Footsie at six-month higher after QE3
Market Movers
techMARK 2,147.78 +0.56%
FTSE 100 5,899.81 +1.37%
FTSE 250 12,046.99 +1.69% Stock markets across Europe surged in early trading on Friday following last night's stimulus announcement from the Federal Reserve; increased risk appetite was benefitting the mining and banking sectors the most early on.
The Footsie, up 1.4% in the opening hour at 5,900, hasn't closed about this level since March 26th when it finished at 5,903.
The Fed announced that, in order to bolster the economy and make sure that inflation stays close to its target, it would engage in a third round of quantitative easing (QE3) by buying more mortgage-backed securities at a pace of $40bn per month. It is also sticking with Operation Twist, the programme where it swaps short-dated securities for longer term securities.
The announcement last night prompted the Dow Jones Industrial Average to rise by 206.51 points to its highest level since late 2007, and the S&P 500 by 23.43 points to its highest closing point since December of the same year.
"After keeping the market guessing for months the Federal Reserve finally did what the markets hoped they would do several months ago, and gave the green light to further asset purchases," said senior market analyst Michael Hewson from CMC Markets. He said that the committee "decided to throw caution to the winds and dispense with worrying about appearing political, in the lead up to the US election."
In other news, Japan has cut its assessment for its economy, with the Cabinet Officer saying that the "recovery appears to be pausing due to deceleration of the world economy".
Meanwhile, Wolfgang Schaeuble, Germany's Finance Minister, has cautioned Spain against asking for further aid on top the €100bn for its financial sector: "I'm not in the camp that says 'take the money'," he said.
“I don’t share the view of those who say Spain is so much a focus of speculation in the financial markets that we should advise the Spaniards to do anything different from what they’re doing…I’m one of those who says we should do everything possible to convince the markets that this speculation against Spain is without any basis in reality, he said. FTSE 100: Miners, banks give the Footsie a boost
Mining stocks were putting in an impressive performance as metals prices gained on a weaker dollar after the Fed announcement. Investors are hoping that an improved US economy will boost the demand for commodities. Kazakhmys, Evraz, Fresnillo, ENRC, Vedanta, Antofagasta and Anglo American all gaining over 6%
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 akin decent gains. RBS announced this morning 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. 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 Platinum, Ferrexpo, Talvivaara, Lonmin and Centamin on the up.
FTSE 100 - Risers
Kazakhmys (KAZ) 739.50p +8.75%
Evraz (EVR) 282.00p +8.71%
Fresnillo (FRES) 1,840.00p +8.04%
Eurasian Natural Resources Corp. (ENRC) 353.60p +7.97%
Vedanta Resources (VED) 1,038.00p +7.96%
Antofagasta (ANTO) 1,330.00p +7.52%
Anglo American (AAL) 2,026.50p +6.16%
Rio Tinto (RIO) 3,250.00p +5.57%
Glencore International (GLEN) 371.00p +5.01%
GKN (GKN) 239.80p +4.95%
FTSE 100 - Fallers
Diageo (DGE) 1,670.00p -1.15%
GlaxoSmithKline (GSK) 1,429.00p -0.73%
British Sky Broadcasting Group (BSY) 739.00p -0.67%
AstraZeneca (AZN) 2,894.50p -0.62%
Tate & Lyle (TATE) 644.00p -0.54%
British American Tobacco (BATS) 3,167.50p -0.46%
Associated British Foods (ABF) 1,282.00p -0.39%
Intertek Group (ITRK) 2,721.00p -0.29%
BT Group (BT.A) 236.20p -0.25%
Reckitt Benckiser Group (RB.) 3,626.00p -0.22%
FTSE 250 - Risers
Aquarius Platinum Ltd. (AQP) 47.05p +14.48%
Ferrexpo (FXPO) 220.50p +12.50%
Petropavlovsk (POG) 408.90p +8.03%
Kenmare Resources (KMR) 42.70p +6.46%
Essar Energy (ESSR) 121.00p +5.49%
Fenner (FENR) 401.70p +5.29%
Hochschild Mining (HOC) 473.70p +5.27%
Centamin (DI) (CEY) 87.90p +5.27%
Talvivaara Mining Company (TALV) 165.00p +5.23%
Lonmin (LMI) 615.50p +5.12%
FTSE 250 - Fallers
RPS Group (RPS) 251.60p -1.26%
Stobart Group Ltd. (STOB) 115.19p -1.21%
Fidessa Group (FDSA) 1,467.00p -0.88%
BH Global Ltd. USD Shares (BHGU) 11.46 -0.78%
RIT Capital Partners (RCP) 1,180.00p -0.51%
BH Global Ltd. GBP Shares (BHGG) 1,155.00p -0.43%
Phoenix Group Holdings (DI) (PHNX) 515.00p -0.39%
TR Property Inv Trust (TRY) 162.00p -0.31%
Synergy Health (SYR) 921.00p -0.27%
HICL Infrastructure Company Ltd (HICL) 122.50p -0.24%
| European broker round-up |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Antena3: Barclays raises price target to €3.75 from €3.25.
EADS: Commerzbank downgrades to HOLD from buy and lowers price target to €30 from €36.
Enel: AlphaValue upgrades to BUY from add and raises price target to €3.70 from €3.40. LVMH: AlphaValue upgrades to BUY from add and lowers price target to €153.20 from €153.30.
Mediaset España: Barclays raises price target to €4.40 from €3.50. UK Event Calendar
INTERIMS
M. P. Evans Group, Verona Pharma
INTERIM DIVIDEND PAYMENT DATE
4Imprint Group, Delcam, Japan Residential Investment Co Ltd., Moneysupermarket.com Group, Pearson, RM, Witan Inv Trust
QUARTERLY PAYMENT DATE
Anglogold Ashanti Ltd., Carnival, Energy XXI (Bermuda) (Di)
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Business Inventories (US) (13:30)
Capacity Utilisation (US) (16:15)
Consumer Price Index (EU) (10:00)
Consumer Price Index (US) (13:30)
Harmonised Index of Consumer Prices (EU) (10:00)
Industrial Production (US) (16:15)
Manufacturing Inventories (US) (15:00)
Retail Sales (US) (13:45)
Retail Sales Inventories (US) (15:15)
U. of Michigan Confidence (Prelim) (US) (15:00)
Wholesale Price Index (GER) (07:00)
FINALS
Wetherspoon (J.D.)
ANNUAL REPORT
Mwana Africa
AGMS
Avengardco Investments Public Ltd GDR, Eastern European Property Fund Ltd., First Property Group, Imaginatik, Imagination Technologies Group, Immunodiagnostic Systems Holdings, Jupiter Green Inv Trust, Mwana Africa, Plant Impact
TRADING ANNOUNCEMENTS
Wetherspoon (J.D.)
FINAL DIVIDEND PAYMENT DATE
JPMorgan Brazil Inv Trust , Latchways, New Century AIM VCT |
| US Market Report | Stocks rocket on QE3 announcement
Dow Jones +207 at 13,540
Nasdaq +42 at 3,156
S&P 500 +23 at 1,460 US stocks soared on Thursday after the US Federal Reserve announced that it will launch its third round of quantitative easing, or QE3, by purchasing mortgage-backed securities ‘to support a stronger economic recovery’.
The Fed announced that, in order to bolster the economy and make sure that inflation stays close to its target, it would step up “policy accommodation” by buying more mortgage-backed securities at a pace of $40bn per month.
The announcement prompted the Dow Jones Industrial Average to rise by 206.51 points to its highest level since late 2007, and the S&P 500 by 23.43 points to its highest closing point since December of the same year.
The Fed said it will buy $40bn of agency mortgage-backed securities each month, starting this Friday.
It is also sticking with Operation Twist, the programme where it swaps short-dated securities for longer term securities.
As expected, there was no change to the Fed's low interest rates policy.
Jobless claims and inflation figures on the up
Initial jobless claims rose 15,000 to a seasonally adjusted 382,000 last week, according to the Labor Department. The consensus estimate was for a smaller rise to 370,000.
“We do not interpret the higher-than-expected outturn in claims as a sign that labor market conditions are weakening since the Labor Department reported that claims were pushed higher partially as a result of Tropical Storm Isaac and the seasonal distortions associated with a shortened holiday work week,” said analyst Michael Gapen from Barclays Research.
Meanwhile, the producer price index rose 1.7% in August, the biggest rise in over three years and ahead of the 1.2% increase that was expected, as gasoline and food prices gained more than forecast.
Apple extends gains after iPhone 5 release
Tech giant Apple closed at a record high of $682.98 after unveiling its newest toy, the iPhone 5. With a four-inch 1136x640 pixel screen, the iPhone 5 is 18% thinner and 20% lighter than the previous iPhone 4S, but lacks near field communications and wireless charging technology available in smartphone offerings from rival companies.
Analysts at Barclays Capital have raised their price target for the stock to $810 from $750 today.
Computer chip titan Intel slipped after Citigroup downgraded its recommendation from ‘buy’ to ‘neutral’, while sports apparel group Nike was lower after the same US broker also cut its rating.
Purification solutions provider Pall cheered the market with fiscal fourth quarter earnings that were well ahead of expectations at 86 cents per share. Analysts had been expecting a figure around 77 cents.
Other markets
10-year US Treasuries were little changed after the Fed's big decision, with the yield at 1.73%. The front month contract for West Texas intermediate crude was up $1.30 at $98.31 a barrel at the close of trading. |
| FX and Commodities round-up | Dollar falls following Fed announcement
The dollar declined further on Thursday, its third consecutive fall, after the Federal Open Market Committee (FOMC) voted 11-to-1 in favour of a third phase of quantitative easing.
The Fed said it will buy $40bn of agency mortgage-backed securities each month, starting this Friday.
It is also sticking with Operation Twist, the programme where it swaps short-dated securities for longer term securities.
The euro climbed from $1.2894 on Wednesday to $1.2997 last night, notably close to the $1.30 mark.
The ICE dollar index, which measures the greenback against a basket of six other major currencies, declined from 79.686 immediately before the QE announcement to 79.211 not long after, having initially risen higher.
Meanwhile, the pound traded hands at $1.6158, compred to $1.6105 the previous evening, while the euro climbed to buy 1.2163 Swiss francs and the Australian dollar rose to exchange at $1.0555, against $1.0463 on Wednesday.
The pound was last night being traded at 1.2433 euro, compared to 1.2500 the evening before.
Oil and gold both rise on QE3 announcement
Oil futures soared to a four-month high on Thursday after the Federal Open Market Committee (FOMC) announced that it will launch its third round of quantitative easing, or QE3, by purchasing mortgage-backed securities ‘to support a stronger economic recovery’.
October delivery oil futures rose $1.30 or 1.3% to $98.31 per barrel on the New York Mercantile Exchange, its highest level since around the beginning of May.
The commodity was also boosted by reports of unrest in the Middle Easdot.
Meanwhile, things were looking distinctly less rosy in other energy commodities, with heating oil settling down 0.12% at $3.21 per gallon, natural gas down 0.85% at $3.04 per million British thermal units, and unleaded gas down 1.31% at $2.96 per gallon.
In metals, gold climbed 2.21%, or $38.40, to $1,772.10 per troy ounce on the December delivery contract, its highest level in almost seven months, boosted by the Fed's plans.
The Fed said it will buy $40bn of agency mortgage-backed securities each month, starting this Friday. It is also sticking with Operation Twist, the programme where it swaps short-dated securities for longer term securities.
Meanwhile, silver was 4.46% higher at $34.78 per troy ounce, while platinum gained 1.81% to $1,679.50 and copper climbed 0.47% to $3.71. |
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