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Stocks slip as central banks stand pat
Market Movers
techMARK 2,285.91 -0.39%
FTSE 100 6,228.42 -1.06%
FTSE 250 13,300.65 -0.31%
Markets across Europe suffered steep losses on Thursday as traders reacted to comments from central bankers from the UK and Europe.
"Early gains in equity markets proved unsustainable in the face of rising European yields and the unconvincing political backdrop," said senior sales trader Matt Basi from CMC Markets.
"Indices are now trading at their lows of the session with investors taking some risk off the table as markets lack the impetus to make force through the recent highs."
All eyes on the central banks
Stocks dropped in negative territory mid-morning as investors turned their focus to a Treasury Select Committee grilling of incoming Bank of England (BoE) Governor Mark Carney, who answered questions over his pay package, policies and nominal GDP targeting. All in all, Carney showed that he was willing to consider new approaches to policy, but said he was not keen to replace the inflation-targeting framework.
At midday, the BoE kept its Bank Rate at 0.5% and the asset purchase programme at £375bn, as expected. However, it released an unusually long statement explaining its decision - not normally revealed until the minutes of each meeting two weeks later - which painted a gloomy outlook for the UK economy.
The Monetary Policy Committee (MPC) said it continues to see a "slow but sustained recovery" but said that risks are "weighted to the downside, not least because of the challenges facing the euro area". The MPC also announced that it would re-invest the cash flows of £6.6bn associated with the gilt redemption due in March.
Analyst Simon Hayes from Barclays Research said: "This statement highlights the acute dilemma faced by the MPC. The weak activity outlook begs for more stimulus, but the inflation outlook is not sufficiently benign to make the committee comfortable expanding policy further. Assuming the recovery does take hold – and the early indications for Q1 are promising on this front – we would not expect the MPC to sanction more stimulus, but the debate remains live."
The European Central Bank (EBC), meanwhile, also kept hold of rates at its policy meeting today, as expected, but the focus was on bank President Mario Draghi at the subsequent press conference this afternoon. He addressed the recent rise in the euro and said that the strength of the single currency could post a threat to the inflation outlook.
He said: “The appreciation is a sign of the return of the confidence in the euro. […] We certainly want to see whether the appreciation, if sustained, will alter our risk assessment as far as price stability is concerned.”
FTSE 100: Compass rises on strong first quarter
Contract caterer Compass was a high riser after having a good first quarter with expectations for the full year unchanged as its North America and emerging market business segments performing strongly.
Telecoms group Vodafone rose despite posting a 1.8% drop in revenue for the last three months of 2012, blaming difficult market conditions in Europe. However, the company said it expects adjusted operating profit in the upper range of £11.1bn-to-£11.9bn for the 2013 financial year.
Medical technology group Smith & Nephew was higher after beating forecasts in the fourth quarter. Investors managed to shrug off news comments about declining margins in 2013.
Travel and leisure firm TUI Travel gained after reporting a narrower operating loss in the first quarter as it outperformed in the UK and Nordic markets.
Meanwhile, Burberry sank after a series of boardroom changes. Market chatter also suggested that the stock was being weighed down by China's move earlier this week to ban luxury TV and radio ads for extravagant gifts, saying they promote "incorrect values and create a bad social ethos".
FTSE 250: Ophir falls on placing news
Shares in Ophir Energy fell after Credit Suisse confirmed that it has sold 36m shares on behalf the investment funds of two stakeholders, Och-Ziff Capital Management and Mittal Investments. The news overshadowed a positive drilling update from the company out this morning about an appraisal well in Tanzania.
Online grocer Ocado jumped after reporting a 13% rise in revenue in 2012, helped by rising demand.
Trendy fashion brand SuperGroup also surged after unveiling a 12.3% increase in sales for the holiday season as shoppers stocked up on jackets, knitwear and gifting accessories.
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FTSE 100 - Risers
Compass Group (CPG) 779.50p +1.83%
Smiths Group (SMIN) 1,225.00p +0.91%
TUI Travel (TT.) 306.30p +0.89%
Vodafone Group (VOD) 171.85p +0.88%
Amec (AMEC) 1,094.00p +0.83%
Smith & Nephew (SN.) 710.50p +0.71%
Capita (CPI) 798.50p +0.69%
Marks & Spencer Group (MKS) 378.00p +0.59%
Weir Group (WEIR) 2,078.00p +0.58%
Meggitt (MGGT) 436.50p +0.37%
FTSE 100 - Fallers
Burberry Group (BRBY) 1,337.00p -6.50%
Royal Bank of Scotland Group (RBS) 332.90p -2.69%
International Consolidated Airlines Group SA (CDI) (IAG) 211.20p -2.49%
Royal Dutch Shell 'A' (RDSA) 2,144.00p -2.43%
Tullow Oil (TLW) 1,178.00p -2.40%
Aberdeen Asset Management (ADN) 402.60p -2.31%
Polymetal International (POLY) 1,054.00p -2.23%
Standard Chartered (STAN) 1,650.00p -2.19%
BG Group (BG.) 1,111.00p -2.11%
BT Group (BT.A) 267.00p -2.09%
FTSE 250 - Risers
Supergroup (SGP) 730.00p +15.23%
Ocado Group (OCDO) 115.00p +10.68%
Beazley (BEZ) 199.00p +4.52%
Bellway (BWY) 1,161.00p +3.48%
Anite (AIE) 157.90p +3.07%
F&C Asset Management (FCAM) 108.50p +3.04%
Daejan Holdings (DJAN) 3,120.00p +2.80%
Sports Direct International (SPD) 432.80p +2.75%
Amlin (AML) 402.60p +2.70%
Ashmore Group (ASHM) 360.40p +2.68%
FTSE 250 - Fallers
Ophir Energy (OPHR) 475.00p -8.57%
Dairy Crest Group (DCG) 408.00p -3.32%
Salamander Energy (SMDR) 200.30p -3.19%
PZ Cussons (PZC) 403.00p -3.03%
International Personal Finance (IPF) 400.10p -3.03%
BTG (BTG) 330.20p -2.77%
RPS Group (RPS) 229.50p -2.75%
Drax Group (DRX) 606.00p -2.73%
SIG (SHI) 130.50p -2.47%
Jardine Lloyd Thompson Group (JLT) 796.00p -2.45%
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European Markets Mostly Lower After Central Bank Decisions
The majority of the European markets finished to the downside Thursday, after both the European Central Bank and the Bank of England made no change to interest rates. ECB President Mario Draghi stated that he sees a gradual recovery later in the year as domestic demand will be underpinned by accommodative monetary policy stance.
The European Central Bank left its interest rates unchanged on Thursday, despite a stronger currency raising concerns in the euro area, as policymakers wait for the positive trends in the financial markets to trickle down to the real economy.
The central bank of 17 nations kept the refinancing rate at a record low 0.75 percent for a seventh consecutive month in February, following the Governing Council meeting in Frankfurt. The deposit rate was held at zero and the marginal lending facility rate at 1.50 percent. The decision was in line with economists' expectations.
European Central Bank President Mario Draghi said on Thursday that the recent appreciation in the euro is a sign of confidence in the currency. Speaking at the post-decision press conference in Frankfurt, Draghi reiterated that the exchange rate is not a policy target, but is important for growth and price stability.
"Exchange rates should reflect fundamentals," the central bank chief said. The central bank will monitor the currency to determine any impact on inflation outlook, he added.
The better-than-expected repayment of 3-year loans, or LTROs, by banks "reflects the improvement in financial market confidence", Draghi said in his introductory statement.
Despite a renewed contraction in the fourth quarter, the Bank of England policymakers decided to leave its asset purchase programme as well as record-low interest rates unchanged in the face of heightened inflation concerns and hopes of positive signs in the euro area underpinning the U.K. economy.
At the end of two-day meeting on Thursday, the Monetary Policy Committee voted to retain the asset purchase programme at GBP 375 billion. The previous change in asset purchases was in July, when it was raised by GBP 50 billion.
The nine-member panel also decided to hold the key interest rate at 0.50 percent. The current rate is the lowest since the central bank was established in 1694.
Bank of England Governor-designate Mark Carney said the bank should ultimately exit unconventional monetary policy measures in a manner that reinforces public confidence.
The exit should not disrupt the gilts markets as such disruption could lead to sharp movements in a range of asset prices and even threaten financial stability.
Regarding any change in monetary policy, he said, "I have not made an assessment of the merits of altering the monetary policy framework in the UK and of course any change to the Monetary Policy framework would be the sole responsibility of HM government."
Spanish borrowing costs climbed at an auction on Thursday as investor sentiment remained hurt by the corruption allegations against the premier and a weak economy.
While the Treasury raised more funds than targeted, the cost of borrowing rose across the board. The agency raised EUR 4.61 billion from the sale that included 3-year and 5-year benchmarks, against the EUR 3.5 billion - EUR 4.5 billion target.
The March 2015 bond fetched a yield of 2.823 percent, which was higher than the 2.476 percent paid at an auction on January 10.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.69 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.39 percent.
The FTSE 100 of the U.K. dropped by 0.95 percent and the SMI of Switzerland fell by 1.25 percent. The CAC 40 of France decreased by 1.15 percent, but the DAX of Germany climbed by 0.09 percent.
In Frankfurt, HeidelbergCement climbed by 4.91 percent. The company reported a 6.5 percent rise in total revenues to 3.5 billion euros despite the negative impact of the euro crisis across Europe.
Air Berlin rose by 3.96 percent, after the nation's second-largest airline said it increased its capacity utilization rate in January to 83.1 percent, up 1.0 percentage points over the previous year.
In Paris, Sanofi dropped by 3.89 percent. The drug major reported a sharp decline in fourth-quarter profit, hurt by margin pressure and lower pharmaceutical sales that reflected generic competition and EU austerity measures, among others.
Alcatel-Lucent decreased by 4.48 percent, after the telecom equipment maker said its chief executive Ben Verwaayen has decided not to seek re-election as a director at this year's Annual General Meeting.
Axa fell by 0.08 percent, after Citigroup upgraded the insurer to "Buy" from "Neutral."
In London, GlaxoSmithKline declined by 0.65 percent. The company reported a drop in profit for the fourth quarter, hurt mainly by higher taxation and the continued weak demand for drugs and vaccines in Europe.
Vodafone increased by 1.17 percent, despite reporting lower revenues for the December quarter amid extremely weak market conditions in Europe.
Burberry sank by 6.31 percent, after Stacey Cartwright announced that she would step down from her positions of CFO and Executive Vice President.
Compass Group advanced by 1.89 percent, after reporting first quarter results. Credit Suisse declined by 3.11 percent in Zurich, despite reporting a fourth quarter profit.
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Stocks Firmly In Negative Territory In Mid-Day Trading
Stocks have moved sharply lower over the course of the trading day on Thursday after ending the previous session roughly flat. Despite the steep losses on the day, the major averages currently remain stuck in a recent trading range.
The major averages have moved roughly sideways in recent trading, lingering near their worst levels of the day. The Dow is down 117.19 points or 0.8 percent at 13,869.33, the Nasdaq is down 23.63 points or 0.8 percent at 3,144.85 and the S&P 500 is down 10.67 points or 0.7 percent at 1,501.45.
Selling pressure has also been generated by worries about whether lawmakers in Washington will be unable to reach an agreement to avoid the automatic spending cuts currently due to go into effect at the end of the month.
President Barack Obama has called on Congress to pass a smaller budget package in order to temporarily delay the automatic cuts for a few months, although Republicans have expressed opposition to the idea.
Traders are also digesting a mixed batch of U.S. economic data regarding weekly jobless claims and fourth quarter productivity.
Sector News
Housing stocks have shown a substantial move to the downside on the day, dragging the Philadelphia Housing Sector Index down by 1.9 percent. Radian Group (RDN) and M/I Homes (MHO) are turning in two of the sector's worst performances.
Significant weakness has also emerged among biotechnology stocks, as reflected by the 1.6 percent loss being posted by the NYSE Arca Biotechnology Index. With the loss, the index is pulling back further off the record closing high that it set on Tuesday.
Pharmaceutical stocks have also come under pressure, with Sanofi (SNY) leading the sector lower after reporting a sharp decline in its fourth quarter profits. Sanofi is currently down by 5.8 percent, contributing to a 1.3 percent drop by the NYSE Arca Pharmaceutical Index.
Steel, semiconductor, computer hardware, and airline stocks are also posting notable losses on the day, moving lower along with most of the major sectors.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index fell by 0.9 percent, while Hong Kong's Hang Seng Index ended the day down by 0.3 percent.
In the bond market, treasuries have moved to the upside over the course of the session, climbing further off their recent lows. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.1 basis points at 1.937 percent.
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| Friday preview | ||||||||||||
Aquarius Platinum digs out latest results
South African miner Aquarius Platinum unleashes its latest financial results Friday after reporting an improvement in output during the final quarter of 2012.
The company saw attributable production rise 2.0% quarter-on-quarter for last three months of December, according to results published last month.
At the time the FTSE 250 firm said it was a challenging quarter during which industrial relations in South Africa remained strained and metal prices remained low.
The group also highlights that it remained acutely aware that despite the improvements in production, it continued to consume cash during the quarter.
The price improvements and the weakened exchange rate in January were expected to substantially reduce cash consumption and enable the to company to start producing cash at mine level.
Platinum spot prices rose 0.06% to $1,737.85 per troy ounce at 15:46 Thursday, according to data on Bloomberg.
The company has been under pressure as it mothballed two of its mines in 2012 and saw its increasingly exasperated Chief Executive Officer (CEO), Stuart Murray, resign in October.
Platinum gained for a fifth day Thursday on increased concern that supplies will decline from South Africa, which produces of about 73% global output.
Friday February 08
INTERIMS
Aquarius Platinum Ltd.
INTERIM DIVIDEND PAYMENT DATE
ICAP, Pinewood Shepperton
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Trade (GER) (07:00)
Balance of Trade (US) (13:30)
Current Account (GER) (07:00)
Factory Orders (GER) (11:00)
Retail Price Index (GER) (07:00)
Wholesales Inventories (US) (15:00)
FINALS
Catlin Group Ltd.
IMSS
Cable & Wireless Communications, Shaftesbury
AGMS
Grainger, Shaftesbury
FINAL DIVIDEND PAYMENT DATE
Daily Mail and General Trust 'Ord' Shares, Daily Mail and General Trust A (Non.V), Grainger, Next Fifteen Communications, Smiths News, Unicorn AIM VCT
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