| Stocks rise on hopes for the US economy
Market Movers
techMARK 2,066.71 +1.13%
FTSE 100 5,685.77 +1.01%
FTSE 250 11,085.68 +0.60% After a tentative start, stocks rallied on Wednesday afternoon on the back of some upbeat comments from Ben Bernanke, the Chairman of the US Federal Reserve. Meanwhile, markets gave a rather muted reaction to the minutes of the latest policy-making meeting in the UK.
Bernanke, speaking on the second day of the Fed’s semi-annual policy report to Congress, said that he does not expect the US economy to slip back into recession. European markets were initially dampened on Tuesday after Bernanke failed to hint at injecting extra stimulus in the near term but said that the central bank was ready to act.
Seven out of the nine policy makers at the Bank of England (BoE) voted in favour of increasing the asset purchase programme by £50bn to £375bn at the last meeting, while the Monetary Policy Committee (MPC) were unanimous in their decision to maintain the Bank Rate at 0.5%. However, the MPC said that new initiatives, such as the BoE's Funding for Lending Scheme (FLS), which offers cheap funding to banks to encourage lending, could make a case for an interest-rate cut in the future.
Analyst Philip Shaw from Investec said: “Overall we suspect that QE will remain the authorities’ principal stimulus weapon and that the MPC will look through the volatility of the economic data (very weak in Q2, stronger in Q3) and sanction another £50bn of asset purchases later during the year."
In other news, UK unemployment fell by 65,000 to 2.58m in the three months to May, according to the Office for National Statistics. The jobless rate dropped from 8.3% to 8.1%, better than the consensus estimate of 8.2%. Nevertheless, the number of people claiming jobless benefits rose by more than expected. FTSE 100: Tullow pleases with Wawa-1 well update Oil and gas giant Tullow made gains after finding oil and gas-condensate at its Wawa-1 well offshore Ghana, likely to reassure shareholders who were disappointed on Monday after the firm plugged and abandoned a well in Guyana due to safety concerns. Credit Suisse raised its target price on the stock to and maintained its ‘outperform’ rating on the shares.
Fund managers Ashmore and Schroders were high risers of the day after Goldman Sachs upgraded its ratings on the stocks to 'buy' and 'conviction buy', respectively. In contrast, Scottish engineering firm Weir was one of the weakest performers after Nomura initiated coverage with a 'reduce' recommendation and a price target of 1,350p, some way below the current share price.
Publisher Reed Elsevier was friendless after the European Commission lent its weight to calls for free access to publicly funded research.
Real estate group Land Securities fell despite saying that it has seen "good momentum" on lettings across all schemes in the first quarter. Land Secs and sector peer Hammerson were being pressured lower after Barclays Capital downgraded the stocks to 'equal weight'.
Security solutions group G4S was performing well as it attempts to claw back some of the losses it has incurred over the last week - including today's gain, the stock is still down nearly 15% on last Wednesday. The group said on Monday that it will take a £35-50m loss on its Olympics contract. FTSE 250: Homeserve surges on M&A speculation Homeserve, the troubled emergency home repairs company , jumped despite denying it is in talks about a possible takeover. Wireless technology and computer chip company CSR was in the red, pulling back after gaining over 30% the day before as it announced the sale of its handset connectivity technology business to Samsung. UBS downgraded the stock from 'buy' to 'neutral' this morning.
FTSE 100 - Risers
Hargreaves Lansdown (HL.) 575.50p +4.16%
Aggreko (AGK) 1,995.00p +3.48%
Tullow Oil (TLW) 1,428.00p +3.33%
Johnson Matthey (JMAT) 2,168.00p +3.09%
Burberry Group (BRBY) 1,232.00p +3.01%
Antofagasta (ANTO) 1,072.00p +2.68%
Ashmore Group (ASHM) 330.30p +2.58%
InterContinental Hotels Group (IHG) 1,554.00p +2.57%
Capital Shopping Centres Group (CSCG) 335.30p +2.41%
Standard Chartered (STAN) 1,485.00p +2.38%
FTSE 100 - Fallers
Reed Elsevier (REL) 524.50p -1.59%
Land Securities Group (LAND) 775.00p -0.77%
Weir Group (WEIR) 1,491.00p -0.73%
Hammerson (HMSO) 464.00p -0.64%
Imperial Tobacco Group (IMT) 2,534.00p -0.43%
Eurasian Natural Resources Corp. (ENRC) 386.00p -0.36%
HSBC Holdings (HSBA) 545.70p -0.31%
Tate & Lyle (TATE) 669.00p -0.30%
United Utilities Group (UU.) 696.00p -0.29%
Lloyds Banking Group (LLOY) 29.77p -0.28%
FTSE 250 - Risers
Homeserve (HSV) 187.00p +11.98%
Ruspetro (RPO) 139.00p +6.92%
Kenmare Resources (KMR) 33.66p +6.62%
Yule Catto & Co (YULC) 138.50p +6.13%
Imagination Technologies Group (IMG) 468.70p +5.68%
Elementis (ELM) 187.60p +4.80%
Hays (HAS) 69.50p +4.67%
Booker Group (BOK) 89.90p +4.23%
NMC Health (NMC) 200.00p +3.63%
Inchcape (INCH) 370.50p +3.20%
FTSE 250 - Fallers
Talvivaara Mining Company (TALV) 124.30p -5.19%
Morgan Crucible Co (MGCR) 260.30p -3.31%
Petropavlovsk (POG) 415.60p -3.01%
Melrose (MRO) 218.70p -2.80%
Dixons Retail (DXNS) 15.56p -2.57%
CSR (CSR) 284.50p -2.57%
Dechra Pharmaceuticals (DPH) 484.00p -2.32%
COLT Group SA (COLT) 121.00p -2.26%
Daejan Holdings (DJAN) 2,800.00p -2.13%
Howden Joinery Group (HWDN) 127.20p -2.08%
| Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | | European Markets Bounced Back On Earnings Strength Wednesday
The European markets finished in positive territory on Wednesday, rebounding from yesterday's sluggish performance. Tuesday's disappointment over Ben Bernanke's testimony before the Senate was replaced by excitement over some strong earnings results. However, investors continued to watch the U.S Federal Reserve Chairman's testimony on Wednesday, hoping for some hint regarding plans for a third round of quantitative easing. The unexpected dip in the U.K.'s unemployment rate was another welcome development. The European markets received further support in the afternoon, from the positive performance of the U.S. stock markets.
Federal Reserve Chairman Ben Bernanke warned lawmakers they may push the U.S. economy into recession unless they back away from an impending "fiscal cliff." The fragile recovery, already showing obvious signs of weakness, will be severely damaged by spending cuts and tax increases that will automatically kick in at the start of 2013, the nation's top central banker told the House Financial Services panel Wednesday morning.
Congress must act now to restore confidence amid a worrisome drop in business spending and new hiring, according to the Fed chief. Bernanke assured that the Fed has further easing measures at its disposal, but cautioned that any additional support would be wasted unless Congress can reach a compromise.
Germany sold its 2-year treasury notes at negative yield for the first time on Wednesday as investors continued their flight to safety, reports said citing Bundesbank data. The country raised EUR 4.173 billion from the sale of its June 2014 treasury notes, also known as Schatz. The target set for the auction was EUR 5 billion. The yield on the debt was -0.06 percent, down from 0.10 percent in the previous sale on June 20.
Bank of England policymakers raised the size of economic stimulus by GBP 50 billion this month through a split vote as Spencer Dale and Ben Broadbent voted to retain it at GBP 325 billion, the minutes of the meeting revealed Wednesday.
At the meeting held on July 4 and 5, seven members of the Monetary Policy Committee including Governor Mervyn King sought an increase in quantitative easing to GBP 375 billion. All nine of the members voted to hold the interest rate at a record low 0.50 percent.
European Central Bank Executive Board member Joerg Asmussen said Tuesday that a deeper economic union may require further sharing of sovereignty. "It means endowing the euro area with the power to effectively prevent and cor¬rect unsustainable policies in every euro area Member State," he said during a policy briefing at the European Policy Centre, Brussels.
This would imply that a euro area authority would have compe¬tence to limit countries' ability to issue debt and have intervention rights into national budgets, and to compel Member States to cor¬rect their policies, be that in the fiscal, struc¬tural and financial fields, he added.
The French economy can grow at least 1 percent next year if the government sticks to deficit reduction measures and reforms, European Central Bank Governing Council member Christian Noyer said in an interview on Wednesday.
There should be a gradual recovery in the second half of this year, which could help the economy to surpass the IMF's estimate of 0.8 percent growth in 2013, Noyer, who heads Bank of France, told Europe 1 radio.
Spanish banks' bad loans increased to 8.95 percent of total lending in May, the Bank of Spain reported Wednesday. The bad-loan ratio rose from 8.7 percent in April. Bad loans rose to EUR 155.84 billion in May, the highest since April 1994.
Portuguese recession could prove more protracted than currently envisaged, though the government has implemented the fiscal reforms as planned, the International Monetary Fund has warned.
"Export growth has been a bright spot, offsetting weaker domestic demand conditions and supporting output. But if conditions in the euro area weaken further, this would affect the growth outlook," the fund said in a report on Tuesday.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 1.36 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 1.04 percent.
The DAX of Germany climbed by 1.62 percent and the CAC 40 of France gained 1.84 percent. The FTSE 100 of the U.K. rose by 0.92 percent and the SMI of Switzerland finished up by 1.02 percent.
In Frankfurt, shares of Puma dropped by 4.90 percent. The company said it expects a decline in profits for the first half of the year due to a slowdown of business, particularly in Europe.
In Paris, Alcatel-Lucent fell by 0.88 percent, extending Tuesday's steep slide after issuing a profit warning.
Accor SA closed higher by 0.72 percent. The French hotel group announced a decline in revenues for the second quarter, hurt mainly by changes in scope of consolidation. On a like-for-like basis, the company reported a 3.1 percent rise in revenues.
In London, BHP Billiton increased by 1.82 percent. The mining giant reported a 15 percent year-over-year increase in iron ore production for the fourth quarter, and 8 percent growth from the previous third quarter.
Fresnillo gained 1.49 percent, after reporting gold production results for the second quarter.
Ashmore Group finished higher by 2.73 percent. Goldman Sachs upgraded its rating on the stock to "Buy" from "Neutral."
Shares of Credit Suisse rose by 4.00 percent in Zurich, after the investment bank unveiled plans to boost its capital in preparation for Basel III regulatory requirements.
| US Market Report | | Wall Street Continues To Benefit From Rally By Tech Stocks
Stocks have moved notably higher over the course of the trading day on Wednesday, extending the upward move seen in the previous session. The markets are benefiting from considerable strength that has emerged among technology stocks.
The major averages are all in positive territory, although the tech-heavy Nasdaq is outperforming its counterparts. While the Nasdaq is up 33.25 points or 1.1 percent at 2,943.29, the Dow is up 76.03 points or 0.6 percent at 12,881.57 and the S&P 500 is up 7.77 points or 0.6 percent at 1,371.44.
Much of the strength that has emerged on Wall Street stems from the rally by tech stocks, which have moved sharply higher despite disappointing guidance from semiconductor giant Intel (INTC).
While Intel reported better than expected second quarter earnings after the close of trading on Tuesday, the company also reported weaker than expected revenues and lowered its full year revenue growth outlook. Nonetheless, shares of Intel have risen by 3.1 percent.
Tech stocks may be benefiting from bargain hunting following recent weakness in the sector, with the gain by Intel extending a recovery from the six-month closing low it set last Thursday.
Buying interest may also have been generated by a report released by the Commerce Department before the start of trading showing a bigger than expected rebound in housing starts in the month of June.
The report showed that housing starts jumped 6.9 percent to an annual rate of 760,000 in June from the revised May estimate of 711,000. Economists had expected housing starts to climb to 745,000 from the 708,000 originally reported for the previous month.
On the other hand, building permits, an indicator of future housing demand, fell by 3.7 percent to an annual rate of 755,000 in June from the revised May rate of 784,000.
Traders are also keeping an eye on Federal Reserve Chairman Ben Bernanke's second day of testimony on Capitol Hill, with the Fed Chief facing questions from the House Financial Services Committee.
Bernanke's prepared remarks were unchanged from those he delivered to the Senate Banking Committee on Tuesday.
Sector News
While significant strength is visible throughout the tech sector, semiconductor stocks are posting particularly strong gains. The Philadelphia Semiconductor Index has surged up by 3.4 percent, bouncing off a seven-month closing low.
NXP Semiconductors (NXPI), Nvidia (NVDA), and Cree (CREE) are turning in some of the semiconductor sector's best performances.
Networking and computer hardware stocks are also seeing considerable strength, with the NYSE Arca Networking Index and the NYSE Arca Computer Hardware Index advancing by 3 percent and 2.9 percent, respectively.
Outside of the tech sector, health insurance stocks have shown a strong move to the upside on the day, driving the Morgan Stanley Healthcare Payor Index up by 1.7 percent. Defense, trucking, and oil service stocks are also posting notable gains.
Meanwhile, gold stocks have come under pressure amid a decrease by the price of the precious metal. With gold for August delivery sliding $10.90 to $1,578.60 the NYSE Arca Gold Bugs Index is down by 1.1 percent. |
| Wednesday newspaper round-up: HSBC, China, Fed | | Credit Suisse ups Tullow target after Wawa discovery While Tullow Oil’s Wawa-1 exploration well offshore Ghana was smaller than expected, Credit Suisse has raised its target price on the stock from 1,803p to 1,796p. Tullow announced on Wednesday morning that it had made a discovery at Wawa-1, after the well encountered 13m of net oil pay with samples showing good quality oil (33-44 API) and 20m of gas-condensate in Turonian-aged reservoirs. Credit Suisse says that the discovery is smaller and more gassy than pre-drill estimates and has lowered its recoverable resource estimate to 60m barrels of oil equivalents (boe) from 150m boe. However, the ‘de-risking’ of Wawa adds seven pence per share to the broker’s risked net asset value estimate. The broker also said that today’s news is “helpful” to the TEN complex: “the discovery is a separate and distinct accumulation from the TEN complex - 10km north of Enyenra-3A – and tested the previously undrilled, updip portion of the license. “While the Plan of Development (PoD) for the TEN complex is likely already finalised for submission or already submitted, we think the TEN development has been designed to have capacity for tie-ins. This is how we expect Wawa to be treated.” Credit Suisse says that the TEN complex is a candidate for a partial farm-out. Nevertheless, the group has not said that it is actively seeking to farm-out TEN; “it has funds to develop it and with that it will be a better seller, in our view, if it chooses the part of a partial sale,” the broker said. “This strategy is important, in our view, to keep the gearing to the drill-bit high (and unlock value earlier) as typically oil companies tend to underperform during the development phase.” Credit Suisse has maintained its ‘outperform’ rating on the stock. By 15:41, shares were trading 1.65% higher at 1,812.5p. |
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