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| London close: Investors take profits ahead of Fed decision Stocks extended losses by the end of trade on Tuesday as investors trimmed positions ahead of the much-anticipated Federal Reserve policy meeting tomorrow. Weighing on markets were heavy falls in the banking sector, with Lloyds sinking after the government placed a 6% stake at a 3.1% discount to yesterday's closing price. The FTSE 100 finished 52.69 points lower at 6,570.17, pulling back from Monday's close of 6,622.86 - that was the best close for the UK's benchmark index since August 2nd, when it finished the day at 6,647.87. Over in Europe meanwhile, the STOXX Europe 600 retreated after closing at its highest level since June 2008, while the DAX 30 index in Germany pulled back from hitting a record high. "The failure to break through yesterday's highs [...] suggests that investors are wary and less inclined to establish new long positions. The profit-taking that we are seeing is an attempt to drain what may be the final dregs of the rally," said Brenda Kelly, Senior Market Strategist at IG. "Since markets are, for the most part, expecting a tapering decision, any delay could be construed as a lack of US Federal Reserve confidence in the US economic recovery and may add some volatility and downside risk for equities," she remarked. The two-day Federal Open Market Committee (FOMC) meeting which concludes tomorrow afternoon will be one of the most closely-watched US policy decisions in recent years, given rising expectations that policymakers will begin to scale back quantitative easing. The Fed is widely expected to start by tapering its monthly asset purchases by around $10-15bn from the current level of $85bn, with forecasts being pared slightly over the last month given recent mixed economic data as of late, including August's disappointing jobs report. Just as important will be the new set of macroeconomic projections which the monetary authority will provide. These may help to cement expectations that policy rates are to stay low for quite some time yet. Markets across the globe gained on Monday after the announcement by well-known hawk Larry Summers that he has dropped out of the race to take over Ben Bernanke's position as Fed Chairman when he steps down in January. Analysts believe that Summers would have tightened policy more aggressively than Fed Vice Chair Janet Yellen, who is now regarded as the firm favourite to succeed Bernanke. Investors largely shrugged off improving economic data closer to home today: the ZEW survey of German economic sentiment jumped 7.6 points in September to 49.6, beating the consensus estimate of 46; while the annual rise in UK consumer prices eased from 2.8% to 2.7% in August, as expected. | ||||||||||||
| FTSE 100: Lloyds falls as government begins stake sale Banking group Lloyds was in the red after UK Financial Investments sold a 6% stake in the bank for £3.2bn, reducing its shareholding from about 38.7% to approximately 32.7%. The Treasury sold 4.3bn shares at a price of 75p each. Part-nationalised peer RBS was also lower after UBS downgraded the bank from 'buy' to 'neutral'. Analyst said they like the bank's improving fundamentals - "under a new 'business-focused' management team" - but reckon that the stock's valuation is up with events. Barclays was also lower after it was reported yesterday that it is facing a £50m fine for allegedly breaching market listing rules over its capital raisings. The bank also said that its adjusted income for July and August was lower than in the same period of the previous year, resulting in a 5% year-on-year decline in adjusted income for the eight-month period to August 31st. Temporary power and temperature control firm Aggreko was the standout faller on the FTSE 100 after Credit Suisse downgraded the stock from 'neutral' to 'underperform' and slashed its target by 30% from 2,000p to 1,400p to reflect "more challenging trading conditions in the Power Projects division". Mining group Glencore Xstrata was being weighed down by UBS, which lowered its rating from 'buy' to 'neutral', saying that a "challenging" price outlook will cap share-price performance. Sector peer Randgold, however, rose as gold prices rebounded after hitting a five-week low the day before. The decline in risk appetite today benefited defensive stocks such as utility groups Severn Trent and United Utilities, as well as consumer products firms Unilever and Diageo. FTSE 250: Investec drops after disappointing update Financial services firm Investec took a hit after saying that half-year results will be behind the prior year after the Australian business was negatively affected by significant strategic restructuring and the UK Specialist Banking business was hit by low levels of activity. Travel stocks were performing well after upbeat comments on the UK bus and rail markets from JPMorgan Cazenove. The US bank raised its ratings for both Go-Ahead and Stagecoach from 'neutral' to 'overweight'. Debenhams rose after saying it expects annual pre-tax profit in line with market forecasts on the back of growth in market share and like-for-like sales. FTSE 100 - Risers United Utilities Group (UU.) 703.00p +2.25% Severn Trent (SVT) 1,792.00p +1.93% Randgold Resources Ltd. (RRS) 4,545.00p +1.32% Reed Elsevier (REL) 828.50p +1.16% International Consolidated Airlines Group SA (CDI) (IAG) 328.10p +0.95% Unilever (ULVR) 2,513.00p +0.84% Shire Plc (SHP) 2,551.00p +0.71% Schroders (SDR) 2,519.00p +0.68% Diageo (DGE) 2,025.00p +0.62% Amec (AMEC) 1,090.00p +0.55% FTSE 100 - Fallers Aggreko (AGK) 1,580.00p -4.18% Lloyds Banking Group (LLOY) 74.65p -3.50% Standard Life (SL.) 343.90p -2.88% Meggitt (MGGT) 549.50p -2.57% IMI (IMI) 1,465.00p -2.27% Glencore Xstrata (GLEN) 334.20p -2.25% Vedanta Resources (VED) 1,158.00p -2.11% Barclays (BARC) 299.00p -2.10% Sage Group (SGE) 353.00p -2.05% ARM Holdings (ARM) 953.50p -1.90% FTSE 250 - Risers Kazakhmys (KAZ) 300.20p +3.52% Salamander Energy (SMDR) 128.60p +3.04% Beazley (BEZ) 222.60p +2.87% Ocado Group (OCDO) 387.00p +2.84% Britvic (BVIC) 592.00p +2.60% Go-Ahead Group (GOG) 1,601.00p +2.23% Rank Group (RNK) 163.50p +2.19% Templeton Emerging Markets Inv Trust (TEM) 554.00p +1.74% Debenhams (DEB) 105.00p +1.74% IG Group Holdings (IGG) 604.50p +1.68% FTSE 250 - Fallers Vesuvius (VSVS) 464.20p -4.64% Restaurant Group (RTN) 550.00p -3.93% Moneysupermarket.com Group (MONY) 157.30p -3.79% Home Retail Group (HOME) 168.70p -3.66% Investec (INVP) 425.80p -3.64% Spectris (SXS) 2,214.00p -3.61% Domino Printing Sciences (DNO) 650.00p -3.49% Centamin (DI) (CEY) 44.00p -3.45% Hochschild Mining (HOC) 229.50p -3.33% Cranswick (CWK) 1,152.00p -3.11% | ||||||||||||
| Europe Market Report | ||||||||||||
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| Europe close: Stocks mixed ahead of Fed stimulus
- Federal Reserve begins policy meeting
- US inflation rises less than forecast - German sentiment improves - UK consumer prices grows at slower pace FTSE 100: -0.63% DAX: -0.13% CAC 40: -0.12% FTSE MIB: 0.10% IBEX 35: -0.05% Stoxx 600: -0.41% European equities finished mixed on Tuesday as the Federal Reserve kicked off its two-day policy meeting. The Fed will announce its latest stimulus measures and interest rate decision when the meeting wraps up on Wednesday. The central bank is expected to reduce its main rate to 0.25% from 0.3% and cut its monthly asset purchases from $85bn to $70bn, according to Barclays Research. "The only way dealers will be surprised is if the trim is more or less than $10bn," IG said in a note to investors on Tuesday. Acting as a backdrop for the meeting, a Labor Department report showed consumer prices rose less than forecast in August. The consumer price index increased 0.1%, the least in three months, after a 0.2% advance in July. Policymakers have said they watching prices to ensure US doesn't slip into a long period of weakening increases which is said to stifle growth. Meanwhile, investors have reacted positively to rumours that current Vice Fed Chair Janet Yellen will take over from Ben Bernanke as the new Fed Chairman after Lawrence Summers dropped out from consideration. Yellen is anticipated to back a slow tapering of quantitative easing. "Summers, a former Treasury secretary, would have tightened central bank policy more than Fed Vice Chairman Janet Yellen, said Spreadex trader Max Cohen. "With the more dovish Yellen, we can expect to see less volatility than what economists expected with the appointment of Summers. Consequently, the dollar sunk near a four-week low." UK inflation, German investor sentiment UK inflation grew at a slower pace in August compared to the previous month, the Office for National Statistics (ONS) revealed on Tuesday. The Consumer Price Index (CPI), the headline measure of inflation, rose by 2.7% on the year, down from 2.8% in July, and in line with market expectations. Economic expectations for Germany increased 'considerably' in September, according to the ZEW indicator published on Tuesday. The ZEW indicator of investor sentiment for Europe's biggest economy jumped 7.6 points in September to 49.6, beating the consensus estimate of 46. "The financial market experts hold the view that the German economy is still gaining momentum," ZEW President Clemens Fuest explained. UK government sells Lloyds stake Lloyds slumped after the UK government sold a £3.2bn stake in the lender. A gauge of carmakers fell, including Volkswagen and PSA Peugeot Citroen, after a report showed European car sales dropped 4.9% in August. Debenhams rose after the UK retailer said like-for-like sales rose 0.8% in the 26 weeks to August 31st, beating estimates for a 0.5% increase. Galp Energia tumbled as terms obtained by Bloomberg News showed Citigroup is representing an undisclosed investor in offering 3.5m shares in the Portuguese utility for €12.25 each. Glencore Xstrata fell as UBS lowered its rating on the miner from 'buy' to 'neutral'. Continental plunged after Schaeffler AG and Schaeffler Verwaltungs GmbH sold a combined stake of about 4% in in European car-parts maker. Brent crude oil declines Brent crude futures dipped $1.653 to $108.280 per barrel on the ICE. Gold declined for the fifth time in six sessions as Goldman Sachs Group Inc. said the retreat had further to go. The euro rose 0.15% to the 1.3354 US dollar. | ||||||||||||
| US Market Report | ||||||||||||
| US close: Markets broadly higher after Summers´ withdrawal, Apple weighs on Nasdaq
- S&P 500 within reach of record high
- Apple drags Nasdaq lower on China worries - Summers' withdrawal celebrated by markets Dow Jones: 0.77% Nasdaq: -0.12% S&P 500: 0.57% US stocks finished broadly higher on Monday after the announcement by Larry Summers that he has dropped out of the race to take over Ben Bernanke's position as head of the Federal Reserve. The S&P 500 finished up 9.61 (+0.6%) at 1,697.6, coming within just five points of its record high of 1,709.67 reached on August 2nd. Analysts at Citi Research said they expect the index to rise to 1,900 by the end of 2014. However, while both the Dow Jones and S&P 500 performed strongly the tech-heavy Nasdaq was dragged down by Apple, the largest listed company by market capitalisation. Furthermore, gains across the wider market were trimmed by the close after a shooting at a Navy Yard in Washington DC which left 12 people dead and several others injured. The gunman, found to be a government contractor who entered the facility legally with a valid ID card, was eventually killed by police. The incident caused delays to flights from the nearby Reagen National Airport and sent the US Senate into lockdown. Summers withdraws; Fed in focus Stocks across the globe were performing well after former Treasury Secretary Summers withdrew from the race to replace Bernanke as head of the US central bank when he steps down in January. The removal of Summers - widely viewed as a hawkish candidate in the running - prompted a positive reaction on the back of hopes that current Fed Vice Chair and well-known dove Janet Yellen may now be the firm favourite. She is expected to favour a slower reduction of stimulus than Summers. The Federal Open Market Committee's (FOMC's) two-day meeting is due to come to a close on Wednesday and will likely be one of the most closely-watched policy decisions in recent years, given rising expectations that the Fed will begin to scale back its quantitative easing (QE) programme. According to analysts at Barclays Research, the Fed is likely to taper monthly asset purchases from $85bn to $70bn this week. However, they note that the announcement of tapering by $10-15bn in itself is unlikely to move the market. Empire State index disappoints The Federal Reserve Bank of New York´s regional manufacturing gauge fell back in August to a reading of 6.29 from 8.24 in the month before. Analysts were expecting a small rise to 9.10. US industrial production increased by 0.4% from July to August, in line with the consensus forecast. Manufacturing production meanwhile rose by 0.7%, ahead of the 0.5% increase expected. "[Monday] saw the release of two key manufacturing figures, with both coming in below market estimates and pointing to yet more confusion as to whether the FOMC outlook will see the US economy as sufficiently strong enough to withstand a reduction in the current rate of asset purchases," said Market Analyst Joshua Mahony from Alpari. Apple slumps on China reports Tech giant Apple, which underwhelmed analysts with the release of two new iPhone models last week, was under the weather again on Monday after The Wall Street Journal said that China Telecom was reducing its subsidies for the popular smartphone. Packaging products group Boise surged by as much as a quarter after being bought by larger rival Packaging Corp of America for $1.28bn. JPMorgan has raised its recommendation on Bristol-Myers Squibb to 'overweight' from 'neutral', causing the stock to advance strongly. The bank said the move came after a pull-back in the shares over the past several months and ahead of "a number of important catalysts over the next 12-18 months, particularly for the company's immunotherapy platform". Financial stocks were performing well on Monday on the back of the news that Summers is no longer running for the position of Fed Chair - Morgan Stanley, Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup were all making gains. S&P 500 - Risers Allegheny Technologies Inc. (ATI) $30.95 +8.10% Boeing Co. (BA) $115.67 +3.90% PulteGroup Inc. (PHM) $17.14 +3.75% D. R. Horton Inc. (DHI) $19.84 +3.66% Bristol-Myers Squibb (BMY) $45.14 +3.63% Adt Corp (ADT) $41.48 +3.62% CF Industries Holdings Inc. (CF) $200.68 +3.53% Franklin Resources Inc. (BEN) $50.19 +3.38% International Game Technology (IGT) $20.96 +3.15% Broadcom Corp. (BRCM) $26.91 +3.10% S&P 500 - Fallers Apple Inc. (AAPL) $450.12 -3.18% Altera Corp. (ALTR) $37.85 -2.12% Denbury Resources Inc. (DNR) $17.41 -2.08% AutoNation Inc. (AN) $52.20 -1.60% Hewlett-Packard Co. (HPQ) $21.74 -1.50% Anadarko Petroleum Corp. (APC) $93.36 -1.41% Valero Energy Corp. (VLO) $34.56 -1.40% Marathon Petroleum Corporation (MPC) $66.95 -1.38% Tesoro Corp. (TSO) $45.49 -1.34% J.C. Penney Co. Inc. (JCP) $13.64 -1.30% Dow Jones I.A - Risers Boeing Co. (BA) $115.67 +3.90% General Electric Co. (GE) $24.14 +1.51% Procter & Gamble Co. (PG) $80.16 +1.40% E.I. du Pont de Nemours and Co. (DD) $59.70 +1.39% Travelers Company Inc. (TRV) $84.57 +1.21% United Technologies Corp. (UTX) $109.70 +1.21% Verizon Communications Inc. (VZ) $48.30 +1.13% JP Morgan Chase & Co. (JPM) $53.14 +1.05% Unitedhealth Group Inc. (UNH) $75.12 +0.86% Merck & Co. Inc. (MRK) $48.19 +0.84% Dow Jones I.A - Fallers Hewlett-Packard Co. (HPQ) $21.74 -1.50% Microsoft Corp. (MSFT) $32.80 -0.69% Intel Corp. (INTC) $23.39 -0.21% Chevron Corp. (CVX) $124.08 -0.05% Nasdaq 100 - Risers Broadcom Corp. (BRCM) $26.91 +3.10% Expedia Inc. (EXPE) $52.42 +2.40% Autodesk Inc. (ADSK) $39.07 +2.33% Staples Inc. (SPLS) $14.76 +2.29% Biogen Idec Inc. (BIIB) $239.57 +2.07% Amgen Inc. (AMGN) $117.18 +1.84% Dollar Tree Inc (DLTR) $55.86 +1.80% Catamaran Corp (CTRX) $55.47 +1.78% Seagate Technology Plc (STX) $40.94 +1.71% Activision Blizzard Inc. (ATVI) $17.25 +1.65% Nasdaq 100 - Fallers Facebook Inc. (FB) $42.51 -4.06% Apple Inc. (AAPL) $450.12 -3.18% Vertex Pharmaceuticals Inc. (VRTX) $76.18 -2.65% Altera Corp. (ALTR) $37.85 -2.12% Equinix Inc. (EQIX) $173.76 -1.86% F5 Networks Inc. (FFIV) $90.88 -1.23% Netflix Inc. (NFLX) $302.16 -1.14% Fossil Group Inc (FOSL) $115.02 -1.02% Celgene Corp. (CELG) $148.04 -0.96% Nuance Communications Inc. (NUAN) $19.15 -0.83% | ||||||||||||
| Broker Tips | ||||||||||||
| Broker tips: Lloyds, Glencore Xstrata, Bunzl...
The sale of a six per cent stake in Lloyds by the government was a 'very well-timed' disposal, according to Investec.
Investec analyst Ian Gordon said: "We regard the government's timing as impeccable, and it appears credible to suggest that it could yet be out in full by the election." Nevertheless, the broker retained its 'sell' rating and 65p target for the stock, highlighting that it trades at 1.4 times 2013 estimate tangible net asset value - "close to a near-five-year high". UBS has downgraded its rating for diversified mining giant Glencore Xstrata from 'buy' to 'neutral', raising concerns about the "challenging" price outlook for the company. The Swiss bank said: "While we are still attracted to GLENX's refreshing strategy and improving free cash flow profile, we expect its valuation to cap performance until the outlook improves for copper/coal prices." Deutsche Bank has raised its target for distribution and outsourcing group Bunzl by over a fifth to include the benefit of potential merger & acquisition (M&A) activity. The target has been raised by 22.9% from 1,160p to 1,426p. "We do not forecast earnings from future M&A, but have now incorporated an M&A benefit in our target," the German bank said. Deutsche Bank reckons that future M&A could add 111p to its underlying target of 1,315p. Travel stocks were performing well on Tuesday after upbeat comments on the UK bus and rail markets from JPMorgan Cazenove. The US bank raised its ratings for both Go-Ahead (GOG) and Stagecoach (SGC) from 'neutral' to 'overweight'. Analysts Wenchang Ma and Christopher Combe said: "We upgrade GOG and SGC to 'overweight' on the back of: (1) high exposure to the more cyclical deregulated UK bus, a likely beneficiary of firming macro prospects mirrored by upward gross domestic product revisions; (2) sizeable upside potential from Rail, a small contributor to valuation today." | ||||||||||||
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