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17-01-2014 12:00 AM GMT
|London Market Report|
|London close: FTSE 100 edges higher after quiet session|
- FTSE 100 within touching distance of 14-year high
- Banks fall after Deutsche Bank's Q4 loss
- Chinese growth slowed down in Q4
- UK outlook improves
- HSBC highlights potential risks from too-low inflation readings
techMARK 2,853.67 +0.09%
FTSE 100 6,836.73 +0.11%
FTSE 250 16,227.11 +0.25%
It was a quiet session for markets in the UK and across Europe on Monday with volumes on the thin side with Wall Street closed for Martin Luther King Jr. Day.
"European indices are trading little changed after a lifeless start to the week with all headline equity gauges trading within a tight range," said Max Cohen, Financial Sales Trader at Spreadex.
Nevertheless, the FTSE 100 still managed to eke out small gains to finish up 7.43 points at 6,836.73. The index is now within touching distance of last year's closing high of 6,840.27 reached in May 2013 and its all-time high of 6,930 hit in December 1999.
Asian markets were lower overnight after data showed that Chinese GDP expanded at a year-on-year rate of 7.7% in the fourth quarter of 2013, slightly ahead of the 7.6% growth expected but down from 7.8% the previous quarter. That means that GDP growth levelled out to 7.7% during 2013 as a whole, the same as 2012, though economists broadly predict a further slowdown next year.
These concerns were countered slightly by an improving outlook closer to home, with UK business optimism improving in the fourth quarter of 2013, according to the quarterly CBI/PwC financial services survey. Meanwhile, reports that the International Monetary Fund is set to upgrade UK growth forecasts also boosted sentiment slightly. It is expected to lift its UK GDP growth projection in 2014 from 1.9% to 2.4%.
On a more sobering note, and in reference to inflation at the global level, the Financial Times cited top-ranked HSBC economist Stephen King as having said: "We're not forecasting a descent into outright deflation. Instead, we're highlighting the risk that inflation remains too low or, worse, that it continues to sink over the next two years."
Banks under pressure
Negative read-across from a surprise fourth-quarter loss at Deutsche Bank weighed on the banking sector across Europe today, with UK banks being no exception. Barclays, Lloyds, Standard Charteredand HSBC all finished in the red.
RBS was also hit after analysts at JPMorgan Cazenove downgraded the stock to 'underweight'.
Leading the upside on the blue-chip index were precious metal miners Fresnillo and Randgold which were both rising strongly with FTSE 250 peer Polymetal following suit.
Oil and gas engineer Weir wasn't far behind, rising strongly after upbeat comments from analysts atRedburn, which said that "any sign of earnings stability will be met by a re-rating". Recent M&A activity in the sector and positive read-across from US peer Baker Hughes were also said to be behind the rise today. The US outfit is due to publish its latest quarterly results tomorrow.
Similarly,Diageo and SABMiller were on the up as M&A activity continues to pick up in the global drinks industry. Just a few days after whisky maker Beam was bought for $16bn by Suntory, it was announced that AB InBev is buying back South Korean brewer Oriental Brewery for $5.8bn.
Shares in Hargreaves Lansdown benefited from an upgrade by Credit Suisse, which moved its rating on the financial services stock from 'underperform' to 'neutral' and significantly upped its target from 790p to 1,470p.
The same bank, however, downgraded its rating for luxury brand Burberry from 'outperform' to 'neutral', pushing the stock lower by the close.
FTSE 100 - RisersFresnillo (FRES) 776.50p +6.08%
Randgold Resources Ltd. (RRS) 4,185.00p +5.82%
Weir Group (WEIR) 2,227.00p +4.21%
Hargreaves Lansdown (HL.) 1,509.00p +3.85%
Pearson (PSON) 1,306.00p +2.03%
Next (NXT) 6,255.00p +1.79%
British Sky Broadcasting Group (BSY) 854.00p +1.67%
Associated British Foods (ABF) 2,692.00p +1.66%
British American Tobacco (BATS) 3,121.00p +1.50%
SABMiller (SAB) 3,094.00p +1.41%
FTSE 100 - FallersBarclays (BARC) 282.80p -2.01%
Prudential (PRU) 1,345.00p -1.39%
Rio Tinto (RIO) 3,336.00p -1.39%
Royal Bank of Scotland Group (RBS) 359.00p -1.29%
Mondi (MNDI) 1,001.00p -1.09%
BT Group (BT.A) 379.50p -1.02%
Burberry Group (BRBY) 1,500.00p -0.99%
CRH (CRH) 1,637.00p -0.97%
Shire Plc (SHP) 2,993.00p -0.86%
Aberdeen Asset Management (ADN) 435.40p -0.82%
FTSE 250 - RisersNMC Health (NMC) 497.90p +6.37%
Imagination Technologies Group (IMG) 208.90p +6.09%
Hunting (HTG) 798.00p +5.77%
Polymetal International (POLY) 570.00p +5.75%
F&C Asset Management (FCAM) 92.00p +4.90%
JD Sports Fashion (JD.) 1,625.00p +3.57%
Bwin.party Digital Entertainment (BPTY) 120.10p +3.18%
Carphone Warehouse Group (CPW) 279.80p +3.17%
Oxford Instruments (OXIG) 1,800.00p +3.15%
Kenmare Resources (KMR) 18.90p +2.89%
FTSE 250 - FallersICAP (IAP) 432.80p -4.31%
Kentz Corporation Ltd. (KENZ) 664.00p -3.14%
FirstGroup (FGP) 136.80p -3.12%
Domino Printing Sciences (DNO) 824.50p -2.94%
Xaar (XAR) 1,011.00p -2.79%
Bank of Georgia Holdings (BGEO) 2,328.00p -2.55%
Big Yellow Group (BYG) 501.00p -2.15%
Moneysupermarket.com Group (MONY) 192.20p -1.69%
Petra Diamonds Ltd.(DI) (PDL) 122.50p -1.61%
Home Retail Group (HOME) 204.40p -1.54%
US Market ReportUS open: Markets mixed after barrage of economic data and earnings
- UPS, Intel, GE fall heavily
- Morgan Stanley beats forecasts
- Housing starts beat forecasts, but permits miss
- Consumer confidence declines
Dow Jones: 0.15%
S&P 500: -0.16%
Markets were lacking direction on Friday morning as investors digested mixed economic data from the housing market and a surprise decline in consumer confidence.
It was also a busy day for corporate earnings; Intel and UPS were both providing a drag after disappointing investors with guidance, General Electric slumped after missing forecasts, while Morgan Stanley jumped after beating expectations.
The Dow Jones Industrial Average rose 0.15% early on; the Nasdaq was down 0.21%, while the S&P 500 was trading 0.16% lower.
Housing data comes in mixed; consumer sentiment weakens
US housing starts fell 9.8% over the month in December to reach an annualised rate of 999,000, according to the US Department of Commerce. This was a significantly pull-back from the revised 23.1% gain in November but still came in ahead of the consensus forecast of 990,000.
Putting last month's fall into context, Property Economist Paul Diggle from Capital Economics said: "It only reversed half of November's (upwardly revised) increase; starts are still up on this time last year and they are more than double their low point from 2009."
However, data today also showed that building permits – more closely-watched by analysts given that they are a forward-looking indicator of housing activity – dropped by a worse-than-expected 3% during December to 986,000, coming in below the 1.014m prediction.
The preliminary reading of the University of Michigan consumer confidence index unexpectedly fell from 82.5 to 80.4 in January, surprising analysts who had expected a rise to 83.5.
Meanwhile, industrial production increased by 0.3% in December, as expected. Manufacturing output expanded by 0.4%, ahead of the 0.3% rise predicted.
Intel, UPS and GE fall; Morgan Stanley gains
Microprocessor group Intel was a heavy faller early on after saying after the bell last night that no revenue growth is expected in 2014, with the struggling PC market affecting demand. Fourth-quarter profit, however, rose to $2.6bn from $2.5bn the year before on sales that rose to $13.83bn from $13.48bn.
Delivery firm UPS was in the red after lowering its guidance for 2013 due to a shorter-than-expected holiday shopping season. Despite an "unprecedented" surge in last-minute orders, the company said that a shorter peak season for deliveries and poor weather dampened results.
Conglomerate General Electric also declined despite a broadly in-line fourth-quarter with income rising 4.8%.
Banking group Morgan Stanley gained strongly after topping estimates despite a 70% drop in fourth-quarter profits due to weak fixed-income trading results, legal costs and expenses. Investors were also reacting to its updated strategic plan, in which is reiterated its target for return on equity to exceed 10%.
Broker TipsBroker tips: Burberry, AB Foods, Motor insurers
Credit Suisse has lowered its recommendation for luxury fashion brand Burberry from 'outperform' to 'neutral', saying that the outlook for the stock looks 'tough' in the near term.
"We now think that Burberry's superior top-line momentum is unlikely to translate into superior earnings growth versus its luxury peers over the next two years," Credit Suisse said.
UBS has named food ingredients and retail firm Associated British Foods as its 'Key Call', as it hiked its target for the stock from 2,430p to 2,890p following last week's first-quarter update.
The bank believes that AB Foods, rated 'buy', should trade on a higher multiple due to the structural growth story at its retail division Primark. Primark is now being valued - based on the current share price - as 70% of the whole company given UBS' £15.5bn valuation for the retailer.
Canaccord Genuity has lifted its targets across the UK motor insurance sector after recent data showed that premium trends began to improve at the end of last year.
The broker has lifted its rating for Admiral from 'sell' to 'hold' and raised its target from 1,160p to 1,400p. The target for Direct Line ('buy') has been raised from 240p to 275p, while the target for esure ('buy') has been lifted from 255p to 305p.trade the most liquid financial market in the world
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|Europe Market Report|
|Europe close: Stocks mixed as US closes for holiday|
- Chinese GDP slows
- US market shut for Martin Luther King Jr. Day
- IMF to upgrade global economic forecast
- Berlusconi returns to politics
FTSE 100: 0.08%
CAC 40: -0.15%
FTSE MIB: 0.02%
IBEX 35: -0.22%
Stoxx 600: -0.13%
European stocks were mixed on a quiet day for markets as US trading was closed to mark the birthday of civil rights leader Martin Luther King Jr.
"Without the US, we are a bit light on fresh data to see the markets want to pull too hard in either direction, with Chinese gross domestic product (GDP) numbers providing the focal point of the day so far," said Toby Morris, Senior Sales Trader at CMC Markets.
China's gross domestic product (GDP) expanded 7.7% compared to the same period a year earlier, easing back from a 7.8% increase in the third quarter and marking the slowest pace of growth since 1999.
Another report showed industrial production in China was up 9.7% year-on-year in December, compared to a 10% jump in November and the consensus forecast of a 9.8% rise.
Retail sales in the nation grew 13.6% in December against a year ago, in line with economists' expectations. Sales were up 13.7% in November.
"Chinese data, released over night, was relatively mixed which explains the mild reaction in the markets," said Craig Erlam, analyst at Alpari.
IMF to upgrade world growth forecast
The International Monetary Fund (IMF) is set to upgrade its global growth forecast tomorrow, with the UK leading the way.
The IMF is anticipated to lift its UK GDP growth projection in 2014 from 1.9% to 2.4%.
The news comes after IMF Managing Director Christine Lagarde warned of risks of deflation in the Eurozone.
She said extremely low inflation in rich countries could spark a prolonged period of falling prices.
Core inflation fell to a record low of 0.7% in December, well below the European Central Bank's (ECB) target of 2%, but President Mario Draghi blamed a statistical glitch in Germany.
Elsewhere in Europe, Former Italian Prime Minister Silvio Berlusconi has struck a reform deal with the leader of the centre-left Democratic Party Matteo Renzi.
The deal, under which Berlusconi will back electoral and constitutional proposals aimed at making Italy more governable, sees him return to politics after being thrown out of parliament last year for a tax fraud conviction.
However, the agreement, made Saturday night, has divided the governing coalition with some policymakers concerned they could risk extinction under a new electoral system.
Banks fall, luxury good rally
Banks, insurance companies and financial-services providers posted the biggest losses on the Stoxx 600 while gauge of personal and household-goods companies posted the biggest gain.
Deutsche Bank declined after the German lender reported a pre-tax loss in the fourth quarter due to litigation-relations expenses and costs of a reorganisation.
Hermes International rose after Deutsche Bank upgraded the company to 'hold' from 'sell'.
Peugeot slumped after posted a fall in annual sales of cars and light commercial vehicles.
Air France fell after UBS downgraded the European carrier to 'neutral' from 'buy'.
AB InBev advanced as the world's biggest beer maker agreed to buy back Oriental Brewery from KKR & Co. and Affinity Equity Partners.
Lanxess dropped after Nomura Holdings cut its rating on the speciality chemicals maker to 'reduce' from 'neutral'.
The euro was up 0.19% to $1.3567.
European oil sanctions ease
Today marked the first easing of European Oil related sanctions as a result of a preliminary deal on Iran's nuclear programme negotiated in November.
European companies are expected to enjoy lighter restrictions on the insurance and transportation of Iranian crude. A bar on trade in Iranian petrochemicals with the European Union is also anticipated.
Brent crude futures fell $0.311 to $106.150 per barrel, according to data from the ICE in late afternoon trading.