Evening Euro Markets Bulletin.

ADVFN III Evening Euro Markets Bulletin

Daily world financial news Tuesday, 08 October 2013

London Market Report

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

London close: FTSE 100 at three-month low as IMF cuts global outlook Disappointing economic data and the ongoing US government shutdown sparked a sell-off on London's FTSE 100 on Tuesday, with the index falling to levels not seen in over three months. Meanwhile, as the budget impasse continues in Washington, the International Monetary Fund (IMF) today cut its outlook for global economic growth and warned that a US default could "seriously damage" the world economy. The FTSE 100 finished 71.45 points lower at 6,365.83, a fall of 1.11% on the day. The last time it closed lower was on July 3rd when it ended at 6,229.87. Risk appetite was also being scaled back ahead of the start of third-quarter earnings season in the US with aluminium giant Alcoa expected to kick off proceedings with its results after the close. "As the government shutdown that began a week ago delays the publication of some [US] economic data, investors will turn their attention to companies' financial results," said Financial Sales Trader Max Cohen from Spreadex. Shutdown continues, IMF cuts global outlook Lawmakers in the US have continued to butt heads over the budget debate and the debt ceiling, extending the partial shutdown of the US government into its second week. While Republicans continue to demand a delay to the Affordable Care Act, Democrats are determined not to give up ground over President Barack Obama's flagship health-care bill. The Treasury has already said that it will exhaust measures to avoid going over the borrowing limit by October 17th, while the Congressional Budget Office claims that cash reserves will run dry between October 22nd and October 31st. The IMF now expects the global economy to grow by 2.9% this year and by 3.6% in 2014, compared with its previous estimates in July for growth of 3.1% and 3.8%, respectively. The forecasts however factor in an assumed short US shutdown and an agreement being made before the October 17th deadline. "The effects of any failure to repay the debt would be felt right away, leading to potentially major disruptions in financial markets, both in the US and abroad," said IMF Chief Economist Olivier Blanchard at a press conference. Even the Chinese government has highlighted its concerns over the political deadlock. In a meeting with reporters, Vice Minister of Finance Zhu Guangyao said that "the clock is ticking" in Washington. "The US is clearly aware of China's concerns about the financial stalemate and China's request for the US to ensure the safety of Chinese investments," he said. Data fails to impress Also weighing on sentiment today was data which showed that activity growth in the Chinese services sector slowed in September. The HSBC/Markit services purchasing managers' index fell from 52.8 to 52.5 last month, adding to the downwards pressure on miners in London. Retailers, meanwhile, were hit by the news that UK retail sales growth slowed for the second straight month in September. According to the British Retail Consortium (BRC), like-for-like sales growth fell to an annual rise of 0.7% last month, from 1.8% the month before - analysts were looking for a pick-up to 2%. Looking across the Channel, German factory orders unexpectedly fell by 0.3% in August, an improvement from the revised 1.9% decline the month before but worse than the 1.1% increase forecast by analysts. The news comes amid uncertainty over which party Chancellor Angela Merkel's Christian Democrats will form a coalition with in order to end a hung parliament. Opposition party Social Democrats have signalled their readiness to join the conservative Christian Democrats while a top aide for Merkel has suggested a partnership with the Greens was a realistic possibility.

FTSE 100: Retailers fall on sales data Blue-chip retailers Marks & Spencer, Next and Kingfisher were among the worst performers of the day after data from the retail sales data from the BRC. Financials were also out of favour as risk appetite was scaled back. Standard Life, Legal & General, Lloyds, Barclays and RBS were all trading in the red by the close. HSBC was also lower after selling a portfolio of non-performing personal unsecured and secured loans to the Paragon Group of Companies for £13.5m. A number of miners, however, performed well as metal prices edged higher. Leading the way was copper giant Antofagasta, along with Fresnillo, Vedanta and Randgold. FTSE 250: Telecom Plus surges after strong first half The share price of Telecom Plus surged after the utility services company reported that growth accelerated strongly in the first half. The firm said that customer numbers jumped by 50 per cent in the six months to September 30th, as it guided to a record full-year performance. Finncap upgraded the stock to 'buy' today. Ocado was another strong riser as the stock continues to set new highs following its incredible performance so far this year. In 2013 alone, the share price has rocketed by nearly 425%. Retailers Dixons Retail, Home Retail, Debenhams and Ted Baker were all on the decline. FTSE 100 - Risers Antofagasta (ANTO) 833.50p +1.58% Fresnillo (FRES) 942.50p +1.18% ITV (ITV) 183.60p +0.99% Persimmon (PSN) 1,077.00p +0.94% Randgold Resources Ltd. (RRS) 4,420.00p +0.91% Vedanta Resources (VED) 1,070.00p +0.85% ARM Holdings (ARM) 977.50p +0.77% Reed Elsevier (REL) 839.00p +0.48% British American Tobacco (BATS) 3,212.00p +0.38% Sports Direct International (SPD) 676.50p +0.30% FTSE 100 - Fallers Travis Perkins (TPK) 1,578.00p -3.78% Marks & Spencer Group (MKS) 463.80p -3.44% Standard Life (SL.) 341.10p -2.96% Mondi (MNDI) 1,038.00p -2.54% Lloyds Banking Group (LLOY) 72.52p -2.44% Legal & General Group (LGEN) 190.70p -2.41% easyJet (EZJ) 1,230.00p -2.38% Petrofac Ltd. (PFC) 1,341.00p -2.33% International Consolidated Airlines Group SA (CDI) (IAG) 329.10p -2.32% Reckitt Benckiser Group (RB.) 4,269.00p -2.31% FTSE 250 - Risers Telecom Plus (TEP) 1,371.00p +10.56% Ocado Group (OCDO) 450.50p +5.09% African Barrick Gold (ABG) 158.30p +4.21% Hochschild Mining (HOC) 156.60p +3.50% Bank of Georgia Holdings (BGEO) 2,105.00p +2.93% Perform Group (PER) 552.00p +2.22% Fisher (James) & Sons (FSJ) 1,093.00p +1.86% Rank Group (RNK) 155.60p +1.77% Dialight (DIA) 1,160.00p +1.75% Fidelity China Special Situations (FCSS) 101.00p +1.61% FTSE 250 - Fallers Imagination Technologies Group (IMG) 276.50p -4.16% Dixons Retail (DXNS) 44.60p -4.04% Thomas Cook Group (TCG) 143.40p -3.69% Cranswick (CWK) 1,056.00p -3.65% Afren (AFR) 134.00p -3.25% Workspace Group (WKP) 446.00p -3.02% Keller Group (KLR) 941.50p -2.94% Homeserve (HSV) 249.40p -2.92% PayPoint (PAY) 1,025.00p -2.75% Wood Group (John) (WG.) 762.00p -2.62%

Europe Market Report

FTSE 100 Euronext Dax perf CAC 40

Europe close: Stocks fall as IMF cuts world growth forecast - IMF lowers outlook for world growth - US tackles debt ceiling - German economic data - Clegg addresses UK/EU relations FTSE 100: -1.11% DAX: -0.42% CAC 40: -0.77% FTSE MIB: -0.29% IBEX 35: -0.67% Stoxx 600: -0.76% European equities slid as the International Monetary Fund (IMF) lowered its outlook for growth and concerns over the US debt ceiling mounted. The IMF cut its world growth forecast for this year by 0.3 percentage point to 2.9% and next year by 0.2 percentage point to 3.6%, compared to its assessment in July. In its latest World Economic Outlook the IMF said international recovery rests on the US and China – the globe's two biggest economies. The US Federal Reserve's stimulus measures and China's efforts to turnaround from a recent slowdown will be the key drivers in the near term, the IMF said. In the US, the government is currently wrangling over the federal budget and the impending debt ceiling. If it fails to raise the $16.7trn borrowing limit by October 17th, the Treasury will run out of cash to pay its bills that could lead the US to default on its debt. Majority Leader, Harry Reid, was expected to unveil a measure to raise the debt ceiling as early as Tuesday, setting the table for a vote later in the week. The measure is anticipated to provide enough borrowing room to last beyond the 2014 election. "Although most investors believe that a deal will be reached by the October 17th deadline, investors are still concerned with the impact their portfolios are likely to take in the meantime," said Shavaz Dhalla, Financial Trader at Spreadex. German factory orders fall unexpectedly German factory orders declined in August by 0.3% from July when they dropped a revised 1.9%, the Economy Ministry said. Economists had pencilled in a 1.1% increase. The report supported the European Central Bank's view that economic recovery in the euro area is fragile. Separate data from the Federal Statistics Office showed German exports rose slightly in August to widen the trade surplus. Seasonally-adjusted exports gained 1% on the month, while imports were up 0.4%. The data comes amid political uncertainty in Germany over which party Chancellor Angela Merkel's Christian Democrats will form a coalition with in order to end a hung parliament following the September 22nd federal election. Opposition party Social Democrats have signalled their readiness to join the conservative Christian Democrats while a top aide for Merkel has suggested a partnership with the Greens was a realistic possibility. Clegg slams Cameron's EU/UK plans Liberal Democrat leader Nick Clegg has accused Prime Minister David Cameron of "playing with fire" over his plans to reform Britain's relations with the European Union (EU). The Deputy Prime Minister said it would be "economic suicide" for Britain to leave the EU and slammed Cameron's proposed referendum as a "short sighted political calculation". In January Cameron vowed to negotiate a new EU deal for Britain and hold an "in-out" referendum on EU membership by the end of 2017. Getinge, Telecom Italia Getinge slumped after the maker of sterilisation systems said it expects a consolidated profit before tax of 560m kronor to 570m kronor for the third quarter, missing analysts' forecasts. Telecom Italia declined after Standard & Poor's said it was likely to reduce its BBB-long-term rating, the lowest investment grade, to BB+ after concluding a review of the phone company by the end of next month. Alcatel-Lucent gained following reports the company plans to cut 10,000 jobs. TGS Nopec Geophysical dropped after saying sales for the full year will be between $810m and $870m, down from a previous forecast for a range between $920m and $1bn. Novartis slid after JPMorgan Chase reduced its rating on the drugmaker to 'neutral' from 'overweight'. Celesio rallied on a report that McKesson Corp. may buy the German drug distributor. Ocado Group jumped afer Goldman Sachs recommended that investors 'buy' the stock due to expected growth from its partnership with Morrison Supermarkets. UK house builders Barratt Developments and Taylor Wimpey advanced after the house-price gauge from the Royal Institution of Chartered Surveyors rose in September to 54, the highest since June 2002, from 41 in August. Other asset classes climb The euro rose 0.02% to the 1.3584 US dollar. Brent crude futures edged up $0.580 to $110.320.

US Market Report

Stocks Under Pressure As Government Shutdown Persists The major U.S. index futures are pointing to a slightly higher on Tuesday, with sentiment still cautious as traders dread the prospect of the U.S. defaulting on its debt. In the eventuality of the intransigency of lawmakers continuing, the risk event will materialize and this could spell trouble not only for the U.S., but for the global economy as a whole. Another irritant has been the absence of any major Main Street catalysts due to the delay in the release calendar stemming from the government shutdown. The markets could also look ahead to the unfolding reporting season for direction. The ongoing political stalemate troubled the markets on Monday, sending U.S. stocks notably lower. The major averages opened lower but pared some of their losses in early trading. Thereafter, the averages moved sideways until late trading and pulled back slightly going into the close before closing notably lower. The Dow Industrials ended down 136.34 points or 0.90 percent at 14,936 and the S&P 500 Index closed 14.38 points or 0.85 percent lower at 1,676, while the NASDAQ Composite closed at 3,770, down 37.38 points or 0.98 percent. Twenty-seven of the thirty Dow components closed lower, while the remaining three stocks rose slightly. Alcoa , Goldman Sachs , JP Morgan Chase (JPM), Microsoft and Visa (V) were among the biggest decliners of the session. Biotechnology, basic material, oil service, retail, financial, transportation and housing stocks were among the worst performers of the session. On the other hand, Gold stocks rallied strongly. On the economic front, outstanding consumer credit climbed a seasonally adjusted 5.4 percent or $13.6 billion in August. Non-revolving credit tied to auto loans rose by $14.5 billion, offsetting the $0.9 billion decrease in revolving credit tied to credit cards. With the shutdown continuing, the markets could see further weakness, although earnings, if encouraging, could offer some respite. After yesterday's pullback, The Dow Industrials fell below the shoulder level of a triple top formation. On the downside, the index now has support around 14,892 and 14,802. In the eventuality of some deal struck among lawmaker, the index could rebound, and in that case, the index has resistances around the 14,990, 15,063 and 15,129 levels.

Broker Tips

Broker tips: Melrose, Ladbrokes, Cineworld Investec has upgraded its rating for industrial investment firm Melrose from 'add' to 'buy', saying it still sees upside potential following a slight underperformance. Dyett said that the company has shown through previous acquisitions that it is "capable of generating value from a range of businesses, using the many and varied tools at its disposal, and that investors should be well disposed to its proven model and track record". High Street bookie Ladbrokes was in the red on Tuesday morning after Jefferies downgraded its stance on the stock from 'buy' to 'hold, raising concerns about the online business and the future of the dividend. Jefferies said: "With no material online earnings and almost all profit derived from a low-growth (cash-generative) retail business, a low valuation multiple is appropriate. There is little prospect of an uplift until 3Q14E. With c11p of earnings in each of the next three years, it is easy to construct a valuation well below the current share price. We do see some hope, but uncertainty remains." Panmure Gordon said it expects a reduction in consensus forecasts for Cineworld after the Competition Commission (CC) ruled that three cinemas must be sold due to the acquisition of City Screen. Meanwhile, ahead of the next trading update later this month, the broker said: "we expect a downbeat assessment given that industry weekend box office revenues have fallen around 2% in the group's second-half trading period to date."