Markets celebrate ECB bond-buying plan
Market Movers
techMARK 2,116.90 +1.44%
FTSE 100 5,777.34 +2.11%
FTSE 250 11,676.44 +2.01% Global stocks markets rocketed higher on Thursday afternoon after European Central Bank (ECB) President Mario Draghi revealed details of the bank’s bond-buying plan. London’s Footsie jumped over 2%, the CAC in Paris and DAX in Frankfurt both rose 3%, while Madrid’s IBEX and Milan’s FTSE MIB ended the day between 4% and 5% higher. “On a day that many traders would have been looking towards in their diaries this week it would appear that the detail that was needed in exactly how the ECB would tackle the crisis was finally made available,” said sales trader Matthew Nelson. Just one month after promising to do “whatever it takes to preserve the euro”, Draghi announced that the ECB would embark on an unlimited bond purchase programme of notes on the secondary market with maturities between one and three years. They would be ‘sterilised’ so as to avoid the inflationary pressures which excessive growth in the money supply is thought to engender in the long-run. Speaking after the ECB maintained its key interest rate at 0.75%, Draghi said that the purchases, known as Outright Monetary Transactions, will “enable us address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro.” Economic data from the US also helped to lift markets this afternoon: weekly jobless claims were below expectations; the ISM non-manufacturing index surprised to the upside in August; while the ADP employment report beat forecasts. In other news today, the UK's Monetary Policy Committee did what was largely expected and maintained its Bank Rate at 0.5% and asset purchase programme at £375bn in its policy announcement at noon. The Bank of England injected £50m of additional quantitative easing in July which is not due to be completed until the end of October.
Evraz, Polymetal, Vedanta, Antofagasta, Randgold and ENRC were among the best performing resource stocks today and Lloyds and Barclays led the banks on hopes over the global economy.
Helping gains today for miners were gold futures which jumped to $1,716.90 the highest level since March. According to Jeffrey Currie, the head of commodities research at Goldman Sachs, prices will rise to $1,840 by the year-end.
Hotel, restaurant and Costa coffee owner Whitbread jumped after reporting second-quarter sales growth of 14.8%, up from 13.9% in the first three months of the year. Investec said that the Whitbread "offers compelling value for a stock with impressive roll-out potential, strong asset backing and impressive trading momentum."
Supermarket group Morrisons also rose after pre-tax profits in the first half came in 3% ahead of consensus estimates. Jefferies said this morning that the stock is trading at an "unjustified" discount to supermarket peers in the UK and Europe.
Just a handful on the Footsie were in the red today with Imperial Tobacco extending losses from yesterday when it was reported that France may be considering a plain packaging law and price hikes for cigarettes packets. FTSE 250: Lonmin leads miners higher after accord with strikers
South Africa-focused platinum miner Lonmin rose strongly on reports that it has reached a 'peace accord' with its striking miners following a wave of protests over the last few weeks which resulted in the deaths of around 40 people. Mining peers Hochschild Mining, Centamin and Aquarius Platinum were all registering decent gains in afternoon trade.
AG Barr was in demand after Societe Generale upgraded the shares to ‘hold’ and lifted its target price from 370p to 440p, one day after the group announced it is in discussions about an all-share merger with soft drinks peer Britvic. The latter was in the red today after both Societe and Bank of America Merrill Lynch cut their recommendations on the stock.
Electrical retailer Dixons was higher after saying it made an "encouraging" start to the year with decent growth in the UK, Ireland and Northern Europe, though trading in Southern Europe continues to be tough. Seymour Pierce raised its rating on the stock today to ‘buy’, saying that it was “reassured by this trading update that underlying momentum is set to continue within its two core businesses driven by both market consolidation and plenty of innovation”.
easyJet gained after reporting that it carried 6% more passengers in August. Yesterday the firm also announced that it would introduce allocated seating in its planes. FTSE 100 - Risers
Evraz (EVR) 226.70p +7.19%
Lloyds Banking Group (LLOY) 36.20p +6.69%
Polymetal International (POLY) 1,020.00p +6.58%
Barclays (BARC) 193.05p +6.10%
Vedanta Resources (VED) 928.00p +5.82%
Antofagasta (ANTO) 1,157.00p +5.57%
Aviva (AV.) 344.90p +5.31%
Whitbread (WTB) 2,210.00p +5.29%
Randgold Resources Ltd. (RRS) 6,795.00p +5.27%
Kazakhmys (KAZ) 599.00p +5.09%
FTSE 100 - Fallers
Imperial Tobacco Group (IMT) 2,344.00p -2.58%
Tate & Lyle (TATE) 640.50p -1.69%
Burberry Group (BRBY) 1,312.00p -1.13%
Reed Elsevier (REL) 604.00p -0.17%
FTSE 250 - Risers
Gem Diamonds Ltd. (DI) (GEMD) 170.80p +9.42%
New World Resources A Shares (NWR) 294.00p +8.13%
Lonmin (LMI) 568.00p +7.27%
Barr (A.G.) (BAG) 481.60p +6.97%
Hays (HAS) 73.05p +6.49%
Yule Catto & Co (YULC) 170.00p +5.92%
Centamin (DI) (CEY) 81.85p +5.21%
Aquarius Platinum Ltd. (AQP) 36.29p +5.19%
Rathbone Brothers (RAT) 1,370.00p +5.14%
Man Group (EMG) 76.50p +4.94%
FTSE 250 - Fallers
Ruspetro (RPO) 119.30p -2.93%
Daejan Holdings (DJAN) 2,935.00p -2.62%
Britvic (BVIC) 363.00p -1.87%
Ted Baker (TED) 961.50p -1.28%
Rank Group (RNK) 129.10p -1.07%
PayPoint (PAY) 702.50p -0.71%
Beazley (BEZ) 168.50p -0.47%
F&C Asset Management (FCAM) 88.90p -0.34%
Soco International (SIA) 333.00p -0.30%
UK Commercial Property Trust (UKCM) 68.00p -0.29% | Friday preview |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Industrial production to rebound Compared to some of its peers in the recruitment sector, SThree had a commendable first half in tough market conditions, but those conditions have shown no signs of improvement in the last two months, so Friday's interim management statement may be one of no more than quiet satisfaction. France and Germany notched up year-on-year increases in gross profit of 23% and 17% respectively in the first half of 2012. "The outlook remains bleak, however, and we still expect global macro-economic uncertainty to weigh on candidate and employer confidence – we think it’s unlikely that France and Germany can carry on at those rates of growth," comments Peel Hunt. "The best indicator we have of how the company sees the outlook is the headcount, which was down 2.2% in H1 [the first half]," the broker added. Switching to the economy, Credit Suisse thinks it likely that UK industrial production rebounded in July, following the collapse caused by the Queen's Diamond Jubilee celebrations in June. Purchasing Managers' Index data suggest that underlying industrial production could be weak, Credit Suisse avers, "but it seems likely that the noise from the Jubilee will work to override any informational content in this month’s release." Credit Suisse is predicting a return of the industrial production index to April levels, which would give a monthly growth rate of 1.5% and an annual growth rate of -2.7%. Charles Stanley is a bit more bullish, predicting a 1.8% rise in July, giving a year-on-year decline of 2.4%. Charles Stanley forecasts that producer input prices rose 1.5% in August, following July's 1,3% increase. That would take the index to a level 1.0% higher than a year earlier, representing a turnaround from the 2.4% year-on-year decline seen in July. Core output prices are seen edging up 0.1% in August (+1.3% year-on-year), after holding steady (+1.3% year-on-year) in July. INTERIM DIVIDEND PAYMENT DATEAvon Rubber, BG Group, Blackrock Income And Growth Investment Trust, CSR, Dialight, Foreign and Colonial Inv Trust, Jupiter Fund Management , Porvair, Puma VCT V QUARTERLY PAYMENT DATE Barclays, Boeing Co INTERNATIONAL ECONOMIC ANNOUNCEMENTS Balance of Trade (GER) (07:00) Current Account (GER) (07:00) Industrial Production (GER) (11:00) Non-Farm Payrolls (US) (13:30) Retail Price Index (GER) (07:00) Unemployment Rate (US) (13:30) ANNUAL REPORT MDM Engineering Group Ltd. (DI) IMSS SThree AGMS BlueStar SecuTech Inc. (DI), Latchways, Oilex Ltd., Small Companies Dividend Trust UK ECONOMIC ANNOUNCEMENTS Industrial Production (09:30) Manufacturing Production (09:00) Producer Price Index (09:30) FINAL DIVIDEND PAYMENT DATE Ashtead Group, Cranswick, iEnergizer Ltd., Prosperity Minerals Holdings Ltd., QinetiQ Group, RPC Group |
| US Market Report | Stocks Seeing Substantial Strength In Mid-Day Trading
Stocks have moved sharply higher over the course of the trading day on Thursday after ending the previous session nearly flat. The markets have benefited from a positive reaction to the latest news out of the European Central Bank along with a batch of upbeat U.S. economic data.
The major averages have moved roughly sideways in recent trading, hovering near their best levels of the day. The Dow is up 232.57 points or 1.8 percent at 13,280.05, the Nasdaq is up 60.08 points or 2 percent at 3,129.35 and the S&P 500 is up 26.07 points or 1.9 percent at 1,429.51.
The rally on Wall Street is partly due to a positive reaction to comments from European Central Bank President Mario Draghi, who outlined the central bank's highly anticipated bond purchasing program.
Draghi said the program would enable the ECB to address severe distortions in government bond markets and called it a "fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability."
The central bank will consider a bond purchase only when there is a request from a country. The size of the purchase is unlimited and sovereign bonds with maturities up to three years would qualify.
The markets have also benefited from the release of some upbeat U.S. economic data, including a report showing stronger than expected private sector job growth.
ADP said private sector employment increased by 201,000 jobs in August following a revised increase of 173,000 jobs in July. Economists had expected employment to increase by about 149,000 jobs compared to the addition of 163,000 jobs originally reported for the previous month.
The Labor Department released a separate report showing a bigger than expected drop in first-time claims for unemployment benefits in the week ended September 1st.
The release of the upbeat jobs data has generated some optimism about the outlook for the Labor Department's monthly jobs report, which includes government jobs. The report is expected to show an increase of about 125,000 jobs in August..
Additionally, the Institute for Supply Management released a report showing that the pace of service sector growth accelerated by more than anticipated in August.
The ISM said its non-manufacturing index rose to 53.7 in August from 52.6 in July, with a reading above 50 indicating an increase in activity in the service sector. Economists had been expecting the index to show a more modest increase to a reading of 53.0. |
| Broker tips | Lloyds, Whitbread, Morrisons Investec says that the news of another regulatory fine at Lloyds should only have a little impact, seeing as though the banking group still has a lot of mis-selling issues hanging over its head. The broker has maintained its 'hold' rating and 36p target price for the stock. He said: "The cost of redress for Lloyds’s market-leading role in the mis-selling of financial products over the past two decades – e.g. pensions, endowment mortgages and PPI to mention just a few - will dwarf any fresh regulatory fine, alongside the gaping hole left in the Other Income line by lost PPI revenues that it is unable to fill." Nomura has reiterated its 'buy' rating and 2,220p target price for Whitbread, saying that its second-quarter trading statement shows 'solid trading' at Premier Inn and a 'strong performance' in pubs/restaurants and Costa. "We believe it offers compelling value for a stock with impressive roll-out potential, strong asset backing and impressive trading momentum." Supermarket group Morrisons is trading at an 'unjustified' discount to its peers, according to Jefferies which was maintained its 'buy' rating and 350p target price on the stock after the firm's strong set of interim results. Morrisons is trading at nine times prospective earnings which equates to a 10% discount to its UK supermarket peers and a 20% discount to the pan-European sector. "This ignores industry leading returns, self-help opportunities, lower leverage and higher property ownership." |
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