Stocks lifted by upbeat US earnings
Market Movers
techMARK 2,230.24 +0.32%
FTSE 100 6,197.64 +0.30%
FTSE 250 12,934.40 -0.18%
London’s
FTSE 100 finished with moderate gains on Wednesday afternoon ahead of a
key vote over the potential extension of the debt ceiling Stateside, as
some decent results from US bellwethers Google, McDonald’s and IBM lifted sentiment across stock markets worldwide.
The US House of Representatives is to vote this evening on whether to extend the government's debt ceiling until May 19th. A White House spokesman said that President Barack Obama "won't stand in the way" of this short-term fix.
For the time being, traders will likely focus on tech giant Apple’s
results after the closing bell this evening. Earnings are widely
expected to fall year-on-year due to a drop in the gross margin, however
the market’s attention will undoubtedly be on the company’s outlook for
2013 amid concerns over disappointing smartphone sales as of late.
In other news, the International Monetary Fund (IMF) has slashed its growth forecasts for the global economy, saying that the upturn is expected to be ‘more gradual’
than previously thought. The IMF expects world output in 2013 and 2014
to expand by 3.5% and 4.1%, respectively, down 0.1 percentage point from
earlier forecasts.
Markets shrug off Cameron speech
UK Prime Minister David Cameron's
much-anticipated 'in-or-out-case' speech on Britain's membership in the
European Union didn't really move markets this morning.
He
committed his party to holding a referendum on whether the UK should
remain in the EU in the first half of the next parliament (by the end of
2017 at the latest). "It is time for the British people to have their
say; it is time to settle this question over Britain and Europe,"
Cameron said.
Financial trader Shavaz Dhalla from Spreadex said this morning that Cameron's speech "proved futile".
He said: "European markets took the speech in their stride and digested
enough information to gauge that the speech was probably designed to
build momentum for Cameron’s next campaign rather than mount a serious
economic backing for whether remaining in the EU is worthwhile."
BoE in wait-and-see mode
Minutes from the latest Bank of England policy meeting
showed that members voted eight-to-one in favour of leaving the asset
purchase programme unchanged at £375bn. The Monetary Policy Committee
(MPC) voted unanimously to keep the Bank Rate at 0.5%.
Analyst Chris Crowe from Barclays Research said that the MPC is "still content to wait and see" with the committee "likely to resist expanding QE as long as the economy shows signs of stabilisation and improvement."
Meanwhile, the UK jobless rate
fell from 7.8% to 7.7% in the three months to November, better than the
consensus estimate for no change. The UK claimant count fell by 12,100
in December to 1.56m, the lowest since June 2011.
FTSE 100: Unilever impresses with 2012 sales record
Consumer products titan Unilever
was on the up after double-digit growth in emerging markets helped push
its turnover past the €50bn-mark in 2012, the first time this milestone
has been reached. Revenue growth was 10.5% last year.
Tullow Oil
was also a high riser, a day after the company said it completed the
acquisition of Spring Energy Norway AS. The group announced that the
acquisition had already brought success for Tullow.
Following close behind was Marks & Spencer amid rumours of a takeover bid following bleak sales updates.
Travel and leisure group TUI Travel was a heavy faller after its Germany parent company TUI AG
said it has no intention of making an offer. TUI Travel said last week
that it had received an approach from TUI AG, which owns a 56.4% stake
in the firm.
Utilities group SSE followed close behind
after announcing Chief Executive Ian Marchant would step down after 10
years in the role. The stock also went ex-dividend today.
Compass Group,
also ex-div today, dropped following recent damning comments from
Portuguese investment bank Espirito Santo which said the company will
lose its direction in 2013.
Real estate investment trust Land Securities edged lower despite saying that the third quarter saw a "strong operating performance across our investment portfolio".
Business software firm Sage
was down despite an in-line trading statement. The group said that
revenue trends had varied across its geographies, with good growth seen
in the UK and Ireland and challenging conditions noted in mainland
Europe.
Diversified mining giant BHP Billiton was
wanted after saying it expects to deliver a compound annual growth rate
of 10% in copper equivalent terms over the next two years.
| AIM/Small Cap Report |
FTSE 250: Afren provides a lift
Oil and gas firm Afren
was extending gains after impressing the market on Monday with record
results. The African-focused group earlier this week reported strong
production and financial performance following exploration success in
Nigeria and the Kurdistan region of Iraq.
Oil and gas group EnQuest
was in demand after agreeing with CIECO Energy UK to acquire two of its
affiliate companies which together hold a total of 8.0% non-operated
interest in the producing oil field Alba.
Bumi was also
higher despite the bad press surrounding the company as co-founder Nat
Rothschild continued to butt heads with the board and the Bakrie family.
Meanwhile, house-builders were firmly out of favour after
JPMorgan Cazenove dampened the sector with a series of downgrades. The
US broker cut its rating for Taylor Wimpey, Redrow, Bovis Homes, Bellway and Barratt Developments today, causing stocks to fall.
FTSE 100 - Risers
Tullow Oil (TLW) 1,195.00p +3.46%
Unilever (ULVR) 2,526.00p +3.06%
Marks & Spencer Group (MKS) 379.10p +2.54%
Petrofac Ltd. (PFC) 1,735.00p +2.06%
Standard Chartered (STAN) 1,669.50p +1.99%
Croda International (CRDA) 2,358.00p +1.77%
BP (BP.) 463.25p +1.71%
Intertek Group (ITRK) 3,067.00p +1.62%
Tate & Lyle (TATE) 825.00p +1.60%
Diageo (DGE) 1,865.00p +1.58%
FTSE 100 - Fallers
TUI Travel (TT.) 278.00p -4.83%
SSE (SSE) 1,382.00p -3.69%
Standard Life (SL.) 336.30p -1.98%
Compass Group (CPG) 746.00p -1.78%
ITV (ITV) 113.50p -1.65%
Anglo American (AAL) 1,869.00p -1.61%
International Consolidated Airlines Group SA (CDI) (IAG) 208.30p -1.56%
Lloyds Banking Group (LLOY) 52.02p -1.51%
Wolseley (WOS) 2,896.00p -1.50%
Melrose Industries (MRO) 243.50p -1.50%
FTSE 250 - Risers
Afren (AFR) 152.00p +9.20%
EnQuest (ENQ) 129.70p +4.26%
Bumi (BUMI) 337.40p +3.98%
Stobart Group Ltd. (STOB) 100.30p +3.19%
Domino Printing Sciences (DNO) 640.00p +3.06%
Dignity (DTY) 1,155.00p +2.94%
Menzies(John) (MNZS) 681.50p +2.79%
RIT Capital Partners (RCP) 1,203.00p +2.56%
Micro Focus International (MCRO) 620.00p +2.48%
Hikma Pharmaceuticals (HIK) 798.50p +2.18%
FTSE 250 - Fallers
Redrow (RDW) 184.00p -4.32%
St. Modwen Properties (SMP) 225.10p -3.84%
Big Yellow Group (BYG) 368.00p -3.64%
Barratt Developments (BDEV) 218.40p -3.62%
Taylor Wimpey (TW.) 70.65p -3.55%
TalkTalk Telecom Group (TALK) 232.40p -3.49%
Man Group (EMG) 93.20p -3.32%
Enterprise Inns (ETI) 96.00p -3.27%
Carillion (CLLN) 308.00p -2.93%
Petropavlovsk (POG) 388.60p -2.56%
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European Markets Finished Mixed As Investors Await U.S. Vote
The European markets ended
Wednesday's session with mixed results. The markets received a boost
from positive earnings results from European giants such as Unilever and
Novartis, as well as results from Google and IBM in the United States.
However, many investors were hesitant to take a position ahead of the
vote to pass a short-term debt ceiling increase in the U.S. House of
Representatives. President Barack Obama has stated that he would sign
the bill if it clears Congress. Investors will also be watching for the
earnings report from Apple later today.
European Central Bank President Mario Draghi observed
Tuesday that the 'darkest clouds' over the euro area have subsided
while countries reinforced their commitment to reforms. In a speech in
Frankfurt, he said resolute actions by euro area governments and
European institutions have made the year 2012 quite different than
predicted.
Bank of England Governor Mervyn King said it
would be sensible to review the arrangements for setting monetary
policy. The inflation target was introduced in the U.K. almost 21 years
ago, and it has now 'come of age', he noted.
In a speech in Belfast, King
said late Tuesday that the economy needs more fundamental reforms to
underpin a "gentle recovery." There are certainly aspects of the
inflation targeting regime to consider, King added.
British Prime Minister David Cameron
on Wednesday said that he is in favor of a referendum on the UK's
membership of the European Union, but insisted that he does not want the
country to drift towards an EU exit.
In a much-awaited speech in
London, he promised to hold an in/out referendum on EU membership by
the end of 2017, if re-elected. Cameron said the next Conservative
manifesto in 2015 will ask for a mandate from the British people for a
Conservative Government to negotiate a new settlement with the European
partners in the next Parliament.
With a majority of 8, the Bank of England's policymakers voted
to maintain quantitative easing unchanged at the start of the year, as
they saw limited stimulus to the economy from further easing.
Policymakers led by Governor Mervyn King unanimously decided to retain
the record low 0.50 percent interest rate. The meeting was held on
January 9 and 10.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.25 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.46 percent.
The DAX of Germany rose by 0.19 percent, but the CAC 40 of France fell by 0.40 percent. The SMI of Switzerland increased by 1.35 percent and the FTSE 100 of the U.K. climbed by 0.34 percent.
In
Frankfurt, SAP increased by 2.59 percent. The business software giant
reported an 8 percent decline in fourth-quarter net profit, reflecting
higher share-based compensation expense and acquisition-related charges.
Siemens
declined by 0.04 percent, after it reported a 12 percent fall in
first-quarter profit to 1.21 billion euros from 1.38 billion euros in
the same period last year.
In Paris, Alcatel Lucent advanced by 4.68 percent. Citigroup upgraded its rating on the stock to "Neutral" from "Sell."
BNP Paribas
decreased by 2.46 percent, after Deutsche Bank downgraded it to "Hold"
from "Buy." Societe Generale declined by 3.70 percent and Credit
Agricole lost 2.57 percent.
In London, TUI sank by 4.96
percent. The travel and tourism group said it doesn't intend to make an
offer for British tour operator TUI Travel Plc.
BHP Billiton gained 1.47 percent, after the mining giant reported a 3 percent rise in its December quarter iron ore production.
Unilever increased
by 3.18 percent, after the Anglo-Dutch consumer goods giant reported a
higher profit for its fiscal year 2012, benefited by strong performance
in emerging markets, even though Europe was weak.
Sage Group fell by 1.04 percent, after the company warned of challenging conditions in Europe.
Novartis surged
by 4.08 percent in Zurich. The drug maker reported a 72 percent
increase in fourth-quarter profit, benefited by lower charges as well as
exceptional performance from recently launched products and emerging
growth markets.
French business confidence deteriorated
unexpectedly in January as manufacturers assessed sharp contraction in
past production and forecast a deterioration on own production outlook.
The business sentiment index came in at 86 in January, survey data from
the statistical office Insee showed Wednesday. It was forecast to rise
to 90 from 89 in December.
Spain's recession likely deepened
during the three months ended December, with gross domestic product
falling for the fifth consecutive quarter, the quarterly bulletin from
the Bank of Spain said Wednesday.
Gross domestic product
(GDP) is estimated to have dropped at a faster rate of 0.6 percent
sequentially in the fourth quarter than 0.3 percent in the third
quarter, signaling that the economy has slipped deeper into recession.
GDP contracted for the fifth successive quarter.
Government debt in the Eurozone stayed broadly unchanged in the third quarter, data released by statistical office Eurostat showed Wednesday.
Total public debt
in the single-currency bloc came in at 90 percent of gross domestic
product at the end of the third quarter, little changed from 89.9
percent recorded in the second quarter. The latest figure was, however,
higher than 86.8 percent recorded in the third quarter of 2011.
U.K. employment total
increased to a record high during three months ended November after
people out of work decreased, data from the Office for National
Statistics revealed Wednesday.
There were 2.49 million unemployed
people in the country during the three-month period, down by 37,000
from June-August. At the same time, the number of people in work
increased by 90,000 to 29.7 million for three months to November, the
highest since records began in 1971.
The employment rate edged
up to 71.4 percent from 71.3 percent during June to August. But it was
lower than the pre-recession peak of 73 percent logged for March to May
2008.
| US Market Report |
Stocks Give Back Ground But Remain Mostly Positive
After
showing a strong move to the upside in early trading on Wednesday,
stocks have given back some ground over the course of the trading day
but remain mostly positive. The markets are benefiting from a positive
reaction to the latest batch of earnings news.
The major averages have pulled back off their highs for the session but are currently all in positive territory. The Dow is up 59.85 points or 0.4 percent at 13,772.06, the Nasdaq is up 10.08 points or 0.3 percent at 3,153.26 and the S&P 500 is up 0.36 points or less than a tenth of a percent at 1,492.92.
The
modest strength on Wall Street extends a recent upward move by stocks,
with the Dow and the S&P 500 reaching new five-year highs earlier in
the session.
Traders have largely reacted positively to
the latest earnings news, with upbeat quarterly results from some
big-name companies inspiring confidence that the markets can sustain
some further upside.
Tech giants IBM Corp. (IBM) and Google (GOOG) are both posting notable gains after reporting fourth quarter earnings that exceeded analyst estimates.
McDonald's
(MCD) is posting a more modest gain after the fast food giant reported
fourth quarter earnings that rose year-over-year and came in above
analyst estimates. The company also reported stronger than expected
revenue growth.
Fellow Dow component United Technologies
(UTX) reported fourth quarter earnings that fell compared to the
year-ago quarter but still came in slightly above expectations. The
diversified conglomerate also reaffirmed its guidance for 2013.
Shares of iPad and iPhone maker Apple (AAPL) are up by 0.8 percent ahead of the release of its fiscal first quarter results after the close of trading.
Nonetheless, buying interest
has waned from earlier in the session, as traders remain somewhat
reluctant to continue buying stocks following the recent strength.
Traders
are also keeping an eye on developments in Washington, where the House
is preparing to vote on a three-month extension of the U.S. debt limit.
Sector News
Railroad stocks are seeing considerable strength in mid-day trading, with the Dow Jones Railroads Index up by 1.5 percent. With the gain, the index has reached a record intraday high.
CSX Corp. (CSX) and Norfolk Southern (NSC) are both posting notable gains after reporting better than expected fourth quarter results.
Significant
strength also remains visible among computer hardware stocks, as
reflected by the 1.2 percent gain being posted by the NYSE Arca
Computer Hardware Index. The index reached a four-month intraday high in
early trading but has given back some ground since then.
On the other hand, gold stocks have come under pressure over the course of the session, dragging the NYSE Arca Gold Bugs Index down by 1.9 percent. Iamgold (IAG) has helped to lead the gold sector lower, falling by 10.6 percent.
Tobacco, healthcare provider, and brokerage stocks are also seeing notable weakness, partly offsetting the strength seen in other sectors.
Other Markets
In overseas trading, stock markets across
the Asia-Pacific region turned in another mixed performance during
trading on Wednesday. Japan's Nikkei 225 Index tumbled by 2.1 percent,
while China's Shanghai Composite Index rose by 0.3 percent.
In the bond market, treasuries are seeing modest strength, adding to the slim gains posted in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1.1 basis points at 1.824 percent.
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| Thursday preview for Event Calendar |
easyJet to report first-quarter figures
easyJet
unveils its first-quarter results Thursday in the wake of news that its
founder threatened to sell further shares if the airline places an
order for more aircraft.
Sir Stelios Haji-Ioannou voiced his
concern over the company’s expansion plans in an open letter published
on Monday, accusing directors of “squandering” cash on new planes. He
warned directors he would sell his 37% family stake in the budget
carrier if they go ahead with the order.
Analysts at Investec
forecast passenger growth of 6.2% year-on-year to 13.7m and pegged
revenue growth of 8.4% at £827.1m for the first quarter.
However the broker reduced its recommendation from ‘buy’ to ‘hold’ on
Monday, saying: “The stock was our key 2012 airlines pick, but the
shares have outpaced the market and we now project a period of share
price stability rather than material growth, coupled with uncertainty
over the outcome of a major new aircraft order in 2013."
In contrast, Morgan Stanley retained
its ‘overweight’ stance on the stock on Wednesday, saying that it
remains its “top pick in the European airline sector”. The US broker’s
full-year profit before tax forecast of £356m is currently 13% ahead of
consensus estimates.
Shares fell 0.12% to 856.00p at 16:00 a day ahead of the results.
Thursday January 24
INTERIM DIVIDEND PAYMENT DATE
Dairy Crest Group, Tongaat-Hulett Ltd.
QUARTERLY EX-DIVIDEND DATE
Marsh & Mclennan Cos Inc.
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Payments (EU) (09:00)
ECB Interest Rate (EU) (12:45)
Spanish Unemployment (Q4) (08:00)
Eurozone Manufacturing/Service sector PMIs (Jan.) (09:00)
US Initial Jobless Claims (Jan 19) (13:30)
US Leading indicators (Dec.) (15:00)
FINALS
Chemring
GMS
Mam Funds
IMSS
easyJet, Invensys, Carphone Warehouse, First Group
Q3
London Stock Exchange Group
AGMS
Botswana Diamonds, Invesco Leveraged High Yield Fund Ltd., Octopus VCT
3, Octopus VCT 4, Scottish Oriental Smaller Companies Trust, Sinclair
(William) Holdings, Smiths News
TRADING ANNOUNCEMENTS
Barr (A.G.)
UK ECONOMIC ANNOUNCEMENTS
BBA Mortgage Lending Figures (09:30)
CBI Distributive Trades Surveys (11:00)
Speech MPC by Member Martin Weale (17:30)
Speech Andy Haldane, Executive Director of Financial Stability BoE (06:00)
FINAL DIVIDEND PAYMENT DATE
Aberdeen Asset Management
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