| ADVFN III | Evening Euro Markets Bulletin |
| Daily world financial news | Monday, 23 September 2013 |
| London Market Report | ||||||||||||
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| London close: Fed uncertainty, US debt ceiling weigh on stocks Concerns about the US economy weighed heavily on global stock markets on Monday as investors focused on comments from Federal Reserve officials and the ongoing debt-ceiling debate. The FTSE 100 finished down 39.06 points on the day at 6,557.37. "Those of the opinion that stock markets have overshot to the upside in recent months will feel emboldened by the performance in recent days – if markets can't hang on to last week's Fed-inspired sharp gains, surely this is a market that has further to fall?" said Chief Market Strategist David Jones from IG "The next few days will show if that appetite to buy in dips is still there for investors, with many looking at the 6,500 level as the potential floor for any further FTSE weakness." Markets were also reacting to mixed manufacturing data from the world's largest economies today: the purchasing managers' index (PMI) for China's manufacturing sector rose from 50.1 to a six-month high of 51.2 in September, ahead of the 50.9 excepted; the Eurozone manufacturing PMI declined from 51.4 to 51.1 (forecast: 51.7); while the US manufacturing PMI slipped from 53.1 to 52.8 (forecast: 54). German elections in focus Markets across Europe finished lower on Monday in the aftermath of the German elections this weekend. Chancellor Angela Merkel's Christian Democratic Union party won 41.5% of the vote after gaining 311 seats in the Bundestag, though this was four seats shy of an absolute majority. The current coalition partner, the Liberal Democrats (FDP), missed out of the 5% minimum threshold and will not be represented in parliament meaning that Merkel is left having to build a new coalition with either the Social Democrats (SPD) or the Green Party, who won 25.7% and 8.4% of the vote, respectively. Senior Market Analyst Michael Hewson from CMC Markets reckons that a coalition with the SPD is the most probable outcome. However, he said: "This could well be complicated as they are more sympathetic to the idea of a banking union, something that Mrs Merkel has been reluctant to countenance, and any disagreements are likely to complicate the decision making process at a time when key decisions are needed with respect to Greece, and the European Stability Mechanism in the coming months." Fed officials cast doubt over recovery; debt-ceiling worries resurface Stocks initially gained strongly in the aftermath of last Wednesday's surprise decision by the Federal Reserve not to begin scaling back stimulus. However, gains were mostly erased by the end of last week after James Bullard, head of the St Louis Fed, admitted that the decision was a close call and that the central bank could still trim asset purchases at its next meeting. Comments from other Fed officials dampened sentiment further today, including New York Fed President William Dudley who said that the US has yet to show "any meaningful pickup" in momentum. He said that the central bank must push hard against headwinds and he would only feel comfortable with a 'taper' as long as there is a "continued improvement in the labour market". Meanwhile, talks surrounding the US debt ceiling were also catching the attention of investors today after President Barack Obama this weekend urged Congress to approve a budget to prevent a government shutdown by October 1st. | ||||||||||||
| FTSE 100: Croda jumps on upgrade from Credit Suisse Chemicals firm Croda was performing well after Credit Suisse upgraded its recommendation from 'neutral' to 'outperform' and hiked its target from 2,600p to 3,000p. The bank said that headwinds seen in the first half will begin to reverse and the stock's 10% premium to the chemicals sector is justified. Investment group Aberdeen trimmed early gains but still held in positive territory after saying that underlying profits should still come in at the higher end of analysts' forecasts despite a slight drop in assets under management in the fourth quarter. FTSE newcomer Coca-Cola bottling group Coca-Cola HBC was among the worst performers, extending its losing streak into the third straight day. Matt Basi, Head of Sales Trading at CMC Markets, said that traders are "tak[ing] profits from the highs of last week – the best levels since the stock moved to the London market in April". Banking stocks were also providing a drag with Royal Bank of Scotland, Lloyds and Barclays registering losses as risk appetite was scaled back. British Gas owner Centrica declined after announcing the decision not proceed with its Baird and Caythorpe gas storage projects, leading to impairments of £240m this year. Utility peer National Grid was also out of favour after analysts at UBS downgraded the stock from 'buy' to 'neutral', saying that the estimated future regulatory asset value (RAV) growth is already priced in. FTSE 250: Dechra jumps after upgrade Pharmaceuticals firm Dechra was a high riser today after Investec upgraded the stock from 'add' to 'buy' and raised its target from 708p to 788p. The broker said: "Re-working our valuation methodology for the increased detail [following last week's results] we now have suggests a much higher value than we first thought." Dairy foods company Dairy Crest edged higher after saying it continues to perform in line with company expectations, despite the challenging trading environment, and profit targets for the full year remain unchanged. FTSE 100 - Risers Croda International (CRDA) 2,727.00p +1.75% Diageo (DGE) 2,050.50p +0.81% Rolls-Royce Holdings (RR.) 1,115.00p +0.81% GlaxoSmithKline (GSK) 1,589.50p +0.79% IMI (IMI) 1,465.00p +0.76% Burberry Group (BRBY) 1,631.00p +0.74% British Sky Broadcasting Group (BSY) 874.00p +0.58% Old Mutual (OML) 193.00p +0.57% Vedanta Resources (VED) 1,122.00p +0.54% Tate & Lyle (TATE) 770.00p +0.46% FTSE 100 - Fallers Lloyds Banking Group (LLOY) 73.91p -3.07% Shire Plc (SHP) 2,520.00p -2.82% Barclays (BARC) 266.35p -2.60% Tullow Oil (TLW) 1,049.00p -2.42% William Hill (WMH) 412.00p -2.42% GKN (GKN) 352.00p -2.41% Coca-Cola HBC AG (CDI) (CCH) 1,825.00p -2.41% Fresnillo (FRES) 1,013.00p -1.94% Compass Group (CPG) 839.00p -1.93% Resolution Ltd. (RSL) 319.70p -1.84% FTSE 250 - Risers Alent (ALNT) 353.80p +4.06% Dechra Pharmaceuticals (DPH) 720.00p +3.67% Essar Energy (ESSR) 133.00p +3.58% Vesuvius (VSVS) 444.70p +2.89% Britvic (BVIC) 569.00p +2.62% Daejan Holdings (DJAN) 3,744.00p +2.52% SEGRO (SGRO) 306.90p +2.50% Unite Group (UTG) 376.00p +2.12% Crest Nicholson Holdings (CRST) 339.90p +2.07% 888 Holdings (888) 164.10p +1.99% FTSE 250 - Fallers esure Group (ESUR) 250.80p -4.53% Carpetright (CPR) 651.00p -4.26% Moneysupermarket.com Group (MONY) 144.50p -3.99% Fidessa Group (FDSA) 2,012.00p -3.96% PayPoint (PAY) 1,067.00p -3.53% CSR (CSR) 502.00p -3.18% Barratt Developments (BDEV) 316.10p -3.10% Keller Group (KLR) 1,055.00p -3.03% Enterprise Inns (ETI) 141.70p -2.95% Fisher (James) & Sons (FSJ) 1,078.00p -2.88% | ||||||||||||
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| Europe close: Stocks lower on inconclusive German election
- Merkel fails to win majority in German election
- ECB ready to fund banks, says Draghi - Euro-area PMI Composite beats consensus - Fed's Dudley backs QE decision FTSE 100: -0.72% DAX: -0.60% CAC 40: -0.62% FTSE MIB: 0.39% IBEX 35: -0.91% Stoxx 600: -0.55% An inconclusive German election and a speech from European Central Bank (ECB) President Mario Draghi saw equities in the region move lower on Monday. German Chancellor Angela Merkel's Christian Democratic Union (CDU) party won 41.5% of votes at Sunday's federal election – but fell short of a majority to win her third term as leader of Europe's largest economy. Merkel will need to find another coalition partner as her current partner, the Liberal Democrats, failed to gain the 5% minimum threshold required to be represented in parliament. She will have to build a new coalition with either the Social Democrats which won 25.7% or the Green party which won 8.4%. "With the Social Democratic party making clear their reluctance to form a coalition, the negotiations between the two main parties may not be as smooth as people had hoped, which could force some market jitters," according to Max Cohen, Financial Sales Trader at Spreadex. "Negotiations to form German governments usually last from four to six weeks." Markets also reacted to remarks from Draghi who said the ECB stands ready to deploy another long-term refinancing operation (LTRO) to provide funds to Europe's banking system if needed. "While repayment of central bank credit is certainly a sign of normalisation, the resulting reduction in excess liquidity can reinforce upward pressures on term money market rates," Draghi told the European Parliament in Brussels today. Meanwhile, euro-area services and manufacturing activity grew at the fastest pace in more than two years in September. Markit's Purchasing Managers' Index (PMI) Composite, covering both sectors, rose to 52.1 from 51.5 in August, beating the 51.8 estimate and the 50 reading that signals expansion. Fed's Dudley defends stimulus decision New York Fed President William Dudley on Monday defended the Federal Reserve's shock decision to keep its monetary stimulus unchanged. The Fed surprised investors last week by saying it would maintain its monthly $85bn in asset purchases until it sees further recovery. In a speech, Dudley argued that any changes to quantitative easing must be based on the most recent measures of economic growth. He pointed out the drag from the recent rise in longer-term interest rates, higher taxes, lower public spending and questions over the US debt ceiling. His comments come after James Bullard, head of the St. Louis Fed, said that a tapering could come in October. Croda, Aberdeen Chemicals firm Croda was in the top spot after Credit Suisse upgraded its recommendation from 'neutral' to 'outperform' and hiked its target from 2,600p to 3,000p. Aberdeen Asset Management advanced after saying it expects underlying profit before tax for the full year to reach the top end of its range estimate between £431m to £477m. National Grid declined after UBS downgraded the shares to 'neutral' from 'buy'. Centrica's shares declined after announcing a £240m non-cash write off on gas storage projects. Other asset classes slide The euro fell 0.24% to the 1.3492 US dollar. Brent crude futures slipped $1.073 to $108.060 per barrel on the ICE. | ||||||||||||
| US Market Report | ||||||||||||
| US close: Stocks sink as Fed uncertainty grips markets
- Bullard comments hit stocks, post-Fed rally fades
- Barclays lifts year-end S&P target - BlackBerry plummets on job losses, Q2 warning Dow Jones: -1.19% Nasdaq: -0.39% S&P 500: -0.72% Strong gains made after the Federal Reserve meeting were mostly erased by the end of trade on Friday as uncertainty over the future of monetary policy dampened sentiment. Markets surged on Wednesday after the Fed's surprise decision not to scale back stimulus with both the Dow Jones and S&P 500 finishing at record highs. The central bank said it "decided to await more evidence that progress will be sustained before adjusting the pace of its purchases". Stocks however have fallen over the two days since with markets dropping sharply ahead of the weekend after comments from the head of the St Louis Fed, James Bullard. Bullard admitted that this month's decision to maintain stimulus was a close call and that the central bank could still taper quantitative easing at its next meeting. He said: "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." Senior Market Analyst Michael Hewson from CMC Markets said that Bullard's 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". The decision not to taper prompted Barclays to raise its year-end target for the S&P 500 from 1,600 to 1,800 with analyst Barry Knapp saying that the "'lower for longer' monetary policy is more probable than we believed a week ago". The closing price of the index was 1,709.91 on Friday. 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. BlackBerry drops sharply Shares of BlackBerry plunged after the smartphone company said late afternoon that it would be slashing 4,500 jobs as it warned that revenues for the second quarter would come in well below current market forecasts. Construction and mining equipment group Caterpillar fell after saying that global machine sales dropped 10% in the three months to the end of August. Coal stocks including Consol Energy and Peabody Energy lost their spark on the back of concerns with emission requirements for new power plants by the Environmental Protection Agency. NetApp Inc. fell as William Blair & Co lowered its rating on the maker of data-storage products from 'market perform to 'underperform'. S&P 500 - Risers Teradata Corp. (TDC) $60.73 +2.79% Netflix Inc. (NFLX) $313.83 +2.73% Agilent Technologies Inc. (A) $52.15 +2.30% Visa Inc. (V) $198.83 +2.12% Bemis Co. Inc. (BMS) $39.58 +1.67% Allergan Inc. (AGN) $92.63 +1.57% Amazon.Com Inc. (AMZN) $316.34 +1.32% Newfield Exploration Co (NFX) $26.83 +1.28% Intuitive Surgical Inc. (ISRG) $374.69 +1.27% Goldman Sachs Group Inc. (GS) $169.75 +1.17% S&P 500 - Fallers Darden Restaurants Inc. (DRI) $45.78 -7.14% Rockwell Collins Inc. (COL) $70.00 -5.76% Newmont Mining Corp. (NEM) $28.07 -5.74% GameStop Corp. (GME) $49.43 -4.65% Sealed Air Corp. (SEE) $28.56 -4.26% D. R. Horton Inc. (DHI) $20.20 -3.86% Dun & Bradstreet Corp. (DNB) $103.87 -3.70% Sprint Nextel Corporation (S) $6.26 -3.54% Caterpillar Inc. (CAT) $84.75 -3.42% Cliffs Natural Resources Inc. (CLF) $21.98 -3.30% Dow Jones I.A - Risers Pfizer Inc. (PFE) $28.97 +0.45% Coca-Cola Co. (KO) $39.40 +0.23% JP Morgan Chase & Co. (JPM) $52.80 +0.09% Dow Jones I.A - Fallers Caterpillar Inc. (CAT) $84.75 -3.42% Microsoft Corp. (MSFT) $32.79 -2.52% United Technologies Corp. (UTX) $109.58 -2.16% Boeing Co. (BA) $116.63 -2.02% Home Depot Inc. (HD) $77.00 -1.92% General Electric Co. (GE) $24.01 -1.84% Alcoa Inc. (AA) $8.29 -1.78% International Business Machines Corp. (IBM) $190.02 -1.74% E.I. du Pont de Nemours and Co. (DD) $59.42 -1.51% Verizon Communications Inc. (VZ) $47.78 -1.50% Nasdaq 100 - Risers Facebook Inc. (FB) $47.49 +3.28% Tesla Motors Inc (TSLA) $183.39 +3.07% Netflix Inc. (NFLX) $313.83 +2.73% Avago Technologies Ltd. (AVGO) $41.62 +2.13% Liberty Interactive Corp (LINTA) $24.53 +1.66% Check Point Software Technologies Ltd. (CHKP) $58.56 +1.54% Amazon.Com Inc. (AMZN) $316.34 +1.32% Intuitive Surgical Inc. (ISRG) $374.69 +1.27% eBay Inc. (EBAY) $54.95 +0.92% Celgene Corp. (CELG) $149.86 +0.90% Nasdaq 100 - Fallers Catamaran Corp (CTRX) $49.52 -4.84% Randgold Resources Ltd. Ads (GOLD) $73.38 -4.53% Garmin Ltd. (GRMN) $43.61 -3.05% NetApp Inc. (NTAP) $43.20 -2.53% Microsoft Corp. (MSFT) $32.79 -2.52% Sigma-Aldrich Corp. (SIAL) $85.93 -2.35% Regeneron Pharmaceuticals Inc. (REGN) $300.80 -2.05% Mondelez International Inc. (MDLZ) $32.30 -1.94% Fastenal Co. (FAST) $50.16 -1.61% Xilinx Inc. (XLNX) $47.12 -1.33% | ||||||||||||
| Broker Tips | ||||||||||||
| Broker tips: Aberdeen, AG Barr, Henry Boot, Dechra
Canaccord Genuity reiterated a 'buy' rating and target of 440p for Aberdeen Asset Management
after the investment company said that underlying profits should still
come in at the higher end of analysts' forecasts despite volatile
markets in the fourth quarter.
"The current dynamics of slowly strengthening FX and better valuation fundamentals in emerging equity markets should continue to attract flows to the better performers - we view Aberdeen as one of the leading performers," the broker said. Soft drinks maker A.G. Barr reported a strong first half as sales benefitted from a hot summer despite a fiercely competitive market, Investec said. "We leave full year [FY] forecasts unchanged as the group faces some tougher revenue competition in the second half, but FY numbers still show +7% for profit before tax year-on-year. We make no changes to our target [585p] and our recommendation remains 'add'," Investec said. Property company Henry Boot was given a 'buy' rating from WH Ireland Research after reporting a hike in first-half earnings. "Following a good set of first half results recently, we still view Henry Boot as attractively valued, and reiterate our 'buy' recommendation with a raised 245p price target (+28%). Results were well ahead year-on-year in terms of the headline numbers and showed good progress across the divisions," WH Ireland said. Veterinary pharmaceuticals group Dechra Pharmaceuticals booked more than a 50% increase in full-year revenue, slightly ahead of Investec's expectations. "Whilst our forecasts still have Dechra delivering 11% earnings per share growth in fiscal year 2014 we think the risk remains to the upside given the opportunities on offer for the company," the broker said. | ||||||||||||
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