Markets unfazed by Osborne's budget
Market Movers
techMARK 2,113.95 +0.28%
FTSE 100 5,892.08 +0.39%
FTSE 250 12,103.11 +0.41%
The
Footsie finished the day with decent gains on Wednesday as investors
mostly shrugged off Chancellor George Osborne’s budget statement, with
the upbeat mood helped by economic data from the US and increasing
optimism about China.
“UK financial markets were largely
unruffled by the Chancellor’s Autumn Statement,” said analyst Julian
Jessop from Capital Economics.
“It’s taking time but the
British economy is healing,” Osborne told MPs today, as revised figures
from the Office for Budget Responsibility (OBR) mean that the government
looks unlikely to achieve its target of reducing public sector net debt
(PSND) as a share of GDP in 2015-16
The OBR now forecasts gross domestic product
(GDP) to fall by 0.1% in 2012 and then to grow by 1.2% in 2013, revised
down from March estimates of 0.8% growth in 2012 and 2.0% in 2013.
“The GDP growth projections were a bit worse than expected and
austerity was extended another year, to 2017/18, although Mr Osborne
seemed sanguine about the possibility of missing his target of getting
debt as a share of GDP falling by 2015/16,” Jessop said.
Wall Street opened higher this afternoon after the US ISM service-sector purchasing managers’ index rose to 54.7 in November, from 54.2 the month before. The figure came in better than the 53.5 consensus estimate.
Concerns over the ‘fiscal cliff’
continue to weigh on investors’ minds, however as market strategist
Ishaq Siddiqi from ETX Capita explained: “for today, markets are putting
that to aside, perhaps comfortable with the fact political posturing
from both Democrats and Republicans alike is to be expected until its
crunch time and they have no choice but to whack out an agreement.”
Meanwhile, hopes for the Chinese economy
improved today after regulators in the country dropped a rule that
limited insurers’ investments in banks. Furthermore, the think-tank,
Chinese Academy of Social Sciences, predicted that Chinese economic
growth would quicken to 8.2% in 2013, from an estimate expansion of 7.7%
this year.
FTSE 100 movers: Miners lead the way
Mining stocks were performing well today on increasing optimism about China; Vedanta, Kazakhmys, Anglo American and Rio Tinto were all making decent gains. Precious metals giant Polymetal also advanced after saying it was giving $191m dollars back to shareholders by way of a special dividend.
Supermarket titan Tesco
was a high riser after announcing that it is considering a sale of its
loss-making US division, Fresh & Easy. The news came alongside the
group's third-quarter trading statement, in which it revealed a
better-than-expected performance in the UK grocery division, though
non-food sales continue to be weak.
Global banking giant HSBC
was higher after saying that it is to receive $9.39bn from the sale of
its 15.57% stake in Chinese insurance giant Ping An Insurance.
Meanwhile, accountancy software group Sage
fell after reporting that it had grown revenues slightly over the past
year, but said it was keeping a close eye on conditions in Europe,
particularly France.
Oil giant Tullow fell after Credit
Suisse cut its target for the stock from 1,650p to 1,550p following
Tuesday's news that the no commercial hydrocarbons were found at the
Zaedyus-2 appraisal well, offshore French Guiana.
Aberdeen Asset Management, SABMiller and Severn Trent were also among the fallers after going ex-dividend.
Land Securities
declined somewhat after the previous day's strong gains on the back of
its announcement that it would spend well over £100m to take control of
entertainment firm X-Leisure.
FTSE 250 movers: Home Retail rises on upgrade
Shares in Argos and Homebase owner Home Retail
raced ahead today after Bank of America Merill Lynch upgraded the stock
from 'neutral' to 'buy' and hiked its price target from 110p to 130p.
The broker said: “We see Argos as a beneficiary of recent capacity
withdrawal in the electricals area and also as we think grocers will now
be more focused on improving their performance in food.”
Public transport firm Stagecoach
was wanted after saying that like-for-like revenue grew 5.9% in the
half year to October and revenue growth in the second half is expected
to be "relatively modest".
Meanwhile, mining group Centamin
was significantly lower and leading the fallers, with the movement
possibly linked to news that Egypt's Vice President, Mahmoud Mekki, has
decided that he will push ahead with a referendum on a draft
constitution, despite protests scaling up. Strong concerns have been
voiced by protesters that the constitution does not offer enough
protection for political freedoms.
Halfords was down after Bank of America downgraded the stock from ‘buy’ to ‘neutral’.
Online gaming firm Bwin.party fell after saying that Jim Ryan, its co-CEO, is to retire from the role in January and return to Canada with his family.
| AIM/Small Cap Report |
FTSE 100 - Risers
Kazakhmys (KAZ) 740.50p +3.71%
Tesco (TSCO) 337.45p +3.31%
Rio Tinto (RIO) 3,226.00p +3.05%
Vedanta Resources (VED) 1,094.00p +2.63%
Anglo American (AAL) 1,780.00p +2.48%
Eurasian Natural Resources Corp. (ENRC) 277.20p +2.44%
BHP Billiton (BLT) 1,998.00p +2.38%
Resolution Ltd. (RSL) 245.50p +2.25%
ITV (ITV) 103.20p +1.98%
Shire Plc (SHP) 1,887.00p +1.73%
FTSE 100 - Fallers
Sage Group (SGE) 300.40p -3.47%
Tullow Oil (TLW) 1,254.00p -2.94%
Severn Trent (SVT) 1,572.00p -2.54%
Carnival (CCL) 2,410.00p -1.43%
Associated British Foods (ABF) 1,465.00p -1.41%
ARM Holdings (ARM) 752.00p -1.31%
British American Tobacco (BATS) 3,278.00p -1.24%
Land Securities Group (LAND) 807.50p -1.10%
Aberdeen Asset Management (ADN) 334.30p -1.09%
Kingfisher (KGF) 271.00p -1.06%
FTSE 250 - Risers
JD Sports Fashion (JD.) 750.00p +7.91%
Savills (SVS) 480.00p +7.38%
Home Retail Group (HOME) 121.00p +6.80%
Stagecoach Group (SGC) 308.70p +5.86%
Ted Baker (TED) 1,073.00p +5.51%
Ocado Group (OCDO) 74.45p +4.86%
Diploma (DPLM) 510.00p +4.44%
New World Resources A Shares (NWR) 275.00p +3.58%
EnQuest (ENQ) 116.90p +3.45%
Dechra Pharmaceuticals (DPH) 594.50p +3.39%
FTSE 250 - Fallers
Centamin (DI) (CEY) 51.75p -9.37%
Halfords Group (HFD) 323.20p -4.46%
Britvic (BVIC) 387.10p -3.23%
Ruspetro (RPO) 80.00p -3.09%
Computacenter (CCC) 389.00p -2.36%
Moneysupermarket.com Group (MONY) 160.00p -2.26%
Big Yellow Group (BYG) 338.40p -2.20%
Lonmin (LMI) 253.50p -2.16%
De La Rue (DLAR) 950.00p -2.01%
Afren (AFR) 131.40p -1.94%
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| UK Event Calendar |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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European Markets Pared Early Gains On Weak Economic Data
The majority of the European markets managed
to hold onto some modest gains at the end of Wednesday's trading
session. The markets got off to a good start thanks to optimism over
China. The country's new party chief made comments which suggested that
its supportive economic policy will remain in place. Some weaker than
expected economic results from Europe and the United States had a
negative impact on the market and concerns over the fiscal cliff in the
U.S. persist.
EU finance ministers' attempt to strike a deal on a
common supervisor for euro area banks hit a roadblock on Tuesday as
nations remained split on the terms of the proposed "single supervisory
mechanism."
The ministers have agreed to meet again next week,
ahead of the EU leaders' summit scheduled for December 13-14. The
meeting is expected to resolve the disagreements over the single
supervisor, which could enable Europe to contain the banking woes of the
single-currency region.
The United Kingdom is facing an
extra year of austerity after missing deficit reduction targets due to
an economic recovery that has been slower than expected. Presenting his
Autumn Statement to the House of Commons, Chancellor George Osborne
said," It's taking time, but the British economy is healing."
Austerity
will extend into 2017-18, he added. Earlier, the consolidation was
projected to end in 2016-17. The U.K. economy is expected to grow 1.2
percent next year and 2 percent in 2014.
China's new Communist Party chief Xi Jinping
set his economic agenda ahead of the party's central economic planning
meeting this month. Urbanization is indicated to remain the engine for
China's economic growth. Meanwhile, the China Insurance Regulatory
Commission abolished a rule that limited the investments insurers can
make in commercial banks.
Chinese service sector growth
moderated in November as new order inflow eased to its lowest level in
three months, a survey by Markit Economics revealed Wednesday. The HSBC
business activity index that measures the service sector performance
fell to 52.1 in November from 53.5 in October.
The Euro Stoxx 50 index of eurozone bluechip stocks fell by 0.08 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.20 percent.
The DAX of Germany climbed by 0.26 percent and the CAC 40 of France rose by 0.28 percent. The FTSE 100 of the U.K. gained 0.39 percent, but the SMI of Switzerland declined by 0.02 percent.
In Frankfurt, Commerzbank increased by 1.23 percent and Deutsche Bank added 1.00 percent.
BMW finished higher by 0.40 percent, while Daimler and Volkswagen lost 0.03 percent and 1.36 percent after Citigroup lifted its rating on European autos to ''Overweight.''
Sky Deutschland climbed by 1.01 percent, following a positive broker recommendation from Nomura.
In Paris, BNP Paribas advanced by 0.17 percent. Citigroup put the stock on its ''Citi Focus List Europe.' Societe Generale and Credit Agricole fell by 1.70 percent and 0.05 percent, respectively.
Lagardere gained 4.86 percent, after a broker upgrade.
Renault climbed by 1.09 percent and Peugeot added 0.29 percent.
In London, Kazakhmys increased by 3.71 percent and Vedanta Resources added 2.63 percent. Anglo American gained 2.48 percent and Eurasian Natural Resources advanced by 2.11 percent. Rio Tinto climbed by 3.05 percent and BHP Billiton rose by 2.18 percent.
Tesco finished up by 3.31 percent, after announcing the review of options for its U.S. business.
Citigroup upgraded
its rating on the European banking sector to "Overweight." Royal Bank
of Scotland rose by 0.20 percent and Barclays added 1.07 percent. Lloyds
Banking Group climbed by 0.70 percent and HSBC gained 1.24 percent.
Stagecoach gained 5.86 percent. The company reported increased profit for the first half of the year. Sage Group, which reported full-year results, lost 3.47 percent.
TUI Travel rose by 2.12 percent and Thomas Cook advanced by 9.26 percent, after Citigroup raised European Travel & Leisure to ''Neutral.''
Eurozone
shoppers scaled down their spending for the third consecutive month in
October, resulting in the biggest decline in retail sales in six months.
Sales fell
1.2 percent in October from a month ago, when it dropped 0.6 percent,
EU's statistics office Eurostat said Wednesday. Sales were forecast to
fall just 0.2 percent. October's decrease was the biggest since April
when it was down 1.5 percent.
The euro area private sector contracted less than estimated in November, according to a survey released by Markit Economics.
The
composite output index, which measures the combined output of the
manufacturing and service sectors, rose to 46.5 in November from 45.7 in
October, final data showed Wednesday. The flash reading was 45.8.
German service sector
contracted at a slower pace in November, detailed results of a survey
by Markit Economics revealed Wednesday. The outcome was in contrast to
the preliminary finding that activity declined at a sharper pace than in
October.
The headline business activity index for the service sector rose to 49.7 in November from 48.4 in October. The flash report showed a lower reading of 48.
French service sector
contracted at a faster rate than initially estimated in November, data
from a survey by Markit Economics and CDAF showed Wednesday. The
seasonally adjusted purchasing managers' index (PMI) for the service
sector increased to 45.8 in November from 44.6 in October. Preliminary
estimates had shown a reading of 46.1.
UK's services sector expanded
at the slowest pace in twenty-three months in November, data from a
survey by Markit Economics and the Chartered Institute of Purchasing and
Supply (CIPS) showed Wednesday.
The seasonally adjusted
purchasing managers' index for the service sector dropped to 50.2 in
November from 50.6 in October. Economists were looking for a reading of
51.
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| US Market Report |
Focus On Fiscal Cliff Leads To Volatility On Wall Street
After
showing a lack of direction throughout the previous session, stocks
have seen considerable volatility over the course of the trading day on
Wednesday. The big swings by the markets come as traders focus on the
latest developments in Washington.
The major averages have shown a
strong move to the upside in recent trading, although the Nasdaq
remains stuck in the red. While the Nasdaq is down 10.88 points
or 0.4 percent at 2,985.81, the Dow is up 110.11 points or 0.9 percent
at 13,061.89 and the S&P 500 is up 5.42 points or 0.4 percent at
1,412.47.
The volatility on Wall Street comes as traders react to
comments regarding the negotiations over an agreement to avoid the
looming fiscal cliff.
While stocks moved to the downside
following remarks by Republican leaders suggesting that lawmakers remain
far apart on a potential deal, the markets rallied as President Barack
Obama spoke to members of the Business Roundtable.
House Speaker John Boehner,
R-Ohio, called on Obama to respond to an offer put forth by House
Republicans while criticizing a White House plan he said "couldn't pass
either house of the Congress."
The GOP unveiled a plan
Monday that they claim will reduce the deficit by $2.2 trillion over ten
years, but the proposal was rejected by the White House.
While
the Republican plan includes $800 billion in new revenues, the higher
revenues are achieved by closing loopholes rather than raising tax rates
on wealthy Americans.
Meanwhile, Obama continued to call for the expiration of the Bush-era tax cuts for the wealthy as part of an agreement on the fiscal cliff.
"We're
not insisting on rates out of spite, but rather we need to raise a
certain amount of revenue," Obama told the Business Roundtable.
He
added, "Among some Republicans over the last several days, I think
there's been some recognition they can accept some rate increases as
long as it's combined with serious entitlement reform and additional
spending cuts."
The comments regarding the fiscal cliff have
overshadowed a batch of largely upbeat U.S. economic data, including a
report from the Institute for Supply Management showing an unexpected
acceleration in the pace of service sector growth.
Sector News
Extending a recent upward move, electronic storage stocks have shown a strong move to the upside on the day. The NYSE Arca Disk Drive Index has advanced by 2.8 percent, rising to its best intraday level in well over a month.
Western Digital (WDC)
has helped to lead the storage sector higher, surging up by 7.7 percent
after the computer hard drive maker announced an accelerated dividend.
Banking stocks
are also seeing considerable strength in mid-day trading, with the KBW
Bank Index up by 1.6 percent. Citigroup (C) is posting a standout gain
after announcing plans to cut more than 11,000 jobs.
Steel,
natural gas, and oil stocks are also moving to the upside, while gold
stocks continue to see weakness on the day amid a decrease by the price
of the precious metal.
Housing stocks also continue to post notable losses in mid-day trading but have climbed well off their lows for the session.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved to the upside during trading on Wednesday. Japan's Nikkei 225 Index advanced by 0.4 percent, while Hong Kong's Hang Seng Index surged up by 2.2 percent.
In the bond market, treasuries have pulled back off their best levels of the day but continue to see modest strength. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1.9 basis points at 1.589 percent.
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| Broker tips |
Tesco, HSBC, Tullow Oil
Nomura has cut its forecasts for supermarket giant Tesco
on the back of a weaker trading in Europe, but has maintained its 'buy'
rating, hailing the group's strong UK grocery performance.
The broker also said that the company's strategic review in the US
"points to a management team willing to act decisively to improve its
capital allocation and discipline." Nomura reckons that a US exit will
benefit full-year EPS and return on capital employed (ROCE) by 4% and
one percentage point, respectively.
Investec has reiterated its 'buy' rating for global banking giant HSBC, saying that the disposal of its stake in Chinese insurer Ping An could bode well for the 2012 dividend.
The broker said that the disposal proceeds should be sufficient enough
for HSBC to raise its final dividend per share (DPS) to 18 cents, above
the current consensus estimate of 16 cents. This would bring the
full-year DPS to 45 cents, compared with the 43 cents forecast.
Credit Suisse has cut its target for Tullow Oil
from 1,650p to 1,550p following Tuesday's news that the no commercial
hydrocarbons were found at the Zaedyus-2 appraisal well, offshore French
Guiana.
Nevertheless, the broker maintained its 'outperform'
rating on the stock, saying that it continued to back Tullow given its
long standing track record in exploration.
However, analysts
said that the market is likely to adjust the implied risk weighting for
its portfolio "especially following a period of relatively less
successful drilling since mid-2012 and the lack of material newsflow in
the near term."
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