| Stimulus hopes drives gains after Fed minutes
Market Movers
techMARK 2,103.00 +0.26%
FTSE 100 5,792.89 +0.32%
FTSE 250 11,511.03 +0.15% Stocks bounced back after a sell-off yesterday as the details of the latest policy-rate setting meeting in the US showed that the Federal Reserve could embark upon more quantitative easing (QE) soon.
The minutes of the Federal Open Market Committee (FOMC) meeting said that "many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery"
Shavaz Dhalla, a financial trader from Spreadex, said this morning: "Although equities have not roared with optimism this morning, as many of the gains are likely to be already factored in over the last few months, the hope that further stimulus for the struggling US economy is providing a beacon of hope for supporters of further quantitative easing.
"Investors are still worried concerning the extent to which policy makers will allow the US economy to deteriorate before they finally step back in with another round of quantitative easing. Time will only tell whether the current approach proves to be too little, too late," he said.
In Eurozone news, Eurogroup President Jean-Claude Juncker made clear that “the ball is in Greece’s court” following his meeting with the country's Prime Minister Antonis Samaras. While the Greek PM requested a two-year extension on the deadline to implement austerity measures, the head of the Eurozone's finance ministers said that the Troika’s visit to Athens in September will give the Hellenic Republic “one last chance” to meet its commitments.
Meanwhile, the HSBC Chinese manufacturing sector purchasing managers' index for the month of September, compiled by Markit, has come in at 47.8 after a reading of 49.3 for the month before, apparently defying expectations for a stabilisation in the country's economy. The latest figure marks a nine-month low. FTSE 100: Miners up on stimulus hopes, shrug off Chinese data
Mining stocks ignored the gloomy economic figures from China early on to making strong gains on the hopes that policy-makers in the US will boost the world's largest economy. Evraz, Randgold, Fresnillo, Antofagasta and Vedanta jumped early on. However, Kazakhmys bucked trend after seeing both revenues and earnings drop in the first half. Cash costs increased significantly during the period, leading the group to increase its cash cost guidance for the full year. Engineering group IMI fell after saying that the first-half revenue growth of 6% would likely slow in the second half mainly due to the weakening economic conditions in Europe. Sales and underlying earnings came in slightly ahead of market expectations at drinks brands leviathan Diageo, helping shares higher early on.
Newsagent chain WH Smith jumped after saying it expects results for the year to the end of August will be at the top end of market expectations as the group's Travel business improves margins.
AZ Electronic Materials, which produces chemicals for the electronics market, dropped after seeing profits fall in the first half.
FTSE 100 - Risers
Fresnillo (FRES) 1,593.00p +4.39% Randgold Resources Ltd. (RRS) 6,385.00p +3.91% Evraz (EVR) 264.80p +3.64% Antofagasta (ANTO) 1,152.00p +2.86% Vedanta Resources (VED) 951.50p +2.15% Xstrata (XTA) 931.40p +1.61% Tullow Oil (TLW) 1,401.00p +1.60% Barclays (BARC) 196.95p +1.44% Wolseley (WOS) 2,539.00p +1.32% BHP Billiton (BLT) 1,972.50p +1.31% FTSE 100 - Fallers
Kazakhmys (KAZ) 696.50p -1.14% SABMiller (SAB) 2,753.50p -1.13% IMI (IMI) 875.50p -0.91% SSE (SSE) 1,344.00p -0.74% National Grid (NG.) 688.50p -0.72% Land Securities Group (LAND) 799.50p -0.68% Next (NXT) 3,585.00p -0.64% Centrica (CNA) 324.20p -0.55% United Utilities Group (UU.) 711.00p -0.49% Rolls-Royce Holdings (RR.) 836.00p -0.42% FTSE 250 - Risers
Aquarius Platinum Ltd. (AQP) 41.10p +5.38% Perform Group (PER) 388.10p +4.89% WH Smith (SMWH) 608.00p +4.47% Hansteen Holdings (HSTN) 77.30p +3.34% Soco International (SIA) 345.20p +2.74% SIG (SHI) 96.50p +2.50% Man Group (EMG) 78.50p +2.21% Hochschild Mining (HOC) 439.00p +2.12% Talvivaara Mining Comany (TALV) 143.10p +2.07% Ferrexpo (FXPO) 193.00p +2.06% FTSE 250 - Fallers
Petropavlovsk (POG) 418.40p -10.77% AZ Electronic Materials SA (DI) (AZEM) 293.10p -3.59% Ruspetro (RPO) 145.50p -3.00% Heritage Oil (HOIL) 202.40p -2.69% NMC Health (NMC) 191.50p -2.49% Chemring Group (CHG) 371.50p -1.62% Redrow (RDW) 141.00p -1.54% Shanks Group (SKS) 86.65p -1.53% Home Retail Group (HOME) 93.95p -1.21% Spirax-Sarco Engineering (SPX) 1,955.00p -1.11%
| European broker round-up |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | AHOLD: Baader Bank reiterates hold, price target of €10.00. BANK OF IRELAND: Alphavalue upgrades to REDUCE from sell, price target of €0.10. FIELMANN: Baader Bank reiterates sell, price target of €65.00. FINMECCANICA: Alphavalue downgrades to ADD from buy, price target of €4.40. IBERDROLA: HSBC reiterates overweight, price target of €4.80 (vs. €4.39). JULIUS BAER: Alphavalue downgrades to REDUCE from buy, price target of 34 Swiss francs (vs. 39.7ChF). UK Event Calendar
INTERIMS
Aegis Group, Alpha UK Multi Property Trust, AZ Electronic Materials SA (DI), Camellia, Delcam, Genel Energy, IMI, Kazakhmys, New World Resources A Shares, Petropavlovsk, Premier Oil, Salamander Energy, Signet Jewelers Ltd., Sportech, STV Group
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Bloomberg Consumer Confidence (US) (14:45)
Consumer Confidence Indicator (EU) (10:00)
Continuing Claims (US) (13:30)
House Price Index (US) (15:00)
Initial Jobless Claims (US) (13:30)
New Homes Sales (US) (15:00)
Q2
New World Resources A Shares, Signet Jewelers Ltd., Wentworth Resources Ltd (CDI)
Q4
Haynes Publishing Group
GMS
Norseman Gold
FINALS
Diageo, Haynes Publishing Group
AGMS
Aberforth Geared Income Trust, Ten Alps
UK ECONOMIC ANNOUNCEMENTS
BBA Mortgage Lending Figures (09:30)
CBI Distributive Trades Surveys (11:00) |
| US Market Report | | Stocks Close Mixed After Seeing Early Weakness
The major averages ended the session on opposite sides of the unchanged line, with the Dow posting a modest loss. While the Dow fell 30.82 points or 0.2 percent to 13,172.76, the Nasdaq rose 6.41 points or 0.2 percent to 3,073.67 and the S&P 500 edged up 0.32 points or less than 0.1 percent to 1,413.49.
The early weakness on Wall Street was partly due to some troubling economic news from overseas, with a report from Japan showing that the country swung to a trade deficit in July.
The report from the Japanese Finance Ministry showed a trade deficit of 517.4 billion yen in July compared to a trade surplus of 60.3 billion yen in June. Japanese exports fell 8.1 percent year-over-year, while imports rose 2.1 percent.
A negative reaction to quarterly results from Dell (DELL) also weighed on the markets, with the PC giant falling by 5.4 percent.
After the close of trading on Tuesday, Dell reported second quarter adjusted earnings that exceeded analyst estimates but on weaker than expected sales.
The company also lowered its full year earnings outlook and forecast a 2 to 5 percent sequential drop in third quarter revenues.
Selling pressure was relatively subdued, however, with an upbeat report on existing home sales helping to limit the downside for the markets.
The report from the National Association of Realtors said existing home sales rose 2.3 percent to an annual rate of 4.47 million in July from 4.37 million in June.
Stocks subsequently regained some ground following the release of the minutes of the Federal Reserve's latest monetary policy meeting, which suggested that the central bank is losing patience with the pace of the fragile U.S. economic recovery
Many members of the Federal Reserve said additional monetary policy accommodation is likely warranted unless the economy improves substantially, potentially opening the door for another round of quantitative easing measures at the next meeting in September.
Meanwhile, shares of Sunrise Senior Living (SRZ) moved sharply higher after the senior living services provider agreed to be acquired by Health Care REIT (HCN) for about $845 million in cash.
The deal values Sunrise Senior Living at $14.50 per share, representing a 62.4 percent premium to its closing price on Tuesday. Shares of Sunrise jumped nearly 60 percent on the news.
Sector News
Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.
Nonetheless, gold stocks showed a strong move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 2.2 percent. The strength among gold stocks came as the price of the precious metal ended the session lower but moved higher in electronic trading.
Housing stocks also saw considerable strength on the heels of the existing home sales report, with the Philadelphia Housing Sector Index advancing by 2 percent. Toll Brothers (TOL) posted a strong gain after reporting fiscal third quarter earnings and revenues that exceeded analyst estimates.
While significant strength was also visible among health insurance stocks, telecom, tobacco, and defense stocks posted notable losses on the day. |
| Wednesday newspaper round-up | | Greece, Gold miners, S.Africa Greece has “one last chance” to meet its bail-out conditions, according to Jean Claude Juncker in comments that crushed hopes for an imminent change of strategy for Athens and the Eurozone. The head of the eurogroup emerged from a highly-anticipated meeting with Antonis Samaras, Greece’s prime minister, only to signal that there would be no leniency for Greece from Brussels. “The ball is in the Greeks’ court”, said Mr Juncker, arguing that Greece’s real problem was a “credibility crisis” which could be resolved if it stuck to the bail-out terms and implemented all the planned reforms. Hours earlier Mr Samaras had pleaded for a “little room to breathe” in the form of an extension of the austerity deadlines set by Greece’s bail-out, The Telegraph reports.
A bad week for the Chancellor got even worse yesterday when the economist he appointed to the Office for Budget Responsibility warned of a straitjacket of “self-defeating” cuts. Only days after it was revealed that the public finances plunged unexpectedly into the red last month and a poll found that confidence in the Chancellor had hit at a record low, Kate Barker urged George Osborne to rethink his approach to deficit reduction. Ms Barker, a non-executive member of the OBR, argues that Mr Osborne’s insistence that there should be no deviation from the fiscal plan may be making it more difficult to respond to economic events. “There is a danger of self-defeating austerity, if some room for manoeuvre cannot be developed,” she said. “There is a risk that the fiscal mandate, rather than a useful discipline, will become a straitjacket.” Ms Barker also criticised government plans to create a Financial Policy Committee at the Bank of England and said it was delegating too much power to Threadneadle Street, The Times says.
Thousands of South African gold miners are attempting to launch a multi-million pound lawsuit against leading companies for alleged negligence that resulted in them contracting lung diseases. Lawyers say AngloGold Ashanti, Gold Fields and Harmony could face record damages if the court recognises their case as a class action. Charles Abrahams, a lawyer representing around 3,000 mostly former miners, filed papers at a regional court in Johannesburg on Tuesday. "If the certification is granted we anticipate that this may be the largest damages suit in the history of this country, in the tens of billions of rand possibly," he said, The Guardian reports.
Labour unrest engulfing the South African platinum industry spread on Wednesday, prompting fears of a broader mining crisis in one of the main commodity-producing countries. Platinum and gold prices continued to soar as investors braced for supply disruptions after 44 people died during strikes at a pit owned by London-listed Lonmin.Anglo American Platinum, the industry leader with about 45% of global supply, said on Wednesday that a group of workers had bypassed their own unions and made a broad range of demands, including on pay, at the end of last week. Miners at Royal Bafonkeng Platinum, a black-owned, mid-tier miner, also demanded pay increases and blocked colleagues from going to work, The Financial Times explains.
Britain’s second largest lender has dealt a blow to government plans to keep borrowing costs low by raising a key mortgage rate. Up to half a million homeowners with Santander are set to see their repayments jump by an average of £300 a year from October. The bank blamed higher costs for the decision but the move is sure to irritate ministers as they desperately seek plans to boost the flagging economy. The increase comes only a month after the Treasury and Bank of England sought to boost lending and lower borrowing costs by offering banks £80bn of cheap funding. Justin Urquhart Stewart, of Seven Investment Management, the wealth manager, said: “Santander’s decision flies straight in the wind of what the Government and the Bank of England are trying to achieve with the Funding for Lending Scheme, which is intended to lower borrowing costs and make it easier to get credit,” The Times reports.
The Treasury is facing criticism for its plans to relax tax rules for multinational companies. Changes going through Parliament “will incentivise multinational corporations to shift profits into tax havens”, according to MPs on the International Development Select Committee. The move will cost the Exchequer £1bn in revenue, and is being done to make Britain “more competitive”. But it is likely to cause embarrassment for the coalition, because the Liberal Democrats made tackling tax evasion and avoidance a priority. The 2012 Finance Bill is changing the rules governing Controlled Foreign Companies, ending the requirement for UK-owned corporations that report profits in jurisdictions with corporation tax lower than 23% to “make up the difference” to HM Revenue and Customs. |
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