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London close: Stocks pull back from five-month high
- Miners, banks weigh on Footsie
- Money-market rates spike in China
- RSA up on bid speculation
Market Movers
techMARK 2,624.47 -0.41%
FTSE 100 6,674.48 -0.32%
FTSE 250 15,494.97 -0.11%
The FTSE 100 finished in negative territory for the first time in 10 trading sessions on Wednesday as traders took profits after the index hit a five-month high on the previous day.
Concerns over the economic outlook in China and weakness in the heavyweight mining and banking sectors weighed on London’s benchmark index today, which finished down 21.18 points at 6,674.48. The FTSE 100 was pulling back after hitting its highest closing levels since May 28th on Tuesday.
The bullish mood was dampened today by concerns over the Chinese economy after the news that debt write-offs at China’s biggest lenders had tripled in the first half. Meanwhile, the People’s Bank of China refrained from adding liquidity to the market through new reverse repurchase operations which led to a sharp increase in the country’s benchmark money-market rate.
Chief Market Analyst Michael Hewson from CMC Markets said that the reports have prompted “concerns that a fiscal tightening could well see a slowdown in the recent recovery in the Chinese economy”.
However, he said: “In reality we have been due a pullback for some time now given the recent run up, and given the fact that a lot of this week’s earnings reports have shown some worrying signs of weakness.”
Miners and banks fall, while RSA jumps
Mining stocks including Antofagasta and Anglo American were out of favour on concerns over China in addition to gloomy results from US bellwether Caterpillar, which makes heavy machinery for the mining and ground-moving industries. The firm disappointed Wall Street forecasts with its full-year guidance owing to weak mining orders, saying that “significant risks and uncertainties” could temper global economic growth next year.
Banks all over Europe were lower after the European Central Bank said it would start to review the balance sheets of 130 institutions across the continent. RBS, Barclays, Lloyds, HSBC and Standard Chartered were all registering losses in London.
Insurance firm RSA was a high riser on speculation that the firm could be the target of a takeover bid. Reuters cited traders as touting Italian group Generali, Swiss firm Zurich Financial and UK peer Aviva as potential bidders.
Chip designer ARM Holdings fell for the second straight day as investors gave a cool reaction to its third-quarter results. JPMorgan Cazenove said this morning that it sees "no reason to be building positions at this time and would take profits in the short-term."
A number of stocks were also trading in the red after going ex-dividend, including Smiths Group, BAE System, Rolls-Royce, John Menzies, Senior, William Hill, Rank Group, Barratt Developments and JD Wetherspoon.
Banknote printer and ID services firm De La Rue was a big mover with shares sinking after the company warned that it would miss its full-year profit target by £10m owing to "challenging trading conditions".
Drugs group GlaxoSmithKline beat earnings growth expectations in the third quarter by cutting back office and drug research and development costs were amplified by a lower tax rate. However, shares fell after revenue growth of 1% to £6.51bn missed forecacts.
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| FTSE 100 - Risers RSA Insurance Group (RSA) 127.00p +2.50% Persimmon (PSN) 1,256.00p +2.36% United Utilities Group (UU.) 716.50p +1.63% International Consolidated Airlines Group SA (CDI) (IAG) 364.80p +1.62% ITV (ITV) 195.00p +1.51% Hargreaves Lansdown (HL.) 1,171.00p +1.47% Legal & General Group (LGEN) 213.00p +1.43% Babcock International Group (BAB) 1,260.00p +1.37% Travis Perkins (TPK) 1,805.00p +1.29% Shire Plc (SHP) 2,525.00p +1.28% FTSE 100 - Fallers ARM Holdings (ARM) 953.50p -5.03% Antofagasta (ANTO) 865.50p -4.26% Smiths Group (SMIN) 1,397.00p -3.99% Anglo American (AAL) 1,495.00p -3.92% Royal Bank of Scotland Group (RBS) 352.10p -2.73% GlaxoSmithKline (GSK) 1,570.50p -1.91% Sage Group (SGE) 327.00p -1.83% CRH (CRH) 1,517.00p -1.81% Barclays (BARC) 268.20p -1.61% Standard Chartered (STAN) 1,500.00p -1.45% FTSE 250 - Risers Pace (PIC) 323.80p +11.66% Laird (LRD) 243.90p +8.06% IP Group (IPO) 149.00p +5.23% Home Retail Group (HOME) 192.10p +4.23% AL Noor Hospitals Group (ANH) 918.00p +3.73% Supergroup (SGP) 1,186.00p +3.31% Dixons Retail (DXNS) 48.20p +3.26% BBA Aviation (BBA) 336.60p +2.97% BTG (BTG) 407.90p +2.85% Kenmare Resources (KMR) 22.39p +2.85% FTSE 250 - Fallers De La Rue (DLAR) 885.50p -9.73% International Personal Finance (IPF) 623.00p -6.81% Telecity Group (TCY) 779.50p -5.74% Essar Energy (ESSR) 120.20p -5.43% Ferrexpo (FXPO) 184.70p -4.74% Evraz (EVR) 128.40p -4.32% Kazakhmys (KAZ) 251.40p -4.05% Centamin (DI) (CEY) 49.76p -4.03% Premier Oil (PMO) 328.50p -3.38% AZ Electronic Materials SA (DI) (AZEM) 286.90p -3.07% | ||||||||||||
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Europe close: Chinese banking fears dampen market
- China banking sector concerns
- Berlusconi to stand trial over bribery claims
- ECB bank stress tests
- BoE meeting minutes rate hikes could come earlier
- Spain exits two-year recession
FTSE 100: -0.32%
DAX: -0.31%
CAC 40: -0.81%
FTSE MIB: -2.38%
IBEX 35: -1.84%
Stoxx 600: -0.62%
European stocks fell after a report showed debt write-offs at China’s biggest lenders tripled in the first half, reigniting fears over the banking sector in the world’s second largest economy.
Industrial & Commercial Bank of China and its four largest rivals wrote off 22.1bn yuan of debt that couldn’t be collected, compared to 7.65bn yuan a year earlier, the report revealed.
It raised concerns over China’s shadow banking system and whether the People’s Bank of China will need to raise interest rates in order to fix the problem.
“If we do see a tightening of monetary policy from the PBOC, it could choke off the recovery being seen in the world’s second largest economy, which in turn would impact growth globally,” according to Alpari UK Market Analyst, Craig Erlam.
Berlusconi to stand trial
Italy’s former Prime Minister Silvio Berlusconi has been ordered to stand trial for allegedly bribing a senator.
He is accused of paying left-wing senator Sergio De Gregorio €3m to defect to his party in 2006 and help bring down the government.
Berlusconi has been entangled in a number of trials including for tax evasion.
His latest trial is scheduled to start in February.
ECB stress tests, BoE meeting minutes
The European Central Bank has applied an 8% capital buffer to 124 banks as part of its upcoming stress tests.
The Eurozone’s top banks will undergo a comprehensive batch of tests next year in an effort to build confidence in the sector.
The ECB is looking for risks in banks’ balance sheets before taking over supervision of lenders from November 2014 as part of a European banking union.
In the UK, meeting minutes from the Bank of England (BoE) showed the Monetary Policy Committee voted unanimously last month to keep interest rates on hold and saw little need for more stimulus.
Committee members acknowledged a slightly faster-than-expected fall in unemployment as the recovery strengthened quicker than hoped. However, views diverged over how fast productivity and jobs would pick up.
"This faster-than-expected reduction in unemployment may result in the implied timing of the MPC’s first rate hike being brought forward from the second half of 2016,” according to Investec.
Also in the UK today, the British Bankers’ Association revealed loans for house purchases rose by 42,990 in September from 38,228 the prior month, beating the consensus estimate for a rise to 39,500 loans.
In Spain, gross domestic product expanded 0.1% in the third quarter, compared to the previous quarter when it shrank 0.1%, breaking away from a two-year recession.
Spain is exiting its second recession since 2008 thanks to growth in foreign investments of the nation’s bond and stock markets.
Orange, GSK
Orange declined after the French telecommunications company posted a 7.7% fall in third-quarter earnings due to drop in sales.
GlaxoSmithKline slumped after Sky News reported that the drugmaker will reveal a fall in sales in China when it reports its third-quarter results later today.
STMicroelectronics NV tumbled after the European semiconductor maker reported a $142m quarterly net loss.
International Consolidated Airlines rose after yesterday saying its Spanish carrier Iberia will return to profit next year.
Telecity Group declined after Bank of America reiterated an ‘underperform’ rating for the data-centre operator, saying the company has little opportunity to increase prices due to new competitors and a weak market.
Norsk Hydro advanced after the European aluminium producer posted third quarter earnings that beat analysts' expectations.
Brent crude slips
Brent crude futures fell $1.317 to $108.540 per barrel on the ICE.
The euro rose slightly by 0.04% to $1.3787.
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US open: Investors take profits after mixed corporate earnings
- S&P 500 pulls back from record high
- Caterpillar drops as guidance disappoints
- Boeing beat forecasts for eighth straight quarter
Dow Jones: -0.48%
Nasdaq: -0.88%
S&P 500: -0.61%
US markets slipped on Wednesday as a raft of mixed corporate earnings gave investors an excuse to take profits following a strong run in recent sessions.
The S&P 500 was registering small losses in morning trading, pulling back after hitting another record close of 1,754.67 the night before following five consecutive days of gains. Stocks have risen sharply over the past week as hopes over a continuation of Federal Reserve monetary stimulus were sparked yesterday after a disappointing September jobs report.
According to data compiled by Bloomberg, the recent run in stock markets has pushed the average price-to-earnings multiple of the S&P 500 to 15.9, the highest since late-2009.
The bullish mood was dampened today by concerns over the Chinese economy after a report said that debt write-offs at China’s biggest lenders had tripled in the first half. Meanwhile, the People’s Bank of China refrained from adding liquidity to the market through new reverse repurchase operations which led to a sharp increase in the country’s benchmark money market rate.
Market Analyst Craig Erlam from Alpari said it has reignited fears that the People’s Bank of China could be looking to raise interest rates which could “choke off the recovery”. He said: “Given that the global recovery is still fragile, with the US repeatedly shooting itself in the foot and the Eurozone constantly on the verge of another crisis, investors are very concerned about what kind of an impact this latest Chinese issue could have."
Economic data comes in mixed
US mortgage applications fell 0.6% in the week to October 18th, compared to a rise of 0.3% the previous week, according to data from the Mortgage Bankers Association.
Import prices increased by 0.2% month-on-month in September, following a 0.2% gain the month before and in line with consensus forecasts.
The house price index rose 0.3% in August, below the 1% gain the month before and under the 0.8% rise expected.
Caterpillar drops after cutting forecasts
Industrial machinery manufacturer Caterpillar was a heavy faller today after cutting its full-year guidance for revenue and profit. The company reported a 44% drop in earnings in the third quarter as weakness in the mining sector hit demand for its products.
Chipmaker Broadcom plunged despite beating analysts’ forecasts with its third-quarter results, as it estimated fourth-quarter revenue that fell short of expectations.
Networking equipment maker Juniper Networks fell sharply after saying that sales in its fourth quarter will be between $1.2bn and $1.23bn, disappointing analysts who were expecting $1.23bn.
Aircraft manufacturer Boeing jumped after raising its full-year earnings forecast following a strong third quarter. The company delivered 170 commercial plans during the period, up from 149 the year before, helping it to top earnings expectation for the eighth quarter in a row.
College chain Apollo rocketed after adjusted fourth-quarter profits came in at 55 cents, well ahead of the 25 cents estimate.
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| Broker Tips | ||||||||||||
Abcam: Numis downgrades to add with a target of 570p.
ARM Holdings: Deutsche Bank increases target from 1080p to 1130p and maintains a buy recommendation. JP Morgan raises target from 625p to 750p and leaves its neutral rating unaltered. Societe Generale ups target from 640p to 680p, but still recommends selling. UBS increases target from 970p to 1050p, while downgrading from buy to neutral. Exane ups target from 940p to 960p and stays with its neutral rating.
BHP Billiton: Canaccord Genuity ups target from 2025p to 2065p retaining a hold recommendation. Morgan Stanley raises target from 2090p to 2190p reiterating its overweight rating.
Britvic: UBS takes target from 500p to 575p maintaining a neutral rating.
Centaur Media: Westhouse Securities moves target from 54p to 59p retaining an add rating.
Cineworld: JP Morgan shifts target from 428p to 425p and keeps an overweight rating.
Computacenter: Panmure Gordon ups target from 504p to 548p maintaining a hold recommendation.
De La Rue: Panmure Gordon reduces target from 964p to 786p and downgrades from hold to sell. Investec cuts target from 1070p to 885p downgrading from add to hold.
EnQuest: Westhouse Securities ups target from 130p to 138p and stays with its neutral rating.
Faroe Petroleum: Liberum Capital cuts target from 183p to 175p, while retaining a buy recommendation.
GKN: Societe Generale moves target from 425p to 430p and retains a buy recommendation. Exane moves target from 390p to 400p and keeps a neutral rating.
International Consolidated Airlines Group: RBC Capital raises target from 360p to 400p and keeps an outperform rating.
International Personal Finance: Canaccord Genuity downgrades from buy to hold with a target of 700p.
Kenmare Resources: Canaccord Genuity lowers target from 27p to 25p, while its buy recommendation remains unchanged.
Ocado: Exane downgrades from neutral to underperform, while leaving its target unchanged.
Petropavlovsk: Westhouse Securities lowers target from 130p to 120p, while its buy recommendation remains unchanged. JP Morgan moves target from 70p to 80p and reiterates an underweight rating. RBC Capital cuts target from 105p to 85p retaining an underperform rating.
Reckitt Benckiser: Societe Generale raises target from 4000p to 4750p and upgrades from sell to hold. Exane shifts target from 44p to 45p retaining an underperform rating.
Regus: RBC Capital increases target from 200p to 250p maintaining an outperform rating.
Renold: N+1 Singer shifts target from 44p to 53p and keeps a buy recommendation.
RM: Numis downgrades to add with a target of 140p.
Smiths News: N+1 Singer ups target from 185p to 200p, while downgrading to hold.
Spectris: UBS raises target from 2000p to 2400p reiterating a neutral rating.
Telecity Group: JP Morgan cuts target from 1200p to 1100p and maintains an overweight rating.
UBM: Liberum Capital reduces target from 890p to 840p staying with its buy recommendation. Nomura cuts target from 860p to 800p, while reiterating its buy recommendation. JP Morgan lowers target from 830p to 815p, while upgrading to overweight. Exane cuts target to 820p and maintains an outperform rating.
Vodafone Group: Credit Suisse increases target from 195p to 245p and reiterates an outperform rating.
Whitbread: Deutsche Bank raises target from 3350p to 3485p, while downgrading to hold. Credit Suisse raises target from 3530p to 3900p and retains an outperform rating
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