61%
Carnival (CCL) 2,442.00p +2.13%
Polymetal International (POLY) 1,176.00p +1.47%
United Utilities Group (UU.) 682.00p +1.19%
Aggreko (AGK) 1,760.00p +1.03%
British American Tobacco (BATS) 3,142.00p +1.03%
International Consolidated Airlines Group SA (CDI) (IAG) 187.90p +1.02%
Xstrata (XTA) 1,051.00p +0.77%
Admiral Group (ADM) 1,200.00p +0.59%
FTSE 100 - Fallers
Evraz (EVR) 257.80p -3.45%
Resolution Ltd. (RSL) 250.10p -2.65%
Compass Group (CPG) 723.00p -2.63%
Prudential (PRU) 872.00p -2.62%
Burberry Group (BRBY) 1,217.00p -2.41%
Diageo (DGE) 1,807.50p -2.22%
Whitbread (WTB) 2,473.00p -1.90%
Lloyds Banking Group (LLOY) 48.33p -1.88%
Petrofac Ltd. (PFC) 1,635.00p -1.68%
Barclays (BARC) 263.00p -1.42%
FTSE 250 - Risers
African Barrick Gold (ABG) 454.00p +4.61%
Euromoney Institutional Investor (ERM) 889.50p +4.16%
Regus (RGU) 109.00p +3.81%
Menzies(John) (MNZS) 642.50p +3.63%
PZ Cussons (PZC) 378.10p +3.19%
Salamander Energy (SMDR) 183.30p +3.15%
New World Resources A Shares (NWR) 304.00p +3.09%
Telecity Group (TCY) 797.00p +2.77%
FirstGroup (FGP) 209.00p +2.55%
COLT Group SA (COLT) 100.90p +2.23%
FTSE 250 - Fallers
Moneysupermarket.com Group (MONY) 159.80p -5.89%
Ruspetro (RPO) 72.25p -5.62%
Talvivaara Mining Company (TALV) 101.60p -4.78%
Centamin (DI) (CEY) 40.88p -4.28%
Essar Energy (ESSR) 117.80p -4.23%
Home Retail Group (HOME) 128.90p -4.23%
Dairy Crest Group (DCG) 378.20p -3.91%
Carpetright (CPR) 669.50p -3.67%
Howden Joinery Group (HWDN) 170.00p -3.57%
Workspace Group (WKP) 296.00p -3.27%
| Europe Market Report |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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European Markets Fell On U.S. Fiscal Cliff Concerns
The European markets ended
Friday's session in negative territory. Investor sentiment was impacted
by the U.S. fiscal cliff negotiations and the failure of the Republican
"Plan B" effort. With the end of the year rapidly approaching, hopes
for a timely solution are dissolving. However, the markets did pare
their early losses following statements made by John Boehner, which
suggested that he has not given up on the negotiations. Shares of
European banks were among the worst performers at the end of the week.
The
U.S. House of Representatives abruptly went into recess on Thursday
after failing to take up a vote on House speaker John Boehner's "Plan B"
to avoid the looming fiscal cliff due to a lack of support from members
of his own party.
Boehner's "Plan B" legislation would have
extended the Bush-era tax cuts for people making up to $1 million, but
Democrats claim it would raise taxes on millions of working families by
eliminating certain tax credits.
Boehner stated Friday that he
will continue to look for ways to resolve the fiscal cliff and that he
will continue to try and work out a deal with the President. He also
stated that it is now up to President Obama and Senate Majority Leader
Harry Reid to come up with a bill for the House to consider.
The Euro Stoxx 50 index
of eurozone bluechip stocks declined by 0.30 percent, while the Stoxx
Europe 50 index, which includes some major U.K. companies, lost 0.27
percent.
The DAX of Germany fell by 0.47 percent and the CAC 40 of France dropped by 0.15 percent. The FTSE 100 of the U.K. decreased by 0.30 percent and the SMI of Switzerland finished lower by 0.34 percent.
In Frankfurt, Deutsche Bank declined by 1.79 percent and Commerzbank fell
by 3.41 percent. Infineon Technologies climbed by 0.10 percent, after
JPMorgan upgraded the stock to ''Overweight'' from ''Neutral.''
Adidas gained 0.28 percent, following impressive quarterly results from U.S. rival Nike. JPMorgan reinitiated Prosiebensat.1 with a ''Neutral'' rating. The stock finished down by 2.87 percent.
In Paris, ArcelorMittal declined by 2.73 percent. The company announced a $4.3 billion write-down in the fourth quarter, owing to weakness in Europe.
Technip dropped
by 0.97 percent. The firm was awarded by Total E&P Norge, a
contract for the Martin Linge development project in Norway. The total
contract is worth around $1.25 billion, with a Technip share of around
$780 million.
Credit Agricole and Societe Generale decreased by 2.51 percent and 2.07 percent, respectively. BNP Paribas also lost 1.99 percent.
In London, defense contractor BAE Systems, which announced a contract, fell by 0.85 percent. Royal Bank of Scotland decreased by 0.79 percent and Barclays lost 1.71 percent. Lloyds Banking Group dropped by 2.08 percent and HSBC finished down by 0.20 percent.
Mining stocks turned in a weak performance. Anglo American fell by 0.48 percent and BHP Billiton lost 0.63 percent. Rio Tinto decreased by 0.14 percent, Eurasian Natural Resources declined by 1.39 percent, and Vedanta Resources lost 0.43 percent.
A
leading indicator of the Eurozone economy increased in November after
falling in the previous months, suggesting that the short-term outlook
has moderately improved, data from a survey by the Conference Board
showed Friday.
The leading economic index increased to 105.3 in November from 104.7 in October, which was lower than September's reading of 105.
German consumer sentiment
is set to deteriorate in January, as consumers see a difficult period
for the economy over the coming months, the results of a survey by
market research group GfK showed Friday. The forward-looking index fell
to 5.6 from a revised value of 5.8 for December. The index was forecast
to remain unchanged the originally estimated reading of 5.9 for
December.
France's business confidence improved for the second
straight month in December in line with expectations, data from the
statistical office Insee showed Friday. The business confidence
indicator for the manufacturing industry rose to 89 from November's
score of 88. The figure matched economists' expectations.
The U.K. economic recovery
was slightly weaker-than-estimated in the third quarter on downward
revisions to manufacturing and services output. Due to the weak
activity, government revenues remained subdued and in turn widened the
budget gap.
The U.K. economy grew 0.9 percent sequentially in the
third quarter instead of previously estimated 1 percent expansion,
final data from the Office for National Statistics showed Friday.
British consumer confidence
declined more than expected in December, from an 18-month high,
reflecting sharp deterioration in general economic expectations. The
consumer sentiment index fell to -29 from -22 in November as four of the
five sub-indicators weakened, a survey by GfK NOP showed Friday. The
expected reading for December was -25.
The U.K. budget deficit
widened to GBP 17.5 billion in November from GBP 16.3 billion a year
ago, the Office for National Statistics said Friday. Economists had
forecast a surplus of GBP 16 billion.
| US Market Report |
Stock Under Pressure After Boehner's "Plan B" Fails
Stocks have
moved sharply lower during trading on Friday, partly offsetting the
strong gains posted earlier in the week. The pullback reflects renewed
concerns that the U.S. could be pushed over the looming fiscal cliff.
The major averages are currently posting steep losses, near their worst levels of the day. The Dow is down 166.03 points or 1.3 percent at 13,145.69, the Nasdaq is down 42.84 points or 1.4 percent at 3,007.55, and the S&P 500 is down 19.01 points or 1.3 percent at 1,424.68.
While
optimism about a potential budget agreement helped to drive stocks
higher earlier in the week, traders are expressing renewed concerns
about the fiscal cliff following the latest developments in Washington.
The
sell-off on Wall Street comes after House Speaker John Boehner, R-Ohio,
scrapped plans to hold a House vote on his "Plan B" legislation due to a
lack of support among members of his own party.
The legislation
would have extended the Bush-era tax cuts for people making up to $1
million, although Democrats claimed it would raise taxes on millions of
working families by eliminating certain tax credits.
"The House
did not take up the tax measure today because it did not have sufficient
support from our members to pass," Boehner said in a statement. "Now it
is up to the president to work with Senator Reid on legislation to
avert the fiscal cliff."
With the House going into recess until after Christmas, Boehner's
inability to get the legislation passed has led to renewed concerns
about whether Congress will be able to reach an agreement.
Unless
Congress acts, approximately $600 billion in tax increases and
government spending cuts are due to go into effect at the end of the
year.
The focus on the developments in Washington has
overshadowed another batch of upbeat U.S. economic data, including a
report showing a bigger than expected increase in durable goods orders.
The
Commerce Department said durable goods orders increased by 0.7 percent
in November following a 1.1 percent increase in October. Economists had
expected orders to increase by 0.5 percent, matching the increase that
had been reported for the previous month.
Excluding a 1.1 percent
drop in orders for transportation equipment, durable goods orders
surged up by 1.6 percent in November compared to a 1.9 percent jump in
October.
The Commerce Department also released a separate report showing a much bigger than expected increase in personal income in November.
Sector News
Most
of the major sectors have shown notable moves to the downside on the
day, reflecting the broad based selling pressure on Wall Street.
Steel stocks
are turning in some of the market's worst performances in mid-day
trading, with the NYSE Arca Steel Index down by 2.1 percent. With the
loss, the index is pulling back further off the seven-month closing high
that it set on Wednesday.
Considerable weakness has also emerged
among housing stocks, as reflected by the 2.5 percent loss being posted
by the Philadelphia Housing Sector Index. MDC Holdings (MDC) and Masco
(MAS) are posting notable losses.
technology stocks have
also come under pressure, with Research in Motion (RIMM) helping to lead
the way lower despite reporting better than expected third quarter
results. Shares of RIM are down by 17.6 percent after ending Thursday's
trading at a seven-month closing high.
Banking, oil service, and airline stocks also posting significant losses, giving back ground following recent strength in the sectors.
Other markets
In overseas trading, stock markets
across the Asia-Pacific region came under pressure during trading on
Friday. Japan's Nikkei 225 Index ended the day down by 1 percent, while
Hong Kong's Hang Seng Index fell by 0.7 percent.
In the bond market, treasuries have
moved notably higher amid the renewed fiscal cliff worries. As a
result, the yield on the benchmark ten-year note, which moves opposite
of its price, is down by 5.2 basis points at 1.748 percent.
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| Broker tips |
ITV, Diageo, Regus
Panmure Gordon has said it foresees 'material upside' for terrestrial broadcaster ITV in the New Year, as it reiterated its 'buy' rating and 140p target for the stock.
The broker is anticipating a "very strong start" to the new financial year in terms of advertising growth.
"We are well-known supporters of ITV, and have been gratified by the
very strong share price performance this year (over 50% share price,
excluding dividend). Our FY 2012-14 forecasts feel increasingly
unambitious," analyst Alex DeGroote said.
Credit Suisse has slashed its estimates for drinks giant and Guinness owner Diageo following the cancelled talks to acquire tequila group Jose Cuervo, but has retained its 'outperform' rating for the stock.
With the stock trading at 17.5 times calendar 2013 earnings, in line
with peers but with above-average growth and returns, Credit Suisse said
that Diageo "remains one of the better long-term investment cases in
our consumer staples universe".
Jefferies has reiterated its 'buy' rating and 130p target for office space group Regus following Friday's 40m-pound cash offer for smaller peer MWB Business Exchange (MBE).
"We view this as a strategically sensible transaction for Regus,
cementing its leading market position in the UK serviced office market,
with considerable potential cross-selling synergies," Jefferies said.
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