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Jan 18, 2013

ADVFN III Evening Euro Markets Bulletin (January 18, 2013).

ADVFN III Evening Euro Markets Bulletin
Daily world financial news Friday, 18 January 2013



London Market Report
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Stocks hold on to gains despite poor start on Wall Street
UK stock markets managed to hold on to gains on Friday as better-than-expected data from China lifted sentiment, though the Footsie did finish below its intraday high after some mixed fourth-quarter earnings from Wall Street heavyweights this afternoon.

China’s economic growth seems to have accelerated for the first time in two years towards the end of 2012 thanks in part to the stimulus measures implemented by the government. Chinese gross domestic product grew 7.9% year-on-year in the last three months of 2012, ahead of the 7.8% expected by the consensus.

"Following last night’s five-year closing high in the S&P, equity bulls found more support in the form of impressive Chinese GDP and Industrial Production numbers that will go some way to allaying analyst fears of slowing growth," said Matt Basi, a senior sales trader at CMC Markets UK.
 
"The momentum in equity indices is clearly positive, but with the major European markets perched at their recent highs there has been a drop-off in volume as fear of paying the top starts to come into play," he said.

Nevertheless, traders were shrugging off the news that UK retail sales grew at the second-slowest rate since 1998 last month. Sales volumes were down 0.1% month-on-month, missing the consensus forecasting a 0.2% increase.

Wall Street indices started today's session firmly in the red after some mixed results for economic bellwethers Stateside. Both General Electric and Morgan Stanley jumped after the opening bell after beating consensus expectations in the fourth quarter, while Intel and Capital One Financial disappointed.

Also weighing on US markets was the University of Michigan's consumer confidence index for January which fell from 72.9 to 71.3, missing the estimate of a rise to 75.
FTSE 100: EVRAZ makes strong gains
EVRAZ was making gains even though it said that steel production fell 6.0% from the third quarter to the fourth, as a result of scheduled maintenance at its ZSMK steel mill in the Siberia region.

The stock was being given a lift this morning by comments from Credit Suisse about the steel sector. The broker said: "The cycle is now recovering. Confidence appears to be returning as the recovery in the financial equities suggested to us could be the case. Anecdotes we hear suggest that the demand outlook (non-res in the US, general demand in EU) could be better than the market believes."

Aberdeen Asset Management was given a boost after UBS upped its target from 370p to 440p, maintaining a 'buy' rating, one day after the company reported a 3.0% rise in assets under management in its first quarter. JP Morgan and Numis also raised their target on the stock today.

Energy services giant Wood Group continued to rise one day after announcing that it has won a contract with Nexen Petroleum UK at the Golden Eagle Area Development (GEAD) project in the North Sea.


Meanwhile, home improvement retail company Kingfisher was lower after saying that its Chief Operating Officer, Euan Sutherland, will step down from the board at the end of January. Meanwhile, UBS cut its target for the shares from 290p to 280p, keeping a 'neutral' rating, on the back of negative read-across from results elsewhere in the sector this week.

Morrison, the supermarket chain, fell after Deutsche Bank reduced its target on the stock from 258p to 235p and left its 'hold' recommendation unchanged.

Cruise operator Carnival was extending gains from yesterday after it boosted its share buy-back programme and declared a quarterly dividend of 25 cents per share. Meanwhile, airline IAG was down after both Heathrow and Gatwick airports were forced to cancel or delay numerous flights due to snow across the UK.
FTSE 250: Spectris and Kentz surge after updates
Instrumentation and controls firm Spectris surged after saying that LFL sales growth accelerated from 2.0% to 4.0% from the third to the fourth quarter of 2012, "helping deliver a robust full year performance despite a challenging trading environment".

Meanwhile, engineering and construction group Kentz was also up after announcing a backlog of $2.75bn at the end of December, up 7.0% year-on-year.

Oil and gas group Ophir was on the rise after receiving a double upgrade from Nomura, from 'reduce' to 'buy'. The broker said that highly-geared E&A drilling in 2013 could be a "company maker". Analysts added that in a ‘blue-sky’ success scenario, 2013 drilling could be worth 500% of the current share price.

In contrast, fund manager Ashmore was being weighed down by a ratings cut by UBS from 'buy' to 'neutral'. "We downgrade Ashmore […] on valuation grounds and because we believe that competitive pressures will persist," the broker said.

UK Event Calendar
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European Markets Finished Mixed On Economic Data

The European markets ended Friday's session with mixed results. The markets received a boost in early trade from the strong fourth quarter GDP data released by China. Investors were also encouraged by some positive earnings releases out of the United States, but the mood was soured by the sharp drop in U.S. consumer sentiment in the afternoon.

The Bank of Italy slashed its economic forecast for this year on Friday to project a worst contraction than expected earlier, citing the deteriorating external environment and the continuing weakness in domestic activity.

The bank now expects the Italian economy to shrink 1 percent this year, which is much worse than the earlier projection of 0.2 percent contraction. Gross domestic product likely declined just over 2 percent in 2012, the bank said in its latest economic bulletin.

International Monetary Fund (IMF) Managing Director Christine Lagarde urged nations to focus on real economy and on growth that can deliver jobs.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.33 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.09 percent.

The DAX of Germany dropped by 0.43 percent and the CAC 40 of France fell by 0.07 percent. The SMI of Switzerland decreased by 0.82 percent, but the FTSE 100 of the U.K. gained 0.51 percent.

In Frankfurt, Metro declined by 1.36 percent. The stock was downgraded to ''Underperform'' from ''Neutral'' at Credit Suisse. Commerzbank finished up by 1.93 percent, while Deutsche Bank lost 0.20 percent.

In Paris, Renault increased by 4.36 percent after announcing sales figures for 2012. BNP Paribas gained 1.12 percent, while Societe Generale added 1.37 percent and Credit Agricole rose by 0.27 percent. Loreal decreased by 0.05 percent. The stock was upgraded to ''Overweight'' from ''Neutral'' at HSBC.

In London, mining stocks were positive in early trade, following the Chinese GDP report. Rio Tinto increased by 1.85 percent, recovering from yesterday's weakness. The company's CEO stepped down on Thursday. Meggitt advanced by 1.46 percent. Barclays upgraded its rating on the stock to "Overweight" from "Equalweight."

J Sainsbury fell by 0.58 percent, after Goldman Sachs added the stock to its "Conviction Sell" list. Spectris surged by 8.26 percent. The company reported higher like-for-like sales in its fourth quarter and fiscal 2012, despite a challenging trading environment.

The gross domestic product grew 7.9 percent year-on-year in the fourth quarter, snapping seven successive quarters of slowdown. Economists had expected a 7.8 percent gain. In the third quarter, GDP expanded 7.4 percent, the weakest pace in three years.

U.K. retail sales declined unexpectedly during Christmas season amid weak consumer demand, intensifying concerns about an economic contraction in the final quarter of 2012.

Retail sales including automotive fuel dropped 0.1 percent month-on-month in December, after staying flat in November, the Office for National Statistics showed Friday. It was in contrast to a 0.2 percent rise forecast by economists.

Confidence among British households about prices of their homes weakened for the thirty-first successive month in January, though at the slowest pace since July 2010, data from a survey by Markit Economics and Knight Frank showed Friday. The house price sentiment index came in at 47.6 in January, up from December's reading of 47.1.


US Market Report
Stocks Mostly Lower Amid Modest Selling Pressure

While selling pressure has remained relatively subdued, stocks have moved mostly lower during trading on Friday. A negative reaction to quarterly results from Intel (INTC) is weighing on the markets along with a disappointing reading on consumer sentiment.

The major averages have seen some further downside in recent trading, hitting new lows for the session. The Dow is down 17.84 points or 0.1 percent at 13,578.18, the Nasdaq is down 15.46 points or 0.5 percent at 3,120.54 and the S&P 500 is down 4.31 points or 0.3 percent at 1,476.63.

The weakness on Wall Street is partly due to a sharp drop by shares of Intel, with the semiconductor giant tumbling by 6.6 percent after ending the previous session at a three-month closing high.

After the close of trading on Thursday, Intel released its closely watched fourth quarter results, reporting earnings and revenues that fell year-over-year.

Intel's quarterly earnings exceeded analyst estimates, but the revenues came in below expectations and the company also gave downbeat revenue guidance for the first quarter.

Shares of Capital One Financial (COF) have also come under pressure after the lender reported fourth quarter earnings that rose sharply year-over-year but came in below estimates. The company also provided disappointing guidance. Capital One is currently down by 8.5 percent.

Negative sentiment was also generated by the release of a report from Thomson Reuters and the University of Michigan showing that U.S. consumer sentiment has unexpectedly deteriorated in the month of January.

The report showed that the preliminary reading on the consumer sentiment index for January came in at 71.3 compared to the final December reading of 72.9. The drop by the consumer sentiment index came as a surprise to economists, who had expected the index to climb to a reading of 75.0.

With the unexpected decrease, the index fell for the second consecutive month, hitting its lowest level since December of 2011.

Meanwhile, a positive reaction to quarterly results from Morgan Stanley (MS) has helped to limit the downside for the markets, with the financial giant up by 7.5 percent after reporting a better than expected fourth quarter profit compared to a year-ago loss.

General Electric (GE) is also posting a notable gain after the industrial conglomerate reported fourth quarter earnings that exceeded analyst estimates on revenues that increased by more than anticipated. Shares of GE are currently up by 3 percent.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index surged up by 2.9 percent, while Hong Kong's Hang Seng Index advanced by 1.1 percent.

In the bond market, treasuries have moved back to the upside after coming under pressure in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.6 basis points at 1.849 percent.


Broker tips
Rio Tinto, Meggitt, Ophir Energy
Credit Suisse has reiterated its 'outperform' rating and 4,000p target for mining giant Rio Tinto, following yesterday's announcement of a CEO change and non-cash impairment charge 14bn dollars.

"After the market digests this news we think the focus should remain on iron ore prices, project delivery and the larger macro picture, all which remains unchanged following [the] announcement especially given current head of iron ore (80% of earnings/65% NPV) takes over as CEO, share price pressure should be seen as buying opportunity."

Aerospace components engineer Meggitt was a high riser on the FTSE 100 on Friday morning after Barclays Capital upgraded its rating for the stock from 'equal weight' to 'overweight' and raised its target from 450p to 520p.

BarCap said that the shares' 20% valuation discount to peers "will close as investors in the aerospace cycle look away from the more expensive pure-play names with original equipment or aftermarket exposure, and seek sector laggards like Meggitt."

Nomura has upgraded its rating for oil and gas group Ophir Energy by two notches, from 'reduce' to 'buy', saying that highly-geared exploration and appraisal (E&A) drilling in 2013 could be a 'company maker'.

The broker said that Ophir has a leading exposure to pure exploration. "In a ‘blue-sky’ success scenario, 2013 drilling could be worth $17bn or c.500% of the current share price, the highest in our coverage universe."

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