Markets finish lower, but TUI Travel surges late on
The FTSE 100 ended moderately lower
on Wednesday as markets trimmed losses by the close, though the mood
was still cautious after both the World Bank and Germany government downgraded growth forecasts.
Concerns about ongoing conflicts in North Africa
were also likely to be on investors’ minds today. As the French
military intervention in Mali intensifies, there was news of an Islamist
militant attack at a BP gas field in neighbouring Algeria which has resulted in a number of deaths and a hostage situation.
Markets are becoming increasingly concerned about the wider
implications that these conflicts could have, as a number of
neighbouring countries are large suppliers of key petrochemicals and
minerals.
The World Bank has cut its global growth
forecast for 2013 due to the difficult recovery that economies worldwide
are currently undergoing despite the improvement in financial markets.
It now expects growth of 2.4% this year, down from its prior forecast of
3%.
Meanwhile, Germany expects its economy to grow by a
mere 0.4% this year, well below the 1% growth forecast in October and
the 0.7% expansion in 2012.
“Given the news flow today it’s
hard to fathom why markets aren’t lower than they are, given the
continued stream of bad news from the retail sector,” said market
analyst Michael Hewson from CMC Markets.
Nevertheless, markets picked up from their intraday lows in afternoon trade after US banking heavyweights JPMorgan Chase and Goldman Sachs
beat consensus estimates with fourth-quarter profits. The latter
reported earnings per share of $5.60 for the last three months of 2012,
smashing the $3.64 consensus estimate. This was Goldman’s most
profitable quarter since the first three months of 2010.
"We’re used to seeing Goldman Sachs beating earnings forecasts, but
today’s results caught everyone off-guard," said market analyst Craig
Erlam from Alpari.
FTSE 100: TUI leaps on confirmation of merger approach
TUI Travel
raced ahead of Wednesday afternoon after the firm confirmed that it has
been approached by its German parent company, TUI AG, about a merger.
“The Independent Directors of TUI Travel have recently received an
approach from TUI AG which may or may not result in a combination of the
two companies,” the company announced.
The mining sector was out of favour today as investors reduced their appetite for risk. Anglo American
was extending losses from yesterday after the restructuring of its
platinum operations prompted backlash from South African politicians and
unions. Shares continued to fall after a number of workers protested
against plans to close several mines. Sector peers Xstrata and Glencore were also registering losses.
However, EVRAZ
bucked the trend after becoming the largest producer of coking coal in
Russia through the indirect acquisition of a controlling interest in
OJSC Raspadskaya. ENRC also rose after JP Morgan upped its target on the stock from 275p to 300p and kept its ‘neutral’.
BP
finished the day flat despite a ‘terrorist’ attack at one of its gas
fields in Algeria. BP released a statement confirming the incident but a
spokesman declined further details when reached for comment. “We can
confirm that there has been a security incident this morning at the In
Amenas gas field in the eastern central region of Algeria,” it said.
Part-nationalised lenders RBS and Lloyds
were registering losses after Bank of England officials said that they
need more capital to shore up their balance sheets. Meanwhile, the Daily Mail has said that RBS may be facing the prospect of a £500m fine over its alleged role in the LIBOR interest-rate rigging scandal.
Nomura also said this morning that it prefers Asia-focused banks (HSBC and StanChart) over UK domestic lenders, though it still prefers French and Swiss banks over the UK banking sector in general.
Information services company Experian
rose after it posted a rise in revenue for the three months to December
31st, during which time total revenue from continuing activities
increased by seven per cent at constant exchange rates.
FTSE 250: Ashtead boosted by Credit Suisse note
Equipment rental group Ashtead Group rose after Credit Suisse raised its target on the stock from 400p to 545p, retaining an ‘outperform’ rating.
Jupiter Fund Management
reported 'another good quarter', but it wasn't enough to stop broker
Peel Hunt downgrading the stock from 'buy' to 'hold', pushing the stock
lower.
Platinum miner Lonmin was also down, largely as a result of nervousness about recent Anglo American events.
In contrast, outsourcing firm MITIE Group declined after Credit Suisse reduced its target on the stock from 290p to 250p and kept an underperform rating.
| Thursday preview |
Aberdeen Asset Management and Associated British Foods results
FTSE 100 companies Aberdeen Asset Management and Associated British Foods
will be the talk of the town Thursday as they release interim
management statements. Shares in investment management group Aberdeen
were down one per cent the day ahead of its results.
The company's last results revealed an 11% increase in revenues for the year to September 30th.
They
made £869.2m for the year, following growth in assets under management
and strong interest in the group’s funds. Underlying profit before tax
increased by 15% to £347.8m compared to 2011.
Investors
will also be hungry for news from Associated British Foods. Nomura on
Monday downgraded the group to ‘neutral’ from ‘overweight’ as it was the
top faller on the FTSE 100.
However, shares recovered Wednesday, rising 1.57% to 1,556.00p.
The international food, ingredients and retail group
delivered a strong set of results last year with group revenues up 11%
to £12.3bn. Adjusted profit before tax climbed 17% to £974m, while net
debt stood at £1,061m.
At the time the group said it expected growth to continue in 2013.
Thursday January 17
INTERIMS
NCC Group
INTERIM DIVIDEND PAYMENT DATE
Hyder Consulting, red24, Sweett Group
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Budget Statement (US) (19:00)
Consumer Price Index (EU) (10:00)
ECB Report (EU) (09:00)
Harmonised Index of Consumer Prices (EU) (10:00)
Housing Starts (US) (13:30)
Philadelphia Fed Index (US) (15:00)
Wholesale Price Index (GER) (07:00)
GMS
Darty
IMSS
Aberdeen Asset Management, Associated British Foods, Home Retail Group
AGMS
Aberdeen Asset Management
TRADING ANNOUNCEMENTS
Computacenter, Dixons Retail
FINAL DIVIDEND PAYMENT DATE
Sportingbet
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| Europe Market Report |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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European Markets Finished Mostly Higher On Positive U.S. Earnings
The majority of the European markets
ended Wednesday's trading session in positive territory. Several better
than expected earnings reports from U.S. banks provided a boost to
investor sentiment. Economic data from the U.S. was mixed and investors
are awaiting a slew of Chinese economic reports. Automakers were weak
after the decline in new auto sales and banks also turned in a negative
performance.
The euro's exchange rate is "alarmingly high" and is
likely to affect the Eurozone economy which is showing signs of
stability, Eurogroup President Jean-Claude Juncker said Tuesday.
While
speaking at the annual gathering of business leaders in Luxemberg,
Junker warned that an overvalued euro is likely to threaten the economy
that is reemerging from financial crisis.
Junker's comments came just few days after European Central Bank President Mario Draghi's statement that the euro area may see a gradual recovery later in the year as there are some modest signs of stabilization.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.05 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.01 percent.
The DAX of Germany climbed by 0.20 percent and the CAC 40 of France advanced by 0.30 percent. The SMI of Switzerland gained 0.45 percent, but the FTSE 100 of the U.K. fell by 0.22 percent.
In Frankfurt, Metro dipped
by 0.17 percent. The department store operator reported a marginal rise
in fourth-quarter sales despite challenging market conditions,
especially in Southern Europe. The company also reaffirmed its full-year
profit forecast.
Deutsche Wohnen increased by 0.15 percent,
after it resolved on a capital increase against cash contributions and
under exclusion of shareholders' subscription rights.
Automakers
were weak after data released by the European Automobile Manufacturers'
Association showed Europe's new car sales declined sharply in December,
continuing a downward trend started fifteen months ago. Sales plunged
16.3 percent from a year ago, while demand for new cars reached the
lowest level recorded since 1995. Daimler declined by 0.16 percent and
Porsche decreased by 0.68 percent. BMW finished up by 0.80 percent and
Volkswagen gained 0.80 percent.
In Paris, Renault finished lower by 1.86 percent and Peugeot dropped by 3.35 percent. Societe Generale decreased by 2.84 percent. Credit Agricole lost 2.19 percent and BNP Paribas fell by 0.05 percent.
In London, Tesco declined by 0.56 percent. Regulators in Ireland have found horse DNA in the company's beef products.
Barclays fell by 0.68 percent and Royal Bank of Scotland lost 1.13 percent. Lloyds Banking group decreased by 2.50 percent and Standard Chartered finished lower by 1.19 percent.
Barry Callebaut dropped by 0.77 percent in Zurich. The manufacturer of cocoa and chocolate products reported a 0.6 percent decline in first-quarter sales revenue in reporting currency.
Eurozone inflation
remained unchanged at 2.2 percent in December as initially estimated,
final data released by Eurostat showed Wednesday. The latest figure is
the lowest since November 2010. Inflation has been hovering above the
central bank's threshold limit of 2 percent for many months.
The
number of people worked in local manufacturing units in Germany rose by
about 79,000 or 1.5 percent in November from a year ago, Destatis
reported Wednesday. Around 5.2 million people were employed in
manufacturing.
Germany's general government debt increased from
last year in the third quarter, data released by the Federal Statistical
Office showed Wednesday. Total federal debt, including those of
governments, states, and municipalities/associations, increased 1.6
percent from last year to EUR 2064.1 billion at the end to the third
quarter.
Consumer prices in the U.S. came in unchanged in
the month of December, according to a report released by the Labor
Department on Wednesday, with a sharp drop in gasoline prices offsetting
higher prices for food and shelter.
The Labor Department
said its consumer price index was unchanged in December after falling by
0.3 percent in November. The unchanged reading matched economist
estimates.
Industrial production in the U.S. increased by
slightly more than expected in the month of December, the Federal
Reserve revealed in a report on Wednesday, with increased manufacturing
and mining output more than offsetting a sharp drop in utilities output.
The report showed that industrial production
increased by 0.3 percent in December following a revised 1.0 percent
jump in November. Economists had expected production to edge up by 0.2
percent compared to the 1.1 percent growth originally reported for the
previous month.
Following eight consecutive monthly gains, homebuilder confidence
in the U.S. held steady in January, according to a report released by
the National Association of Home Builders on Wednesday. The report
showed that the NAHB/Wells Fargo Housing Market Index came in at 47 in January, unchanged from December. Economist had expected the index to inch up to 48.
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| US Market Report |
Stocks Turning In Mixed Performance In Mid-Day Trading
After
moving mostly lower in early trading on Wednesday, stocks have turned
mixed over the course of the trading day as traders digest a slew of
economic data as well as the release of earnings news from some big-name
companies.
The major averages are currently turning in a mixed performance, with the Nasdaq posting a modest gain. While the Nasdaq is up 6.50 points or 0.2 percent at 3,117.28, the Dow is down 26.24 points or 0.2 percent at 13,508.65 and the S&P 500 is down 0.47 points or less than a tenth of a percent at 1,471.87.
The early weakness on Wall Street was partly due to renewed concerns about the outlook for the global economy after the World Bank cut its forecast for global economic growth in 2013.
The World Bank
said it now expects the global economy to expand by 2.4 percent in 2013
compared to its June forecast for 3 percent growth. Estimates suggest
the global economy grew 2.3 in 2012.
However, selling pressure was somewhat subdued following the release of a report from the Federal Reserve showing a slightly bigger than expected increase in U.S. industrial production in the month of December.
The report showed that industrial production increased
by 0.3 percent in December following a revised 1.0 percent jump in
November. Economists had expected production to edge up by 0.2 percent.
The increase in production came as increased manufacturing and mining output more than offset a sharp drop in utilities output.
A separate report from the National Association of Home Builders
showed that homebuilder confidence held steady at a six-year high in
January, while the Labor Department said consumer prices were unchanged
in December.
Meanwhile, traders are also digesting
quarterly results from JP Morgan (JPM) and Goldman Sachs (GS), with both
financial giants reporting better than expected earnings.
Shares of Goldman Sachs
have risen by 2.8 percent on the news, reaching their best intraday
level in well over a year. JP Morgan initially moved lower but has
climbed back near the unchanged line since then.
Sector News
While most of the major sectors are showing only modest moves, considerable weakness remains visible among steel stocks. The NYSE Arca Steel Index is down by 1.6 percent after hitting its worst intraday level of the New Year.
The weakness among steel stocks comes as the World Bank's lower economic growth forecast has raised concerns about the outlook for global steel demand.
Chemical, gold,
and defense stocks are seeing more moderate weakness, while significant
strength has emerged among airline stocks. Extending a recent upward
move, the NYSE Arca Airline Index has risen by 1.2 percent to a two-year intraday high.
Semiconductor and oil service stocks have also moved to the upside on the day, with oil service stocks moving higher along with the price of crude oil.
Other markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 2.6 percent, while China's Shanghai Composite Index fell by 0.7 percent.
In the bond market, treasuries have
pulled back near the unchanged line after moving modestly higher in
early trading. Subsequently, the yield on the benchmark ten-year note,
which moves opposite of its price, is down by less than a basis point at
1.825 percent.
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| Broker tips |
UK banks, Vodafone, Anglo American
Nomura has retained its 'neutral' view on the UK bank sector, saying that domestic lenders 'scan weaker' than French and Swiss banks for total returns.
"In the context of the risk rally we see the UK domestic banks as well
positioned relative to Italian and Spanish banks, but we would prefer to
own the French and Swiss banks, along with a defensive bias towards the
UK Asian and Scandi banks."
Nevertheless, analysts said that they prefer Barclays over Lloyds and RBS.
Deutsche Bank has lowered its recommendation for Vodafone from 'buy' to 'hold', citing concerns about "deterioration" at the telecoms firm.
The broker said that there's "little to cheer" about at Vodafone: "We
forecast growth deterioration through calendar 2013 with the outlook for
financial FY14 set to confirm declining free cash flow (FCF), no
further dividend-per-share (DPS) growth and a scaled down buyback to
avoid increased leverage."
UBS has reiterated its 'neutral' rating and 1,860p target for mining giant Anglo American saying Tuesday's announced shake-up of its platinum division is a necessary step.
The broker maintained its cautious stance on the stock, saying that
Anglo's "value, EPS momentum/growth, heightened South Africa risk and
Minas Rio challenges make the risk/reward less compelling than for other
diversified UK miners".
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