| ADVFN III | Evening Euro Markets Bulletin | ||
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Tuesday, 21 August 2012
| London Market Report | ||||||||||||||||
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| London close: Stimulus hopes drive gains Market Movers
- Miners lead the way higher on Tuesday - Central banks in China and Europe expected to act - Glencore-Xstrata merger at risk Hopes of central bank action in Europe and China boosted stocks today with the mining sector benefitting the most from increased risk appetite. Michael Hewson, the senior market analyst at CMC Markets UK, said this afternoon: "Markets continued their slow low volume move higher today on reports that Germany might be persuaded to grant some concessions to Greece. Meanwhile speculation that the ECB [European Central Bank] may well be minded to go against the Bundesbank in capping bond yields has also helped underpin equity markets. "It would appear that the prospect of further central bank intervention, no matter how unlikely, is continuing to drive what capital there is into equities as the preferred asset of choice," he said. The Daily Telegraph confirmed today that ECB technicians are examining plans to cap Spanish and Italian bond yields, among other options, despite the ECB denying those same rumours yesterday. Meanwhile, the People's Bank of China last night ramped up its reverse-repurchase operations, injecting 220bn yuan ($34.6bn) into the financial system. Meanwhile, state-run news agency Xinhua said that China is considering fresh stimulus for the second half of the year. In domestic news, UK public sector net borrowing in July was £600m, compared with a surplus of £2.8bn the year before. Economists had forecast a surplus of £2.2bn. FTSE 100: Glencore, Xstrata gain in spite of merger risks Glencore and Xstrata finished the day in the blue after a slow start despite hopes for a quick and easy merger fading fast. In response to Xstrata's shareholders demanding better a better offer, Glencore's CEO Ivan Glasenberg said that it "is not a must-do deal…it is a deal that we believe makes sense." The comments come after the release of Glencore's first-half results which saw the group report a less-than-expected 17% fall in adjusted EBITDA (earnings before interest, tax, depreciation and amortisation). Mining peers Fresnillo, Vedanta, Polymetal, ENRC, Anglo American and Antofagasta were making strong gains today on hopes that a stronger Chinese economy would boost the demand for commodities. Banking group Barclays was also a high riser after announcing that it is looking at combining the majority of its operations in Africa with its subsidiary Absa Group, in line with its strategy to operate as 'One Bank' across the continent. Lending peers RBS and Lloyds were also in demand. FTSE 250: Heritage rockets on Genel deal; Lonmin erases gains late on Heritage Oil, an independent upstream exploration and production company, delighted its investors by securing a $294m loan as part of an agreement to sell a 26% interest in the Miran Block in the Kurdistan Region of Iraq to Genel. The loan will be provided by Genel to Heritage on completion of the sale, easing worries over future funding. | ||||||||||||||||
| Europe Market Report | ||||||||
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| Europe close: Euro leaders aim for endgame Markets rise on growing hope for Europe - Copper price lifts miners - Europe's chocolate market hurts Lindt FTSE 100: +0.57%% Dax 30: +0.79% Stoxx 600: +0.52% Cac 40: +0.94% Ibex 35: +1% FTSE MIB: +2.4% Europe's main equity markets posted strong gains on Tuesday as Europe's leaders appeared to be heading towards a cohesive plan for easing the debt crisis. The head of the "Eurogroup" of EU finance ministers, Jean-Claude Juncker, is set to visit Greece tomorrow as speculation mounts that the country's lenders will agree to more concessions as long as the recently elected Greek government sticks to the main points of its aid-for-reform plan. It's thought Greece will ask for, and receive, a two year extension to allow it to implement reforms. French President Francois Hollande, and German Chancellor Angela Merkel are both due to meet Prime Minister Antonis Samaras this week to cement a deal. Further providing hope for investors was news of a successful sale of €4.5bn worth of Spanish government bonds at 12 and 18 month maturities, both at lower yields than recent auctions. Markets have generally been bullish since early August when the President of the European Central Bank, Mario Draghi, indicated the ECB would intervene directly in the secondary bond markets to reduce the yields on Spanish and Italian debt. COMPANIES The strongest sector on the Stoxx Europe 600 was basic resources, which gained 1.99% before the close as a rising copper price lifted mining stocks. Chocolate maker Lindt & Spruengli dropped 1.6% after saying sales within Europe were flat in the first half of the year. Dental implants giant, Straumann, fell 16% after missing analysts' estimates for first half earnings by over 10% and issuing pessimistic guidance for the rest of the year. OTHER MARKETS Futures contracts for a pound of copper gained 2.44% to hit $346.15 by the close. The euro gained 1% against the dollar by 16:50 to stand at $1.2470. |
| US Market Report |
| US open: Atlanta Fed warns of risks of excessively agressive policy -Talks between Apple and Samsung fall through -Atlanta Fed chief warns of excessivelu aggressive monetary policy US open: Dow Jones Industrial: 0.11% Nasdaq Comp.: 0.45% S&P 500: 0.32% The main US equity benchmarks have begun today´s session with slight gains as investors re-evaluate yesterday´s news-flow and reach the conclusion that the European Central Bank is still likely to act. Nonetheless, and as the President of the Federal Reserve Bank of Atlanta, Dennis Lockhart, is pointing out, there are also home-grown problems to watch out for. For him one such obstacle is that the central bank could over-do its hand when trying to compensate for an inert fiscal policy. Significantly, last minute talks between Apple and Samsung last night are said to have fallen through. Urban Outfitters is rocketing 17% higher after the release of better than expected profit figures, while Best Buy is plummeting 10% after its own results. Barns&Noble is moving 4.5% higher after unveiling a smaller than expected fiscal first quarter loss. Front month West Texas crude futures are now rising by 1.44 dollars to the 97.35 dollar per barrel mark on the NYMEX. |
| Broker Tips |
| Broker tips: Glencore, Wood Group, African Barrick Gold Commodities producer and marketer Glencore produced a 'big beat' in its first half, according to Jefferies, leading the broker to reiterate its 'buy' recommendation and 400p target for the stock. As for the proposed merger with Xstrata, Jefferies says that it still expects Glencore to bump up its offer from 2.8 to 3.0 Glencore shares per Xstrata share "but our conviction regarding a bump is weakening". "In the event that there is no bump and no deal, we would be less positive on the outlook for Glencore and Xstrata shares. We are much more positive on the outlook for the merged entity." Credit Suisse has reiterated its 'outperform' rating and 925p target for Wood Group, saying that the oil and gas services firm outdid its UK peers with its first-half results. "At our target the stock would trade at 15.0x [2013 earnings], a premium to the sector, which we believe is justified given the better balance sheet than history and strong organic growth," Credit Suisse said. Westhouse Securities has downgraded its recommendation for African Barrick Gold (ABG) from 'strong buy' to 'neutral' following the recent surge in the shares. The holding company of ABG announced last Thursday that it is in talks with China National Gold Group about the possibility of selling its stake in the London-listed miner to China's largest gold producer. "ABG is up 36.6% since our 'strong buy' recommendation on the 23rd of July; hence we are now moving our recommendation to 'neutral', despite recognising the potential upside from a bid for Barrick's holding," said Westhouse analyst Rob Broke. |
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