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| London Market Report | ||||||||||||
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| London close: Footsie slips after surprise US contraction Market Movers
After a decent start, London's FTSE 100 index slipped into the red in
the afternoon session, as disappointing gross domestic product (GDP)
figures from the US dampened risk appetite.
US contracts in the fourth quarterMining stocks bore the brunt of the selling today, pulling the resource-heavy Footsie down from the four-and-a-half-year high reached the day before. The world's largest economy saw GDP shrink 0.1% in the fourth quarter of 2012, surprising analysts who had expected 1.1% growth. This was a sharp contrast to the 3.1% expansion seen in the third quarter. While the headline figure does not look good, analyst Peter Newland from Barclays Research gave reasons why it's "not all doom and gloom". He said that the downside surprise was mainly due to two components – inventory accumulation and government defence spending – so when excluding these, "the tone of the report was positive". He said that the relative strength of consumption and business investment "suggests that household and corporate sector demand was resilient in the face of uncertainty over the outcome of the fiscal cliff and in a solid position heading into the new year." That would probably suggest why the negative market reaction (on the FTSE 100 at least) to the report was only modest, especially when you consider the recent rally seen in stock markets worldwide since the start of the month. All eyes now on the FOMC The focus now turns to tonight's announcement (at 19:15) by the Federal Open Market Committee after its two-day meeting in Washington. "There was some unrest at the last meeting according to the minutes that were released, with some members suggesting that the programme be wrapped up either in June or at the end of the year," said market analyst Craig Erlam from Alpari. "That is unlikely to happen now, with unemployment remaining stubbornly high and growth far from the levels needed to bring it down," he said. FTSE 100: Resources stocks pull the Footsie lower Mining stocks were weighing heavily on the blue-chip index in London after the disappointing GDP figures from the US dampened the outlook for demand. Antofagasta, which posted strong production results for the fourth quarter this morning, sank after warning about higher copper production costs. Sector peer Polymetal was also lower even though it topped production guidance in 2012. Oilfield services groupPetrofac was another big faller as Europe's energy engineering majors dropped over fears that industry earnings would be lower than expected. The industry-wide drop began after Saipem SpA, Europe's largest energy engineering firm, cut its profit forecast. Tobacco giant Imperial registered sharp falls after saying that its Finance Director is to retire. The company also revealed that operating profits would fall in the first half as "market trends have worsened in a number of key markets including in the EU and Russia". Chemicals group Johnson Matthey was in the red after saying that both sales and profits fell in the third quarter. The firm said that volumes in the Precious Metals division had been hit by Amplats's plan to close mines in South Africa. Advertising and media firm WPP was in demand after Jefferies upgraded its rating for the stock from 'hold' to 'buy'. The broker said that an analysis WPP's largest clients and their 2013 ad budget "looks encouraging" and "with expectations low, we see upside risk". Meanwhile, distribution group Bunzl was a high riser after Numis increased its target from 1,248p to 1,505p, retaining a 'buy' recommendation. FTSE 250: Imagination Tech jumps after upgrade Chip designer Imagination Tech was a high riser after Morgan Stanley upgraded the stock to 'overweight' and increased its target from 450p to 570p. The broker said that two key possible catalysts – improved exposure in China and a design win in the next Samsung smartphone – are "not fully priced in". Shares in Phoenix Group, the consolidator of closed life assurance funds, jumped after it announced a 27% hike in its dividend and suggested there was more on the way. Phoenix also announced it had raised £250m through a combination of a placing and an open offer of 50m new shares at 500p per share. Precision tool maker Renishaw fell after warning that it faces tough financial comparators in the second half. Nevertheless, the company carved out a sharp increase in half yearly earnings, after it was boosted by a string of large consumer electronics orders in China. | ||||||||||||
| FTSE 100 - Risers Bunzl (BNZL) 1,134.00p +2.53% RSA Insurance Group (RSA) 134.30p +2.05% Sage Group (SGE) 331.60p +2.03% Prudential (PRU) 973.00p +1.83% BT Group (BT.A) 250.00p +1.54% WPP (WPP) 990.00p +1.28% Pearson (PSON) 1,192.00p +1.19% Babcock International Group (BAB) 1,032.00p +0.98% Legal & General Group (LGEN) 153.10p +0.92% Fresnillo (FRES) 1,681.00p +0.90% FTSE 100 - Fallers Antofagasta (ANTO) 1,169.00p -8.31% Petrofac Ltd. (PFC) 1,615.00p -7.02% Aggreko (AGK) 1,612.00p -5.23% Imperial Tobacco Group (IMT) 2,361.00p -4.26% Johnson Matthey (JMAT) 2,306.00p -4.24% Kazakhmys (KAZ) 736.00p -3.98% Evraz (EVR) 291.20p -3.54% Anglo American (AAL) 1,885.00p -2.31% Wood Group (John) (WG.) 805.50p -2.19% BAE Systems (BA.) 341.00p -2.10% FTSE 250 - Risers Imagination Technologies Group (IMG) 497.90p +12.77% Phoenix Group Holdings (DI) (PHNX) 630.00p +6.60% Centamin (DI) (CEY) 55.60p +5.10% Oxford Instruments (OXIG) 1,656.00p +4.02% COLT Group SA (COLT) 106.50p +3.00% Savills (SVS) 498.80p +2.93% PZ Cussons (PZC) 384.00p +2.89% William Hill (WMH) 382.30p +2.22% 3i Group (III) 272.50p +2.14% St. Modwen Properties (SMP) 236.50p +1.98% FTSE 250 - Fallers Fenner (FENR) 387.40p -6.20% Ferrexpo (FXPO) 257.00p -5.48% Renishaw (RSW) 1,860.00p -5.10% IP Group (IPO) 124.90p -4.87% Chemring Group (CHG) 275.80p -4.86% Beazley (BEZ) 180.60p -4.85% Kier Group (KIE) 1,345.00p -3.93% Balfour Beatty (BBY) 267.90p -3.81% FirstGroup (FGP) 192.90p -3.50% KCOM Group (KCOM) 71.00p -3.40% | ||||||||||||
| Europe Market Report | ||||||||||||
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| Europe midday: Stocks edge lower
- Investors eye US monetary policy decision
Spain reveals worse-than-expected contraction- Italy's benchmark falls on confidence index - Europe's economic confidence improves - Spain reveals worse-than-expected contraction FTSE-100: 0.03% Dax-30: -0.13% Cac-40: -0.12% FTSE Mibtel 30: -2.04% Ibex 35: -0.20% Stoxx 600: -0.34% European equities were trading lower at the midday mark Wednesday as investors awaited a monetary policy decision from the US. The Federal Open Market Committee is due to reveal its plans at 19:15 after a two-day meeting in Washington. While the decision will be closely watched, analysts have labelled it as the most anticipated "non-event" of the week. Meawhile, Italy's FSE MIB benchmark plunged as the Italian Statistics office ISTAT's business confidence index for the month of January fell to 88.2 (consensus: 89.5) after a reading of 88.9 in the previous month. Elsewhere in the country a shock profit warning came from oil services firm Saipem. Shares were suspended as the Italian group forecast an 80% fall in earnings. The announcement hit the oil services sector which was expected to grow 35.3% year-on-year in the coming quarter, according to Thomas Reuters data. More promising news for the Eurozone came from data revealing a rise in economic confidence. An index of executive and consumer sentiment climbed to 89.2 from a revised 87.8 in December, the European Commission in Brussels said Wednesday. The results pointed to signs the 17-nation currency bloc may be emerging from a recession. Spain reported worse-than-expected contraction of its economy during the fourth quarter of 2012. According to the preliminary data from the INE (government statistics office), Spain's economy fell 0.7% during the quarter, compared to the prior drop of 0.3%. Consensus had expected a contraction of 0.6%. It comes as the Spanish government grapples with the implementation of austerity measures required as part of its Eurozone bailout. In a separate report, the country's autonomous community Catalonia has asked for more bailout funds from the central government. The Catalan regional government requested €9.1bn for 2013, compared with the €5.37bn it asked for last year. Euro strengthens The euro topped $1.35 for the first time since December 2011, while the Eurozone single currency reached its highest level since April 2010. Brent crude features ascended 0.453 dollars to the 114.880 dollar mark on the ICE following a flat start. | ||||||||||||
| US Market Report | ||||||||||||
| US open: Equity investors keep the faith
US markets shook off a disappointing fourth quarter GDP figure to open just slightly down on Wednesday.
The Standard & Poor's 500 Index fell just 0.1% to 1,507 in New York, while the Dow Jones Industrial Average was also down 0.1 percent, to 13,942. Amazon, the world's biggest online retailer, rose 4.5% after it reported a rise in both sales and North American operating margin. One person probably not happy about Chesapeake Energy's 7.2% rise was Chief Executive Officer Aubrey McClendon, coming, as it did, on the back of the announcement of his retirement. Economists had predicted GDP growth to the tune of around 1.1% but the number came in at -0.1% as huge defence cuts began to bite. It was the first fall in US GDP in three-and-a-half years - the last drop was in the second quarter of 2009 when the country was in recession. The latest figures showed government spending fell 6.6% in the fourth quarter, while companies cut back on inventories to the tune of 1.3%. Trade also held the economy back, as exports fell 5.7% during the quarter. One market commentator remarked that "the bulls are immortal". However, another said the headline figure was misleading and the US economy was in better shape than it suggested. In fact, Peter Newland at Barclays pointed out the tone of the report was positive when inventories and defence were excluded. Private consumption growth picked up to 2.2% in Q4 from 1.6% in Q3. Fixed investment saw growth jump from 0.9% to to 9.7% , reflecting gains in equipment and software (12.4%) and residential (15.3%), which more than offset a small decline in structures (-1.1%). The ongoing bullish tone was supported by separate figures which showed a healthy rise in employment in the US. Private-sector jobs in the country increased by 192,000 in January, according to a national employment report calculated by payroll processor Automatic Data Processing. | ||||||||||||
| Broker Tips | ||||||||||||
| Broker tips: Imperial, WPP, Ferrexpo
Panmure Gordon has retained its 'buy' rating and 2,900p target cigarette and tobacco group Imperial Tobacco but has raised some concerns after the company noted challenging conditions in some markets in the first quarter.
"We remain attracted to Imperial on its valuation; however in order for the discount to its peers to narrow we believe that delivery of its organic strategy needs to accelerate." Media and advertising giant WPP was performing well on Wednesday morning after Jefferies upgraded its rating for the stock from 'hold' to 'buy'. The broker said that an analysis WPP's largest clients and their 2013 ad budgets "looks encouraging" and "with expectations low, we see upside risk". Seymour Pierce has reiterated its 'buy' rating for iron ore producer Ferrexpo despite the company revealing a sharp drop in earnings. "Although we will be re-examining our estimates in light of this release this morning we reiterate our positive stance on Ferrexpo. Indeed, we believe there are a number of catalysts around the corner that will have a positive effect on the share price over the next few quarters," said analyst Matthew McDonald. | ||||||||||||
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