|London Market Report|
| London close: Stocks fall as markets await Fed, ECB |
A disappointing reading of business activity in the States sparked a late sell-off on UK financial markets on Tuesday afternoon as traders turned nervous ahead some key risk events later this week.FTSE 100: Lloyds rises after Q1 results impress
The Chicago purchasing managers' index (PMI), one of the leading economic indicators in the US, dropped to a three-and-a-half-year low of 49.0 in April from 52.4 the month before, surprising analysts who had expected a slight rise to 52.5. This sub-50 figure now implies that business activity in the region is now in contraction.
Benchmarks on Wall Street reacted with a mixed start, while the FTSE 100 in London extended losses following the data, as markets shrugged off a surprise rebound in US consumer confidence and an improvement in American home prices this month.
Markets on the whole were on the cautious side today as investors awaited the outcomes of the Federal Reserve and European Central Bank (ECB) meetings this week.
The Fed is expected to maintain the current rate of it quantitative easing programme given weaker-than-forecast growth in the first quarter, while the ECB is predicted to reduce its key interest rate in an effort to ease the pressure on member nations.
Market Analyst Craig Erlam from Alpari said that a rate cut in Europe is already priced into markets. "What this means for Thursday is that if the ECB puts off cutting rates for another month, we could see a strong sell-off in response."
Markets gave a positive reaction to first-quarter results from banking giant Lloyds, with the stock rising sharply after profits came in slightly ahead of consensus estimates and the company reduced its full-year cost guidance. The stock jumped to a 52-week high of 57.21p in intraday trade, not far off the 61p price at which the government could break even it its 39 per cent stake in the lender is sold.
Sector peer RBS was in demand ahead of its interim management statement on Friday.
Oil major BP was also a high riser after replacement cost profits jumped from $4.8bn to $16.6bn in the first quarter, helped by proceeds from the disposal of its interest in the TNK-BP joint venture.
Costa owner Whitbread however was out of favour despite recording a double-digit increase in annual revenue, profit and the dividend in the face of adverse weather conditions.
Mining group Anglo American was lower after UBS reduced its target from 2,000p to 1,720p and retained a 'neutral' rating on the stock. Its subsidiary, Amplats, has agreed with the Department of Mineral Resources to extend their consultation on safety by 30 days to allow them more time to reach a conclusion.
Sector peers Polymetal and Randgold were also lower as they tracked a decline in commodity prices.
Centrica declined after Credit Suisse lowered its target from 325p to 320p and downgraded the stock to 'underperform'.
FTSE 250: Invensys boosted by upgrade
Invensys was given a lift by Societe Generale which upgraded the firm from 'hold' to 'buy', saying that the engineering and software company has an improved investment profile with substantial margin and M&A upside.
Meanwhile, platinum miner Lonmin was a heavy faller after reporting saying that it has had to shut down one of its furnaces due to an "incident" which will take 30-40 days to repair.
Heritage Oil disappointed after posting wider full year pre-tax losses from continuing operations for 2012, while NMC Health failed to impress despite posting an 11% year-on-year increase in first-quarter revenues to $139m.
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| FTSE 100 - Risers |
Royal Bank of Scotland Group (RBS) 306.30p +4.18%
BP (BP.) 466.40p +2.11%
Pearson (PSON) 1,171.00p +1.83%
ARM Holdings (ARM) 996.00p +1.74%
Lloyds Banking Group (LLOY) 54.33p +1.55%
Petrofac Ltd. (PFC) 1,350.00p +1.50%
Morrison (Wm) Supermarkets (MRW) 292.10p +1.28%
Croda International (CRDA) 2,478.00p +1.18%
Legal & General Group (LGEN) 169.50p +0.71%
Serco Group (SRP) 618.50p +0.65%
FTSE 100 - Fallers
Polymetal International (POLY) 695.50p -5.95%
Randgold Resources Ltd. (RRS) 5,060.00p -4.08%
Admiral Group (ADM) 1,281.00p -3.32%
Standard Life (SL.) 374.20p -2.93%
Wood Group (John) (WG.) 775.00p -2.76%
Anglo American (AAL) 1,565.00p -2.73%
Xstrata (XTA) 963.50p -2.64%
Glencore International (GLEN) 316.95p -2.48%
CRH (CRH) 1,382.00p -2.40%
Fresnillo (FRES) 1,152.00p -2.37%
FTSE 250 - Risers
Renishaw (RSW) 1,646.00p +5.65%
Afren (AFR) 134.10p +5.51%
Invensys (ISYS) 384.70p +5.46%
Jupiter Fund Management (JUP) 330.50p +2.99%
Spirax-Sarco Engineering (SPX) 2,623.00p +2.82%
Unite Group (UTG) 347.80p +2.63%
Alent (ALNT) 339.20p +2.51%
Victrex (VCT) 1,605.00p +2.36%
Savills (SVS) 582.00p +2.19%
Synthomer (SYNT) 200.90p +2.19%
FTSE 250 - Fallers
NMC Health (NMC) 310.00p -8.23%
Heritage Oil (HOIL) 160.00p -5.99%
Petropavlovsk (POG) 145.00p -5.84%
Lonmin (LMI) 269.00p -5.71%
Hochschild Mining (HOC) 248.50p -5.51%
Imagination Technologies Group (IMG) 425.40p -4.60%
Paragon Group Of Companies (PAG) 312.40p -4.38%
Grainger (GRI) 136.00p -4.23%
FirstGroup (FGP) 211.10p -4.09%
African Barrick Gold (ABG) 175.00p -3.95%
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|Europe Market Report|
| - US business activity declines |
- Eurozone unemployment increases
- Spain falls into deeper recession
FTSE-Mibtel 30: -0.90%
Ibex 35: -0.29%
Stoxx 600: -0.23%
A slump in US business activity and a rise in Eurozone unemployment pushed European stocks into the red Tuesday.
Business activity in the US shrank in April for the first time in more than three years, according to the MNI Chicago Report.
The report’s business barometer fell to 49, the lowest since September 2009, from 52.4 last month. A reading less than 50 signals a contraction.
In other disheartening news for the economy, Eurozone unemployment increased in March to 12.1% from February’s reading of 12%.
Inflation also eased, as shown by the April consumer price index (CPI) which jumped 1.2%. It was below the consensus estimate of 1.6%, a March reading of 1.7% and the European Central Bank’s (ECB) 2.0% target.
The figures will perhaps give the ECB another excuse to cut interest rates at its meeting Thursday.
Spain’s economy contractsSpain moved deeper into recession, according to first quarter gross domestic product (GDP)results.
The nation registered a 0.5% drop in the first three months of 2013, after falling 0.8% in the final quarter of last year. It is seventh straight quarter showing a contraction.
On a year-on-year basis, the contraction in GDP increased from 1.9% to 2.0%.
The country has continued to struggle from fiscal reform and record high levels of unemployment. It has been moving in and out of recession since 2008 but the government claims that the recovery will arrive next year.
Deutsche Bank tops the DAXDeutsche Bank topped Germany’s DAX index after posting an 18% increase in first quarter net earnings. Germany's largest bank reported net earnings of €1.65bn for the first quarter thanks to savings from cost cuts and 2% revenue growth to €9.4bn.
Lonmin retreated after the platinum producer halted production at its Number Two furnace at Marikana in northwestern South Africa following an unspecified incident.
UBS rallied as Switzerland’s largest bank reported first-quarter net income that beat market estimates.
AB InBev declined after the brewer said earnings fell during the first quarter on weak beer sales in Brazil and the US.
Other asset classes mixedThe euro/dollar rose by 0.54% to the 1.3170 dollar level.
Front month Brent crude futures fell by $1.605 at $102.170 on the ICE.
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|US Market Report|
| Mixed Economic Data Leads To Choppy Trading On Wall Street |
With traders digesting a mixed batch of economic data, stocks have shown a lack of direction over the course of the trading day on Tuesday. Uncertainty about the near-term outlook for the is also contributing to the choppy trading.
The major averages are currently turning in a mixed performance, with the Dow just below the unchanged line. While the Dow is down 3.31 points or less than a tenth of a percent at 14,815.44, the Nasdaq is up 12.42 points or 0.4 percent at 3,319.44 and the S&P 500 is up 1.74 points or 0.1 percent at 1,595.35.
The lackluster performance on Wall Street comes as traders weigh disappointing data on Chicago-area activity against a separate report showing a much bigger than expected rebound by consumer confidence.
Stocks moved to the downside in early trading due in part to the release of a report from the Institute for Supply Management - Chicago showing an unexpected contraction in Chicago-area business activity in the month of April.
The ISM Chicago said its business barometer fell to 49.0 in April from 52.4 in March, with a reading below 50 indicating a contraction in regional business activity. Economists had expected the index to come in unchanged.
With the unexpected decrease in April, the Chicago Business Barometer fell to its lowest level since September of 2009.
Chris Low, chief economist at FTN Financial, said, "The weakness in Chicago was a surprise in part because Chicago was stronger than other regional indices from January to March."
However, the negative sentiment was offset by the release of a separate report from the Conference Board showing a substantial rebound in consumer confidence in April.
The Conference Board said its consumer confidence index jumped to 68.1 in April from an upwardly revised 61.9 in March. Economists had expected the index to climb to 62.0 from the 59.7 originally reported for the previous month.
With the rebound, the consumer confidence index came in a tenth of a point higher than the reading for February, reaching its highest level since last November.
Lynn Franco, Director of Economic Indicators at the Conference Board, said, "Consumer Confidence improved in April, as consumers' expectations about the short-term economic outlook and their income prospects improved."
Among individual stocks, shares of Pfizer have come under pressure after the drug giant reported first quarter earnings growth but lowered its full-year profit forecast.
On the other hand, insurance giant Aetna is turning in a strong performance after reporting better than expected first quarter earnings and raising its full-year guidance.
While most of the major sectors are showing only modest moves in mid-day trading, considerable strength has emerged among networking stocks. Reflecting the strength in the networking sector, the NYSE Arca Networking Indexhas advanced by 1.7 percent.
Juniper Networks has helped to lead the networking sector higher, jumping by 4 percent, while Adtran and Alcatel-Lucent (ALU) are also posting strong gains.
Meanwhile, substantial weakness remains visible among gold stocks, as reflected by the 3.4 percent loss being posted by the NYSE Arca gold Bugs Index. Newmont Mining is posting a notable loss after reporting weaker than expected first quarter results.
Housing stocks have also come under pressure on the day, resulting in a 1 percent drop by the Philadelphia Housing Sector Index. The index is pulling back further off the one-month closing high that it set last Friday.
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| Broker tips: Lloyds, BP, Invensys|
Lloyds' first-quarter results were modestly ahead of consensus estimates, but Nomura has maintained its 'reduce' rating for the bank, saying that the strong share-price reaction on Tuesday morning was overdone.
Nomura thinks that Lloyds' cost guidance - to reduce total costs to £9.6bn this year, better than previous £9.8bn target - will likely drive headline upgrades to consensus estimate of 1-2% but this is driven by the sale of its stake in St James's Place relative to current expectations. The broker said that the "core cost of risk has not improved from the 2012 run rate".
Investec has kept its 'hold' rating for BP but has hailed a "very strong" first-quarter result from the oil giant.
"The statement refers to higher costs, lower production and a weaker downstream in Q2 so earnings upgrades may be more muted than the Q1 headline figures might suggest. Nevertheless, this is an encouraging start to the year for BP."
Societe Generale has upgraded its recommendation for Invensys from 'hold' to 'buy', saying that the engineering and software company has an improved investment profile with substantial margin and M&A upside.
The broker has raised its target for the stock from 330p to 415p. "In a take-out scenario, we estimate new Invensys could potentially be valued at 460p, around 30% upside to current levels