Markets end the week with slight gains
Market Movers
techMARK 2,207.87 +0.57%
FTSE 100 6,121.58 +0.33%
FTSE 250 12,797.83 +0.53%
UK
stocks finished with slight gains on Friday on the back of plans for
economic stimulus in Japan, as markets were able to shrug off some
weakness in the mining sector.
The FTSE 100 closed just 32 points higher than it did last week, but has now gained around 3.8% since the start of 2013.
News from Japan
boosted sentiment in morning trade today, where newly-elected Prime
Minister Shinzo Abe has unveiled a 10.3tn-yen stimulus package, aimed at
raising economic growth by 2% and creating 600,000 new jobs. The plan
“shows a clear commitment to economic revitalization”, Abe said at a
conference in Tokyo.
However, Inflation data in China
was providing a drag on the heavyweight mining sector in London,
limiting gains on the Footsie, as higher-than-expected price rises in
December dampened hopes for further stimulus. Chinese consumer price
inflation rose to 2.5% in December, from 2.0% the month before, as cold
weather resulted in an increase in food prices. The consensus forecast
was for a reading of 2.3%.
"While the figure remains well
below the inflation target of 4%, it has raised concerns that it could
lead to a tightening of monetary policy in the first half of this year,"
according to market analyst Craig Erlam from Alpari.
In domestic news, UK industrial production rose by just 0.3% in November, according to the Office for National Statistics, missing the consensus forecast rise of 0.8%.
“European financial markets have been relatively stable through the
course of the day, flipping between small gains and losses but
ultimately going nowhere as investors hold back from taking bold moves
ahead of high-profile US 4Q earnings next week,” said market strategist Ishaq Siddiqi from ETX Capital.
Wells Fargo, which kicked off earnings season before the opening bell
this morning in New York, will be followed next week by heavyweights
Goldman Sachs, Morgan Stanley, JPMorgan and Bank of America.
FTSE 100: IAG flying high; miners unwanted
British Airways and Iberia owner IAG
was in demand this morning after UBS upgraded the stock from 'neutral'
to 'buy', following its underperformance against other European airline
shares under the broker's coverage. "We think that IAG could be the
laggard most likely to outperform in 2013 should it achieve the
concessions the company wants from Iberia staff," the broker said.
The miners were firmly out favour today after the Chinese inflation figures, with sector peers BHP Billiton, Antofagasta and Rio Tinto firmly in the red. The sector was dampened further by comments from RBC Capital Markets,
which recommended that clients hold fire on mining stocks for now.
“Despite our belief in increased fund flows to the sector this year,
economic growth is not stellar and we believe a significant re-rating in
the miners will be driven by free cash flow generation which we
forecast closer to 2014E.”
Financial stocks were also
performing well with asset management firms given a lift by Credit
Suisse. The Swiss broker said that the recent improvement in the macro
backdrop should drive investor appetite "which bodes well for the asset
managers". It upgraded Schroders to 'neutral' and maintained its 'outperform' recommendation for Aberdeen.
Elsewhere, insurance giant Aviva was boosted by an upgrade by Citigroup to 'buy'. Banking peers RBS, Barclays and Lloyds were also among the highest risers.
Oil giant Tullow
was under the weather after missing production forecasts in 2012. The
group also revealed that exploration write-offs more than doubled last
year due to a number of unsuccessful drilling activities and licence
relinquishments. Prime Markets’ head of dealing, Richard Curr, said:
“The bearish charting configuration fairly reflects waning investor
confidence, and as such Prime Markets believes a retest of year lows at
1,098p and beyond is almost inevitable unless or until Tullow can
demonstrate a turnaround in fortunes.”
FTSE 250: Centamin continues to rise on Q4 production
Gold miner Centamin
continued to rise after its fourth-quarter production results on
Wednesday, in which it beat output guidance by five per cent. Liberum
Capital labelled the stock as a compelling buy this morning. The shares
have now risen by over a third in the last five days.
Price comparison website Moneysupermarket.com
surged after saying that adjusted revenue is expected to have risen by
15% to £204.5m last year. Adjusted EBITDA is forecast to have risen 26%
to £66m.
Meanwhile, Ophir Energy shares dropped to a
five-month low as analysts warned investors of possible delays on the
exploration venture in Tanzania with BG Group.
First Group fell after UBS cut its target from 180p to 170p and downgraded the stock to ‘sell’.
| AIM/Small Cap Report |
FTSE 100 - Risers
International Consolidated Airlines Group SA (CDI) (IAG) 207.60p +5.43%
Aviva (AV.) 380.10p +3.29%
Aberdeen Asset Management (ADN) 391.50p +3.00%
G4S (GFS) 267.70p +2.33%
Schroders (SDR) 1,819.00p +2.25%
ITV (ITV) 110.00p +2.14%
Reckitt Benckiser Group (RB.) 3,996.00p +2.07%
WPP (WPP) 939.50p +2.06%
Amec (AMEC) 1,085.00p +1.97%
Next (NXT) 3,995.00p +1.78%
FTSE 100 - Fallers
Tullow Oil (TLW) 1,186.00p -3.18%
BHP Billiton (BLT) 2,075.00p -2.67%
Kazakhmys (KAZ) 808.50p -2.12%
Johnson Matthey (JMAT) 2,250.00p -1.96%
Anglo American (AAL) 2,042.00p -1.45%
Antofagasta (ANTO) 1,303.00p -1.44%
Rio Tinto (RIO) 3,468.00p -1.24%
Randgold Resources Ltd. (RRS) 5,900.00p -0.84%
Croda International (CRDA) 2,309.00p -0.82%
Severn Trent (SVT) 1,573.00p -0.82%
FTSE 250 - Risers
Centamin (DI) (CEY) 55.80p +9.09%
Supergroup (SGP) 580.00p +6.23%
ITE Group (ITE) 241.00p +6.17%
Moneysupermarket.com Group (MONY) 168.00p +6.13%
Henderson Group (HGG) 143.80p +4.58%
Brown (N.) Group (BWNG) 373.90p +4.44%
Domino Printing Sciences (DNO) 648.00p +4.26%
Taylor Wimpey (TW.) 74.25p +3.99%
Galliford Try (GFRD) 807.00p +3.59%
Barratt Developments (BDEV) 227.30p +3.46%
FTSE 250 - Fallers
Ophir Energy (OPHR) 537.00p -4.53%
Ferrexpo (FXPO) 275.40p -2.72%
Cranswick (CWK) 866.00p -2.70%
FirstGroup (FGP) 195.10p -2.40%
Enterprise Inns (ETI) 100.10p -2.34%
RPS Group (RPS) 230.00p -2.09%
Dignity (DTY) 1,066.00p -1.93%
Soco International (SIA) 373.60p -1.84%
Tullett Prebon (TLPR) 264.50p -1.82%
ICAP (IAP) 320.50p -1.78% |
| Europe Market Report |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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European Markets Finished Mixed After Chinese Inflation Report
The European markets
ended Friday's session with mixed results. The larger than expected
increase in Chinese inflation raised concerns over further policy easing
to support an ongoing economic recovery. Investors also remained
focused on the earnings reports from the United States. Wells Fargo, the
first bank to report results, topped expectations but its net interest
margin declined 8 percent. Japanese Prime Minister Shinzo Abe also
announced a massive spending package to revive the economy.
Japan
on Friday approved a fresh round of stimulus spending worth JPY 10.3
trillion ($116 billion) to jump-start the flagging economy, as Prime
Minister Shinzo Abe signals determination to fulfill his campaign
pledges.
Speaking at a press conference, Abe said the measures
will include spending on public works, disaster prevention and financial
aid for small firms. He said that the new measures would add 2
percentage points to the gross domestic product and create about 600,000
jobs.
The Italian bond auction proved to be eventful at
the end of the week. The treasury sold 3.5 billion euros of three-year
bonds, with a yield of 1.85 percent. This is the first time the yield
has dropped below 2 percent since March of 2010.
The German economy
started positively in the new year and swiftly overcome the temporary
weakness, the Economics Ministry said Friday. The economy appears to
have contracted in the fourth quarter, it said. The indicators show a
significant decline in economic output in the fourth quarter.
Exports
were weaker due to low global growth. However, the ministry sees a
gradual recovery in exports later this year with improvement in global
economic situation.
Debt restructuring is not an option for
Cyprus, Economic and Monetary Affairs Commissioner Olli Rehn said in an
interview to German daily Handelsblatt, published Friday. There are a
number of other options on the table to make the country's debt
sustainable, he told the daily. Rehn also urged the government to tackle
the issue of money laundering.
The European countries, in
particular Germany, have expressed reluctance to lend money to Cyprus
unless it counters the menace with strict regulations. Cyprus asked for
bailout in June last year.
The Euro Stoxx 50 index of
eurozone bluechip stocks increased by 0.29 percent, while the Stoxx
Europe 50 index, which includes some major U.K. companies, lost 0.16
percent.
The DAX of Germany rose by 0.09 percent and the CAC 40 of France advanced by 0.08 percent. The FTSE 100 of the U.K. climbed by 0.26 percent and the SMI of Switzerland gained 0.68 percent.
In Frankfurt, Commerzbank sank by 3.47 percent while Deutsche Bank gained 0.17 percent.
Salzgitter decreased by 3.30 percent, following a broker downgrade.
Goldman Sachs upgraded Daimler to ''Conviction Buy'' from ''Buy.'' Daimler finished with a gain of 0.44 percent. BMW and Volkswagen finished higher by 0.05 percent and 1.64 percent respectively.
Praktiker climbed by 9.40 percent, after Berenberg upgraded the stock to ''Buy'' from ''Sell.''
Sky Deutschland dropped by 1.01 percent, after Merrill Lynch downgraded the stock.
In Paris, Tire firm Michelin fell by 2.05 percent and utility EDF decreased by 1.62 percent. Both stocks received negative broker recommendations.
BNP Paribas and Societe Generale rose by 0.65 percent and 0.60 percent, while Credit Agricole finished up by 0.44 percent.
Cap Gemini gained 2.34 percent, after peer Infosys in India lifted its annual revenue guidance.
In London, Barclays rose by 1.71 percent and Royal Bank of Scotland added 1.01 percent. Both stocks were upgraded at HSBC.
International Consolidated Airlines climbed by 5.43 percent, after UBS upgraded the stock to "Buy" from "Neutral."
Aviva advanced by 3.29 percent, after Citigroup upgraded the stock to "Buy" from "Neutral."
Tullow Oil dropped by 3.18 percent. The oil and gas firm expects to take $670 million in write off for the year.
Marks & Spencer finished higher by 1.00 percent, after HSBC downgraded it to "Neutral" from "Overweight."
Severn Trent dipped by 0.82 percent, after HSBC downgraded the stock to "Neutral" from "Buy."
Mining stocks
turned in a weak performance, due to the inflation data out of China.
Rio Tinto declined by 1.24 percent and BHP Billiton lost 2.67 percent.
Anglo American decreased by 1.67 percent and Kazakhmys fell by 2.12
percent.
Inflation in China accelerated to the highest level in
seven months in December, as the recent cold weather pushed up food
prices, the latest figures from the National Bureau of Statistics showed
Friday.
The consumer price index rose 2.5 percent
year-on-year in December, the fastest pace since May this year, compared
to a 2 percent rise in the previous month. Economists expected the rate
of inflation to increase to a more modest 2.3 percent.
France's
current account shortfall remained unchanged from the previous month in
November, data released by the Bank of France showed Friday. The current
account deficit remained unchanged at EUR2.9 billion in November, the
agency said.
U.K. manufacturing output declined unexpectedly in November in yet another blow to hopes of a recovery in the final quarter of 2012.
Manufacturing output
decreased 0.3 percent in November from a month ago, when it dropped 1.3
percent, the Office for National Statistics showed Friday. Output was
forecast to grow 0.5 percent.
Meanwhile, industrial output rose
0.3 percent month-on-month, underpinned by robust mining output. The
November increase reversed last month's 0.9 percent fall, but the rate
of growth was smaller than the 0.8 percent rise forecast by economists.
House prices
in the U.K. stayed unchanged from the previous month in December, data
from a survey by mortgage services provider Acadametrics and LSL
Property Services Plc showed Friday. The average price of a home in
England and Wales remained broadly unchanged month-on-month at
GBP227,026 in December, after recording a 0.2 percent increase in the
previous month.
| US Market Report |
Stocks Nearly Flat Amid Uncertainty About Outlook
Stocks continue
to show a lack of direction in mid-day trading on Friday after turning
in a lackluster performance throughout the morning. Traders seem
reluctant to make any significant moves amid uncertainty about the
outlook for corporate earnings.
The major averages have once again turned mixed in recent trading, with the Dow creeping above the unchanged line. While the Dow is up 12.08 points or 0.1 percent at 13,483.30, the Nasdaq is down 1.37 points or less than a tenth of a percent at 3,120.39 and the S&P 500 is down 1.29 points or 0.1 percent at 1,470.83.
The lackluster performance
on Wall Street comes as traders express some uncertainty about the
outlook for the markets after recent gains lifted the S&P 500 to a
five-year closing high.
Since earnings season is only just
starting to pick up steam, traders seem to be taking a wait-and-see
approach as more big-name companies release their quarterly results in
the coming weeks.
Mixed news from overseas is also contributing
to the choppy trading after upbeat news from overseas helped to push
stocks higher in the previous session.
While news of a new $116
billion stimulus package in Japan generated some positive sentiment, a
report from China showing an acceleration in the pace of inflation
suggested that the Chinese may not provide further stimulus.
Meanwhile, traders have
largely shrugged off a report from the Commerce Department showing that
the U.S. trade deficit unexpectedly widened in the month of November.
With
a jump in imports more than offsetting an increase in exports, the
trade deficit widened to $48.7 billion in November from a revised $42.1
billion in October. Economists had expected the deficit to narrow to
$41.1 billion.
Sal Guatieri, Senior Economist at BMO
Capital markets, said, "A wider U.S. trade gap will weigh on Q4 growth,
but a rebound in imports suggests domestic demand has turned up."
Among individual stocks, shares of Wells Fargo
(WFC) have moved to the downside even though financial services giant
reported fourth quarter earnings and revenues that exceeded analyst
estimates.
Wells Fargo, the nation's largest mortgage
lender, reported fourth quarter earnings of $0.91 per share on revenues
of $21.9 billion. Analysts had expected the company to earn $0.89 per
share on revenues of $21.3 billion.
On the other hand, shares of
Infosys (INFY) have surged up by 17.3 percent after the software
services provider reported better than expected third quarter results
and raised its full-year revenue guidance.
Sector News
Despite
the lack of direction being shown by the broader markets, steel stocks
are seeing considerable weakness on the news out of China. The NYSE Arca Steel Index is down by 1.5 percent, pulling back further off the eight-month closing high it set last Wednesday.
Cliffs Natural Resources (CLF) and U.S. Steel (X) are turning in two of the steel sector's worst performances, falling by 4.3 percent and 3.2 percent, respectively.
Banking
stocks are also seeing some weakness in mid-day trading, with the KBW
Bank Index down by 1 percent. Regions Financial (RF) and Fifth Third
Bancorp (FITB) are posting notable losses.
While health insurance stocks
have also moved to the downside, airline stocks have shown a strong
upward move on the day. The NYSE Arca Airline Index has advanced by 1.3
percent and is on pace to end the session at a nearly two-year closing
high.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index surged up by 1.4 percent, while China's Shanghai Composite Index tumbled by 1.8 percent.
In the bond market, treasuries are
seeing modest weakness but have climbed off their worst levels of the
day. As a result, the yield on the benchmark ten-year note, which moves
opposite of its price, is up by 1.3 basis points at 1.907 percent.
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| Broker tips |
Tullow, Schroders, IAG
Investec has retained its 'sell' rating and 1,000p target for oil giant Tullow following a production miss on Friday morning.
The broker said: "This morning’s trading update delivered disappointing
production figures for Tullow and underlined our view that it may not
attain production of 100,000 bopd or more until as late as 2018
(disposal dependent). This will put greater pressure on the exploration
portfolio to deliver exceptional results, we think."
With global economic growth starting to gather momentum, Credit Suisse believes that increased risk appetite bodes well for asset managers and has upgraded its rating for London-listed firm Schroders from 'underperform' to 'neutral' as part of its sector review.
The broker said that the decision was "driven by our more positive
stance on net inflows into equities across retail and institutional
clients, increased demand for multi-asset products and potential for
revenue margin uplift following multi-year declines".
British Airways and Iberia owner International Consolidated Airlines, otherwise known as IAG, was flying high on Friday morning after UBS upgraded its rating for the company from 'neutral' to 'buy' following the stock's underperformance last year.
"We think that IAG could be the laggard most likely to outperform in 2013 should it achieve the concessions the company wants from Iberia staff," the broker said in a research report.
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