ADVFN III Morning Euro Markets Bulletin (February 1, 2013).

ADVFN III Morning Euro Markets Bulletin

Daily world financial news Friday, 01 February 2013

London Market Report

FTSE 100 Euronext Dax perf CAC 40 Please click on the images to view our interactive charts

Stocks extend gains after strong performance in January Markets were performing well in early trading on Friday, extending gains made last month, ahead of the all-important jobs report in the US this afternoon. The FTSE 100 rose a total of 6.4% in January alone, the best January performance since 1989. However, as Joe Rundle, head of trading at ETX Capital, explains, strong gains in January are not always a good indicator of how the rest of the year will pan out. "Strength in the first month of the year is not exactly a sufficient signal to go by and investors should adopt a level of caution for the months ahead," he said in an e-mail this morning. Nevertheless, stocks were given support this morning by economic news out of China, where the manufacturing sector continues to expand. While the HSBC manufacturing purchasing managers' index (PMI) beat forecasts, rising from 51.5 to 52.3 in January, the official manufacturing PMI disappointed, falling from 50.6 to 50.4. "Now, there’s two ways we can look at this," said market analyst James Hughes from Alpari. "Firstly, the two pieces of data conflict, as one suggests the recovery has hit some speed bumps which means the first quarter may not be quite as strong as some had hoped. On the other hand, both numbers are still above 50, which suggests the industry is still growing, albeit at a moderate pace. Therefore, I think we should remain cautiously optimistic." FTSE 100: BT impresses with third-quarter statement Telecoms giant BT was a high riser this morning after its third-quarter results, as cost control helped it to beat expectations on the bottom line. Pre-tax profit increased by 7.0% in the quarter to £675m, however, revenues fell 6.0% to £4.5bn. Miners were also performing well this morning as continued growth in China's manufacturing lifted the demand outlook for commodities. Antofagasta, Kazakhmys, Vedanta Resources and ENRC were wanted early on. Heading the other way was sweeteners and food products group Tate & Lyle after saying that third-quarter profits, while in line with expectations, were lower than they were last year. The company also warned about the elevated levels of volatile corn prices and the impact of the hot summer last year. "We read the Q3 as cautious in tone and a downgrading influence on numbers," said analyst Martin Deboo from Investec. Global banking group HSBC was lower after Citigroup cut its rating on the stock to 'neutral'. Meanwhile, Shell was suffering the effects of a downgrade by UBS. FTSE 250: Lonmin extends gains Platinum producer Lonmin was continuing to rise after yesterday posting quarterly production ahead of targets despite strikes that hit the South African mining sector last year. De La Rue, the banknote printer, surged after saying that it had received "some" of the previously delayed orders that it had referred to in the last trading update. The company said that results this year would be flat on 2011/12. Communications services provider KCOM rose after saying in a third-quarter statement that it has seen "positive momentum across all brands". Pubs group Greene King was a high riser this morning after HSBC raised its recommendation for the shares to 'overweight' and lifted its target from 620p to 750p.

UK Event Calendar

Q3 BT Group IMS Electrocomponents Tate & Lyle GM Coms ORA Capital Partners Ltd FINAL DIVIDEND PAYMENT DATE Baring Emerging Europe Character Group Standard Life European Private Equity Trust Tracsis INTERIM DIVIDEND PAYMENT DATE Aveva Group Bisichi Mining Central Asia Metals Dart Group Doric Nimrod Air Two Ltd C Shs KCOM Group United Utilities Group SPECIAL EX-DIVIDEND PAYMENT DATE Central Asia Metals QUARTELY PAYMENT DATE Investors Capital Trust 'A' Shares Investors Capital Trust 'B' Shares Mercantile Investment Trust (The) Torchmark Corp. Verizon Communications UK ECONOMIC ANNOUNCEMENTS PMI Manufacturing (09:30) INTERNATIONAL ECONOMIC ANNOUNCEMENTS PMI Manufacturing (GER) (08:55) PMI Manufacturing (EU) (09:00) Unemployment Rate (EU) (10:00) Non-Farm Payrolls (US) (13:30) Unemployment Rate (US) (13:30) Auto Sales (US) (15:00) Construction Spending (US) (15:00) ISM Manufacturing (US) (15:00) ISM Prices Paid (US) (15:00) U. of Michigan Confidence (US) (15:00)

Forex Market

FTSE 100 Euronext Dax perf CAC 40

Dollar declines on jobless data The dollar declined against the euro on Thursday, following a higher rise in US jobless claims than had been predicted. The euro rose 0.09% to buy $1.3583 last night, up from $1.3568 the previous evening. Jeremy Stretch, Currency Strategist at CIBC in London, was quoted as saying: “That the euro has remained relatively well supported suggests that investors continue to look for positives in Europe." Initial weekly unemployment claims rose by 38,000 last week, to reach 368,000, well above the 335,000 expected by the consensus. Economists at Barclays Research, however, believe one needs to look through seasonal volatility. The ICE dollar index, which measures the greenback against a basket of six other major currencies, fell from 79.302 to 79.157 overnight. The WSJ dollar index, which records the currency against a wider range of currencies, dropped from 70.67 on Wednesday to 70.61 last night. Meanwhile, the pound rose to buy $1.5867, up from $1.5800 late Wednesday. Jobs data pushes crude lower Crude oil futures had their best January in six years, despite ending the last session of the month lower. Thursday's decline was as a result of profit taking following a higher rise in US jobless claims than had been predicted. The commodity fell 0.86% to $97.10 per barrel on NYMEX. Initial weekly unemployment claims rose by 38,000 last week, to reach 368,000, well above the 335,000 expected by the consensus. Economists at Barclays Research, however, believe one needs to look through seasonal volatility. Heating oil dropped 0.34% to settle at $3.10 per gallon, while natural gas declined 0.45% yo $3.32 per million British thermal units. Unleaded gas followed suit, down 0.93% to $3.00 per gallon. In metals, gold suffered a decline on Thursday, rounding offer a lower January overall, with the commodity down 0.96% to $1,663.80 per troy ounce. Overall, the commodity price fell 0.8% in January, its fourth consecutive month heading lower. Copper also took a hit, down 0.16% to $3.74 per pound.

US Market Report

Stocks End Choppy Day Slightly Lower Ahead Of Jobs Report Stocks showed a lack of direction throughout the trading day on Thursday as traders digested a mixed batch of economic data. Uncertainty ahead of Friday's monthly jobs report also contributed to the lack of conviction among traders. The major averages eventually ended the day in negative territory, although the Nasdaq posted a very slim loss. While the Nasdaq edged down 0.18 points or less than 0.1 percent to 3,142.13, the Dow fell 49.84 points or 0.4 percent to 13,860.58 and the S&P 500 slid 3.85 points or 0.3 percent to 1,498.11. The lackluster performance on Wall Street came as traders expressed uncertainty about whether the recent batch of economic data supports any further upside for the markets. Following yesterday's disappointing fourth quarter GDP report, the Labor Department released a report before the start of trading showing a bigger than expected rebound by weekly jobless claims. The Labor Department said initial jobless claims rose to 368,000 in the week ended January 26th, an increase of 38,000 from the previous week's unrevised figure of 330,000. Economists had been expecting jobless claims to climb to 350,000 after hitting a five-year low in the previous week. While bigger than expected, Jennifer Lee, senior economist at BMO Capital, said the rebound was not too shocking, adding, "And it was encouraging that the bounceback did not completely erase the two weekly improvements." Helping to offset the negative sentiment generated by the report was a separate report from the Institute for Supply Management - Chicago showing a notable improvement in business activity in the Chicago-area in the month of January. The ISM Chicago said its Chicago business barometer climbed to 55.6 in January from a revised 50.0 in December, with a reading above 50 indicating growth. The Commerce Department also released a report showed a substantial increase in personal income in December, although the jump was due in large part to accelerated dividend and bonus payments ahead of the year-end tax increases. Among individual stocks, Dow Chemical (DOW) came under pressure after reporting adjusted fourth quarter earnings that fell short of analyst estimates. Shares of Dow fell by 7 percent. Delivery giant UPS (UPS) also posted a notable loss after reporting weaker than expected fourth quarter earnings and forecasting 2013 earnings below expectations. On the other hand, shares of Qualcomm (QCOM) jumped 3.9 percent after the chip maker reported better than expected first quarter results and provided upbeat guidance. Sector News Most of the major sectors showed only modest moves on the day, although considerable strength was visible among networking stocks. The NYSE Arca Networking Index surged up by 2.2 percent, regaining some ground after ending the two previous sessions sharply lower. Infinera (INFN), Alcatel-Lucent (ALU), and Ciena (CIEN) turned in some of the networking sector's best performances. On the other hand, gold stocks came under pressure, with a notable decrease by the price of gold weighing on the sector. With gold for April delivery sliding $19.60 to $1,662 an ounce, the NYSE Arca Gold Bugs Index fell by 1.1 percent. Defense stocks also showed a significant move to the downside, dragging the Philadelphia Defense Sector Index down by 1.2 percent. General Dynamics (GD), General Dynamics (LLL), and Raytheon (RTN) posted notable losses. Other Markets In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan's Nikkei 225 Index edged up by 0.2 percent, while Hong Kong's Hang Seng Index fell by 0.4 percent. In the bond market, treasuries saw modest strength after coming under pressure in recent sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2.1 basis points to 1.985 percent. Looking Ahead Trading on Friday is likely to be driven by reaction to the Labor Department's monthly jobs report, which is expected to show an increase about 180,000 jobs. While reports on manufacturing activity, consumer sentiment, and construction spending are also due to be released, the data is likely to be overshadowed by the jobs numbers. On the earnings front, Exxon Mobil (XOM), Merck (MRK), Chevron (CVX), Mattel (MAT), and Tyson Foods (TSN) are among the companies scheduled to release their quarterly results before the start of trading on Friday.

Friday newspaper round-up

Barclays, Chinese manufacturing, Jessops... UK authorities are probing an allegation that Barclays loaned Qatar money to invest in the bank as part of its cash call at the height of the financial crisis in 2008, which enabled the bank to avoid a UK government bailout. While the terms of Barclays’ emergency fundraising have been under the scrutiny of the Financial Services Authority and the Serious Fraud Office since the summer – with a particular focus on fees paid for the deal – allegations over a loan to the Qataris is a new thread of the investigation. Two sources familiar with the situation have independently told the Financial Times of the investigation into the alleged loan. [Financial Times] The Chinese economy paused for breath at the start of 2013 according to a survey that showed a dip in growth in its manufacturing sector last month. The official purchasing managers’ index, a gauge of the industrial sector, edged down to 50.4 in January from 50.6 in December. In remaining above the midpoint of 50 for the fourth consecutive month, the reading still signalled an expansion in activity but at a slightly reduced pace. [Financial Times] The Dragons’ Den entrepreneur Peter Jones is to run Jessops as an online-only retailer after buying the brand of the collapsed camera business from administrators. PricewaterhouseCoopers, the administrators to Jessops, said that Mr Jones is among a “number of buyers” to have purchased assets from the retailer, including its remaining stock and intellectual property. [The Telegraph] Thousands of small businesses that were mis-sold interest rate hedging products may run out of time to make a claim unless they make rapid contact with their bank. The Financial Services Authority’s decision to force Britain’s four biggest banks to review thousands of past sales of swap products to small businesses and pay compensation in a “significant” number of cases may catch out some customers, experts said. Barclays, HSBC, Lloyds and Royal Bank of Scotland will conduct the review within a year, with most cases resolved in six months. The banks will start writing to customers next week. However, under contract law, businesses have six years to bring a claim. As many of the swaps were sold in 2006 and 2007, thousands that wait for banks to contact them may find that the statute of limitations runs out. [The Times] The UK head of tax at Ernst & Young, the accountancy firm that audits Google, Amazon and Facebook, has admitted that international guidelines that allow online firms to pay much lower corporation tax than their rivals are outdated and in need of urgent reform. John Dixon told a committee of MPs that the Organisation for Economic Co-operation and Development (OECD), which drafts the politically contentious rules, was facing a "difficulty … [it] needs to address" because the codes established decades ago never envisaged an explosion in online commerce. [The Guardian] There was intense speculation in the City last night about the future of Seymour Pierce, the stockbroker led by football deal maker Keith Harris. Mr Harris, the Square Mile's "Mr Football", has brokered some of the biggest deals in the game, and is often linked to many others that do not come to fruition. Rumours that Seymour was in some difficulty have been the talk of the City for some months, with low levels of takeover activity and little appetite from investors to take risks hitting earnings at all but the biggest brokers. The firm is known to have been seeking a cash injection from an outside investor for some time. City sources say that administration is a possibility but insist that it is not imminent. Mr Harris is said to be seeking funds of perhaps £3m. [The Independent] The US has stepped in the middle of Anheuser-Busch Inbev's (ABI) $20bn (£13bn) deal to buy up the Mexican brewery business Grupo Modelo, with federal lawyers filing a suit claiming the move would hit competition in the American beer market. The deal would bring together two of the most successful beer brands in the US, namely ABI's Bud Light, and Grupo Modelo's Corona Extra. [The Independent]