Losses pared but miners are hit hard
Market Movers
techMARK 2,128.73 -0.35%
FTSE 100 5,854.64 -0.57%
FTSE 250 11,928.98 -0.38% Losses were pared in the final 90 minutes of trading in London on a day when investors fretted about a slow-down in the global economy. Disappointing Chinese manufacturing data was released overnight, and the news was not good. China´s manufacturing sector Purchasing Manufacturers' Index (PMI) for the month of September came in at 47.8, after 47.6 in August, for its longest streak below the 50 point threshold – which indicates economic contraction – in eight years. Closer to home, UK retail sales fell by 0.2% in August, slightly less than the 0.3% fall expected by economists. In year-on-year terms total retail sales grew by 2.7% (Consensus: 2.9%), which was not such good news for retailers, and neither was the fact that the previous month´s year-on-year reading was revised down to show a rise of only 2.3%, instead of the preliminary estimate of 2.8%. Capital punishment Capital Shopping Centres (CSC) is to tap the bond market to refinance its short-term borrowings and top up its war-chest. The shares dived after the group said it is offering £300m of senior unsecured convertible bonds due 2018. The bonds will have a coupon of 2.50% and an initial conversion price of 437.52p.
Online grocer Ocado was on offer after an underwhelming trading update. The firm said gross sales increased 9.9% in the 12 weeks to August 5th 2012 and that it expects an increase in the rate of sale growth in the fourth quarter.
Year-to-date gross sales growth to the end of the third quarter was 11.3%. Analysts at Panmure Gordon reckon the company may breach its net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) covenant this year. They add that: "although we now believe that Ocado's days as a public company are limited, we don't think that the equity is worth very much."
Food and drink wholesale group Booker Group reported a 4.3% year-on-year rise in total sales in the 12 weeks to September 14th, with non-tobacco sales 3.9% higher, while tobacco sales rose by 5.1%.
On a like-for-like (LFL) basis, total sales rose by 4.4%, non-tobacco sales by 3.8% and tobacco sales by 5.4%. Peel Hunt had forecast LFL non-tobacco sales growth of 4.0%, which might account for why the shares lost a little ground. Miners man the barricades The Chinese PMI manufacturing data hit mining stocks hard. BHP Billiton, meanwhile, has confirmed it is to cease studies into the expansion of its Red Hill coal asset in central Queensland. The decision should not come as too great a surprise as the group announced on August 22nd that it would delay a number of project expansions because of current market conditions.
In South Africa, mining giant Anglo American Platinum (Amplats) has reported poor attendance at its Rustenburg process operations since it re-opened on Tuesday following a temporary halt to operations amid a wave of labour unrest that has hit the mining industry in South Africa in recent weeks.
The firm announced on Wednesday that the current industrial action is illegal and said it has given notice to its employees that they are required to return to work by Thursday's night shift.
Press reports suggest that striking miners remain defiant and have formed a barricade of burning tyres in a street near the mine.
There was better news at Lonmin as strikers returned to work after a pay settlement was agreed earlier this week, but the market appears not to like the terms of the agreement, as Lonmin's shares were among the hardest hit in the sector.
In other company news, Imperial Tobacco's operational performance in the year ended September 30th has been in line with its expectations. Tobacco net revenues are expected to be up by around four per cent with particularly good performances in its Eastern Europe, Africa & Middle East and Asia-Pacific regions. However, stick equivalent volumes are expected to decline by up to three per cent, the majority of which is due to ongoing market weakness in Ukraine and Poland and compliance with international trade sanctions against Syria.
BSkyB has said it welcomes an announcement by Ofcom that Sky "remains a fit and proper holder of its broadcasting licences".
Utility company United Utilities remains confident of delivering its 2010-15 regulatory out-performance targets after a solid start to the current financial year. Revenue in the year to the end of March 2013 should be higher than last year, but, as expected, the increase is slightly below the allowed regulated price rise, principally reflecting the ongoing impact of customers switching to meters and continued lower commercial volumes. Other markets The price of Brent crude bounce back today, with the most widely traded contract rising $1.46 to $109.65 a barrel. Gilts were in favour, as investors deserted equities. The yield on the benchmark 10-year gilt eased to 1.80% from 1.85% overnight. Yields move inverseley to prices.
FTSE 100 - Risers
Imperial Tobacco Group (IMT) 2,399.00p +2.70%
International Consolidated Airlines Group SA (CDI) (IAG) 158.80p +2.32%
ITV (ITV) 91.15p +1.84%
Ashmore Group (ASHM) 343.00p +1.33%
Amec (AMEC) 1,143.00p +1.06%
Marks & Spencer Group (MKS) 371.40p +1.01%
SABMiller (SAB) 2,725.00p +1.00%
British Sky Broadcasting Group (BSY) 734.00p +0.96%
WPP (WPP) 868.50p +0.93%
Diageo (DGE) 1,720.00p +0.70%
FTSE 100 - Fallers
Evraz (EVR) 260.80p -6.02%
Anglo American (AAL) 1,944.00p -4.42%
Capital Shopping Centres Group (CSCG) 332.40p -4.10%
Eurasian Natural Resources Corp. (ENRC) 343.60p -3.86%
Kazakhmys (KAZ) 724.50p -3.40%
Rio Tinto (RIO) 3,077.00p -2.67%
Vedanta Resources (VED) 1,054.00p -2.41%
Shire Plc (SHP) 1,832.00p -2.40%
BHP Billiton (BLT) 1,954.50p -2.27%
Burberry Group (BRBY) 1,037.00p -2.17%
FTSE 250 - Risers
Perform Group (PER) 390.00p +4.84%
Petra Diamonds Ltd.(DI) (PDL) 107.10p +4.49%
Ashtead Group (AHT) 338.80p +3.20%
Halma (HLMA) 448.50p +3.10%
Drax Group (DRX) 515.00p +2.18%
Ladbrokes (LAD) 185.90p +2.14%
Greene King (GNK) 606.50p +2.02%
BBA Aviation (BBA) 205.40p +1.99%
Phoenix Group Holdings (DI) (PHNX) 520.00p +1.76%
Rathbone Brothers (RAT) 1,348.00p +1.74%
FTSE 250 - Fallers
Bumi (BUMI) 250.10p -11.31%
Lonmin (LMI) 610.50p -6.29%
Essar Energy (ESSR) 118.20p -5.52%
Chemring Group (CHG) 343.00p -4.88%
Imagination Technologies Group (IMG) 511.50p -4.21%
Ocado Group (OCDO) 64.40p -4.17%
Ferrexpo (FXPO) 209.80p -3.89%
Talvivaara Mining Company (TALV) 169.10p -3.76%
Aquarius Platinum Ltd. (AQP) 45.00p -3.74%
Homeserve (HSV) 217.00p -3.73%
FTSE TechMARK - Risers
Filtronic (FTC) 44.88p +5.28%
Pace (PIC) 164.25p +4.95%
Xaar (XAR) 245.00p +4.26%
Ricardo (RCDO) 369.75p +3.28%
BATM Advanced Communications Ltd. (BVC) 16.25p +3.17%
Ark Therapeutics Group (AKT) 3.35p +2.29%
Optos (OPTS) 170.00p +1.80%
Timeweave (TMW) 22.50p +1.12%
FTSE TechMARK - Fallers
AEA Technology Group (AAT) 0.055p -8.33%
RM (RM.) 78.00p -4.29%
Promethean World (PRW) 23.00p -4.17%
XP Power Ltd. (DI) (XPP) 1,012.00p -3.62%
Antisoma (ASM) 1.65p -3.52%
Oxford Biomedica (OXB) 2.44p -2.40%
Phoenix IT Group (PNX) 144.50p -2.20%
Emblaze Ltd. (BLZ) 47.00p -2.08%
| European Market |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | European Markets Declined On Weak Economic Data
The European markets finished in negative territory Thursday, largely due to weak economic results from around the globe. The lackluster Chinese manufacturing data got the markets off to a weak start. European data also failed to impress investors, followed by the release of the U.S. weekly jobless claims in the afternoon, which came in above expectations. Energy stocks were under pressure due to falling oil prices, while miners and banks were also weak.
An indicator of China's manufacturing performance rose marginally in September from August's nine-month low, but continued to suggest deterioration in activity with production falling at the fastest pace in ten months. Flash results of a survey by Markit Economics and HSBC revealed Thursday that the purchasing managers' index (PMI) rose to 47.8 in September from 47.6 in August.
The European Central Bank's new government bond purchase program may last only for a few years, ECB Governing Council member Christian Noyer told Frankfurter Allgemeine Zeitung in an interview published Thursday.
Noyer, who heads the Bank of France, said he hoped that the impact of the program would be felt very quickly. "I would be surprised if such a program" is in place for several years, he told the magazine.
The European Union's Internal Market Commissioner Michel Barnier reportedly said on Thursday that he will work to find a compromise with Germany on the proposal for a banking union.
Banks' shareholders must be ready to take on more risk in banking operations without burdening the government and the tax payers, European Central Bank Governing Council member Erkki Liikanen said in an interview to newspaper Demokraatti.
It is the task of the shareholders and investors to ensure that the banks operate in such a way as to avoid losses, Liikanen, who heads the Bank of Finland, said.
Spain conducted a successful bond auction on Thursday, with borrowing costs falling amid hopes the country will request aid paving the way for the European Central Bank to purchase sovereign debt.
In the first bond auction held by Spain after the European Central Bank announced its new bond purchase plan earlier this month, the treasury raised EUR 4.8 billion from the sale of its benchmark 10-year bond and a new 3-year bond. The target set for the sale was between EUR 3.5 billion and EUR 4.5 billion.
The yield on the January 2022 bond dropped to 5.666 percent from 6.647 percent paid in the previous sale on August 2.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.62 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.15 percent.
The DAX of Germany dropped by 0.02 percent and the CAC 40 of France finished lower by 0.62 percent. The FTSE 100 of the U.K. fell by 0.57 percent and the SMI of Switzerland decreased by 0.22 percent.
In Frankfurt, Commerzbank fell by 4.51 percent and Deutsche Bank lost 1.44 percent. Deutsche Bank confirmed that it reached agreement to sell private bank unit BHF-BANK to Kleinwort Benson Group, a unit of Belgium-based financial services group RHJ International, for 384 million euros.
BMW and Volkswagen finished down by 3.24 percent and 0.53 percent. Shares of Daimler declined by 2.22 percent. Daimler has said that it sees increasingly difficult market conditions in Europe.
Hawesko Holding decreased by 1.22 percent, after Berenberg started the stock with a "Hold" rating. Sky Deutschland climbed by 1.12 percent, after Barclays initiated the stock with an "Overweight" rating. Sartorius gained 1.52 percent, after Berenberg initiated the stock with a "Buy" rating.
In Paris, Total declined by 1.59 percent, amid falling oil prices. Renault dropped by 2.12 percent and Peugeot fell by 3.29 percent. Peugeot announced exclusive negotiations to sell 75 percent interest in its Gefco trucking unit to JSC Russian Railways for 800 million euros. The sale is aimed at reducing debt.
BNP Paribas fell by 1.54 percent, Societe Generale lost 2.26 percent and Credit Agricole closed lower by 1.09 percent.
Miners are notably lower in London. Rio Tinto declined by 2.67 percent and Eurasian Natural Resources fell by 3.86 percent. Anglo American dropped by 4.42 percent, Kazakhmys decreased by 3.40 percent and BHP Billiton lost 2.28 percent.
Imperial Tobacco increased by 2.70 percent. The company expects to report about 4 percent rise in fiscal 2012 tobacco net revenues at constant currency.
| US Market Report | Stocks Stage Recovery Attempt After Seeing Early Weakness
Stocks have shown a notable recovery attempt over the course of the trading day on Thursday after coming under pressure early in the session. The rebound was partly due to the release of relatively upbeat manufacturing data.
The major averages have climbed well off their worst levels of the day but currently remain stuck in the red. The Dow is down 8.09 points or 0.1 percent at 13,569.87, the Nasdaq is down 10.18 points or 0.3 percent at 3,172.44 and the S&P 500 is down 3.22 points or 0.2 percent at 1,457.83.
The early weakness on Wall Street came on the heels of the release of a Labor Department report showing that jobless claims came in above estimates in the week ended September 15th.
While jobless claims edged down to 382,000 from the previous week's revised figure of 385,000, economists had expected jobless claims to drop to 373,000 from the 382,000 originally reported for the previous week.
Peter Boockvar, managing director at Miller Tabak, said, "Bottom line, the labor market still can't gain any lasting traction in light of the obvious economic challenges."
Selling pressure was relatively subdued, however, as traders remained reluctant to make any significant moves amid uncertainty about the near-term outlook for the markets.
The subsequent recovery attempt was partly due to the release of a report from the Philadelphia Federal Reserve showing that its index of regional manufacturing activity rose by much more than expected.
The Philly Fed said its diffusion index of current activity rose to a negative 1.9 in September from a negative 7.1 in August, although a negative reading still indicates a contraction in regional manufacturing activity.
Among individual stocks, shares of Adobe Systems (ADBE) have moved higher even though the publishing and design software developer reported weaker than expected third quarter revenues and forecast fourth quarter results below analyst estimates.
Denbury Resources (DNR) is also posting a notable gain after announcing an agreement to sell its Bakken assets in North Dakota and Montana to Exxon Mobil (XOM) for $1.6 billion in cash
Meanwhile, Bed Bath & Beyond (BBBY) has come under pressure after the home furnishings retailer reported second quarter earnings that rose year-over-year but still came in weaker than expected. |
| Broker tip | Analysts at WH Ireland have issued a bullish note on Gulf Keystone Petroleum this morning. The broker highlights the recent positive news-flow on the company –including the apparent resolution of the stand-off between authorities in Baghdad and Erbil and the construction of a new pipeline through Turkey- along with several other factors as possibly heralding a move by the company into the main FTSE index, from AIM. As regards the latter factors WH Ireland highlights the fact that: “The company is on track to achieve 150,000bpd by 2015 and importantly has an array of funding options at its disposal to fund development including the sale of its 20% working interest in the Akri-Bijeel block, debt options and with early production from Shaikan set to reach 40k barrels per day by the first half of 2013 and this could provide valuable cash flows (assuming Baghdad continues payments). These analysts also hold out the possibility that the company might yet be “taken-out.” We maintain our BUY recommendation and target of 315p which implies a healthy 26% upside from here and reiterate our 450p take-out target, they conclude. After a strong run in the share price, passing their target on the way, analysts at Panmure Gordon believe it is time to lock in some profits on Wolseley. Hence, they cut their recommendation from Buy to Hold, while maintaining their 2500p target. Their forecasts for a fiscal year 2012 earnings per shares (EPS) of 162p, versus a consensus estimate of 160p, and a fiscal year 2013 EPS of 184p (Consensus: 183p) imply a calendar 2012E price-to-earnings multiple of 16x falling to 14x. That compares with its near UK peers on circa 11x, although Home Depot appears to be on 18x. Nevertheless, the broker admits that the company´s shares offer a sound long-term investment case. Panmure thus adds that: “We have been impressed with the action taken by management in recent years, with many of its problem businesses sorted out. The 63%/37% North America/Europe split is still an attractive “mix,” until signs of a stronger European recovery emerge.” In a research not sent to clients this morning analysts from Seymour Pierce indicate that they will be closely watching for the success –or not- of real estate investment trust (REIT) Capital Shopping Centres´ just announced debt issue. In their own words, the transaction “ to the proliferation of debt and equity raises in the sector.” More specifically, they point out how the terms offered are somewhat higher than those offered by British Land in a recent debt sale of its own. As well, Seymour Pierce adds that: “Given the equity yield of 4.4%, and that CSCG is trading at an 11.3% discount to its June 30 2012 net asset value of 390p, the success of the issue is purely predicated on debt funds which have to deploy into the debt or convertible market rather than investors with a choice between debt and equity.” “If the issue is successful and the other equity divestments occur we believe this may be very good news for the group as it would go a long way to rectifying the core financing problems of the group which we have regularly highlighted. The shares should react positively to the success of the issue and we will be reviewing our forecasts once the outcome has been published.” Seymour Pierce currently has a “reduce” on shares of Capital Shopping Centres and a target of 327p. |
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