Evening Euro Markets Bulletin.

ADVFN III Evening Euro Markets Bulletin

Daily world financial news Friday, 20 September 2013

London Market Report

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

London close: Stocks hit by Bullard comments as post-Fed rally fades The exuberant post-Fed mood quickly faded on Friday with comments from one US policymaker dampening stocks before the close of trade. Risk appetite was also scaled back as caution set in ahead of the German elections at the weekend with the outcome still highly uncertain. The FTSE 100 finished 28.96 points lower at 6,596.43, a fall of 0.44% on the day. The Federal Reserve surprised analysts on Wednesday with the decision not to scale back stimulus, sparking a huge surge on global stock markets worldwide. After a broadly flat start this morning however, stocks sank into the red by the afternoon after the head of the St Louis Fed, James Bullard, said that the central bank could still taper quantitative easing at its next meeting in October. He admitted that this month's decision to maintain stimulus was a close call. "This admission so soon after Wednesday's surprise has introduced an element of sogginess to today's afternoon trading with investors reluctant to take on any significant new positions ahead of the weekend, in what has been a fairly positive week for European equity markets," said Senior Market Analyst Michael Hewson from CMC Markets. Also on investors' minds today will be the looming elections in Germany this weekend, with the outcome still highly uncertain given that a rising euro-sceptic movement across the country could complicate things for Angela Merkel's CDU party. Chris Beauchamp, Market Analyst at IG said that the elections is "the only real cloud on the horizon now" and it would be a major upset if euro-sceptics made significant gains. He said: "Like most Europeans, Germans have had enough of the crisis and would rather not rock the boat, even if it is they that are underpinning the rescue and recovery efforts."

FTSE 100: Miners track metal prices lower Falling metal prices were weighing on mining stocks today as commodities pulled back after recent gains. Vedanta, Antofagasta, Fresnillo, Randgold, Anglo American and ENRC fell sharply as gold, silver and copper values took a hit. Food and sweeteners manufacturer Tate & Lyle was also a heavy faller after the stock's rating was cut by Credit Suisse from 'outperform' to 'neutral'. The bank said: "The long-running forward price-to-earnings multiple is 12 versus 13.5 today. That looks right to us." United Utilities was retreating after yesterday's strong gains, dragged down after Beaufort Securities lowered its recommendation to 'hold'. Banking stocks were also out of favour with domestic lenders RBS, Lloyds and Barclays among the worst performers. RBS, which announced this morning the sale of a further 20% stake in Direct Line Insurance, was being weighed down by comments by Investec which said that the third-quarter trading statement on November 1st "may (once again) prove to be a poor time to own the shares!" Heading the other way was supermarket chain Sainsbury after Citigroup upgraded the group to 'neutral' ahead of its second-quarter trading update in a couple of weeks. The bank said it expects a "big improvement" in like-for-like sales trends from the first quarter. BP was also making gains this morning on market chatter that US oil major Exxon could be interested in making a bid for its smaller rival. One analyst however suggested that these rumours should be taken "with a pinch of salt" perhaps as a result of light news flow on Friday. Pharmaceuticals group AstraZeneca rose after receiving a green light from European regulators for its nasal influenza vaccine for children. FTSE 250: Premier Farnell, ICAP hit by downgrades Electronic components distributor Premier Farnell was a heavy faller after yesterday's first-half report as Numis cut the stock to 'hold', outweighing a Cantor Fitzgerald upgrade to 'buy'. Interdealer broker ICAP was also trading lower after Bank of America Merrill Lynch downgraded the stock to 'neutral'. The group was also making headlines on reports that it could soon agree a settlement with regulators over the LIBOR rate-rigging scandal. Insurance firm Jardine Lloyd Thompson, meanwhile, was in demand after buying Towers Watson's reinsurance brokerage business for $250m. FTSE 100 - Risers Shire Plc (SHP) 2,593.00p +2.01% Persimmon (PSN) 1,127.00p +1.44% GKN (GKN) 360.70p +1.41% Sainsbury (J) (SBRY) 396.40p +1.38% International Consolidated Airlines Group SA (CDI) (IAG) 328.60p +1.20% Pearson (PSON) 1,301.00p +1.17% Centrica (CNA) 402.20p +1.16% Reed Elsevier (REL) 845.00p +1.14% Johnson Matthey (JMAT) 2,878.00p +0.91% Schroders (SDR) 2,631.00p +0.88% FTSE 100 - Fallers Vedanta Resources (VED) 1,116.00p -4.37% Antofagasta (ANTO) 851.50p -3.89% Randgold Resources Ltd. (RRS) 4,676.00p -3.41% Fresnillo (FRES) 1,033.00p -3.37% Anglo American (AAL) 1,591.00p -2.69% London Stock Exchange Group (LSE) 1,558.00p -2.62% Tate & Lyle (TATE) 766.50p -2.23% Old Mutual (OML) 191.90p -1.89% Standard Chartered (STAN) 1,535.50p -1.82% Barclays (BARC) 273.45p -1.74% FTSE 250 - Risers esure Group (ESUR) 262.70p +5.08% Bwin.party Digital Entertainment (BPTY) 120.50p +3.97% Centamin (DI) (CEY) 45.50p +3.27% Jardine Lloyd Thompson Group (JLT) 942.00p +2.95% Playtech (PTEC) 739.50p +2.71% Cranswick (CWK) 1,189.00p +2.50% Kenmare Resources (KMR) 27.50p +2.23% Ted Baker (TED) 1,909.00p +2.19% Countrywide (CWD) 570.00p +2.15% Big Yellow Group (BYG) 425.60p +1.94% FTSE 250 - Fallers Anite (AIE) 112.50p -6.64% Alent (ALNT) 340.00p -6.21% Britvic (BVIC) 554.50p -5.78% Premier Farnell (PFL) 215.20p -5.66% Vesuvius (VSVS) 432.20p -5.43% Polymetal International (POLY) 669.00p -5.17% Hochschild Mining (HOC) 202.40p -4.89% Daejan Holdings (DJAN) 3,652.00p -4.80% Lonmin (LMI) 332.00p -4.68% Tullett Prebon (TLPR) 352.50p -4.60%

Europe Market Report

FTSE 100 Euronext Dax perf CAC 40

Europe close: Stocks mixed as Fed's Bullard signals October taper - Fed's Bullard signals October stimulus cut - Germans head to polls Sunday - Euro-area consumer confidence rises - EU changes budget policies to support periphery - UK public finances improve FTSE 100: -0.43% DAX: -0.23% CAC 40: 0.11% FTSE MIB: -0.39% IBEX 35: 0.18% Stoxx 600: -0.24% European equities ended the week mixed after Federal Reserve Bank of St. Louis President James Bullard said the central bank may reduce stimulus at its next policy meeting. Just two days after the Fed's announcement that it would keep up its $85bn monthly asset purchases, Bullard said a tapering could be on the cards for an October meeting. In an interview with Bloomberg ahead of his speech in New York on Friday, he called October a "live meeting" because "it's possible you could get some data that change the complexion of the outlook and could make the committee be comfortable with a small taper in October". The Fed on Wednesday decided to keep its monetary easing unchanged following a two-day policy meeting, surprising economists who had predicted a cut of between $10bn to $15bn per month. "That was a borderline decision" after "weaker data came in," Bullard said. Bullard has previously said that the central bank should not rush into trimming its quantitative easing. The Fed wasn't the only central bank to shock markets this week as the Reserve Bank of India (RBI) announced a 25 basis-point rise in its main policy rate, to 7.5% from 7.25%, although it unwound some short-term tightening measures. German election looms Germans will head to the polls on Sunday to vote in the federal election. An INSA opinion poll on the German election published Friday showed the opposition Social Democrats climbing one percentage point to 28%, 10 points behind Angela Merkel's Christian Democrats party. The parties both fell short of a majority. Free Democrats, the governing coalition's partners, failed to reach the 5% threshold they need to enter parliament. Another survey, conducted by telephone for the public television network ZDF, showed the Chancellor's centre-right party is backed by 40% of voters, while the centre-left Social Democrats earned the backing of 27%. The Free Democrats, were supported by 6%. Despite Merkel's popularity, the fresh polls signal a difficult road ahead this weekend, meaning she may have to form a government with another party. Also in Europe, consumer confidence rose less than expected. The European Commission's index of consumer sentiment increased to minus 14.9 in September from minus 15.6 in August, missing the minus 14.5 estimate. EU regulation, Britain's public finances European finance officials have approved a change to the region's budget policies which allows for lowered austerity requirements among the hardest hit countries in the Eurozone. "The decision to allow an amendment to a calculation by the European Commission to alleviate the requirements in relation to the size of budget deficits being run within each country is certainly controversial and has been met with significant criticism," said Joshua Mahony, Research Analyst at Alpari. "There are worries as to whether such a measure would allow nations to resume normal business and cast aside austerity measures with significantly improved data." However, Mahony noted that many see this as a necessary towards loosening the framework for more troubled nations to pull themselves out of financial ruins. In the UK, public finances showed a smaller than anticipated deficit in August, supported by a drop in spending by government departments. The deficit was £13.157 in August, the Office for National Statistics said, compared to £14.409bn the same month last year and forecasts of £13.5bn. Tate & Lyle, BP Shares in food and sweeteners manufacturer Tate & Lyle fell after the Credit Suisse reduced its rating from 'outperform' to 'neutral'. BP's shares rallied as investors speculated on rumours of a takeover bid by US energy giant Exxon Mobil. Adidas declined after cutting the lower end of its profit forecast for 2013 by 7.9%. Mediaset SpA gained after Morgan Stanley increased its target on the broadcaster controlled by former Italian Prime Minister Silvio Berlusconi to €3.65 from €2.15. Direct Line dropped after Royal Bank of Scotland sold 300m shares at 210p each in its third sale of a stake in the insurance company. A gauge of miners including Randgold Resources, Antofagasta and Vedanta Resources snapped Thursday's rise as the prices of gold, silver and copper retreated. Brent crude rises Brent crude futures rose $0.321 to $109.110 per barrel. The euro fell 0.06% to the 1.3522 US dollar.

US Market Report

US close: Stocks pull back from record highs after Fed surprise - Dow and S&P retreat from record highs - Most economic data beats forecasts - JPMorgan, banks weigh on markets Dow Jones: -0.26% Nasdaq: 0.15% S&P 500: -0.18% US markets finished broadly lower on Thursday despite some upbeat economic data as analysts continued to digest the Federal Reserve's decision not to taper its stimulus programme. Both the Dow Jones and S&P 500 snapped a four-day winning streak to pull back from record closing highs the previous session, though the tech-heavy Nasdaq ended in positive territory. "US markets have stalled following their leap yesterday, and may well stay in this mode for the rest of the week," said Chris Beauchamp, Market Analyst at IG. "1,700 [on the S&P 500] might have been firmly breached, but the latest all-time highs will probably provoke a degree of short-term selling, such as we saw in late May and early August," he said. Markets surged on Wednesday after the Federal Open Market Committee (FOMC) surprised the market by maintaining the rate of its asset purchases at $85bn a month as it awaits a more sustainable recovery. However, it did say that this amount could still be scaled back before the end of the year. In its report, the Fed said that while household spending and business fixed investment has advanced, and the housing sector has been strengthening, mortgage rates have risen further and fiscal policy is "restraining economic growth". As such, as part of its goal "to foster maximum employment and price stability", the FOMC "decided to await more evidence that progress will be sustained before adjusting the pace of its purchases". "I feel the Fed failed to seize on the opportunity to send the market a strong message by withdrawing its favourite drug," said Market Strategist Ishaq Siddiqi from ETX Capital. Philly Fed index trounces forecasts US existing home sales increased to an annualised rate of 5.48m in August, from 5.39m in the month before (consensus: 5.25). The Federal Reserve bank of Philadelphia's monthly manufacturing index improved to 22.3 points from 9.3 in August (consensus: 10.3). Initial weekly US unemployment claims rose by 17,000 to 309,000 in the seven days ended on September 7th (consensus: 330,000). The country's current account deficit improved to -$98.9bn in the second quarter, from -$104.9bn for the previous three months (consensus: -$97.0bn). Financials weigh on markets JPMorgan Chase finished in the red as it continues to feel the impact of its 'London Whale' trading losses. The bank was fined a total of $920m, $221m of which was by UK regulators due to failures in risk management and financial reporting systems. Other banking groups also finished lower, providing a drag on markets, including Bank of America, Citigroup and Goldman Sachs. Agilent Technologies jumped after the testing-equipment company announced plans to split into two listed firms by means of a spin-off of its electronic-measurement products unit. Drugstore chain RiteAid surged after the company unveiled quarterly earnings per share which beat consensus estimates by a wide margin. After a sharp fall early on, software marker Oracle managed to push into the blue despite issuing a weaker-than-forecast outlook. Shares of food group ConAgra fell steeply after delivering a mixed set of quarterly results with sales missing estimates. Sector peer General Mills was also lower after Wells Fargo Securities downgraded the stock from 'outperform' to market perform'. Home furnishing group Pier 1 Imports slumped after lowering its full-year earnings guidance after weak second-quarter profits. S&P 500 - Risers Pitney Bowes Inc. (PBI) $18.50 +4.64% CME Group Inc. (CME) $73.86 +4.20% Agilent Technologies Inc. (A) $50.98 +3.37% Iron Mountain Inc. (IRM) $29.02 +3.02% Interpublic Group of Companies Inc. (IPG) $17.51 +2.88% Allergan Inc. (AGN) $91.20 +2.59% Lowe's Companies Inc. (LOW) $48.98 +2.58% T. Rowe Price Group Inc. (TROW) $74.65 +2.54% Williams Companies Inc. (WMB) $36.84 +2.53% Fluor Corp. (FLR) $71.45 +2.20% S&P 500 - Fallers CIGNA Corp. (CI) $77.72 -4.34% Regions Financial Corp. (RF) $9.21 -4.16% ConAgra Foods Inc. (CAG) $30.80 -3.96% Keycorp (KEY) $11.60 -3.89% Lincoln National Corp. (LNC) $42.21 -3.67% Newmont Mining Corp. (NEM) $29.78 -3.53% Cliffs Natural Resources Inc. (CLF) $22.73 -3.24% Monster Beverage Corp (MNST) $56.17 -3.21% MetLife Inc. (MET) $47.08 -3.19% SunTrust Banks Inc. (STI) $33.14 -3.01% Dow Jones I.A - Risers Home Depot Inc. (HD) $78.51 +1.47% Travelers Company Inc. (TRV) $86.90 +1.15% Microsoft Corp. (MSFT) $33.64 +0.96% United Technologies Corp. (UTX) $112.00 +0.89% Boeing Co. (BA) $119.04 +0.54% 3M Co. (MMM) $121.57 +0.23% Johnson & Johnson (JNJ) $90.07 +0.18% Intel Corp. (INTC) $23.92 +0.06% Dow Jones I.A - Fallers Unitedhealth Group Inc. (UNH) $70.84 -3.01% Hewlett-Packard Co. (HPQ) $21.31 -2.23% Walt Disney Co. (DIS) $65.72 -2.07% General Electric Co. (GE) $24.46 -1.61% Alcoa Inc. (AA) $8.44 -1.34% JP Morgan Chase & Co. (JPM) $52.75 -1.24% McDonald's Corp. (MCD) $97.92 -0.79% Cisco Systems Inc. (CSCO) $24.61 -0.73% Bank of America Corp. (BAC) $14.61 -0.71% Coca-Cola Co. (KO) $39.31 -0.71% Nasdaq 100 - Risers Tesla Motors Inc (TSLA) $177.92 +7.04% Sirius XM Radio Inc (SIRI) $3.96 +2.59% Catamaran Corp (CTRX) $52.04 +2.40% Equinix Inc. (EQIX) $183.29 +2.26% Yahoo! Inc. (YHOO) $31.03 +1.95% Fossil Group Inc (FOSL) $118.48 +1.90% Citrix Systems Inc. (CTXS) $76.33 +1.84% Mattel Inc. (MAT) $43.41 +1.69% Facebook Inc. (FB) $45.98 +1.66% Discovery Communications Inc. Class A (DISCA) $81.76 +1.64% Nasdaq 100 - Fallers Monster Beverage Corp (MNST) $56.17 -3.21% Randgold Resources Ltd. Ads (GOLD) $76.86 -2.94% Kraft Foods Group, Inc. (KRFT) $53.98 -2.79% Green Mountain Coffee Roasters Inc. (GMCR) $84.32 -2.64% Sears Holdings Corp. (SHLD) $58.11 -2.53% Staples Inc. (SPLS) $14.77 -2.28% Vodafone Group Plc ADS (VOD) $33.54 -1.85% Bed Bath & Beyond Inc. (BBBY) $75.59 -1.79% Alexion Pharmaceuticals Inc. (ALXN) $114.03 -1.64% Express Scripts Holding Co (ESRX) $61.94 -1.51%

Broker Tips

Broker tips: Tate & Lyle, Sainsbury, Compass Shares in food and sweeteners manufacturer Tate & Lyle were falling heavily on Friday morning after the stock's rating was cut by Credit Suisse from 'outperform' to 'neutral'. The bank said its greatest concerns is a proposal in Mexico to tax soft drinks which would cut demand the group's high-fructose corn syrup. It has cut its earnings per share estimates for Tate & Lyle by 7-8% and lowered its price target from 930p to 800p. Citigroup has upgraded its rating for supermarket chain Sainsbury from 'sell' to 'neutral', saying it expects a "big improvement" in sales trends in the second quarter. "On both sales and earnings we anticipate that Sainsbury's 1H will show substantially more progress than either of its UK rivals. This is not a 'sell' in our opinion," said analysts Alastair Johnston and Pradeep Pratti. Panmure Gordon has maintained its 'hold' rating for catering group Compass ahead of its pre-close trading update next week, but highlighted the company's strong balance sheet and showed optimism about shareholder returns. "In our view, Compass remains a high quality, global growth story albeit the valuation in our view is fair and whilst there remains some balance sheet potential, is fairly limited. However further weakness in the share price may provide an opportunity given its defensive and cash generative characteristics."