Markets cautious after Chinese inflation figures
UK
markets opened tentatively on Friday morning, making only slight gains
as investors digested inflation data in China and economic stimulus in
Japan.
Chinese inflation rose to 2.5% in December as
cold weather resulted to a increase in food prices. "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.
"The loosening of monetary policy appears to have been largely
responsible for the improvement witnessed in the economy in the fourth
quarter," he said.
As such, mining stocks in London were firmly out of favour this morning on concerns over Chinese growth, with BHP Billiton, Rio Tinto and Anglo American registering losses.
In other news, Japan's
newly-elected Prime Minister Shinzo Abe unveiled a 10.3tn-yen stimulus
package, aimed at raising economic growth by 2% and creating 600,000 new
jobs.
Markus Huber, the head of German HNW trading at ETX
Capital, said: "No doubt the news out of Japan is encouraging, however
at the same time it needs to be seen if indeed these measure will also
have a positive long term impact on the economy or just provide a
short-term boost, and in the end just lead to a worsening of the already
dire financial situation in Japan."
Tullow disappoints; IAG flying high after upgrade
Oil giant Tullow
was under the weather after achieving average working interest
production of 79,200 barrels of oil per day (bopd) in 2012, below the
forecast range of 80,000-84,000 bopped. The group also revealed that
exploration write-offs more than doubled last year due to a number of
unsuccessful drilling activities and licence relinquishments.
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.
Financial stocks were performing well this morning with banking peers RBS, Barclays and Lloyds among the highest risers. Asset manager Schroders was higher after Credit Suisse upgraded the stock to 'neutral', while insurance giant Aviva was lifted by an upgrade by Citigroup to 'buy'.
High Street giant Marks & Spencer
was lower, extending losses from yesterday after its third-quarter
sales disappointed the market. The stock was taken down a peg by HSBC
this morning, which downgraded its recommendation for the shares to
'neutral'.
On the FTSE 250, 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.
| UK Event Calendar |
FINALS
Avesco, Aukett Fitzroy Robinson Group
TRADING ANNOUNCEMENTS
Tullow Oil, Centaur Media
INTERIM DIVIDEND PAYMENT DATE
Atkins (WS), Babcock International Group, Cable & Wireless
Communications, Caffyns, Cropper (James), Electrocomponents, First
Property Group, Marks & Spencer Group, Montanaro European Smaller
Companies Trust, Northern 2 VCT, Northern 3 VCT, Northgate, Severn
Trent, Shanks Group, Telford Homes, Worldwide Healthcare Trust
QUARTERLY PAYMENT DATE
Schlumberger Ltd.
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Import and Export Price Indexes (US) (13:30)
International Trade Statistics (US) (13:30)
Budget Statement (US) (19:00)
Q3
JSC Acron GDR (Reg S)
GMS
Supercart
IMSS
Clarke (T.)
EGMS
Alternative Energy Ltd. (DI)
AGMS
Bellway, Fenner Group
FINAL DIVIDEND PAYMENT DATE
Associated British Foods, Debenhams, Netcall, Waterman Group
UK ECONOMIC ANNOUNCEMENTS
Industrial Production (09:30)
Manufacturing Production (09:30)
NIESR GDP estimate (15:00)
Construction output (09:30)
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| Europe Market Report |
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| FTSE 100 | Euronext | Dax perf | CAC 40 |
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ECB will not cut rates this year, Goldman says
FTSE-100: 0.02%
Dax-30: 0.04%
Cac-40: 0.12%
FTSE Mibtel 30: -0.07%
Ibex 35: 0.30%
Stoxx 600: -0.02%
The main European equity
benchmarks have started the day on a mixed footing as investors wait
for the signal to advance, or not, from their brethren on the other side
of the pond. That as the main benchmarks are now still hovering at or
near resistance in the form of multi-year highs.
Acting as a backdrop, some in the markets -not least Goldman Sachs among them - are now of the view that the European Central Bank will demur from cutting rates further this year.
Also worth noting, Japan´s Cabinet Office has recommended the implementation of a new fiscal stimulus package.
SAP is
rising after announcing a significant overhaul of its
enterprise-software system, while the likes of Cap Gemini SA is
benefiting from the positive outlook just provided by its rival Infosys.
From a sector stand-point the worst performers now on the DJ Stoxx 600 are: Basic resources (-1.47%), Automobiles (-0.75%) and Chemicals (-0.50%).
Dutch industrial production rose at a 1.2% month-on-month clip in November (Consensus: 0.0%).
Spanish industrial production on the other hand contracted by 7.2% year-on-year in November, far more than the 4% fall expected.
The euro/dollar is now down a tad, at 1.3260.
Front month Brent crude futures are off by 0.351 dollars to the 111.61 dollar mark on the ICE.
European broker round-up
Alstom: Citi upgrades to BUY from neutral and raises its price target to €38 from €30.
ArcelorMittal: AlphaValue reiterates UNDERWEIGHT rating.
BHP Billiton: Macquarie downgrades to NEUTRAL from overweight.
Casino Guichard: Oddo downgrades to NEUTRAL from buy and lowers price target to €77 from €84.
Rio Tinto: Macquarie downgrades to NEUTRAL from overweight.
Viscofan: Kepler downgrades to HOLD from buy.
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| US Market Report |
Upbeat Overseas News Leads To Strength On Wall Street
Stocks
fluctuated over the course of the trading day on Thursday but largely
maintained a positive bias before ending the day notably higher. The
markets benefited from a positive reaction to some upbeat news from
overseas.
The major averages ended the day firmly in positive territory, adding to the gains posted in the previous session. The Dow rose 80.71 points or 0.6 percent to 13,471.22, the Nasdaq climbed 15.95 points or 0.5 percent to 3,121.76 and the S&P 500 advanced 11.10 points or 0.8 percent to 1,472.12.
With the gains over the past two days, the major averages have more than offset the weakness seen earlier this week. The S&P 500 ended the day at a new five-year closing high.
The strength on Wall Street was partly due to the release of some upbeat Chinese trade data, with a report from the Chinese General Administration of Customs showing that the nation's trade surplus swelled to $31.6 billion in December from $19.6 billion in November.
The
report said Chinese exports rose 14.1 percent year-over-year, the
fastest rate of growth in seven months. Chinese imports also saw 6
percent annual growth.
The upbeat Chinese trade data generated some optimism about the outlook for the global economy, as China represents the world's second-largest economy.
Traders
also reacted positively to news out of Europe, where the European
Central Bank announced its decision to leave interest rates unchanged at
a record low.
ECB President Mario Draghi said economic
weakness in the euro area is expected to extend into the new year but
said economic activity should gradually recover later in 2013.
Meanwhile, traders largely shrugged off a report from the Labor Department showing an increase in initial jobless claims in the week ended January 5th.
The Labor Department said initial jobless claims
rose to 371,000 from the previous week's revised figure of 367,000.
Economists had expected jobless claims to drop to 362,000 from the
372,000 originally reported for the previous week.
Sector News
Gold stocks moved
sharply higher on the day, regaining some ground following recent
weakness. The NYSE Arca Gold Bugs Index surged up by 2.6 percent,
bouncing off yesterday's five-month closing low.
The rebound by gold stocks
came amid a notable increase by the price of the precious metal, with
gold for February delivery jumping $22.50 to $1,678 an ounce.
Significant strength also emerged among health insurance stocks, as reflected by the 1.6 percent gain posted by the Morgan Stanley Healthcare Payor Index. Humana (HUM) and Molina Healthcare (MOH) turned in two of the sector's best performances.
Banking, semiconductor, and oil stocks
also saw considerable strength on the day, with oil stocks moving
higher as the price of crude reached its highest closing level in almost
four months.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Thursday, adding to yesterday's gains. Japan's Nikkei 225 Index rose by 0.7 percent, while Hong Kong's Hang Seng Index advanced by 0.6 percent.
In the bond market, treasuries moved back to the downside after regaining some ground over the past few sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.2 basis points to 1.894 percent.
Looking Ahead
Trading on Friday may be impacted by reaction to quarterly results from financial services giant Wells Fargo (WFC), which is due to release its fourth quarter results before the start of trading.
U.S. trade data
may also attract some attention, with traders likely to keep an eye on
reports on the U.S. trade deficit and import and export prices.
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| Friday newspaper round-up |
RBS, Japan, PPI claims...
Senior Royal Bank of Scotland
bankers may step down in the coming weeks as part of the bailed-out
bank's multimillion-pound settlement with regulators over the
Libor-rigging scandal. John Hourican, head of the RBS investment bank,
and Peter Nielsen, head of markets, may leave even though neither of
them had personal knowledge of the attempts to manipulate interest rates
that have already led to four staff being fired and others being
suspended.
The chief executive of RBS, Stephen Hester, has
been preparing the ground for a substantial Libor fine since the summer
when Barclays was hit with a £290m penalty that forced out chief
executive Bob Diamond. Hester was parachuted in to turn around RBS after
£45bn taxpayer bailout, and while the manipulation of the benchmark
rate carried on while he was at the helm, he is not thought to be under
pressure. [The Guardian]
Japanese prime minister, Shinzo Abe, unveiled a Y10.3tn ($116bn) economic stimulus package
that the government expects will lift the country’s gross domestic
product by 2 per cent and create 600,000 jobs. “We are making a bold
shift . . . towards an economic policy that will create wealth through
economic growth,” Mr Abe said on Friday. The stimulus package will
exacerbate Japan’s deteriorating fiscal health as government debt is
already at 220 per cent of GDP. The newly-elected Mr Abe, however, is
under significant pressure to lift the economy out of its fifth
recession in 15 years before Upper House elections in July. [Financial Times]
The Financial Ombudsman Service plans to take on 1,000 staff this year
to deal with a surge of complaints relating to mis-sold payment
protection insurance (PPI). The expansion comes on top of the 1,000 it
hired last year, when it increased its number of case workers to 2,500.
Deputy chief ombudsman Tony Boorman said: “While we see some businesses
using complaints positively, many continue to frustrate their customers
with delays and inconvenience. This has a marked impact on our
workload.” [The Scotsman]
One of the most senior bankers in London should be kicked out of the City, the Parliamentary Commission on Banking Standards suggested yesterday. Alex Wilmot-Sitwell, who heads Bank of America Merrill Lynch in London, was one of four former UBS
chiefs accused by the commission of being “ignorant and grossly
incompetent” over the Libor interest rate rigging scandal. Andrew Tyrie,
the chairman of the commission, lamented the fact that some of the four
were still holding senior jobs in the City and had not been struck off
the Financial Services Authority’s approved persons register. [The Times]
Google
will be forced to change the way it presents search results in Europe
or face sanctions from Brussels for unfairly manipulating its position
as the world’s biggest internet search engine. The European Union’s
competition chief, Joaquin Almunia, told a newspaper that it is his
“conviction” that Google is unfairly promoting links to its own services
above those of third party companies, and that he fears it is abusing
its dominant position. [The Telegraph]
Chinese inflation
accelerated in December as a bout of cold weather led to a spike in
vegetable prices. Consumer prices posted their biggest increase in seven
months, rising 2.5 per cent in December from a year earlier, up from a
2.0 per cent pace in November. The main contributor to inflation was the
cost of food, which the statistics bureau said accounted for nearly
two-thirds of the month-on-month increase.Large swaths of China have
experienced their coldest winter in three decades, raising energy prices
as well as the production and distribution costs of agricultural
products. [Financial Times]
Channel 4 has ended a dispute with its biggest advertiser, WPP,
that was costing the state-owned broadcaster up to £5m a week. The
sides agreed a new deal today, meaning that WPP's clients will start
advertising again on C4's portfolio of channels. WPP's media-buying arm,
Group M, which spends upwards of £250m a year with C4, pulled all its
ads from 1 January, after a previous two-year deal ran out. [The Independent]
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