Footsie jumps to six-month high on QE3
Market Movers
techMARK 2,145.18 +0.44%
FTSE 100 5,915.55 +1.64%
FTSE 250 12,116.12 +2.28% Massive gains in the mining sector lifted the FTSE 100 to a six-month high on Friday as markets reacted to the Federal Reserve announcement of further economic stimulus.
The Footsie closed at 5,916 today; the last time the index finished higher was on March 19th when it reached 5,961.
“Financial markets on both sides of the Atlantic have posted bulky gains today, buoyed by the Federal Reserve’s QE3 response announced yesterday,” said market strategist Ishaq Siddiqi from ETX Capital.
The Fed announced last night that it will launch its third round of quantitative easing, or QE3, by purchasing mortgage-backed securities at a pace of $40bn a month “to support a stronger economic recovery” and make sure that inflation stayed close to its target. It will also continue its Operation Twist programme to extend the maturity of its holdings.
“This is an ambitious response by the Fed and certainly a step in the right direction as it differs from the first and second QE programmes; however it remains to be seen if the plan is successful and potentially causes some headaches down the road. However, what is clear to markets is that the Fed is ready to support the US no matter what, just like the ECB pledged to Europe, and the commitment here by both central banks is the biggest driver behind the pickup in sentiment,” Siddiqi said.
In other news, the European Central Bank (ECB) has denied a report in Het Financieele Dagblad that it and the International Monetary Fund (IMF) are negotiating a €300bn bailout for Spain. The newspaper cited sources close to the talks. FTSE 100: Miners rocket on Fed plan
The top 10 risers list on the FTSE 100 was dominated by the mining sector this afternoon as the demand outlook improved after the Fed announcement: Kazakhmys, Vedanta and Evraz were all 13% higher; while ENRC, Fresnillo, Anglo American, Xstrata, Antofagasta, Glencore and Randgold were making gains of between 6% and 11%.
Analyst Patrick Jones from Nomura said this morning: "The US Federal Reserve’s announcement of further quantitative easing could provide support for commodity prices and the mining sector. During the 2010 QE2 rally, the copper spot price rose by ~50%, while copper equities doubled on average." The broker said it continues to favour higher quality copper miners over their higher beta peers.
Rio Tinto this morning welcomed Australia's decision to re-examine allowing third parties on a rail network in the Pilbara region which the miner believes could seriously affect its operations.
Royal Bank of Scotland (RBS), Barclays and Lloyds were also making decent gains. RBS announced today that it is to launch an initial public offering (IPO) of its Direct Line Insurance Group, completing one of the conditions of its £45.5bn bailout from the government in late 2008.
InterContinental Hotels shareholders celebrated the news of the hotel group's special division, which will be 108.4p per share. The Holiday Inns group announced on August 7th that it planned to return $0.5bn of funds to shareholders via a special dividend tied to a share consolidation, plus another $0.5bn through a share buy-back programme, and it has now made good on that pledge.
Broadband and satellite TV group BSkyB was in the red after BT Group announced on Wednesday a £152m deal for exclusive rights to show Premiership Rugby, stealing the contract from Sky from the 2013-14 season onwards. FTSE 250: Chemring, Wetherspoons gains after updates
Defence contractor Chemring jumped after pushing back the deadline for The Carlyle Group to make an offer, after not receiving word the US asset management group.
Pubs group JD Wetherspoon was in demand after its new financial year has got off to a flying
start, helped by a strong performance during the Olympic and Paralympic Games.
Second-tier miners were following their blue-chip peers higher, with Aquarius, Ferrexpo, Petropavlovsk, Fenner, Hochschild, New World Resources and Talvivaara on the up.
FTSE 100 - Risers
Kazakhmys (KAZ) 773.00p +13.68%
Vedanta Resources (VED) 1,090.00p +13.36%
Evraz (EVR) 293.70p +13.22%
Eurasian Natural Resources Corp. (ENRC) 363.20p +10.90%
Fresnillo (FRES) 1,870.00p +9.81%
Anglo American (AAL) 2,084.00p +9.17%
Antofagasta (ANTO) 1,334.00p +7.84%
Randgold Resources Ltd. (RRS) 7,420.00p +7.38%
Glencore International (GLEN) 378.85p +7.23%
Polymetal International (POLY) 1,081.00p +7.03%
FTSE 100 - Fallers
British Sky Broadcasting Group (BSY) 720.00p -3.23%
Reckitt Benckiser Group (RB.) 3,572.00p -1.71%
BT Group (BT.A) 233.00p -1.60%
GlaxoSmithKline (GSK) 1,417.50p -1.53%
Associated British Foods (ABF) 1,275.00p -0.93%
Vodafone Group (VOD) 175.85p -0.85%
British American Tobacco (BATS) 3,160.50p -0.68%
AstraZeneca (AZN) 2,893.00p -0.67%
Intertek Group (ITRK) 2,718.00p -0.40%
Diageo (DGE) 1,683.00p -0.38%
FTSE 250 - Risers
Aquarius Platinum Ltd. (AQP) 48.80p +18.73%
Ferrexpo (FXPO) 225.00p +14.80%
Essar Energy (ESSR) 131.50p +14.65%
Petropavlovsk (POG) 433.90p +14.64%
Fenner (FENR) 419.10p +9.86%
Hochschild Mining (HOC) 490.70p +9.04%
New World Resources A Shares (NWR) 313.00p +8.08%
Talvivaara Mining Company (TALV) 169.00p +7.78%
Man Group (EMG) 88.50p +7.66%
Centamin (DI) (CEY) 89.70p +7.43%
FTSE 250 - Fallers
Dunelm Group (DNLM) 640.50p -2.81%
Domino Printing Sciences (DNO) 554.50p -2.80%
Dialight (DIA) 1,184.00p -2.55%
Ruspetro (RPO) 112.10p -2.01%
Renishaw (RSW) 1,633.00p -1.98%
Mitchells & Butlers (MAB) 285.00p -1.49%
UBM (UBM) 710.50p -0.98%
TalkTalk Telecom Group (TALK) 187.10p -0.74%
RPS Group (RPS) 253.00p -0.71%
Computacenter (CCC) 396.70p -0.60%
| European broker round-up |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | European Markets Finished Solidly Higher After Fed Announced QE3
The European markets rallied strongly on Friday, after the U.S. Federal Reserve came through with a third round of quantitative easing. The further economic stimulus had been expected and provided the boost that investors had been hoping for. There were also a number of better than expected economic reports released by the United States in the afternoon. Shares of banks, miners and automakers turned in strong performances on Friday.
The Federal Reserve took drastic new steps to stimulate the sluggish U.S. economy on Thursday, announcing plans to buy $40 billion of agency mortgage-backed securities each month, starting Friday.
In addition to embarking on a third round of quantitative easing, the Fed also extended its vow to keep interest rates at rock-bottom rates to mid-2015. Policy makers also decided to keep in place the Operation Twist program that swaps short-term bonds for longer-term assets.
The European Central Bank's bond-buying plan has lifted confidence in euro, ECB chief told German daily Sueddeutsche Zeitung. President Mario Draghi said it has already shown positive results. Fund managers are bringing back their money into Europe, which is good for the Eurozone economy.
The International Monetary Fund and the European Central Bank have denied a newspaper report that suggested they are in talks over a EUR 300 billion bailout for Spain.
Friday, Dutch daily Her Financieele Dagblad reported without naming any sources that the two institutions were in deep negotiations regarding such a deal. The rescue would allow the ECB to buy Spanish bonds when the country's borrowings costs surge.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 1.81 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.60 percent.
The DAX of Germany climbed by 1.39 percent and the CAC 40 of France finished up by 2.27 percent. The FTSE 100 of the U.K. rose by 1.64 percent and the SMI of Switzerland gained 0.71 percent.
In Frankfurt, EON fell by 0.38 percent. Berenberg lowered its rating on the stock. Fraport was downgraded to "Hold" from "Buy" by Commerzbank. The stock finished up by 0.09 percent.
Commerzbank rose by 2.84 percent and Deutsche Bank advanced by 5.04 percent. UBS downgraded Deutsche Bank to "Neutral" from "Buy." Volkswagen increased by 4.92 percent. BMW and Daimler gained 3.45 percent and 3.36 percent, respectively. Fashion and lifestyle firm Gerry Weber International reported a 22 percent increase in third-quarter profit, but margin declined from last year. The stock closed lower by 1.16 percent.
In Paris, BNP Paribas advanced by 4.39 percent. Societe Generale gained 3.45 percent and Credit Agricole rose by 3.43 percent. Peugeot and Renault climbed by 5.17 percent and 5.59 percent, respectively.
In London, Anglo American rose by 9.17 percent and Antofagasta surged by 7.84 percent. BHP Billiton gained 5.97 percent and Rio Tinto added 6.59 percent. Eurasian Natural Resources climbed by 10.90 percent, Vedanta Resources gained 13.36 percent and Kazakhmys advanced by 13.68 percent.
Russian steel maker Evraz surged by 13.22 percent. Gold miner Petropavlovsk ended the session higher by 14.64 percent. Royal Bank of Scotland Group said it plans to launch an initial public offering of its fully-owned subsidiary Direct Line Insurance Group Plc in an all-secondary offering by the lender. The stock climbed by 1.86 percent.
Barclays rose by 5.09 percent and Lloyds Banking added 2.88 percent. JD Wetherspoon increased by 3.28 percent, after announcing full year results. Chemring Group gained 5.61 percent. The company announced a deadline extension by the Takeover Panel for Carlyle Group to make an offer for the company.
Eurozone inflation increased as initially estimated to 2.6 percent in August, final data issued by Eurostat showed Friday. The rate rose from 2.4 percent in July. The number of persons employed remained stable in the euro area during the second quarter, after falling 0.3 percent sequentially in the prior quarter, Eurostat reported Friday.
British construction output decreased notably from last year in July, data released by the Office for National Statistics showed Friday. |
| US Market Report | Stocks Remain Firmly Positive Following Early Rally
After moving sharply higher in early trading on Friday, stocks have given back some ground but continue to perform well in mid-day trading. While the major averages have pulled back off their best levels of the day, they remain firmly positive.
The major averages have moved roughly sideways in recent trading, hovering in positive territory. The Dow is up 54.94 points or 0.4 percent at 13,594.80, the Nasdaq is up 31.28 points or 1 percent at 3,187.11 and the S&P 500 is up 7.50 points or 0.5 percent at 1,467.49.
The continued strength on Wall Street comes following yesterday's announcement from the Federal Reserve of its decision to provide further economic stimulus by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.
Looking ahead, the Fed said it would continue its purchases of mortgage-backed securities until the outlook for the labor market improves substantially.
The central bank also left interest rates at near-zero levels and said exceptionally low rates are likely to be warranted at least through mid-2015.
Traders are also digesting a slew of U.S. economic data, including a report from the Commerce Department showing slightly stronger than expected retail sales growth amid a jump in gas prices.
The report showed that retail sales rose by 0.9 percent in August following a downwardly revised 0.6 percent increase in July. Economists had expected sales growth to match the 0.8 percent increase originally reported for the previous month.
However, excluding sales in both the automotive and gasoline sectors, August retail sales were up a mere 0.1 percent, notably below the 0.4 percent growth predicted by most economists.
A separate report from Thomson Reuters and the University of Michigan showed that consumer sentiment has unexpectedly seen a substantial improvement in the month of September.
The consumer sentiment index jumped to 79.2 in September from the final August reading of 74.3. The increase came as a surprise to economists, who had expected the index to edge down to a reading of 73.5.
Meanwhile, the Federal Reserve released a report showing a much steeper than expected drop in industrial production in the month of August, with Hurricane Isaac restraining output in the Gulf Coast region
The Fed said industrial production tumbled by 1.2 percent in August following a downwardly revised 0.5 percent increase in July. Economists had expected production to edge down by 0.1 percent.
A report from the Labor Department showed that consumer prices increased in line with economist estimates in August amid a sharp jump in energy prices. |
| FX and Commodities round-up | Gold stocks, Imperial, JD Wetherspoon With gold prices jumping after the announcement of further quantitative easing (QE) from the Federal Reserve last night, Nomura has maintained its 'bullish' view on the sector.
"Following yesterday's Federal Open Market Committee (FOMC) announcement of a new open-ended QE programme, gold prices have reached as high as $1,775/oz. Gold equities, which remain historically cheap on a price-to-earnings and price-to-net present value basis, should continue recent outperformance," the broker said on Friday morning.
The broker rates Petropavlovsk, Polymetal, African Barrick Gold and Centamin as 'buys', keeps Avocet Mining at 'neutral' and Randgold Resources at 'reduce'.
Ahead of Imperial Toabcco's pre-close trading update next Friday, Panmure Gordon has reiterated its 'buy' recommendation and 2,900p target price for the cigarette and tobacco giant.
The broker says that the current 20% discount to the peer group (price-to-earnings ratio basis) is too great: "We continue to regard this discount as too large given its attractive cash generation (free cash flow yield is 8% in FY 2012E) and believe the discount should narrow on evidence that Imperial’s organic growth strategy is delivering results."
JD Wetherspoon's financial year has got off to a great start and the pubs group is the cheapest stock in the sector, according to Jefferies.
Nevertheless, Jefferies said: "There is no explicit guidance in the statement but we are comfortable with our FY13 forecast for LFL sales of c2%, which may yet prove to be conservative."
The broker says that JD Wetherspoon's valuation is the lowest in the peer group despite a 13% compound earnings per share (EPS) growth rate (FY12-14). |
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