Miners jump but Glencore nervous before vote
Market Movers
techMARK 2,123.84 +0.33%
FTSE 100 5,793.79 +0.28%
FTSE 250 11,764.70 +0.76% UK stocks edged only slightly higher in early trading on Friday in spite of an impressive performance in the mining sector, as markets were relatively subdued following some massive gains the day before on the back of the European Central Bank's (ECB's) plan to buy sovereign debt.
Global stock markets soared after ECB President Mario Draghi announced that the bank would embark on its bond-buying plan: the Footsie jumped over 2%; the CAC in Paris and DAX in Frankfurt both rose 3%; while Wall Street benchmarks surged to their best levels in years.
"Yesterday’s actions by the ECB to commit to unlimited short-dated bond buying, in the face of Bundesbank dissent look like they could well buy Europe some additional time to sort out the problems that have plagued the single currency for the last three years," said market analyst Michael Hewson from CMC Markets.
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. The purchases would also be tired to “strict and effective conditionality".
Hewson said: "In effect the ECB has thrown the ball back to the politicians by saying the help is there if you want it, but there is a price to pay for such help. It is now up to the same politicians not to waste it, but given previous experience of European politicians the omens aren’t promising."
The focus on today's markets will be on industrial production figures and the producer price index in the UK, and unemployment data and non-farm payrolls in the US later on. Miners gain though Glencore bucks the trend
Mining stocks continued to rejoice the ECB's plans this morning with Evraz, Vedanta, Kazakhmys, Rio Tinto and Antofagasta all registering impressive gains. Xstrata was also higher ahead of the shareholder vote later on which will decide the fate of its merger with Glencore, which was trading lower as investors remained nervy.
Opposition to the merger has increased over the last few months as some Xstrata shareholders demand a better exchange ratio. However, the Lex column in the Financial Times said this morning: "As investors prepare to blow a raspberry at Glencore, they must accept that a better offer may be a long time coming. If it comes at all."
Banking group Barclays was higher after Deutsche Bank upgraded the stock to 'buy' this morning. Legal & General fell after Credit Suisse downgraded its rating to 'neutral'.
Support services and construction group Interserve was in demand after being named as the preferred bidder to provide a range of services to National Health Service (NHS) trusts in the Midlands. The contract has a potential value of up to £300m and will run for seven years.
Meanwhile, defence contractor Cobham also rose after being awarded a five-year contract to supply on-board inert gas generating system nitrogen inert units for AH-64 Apache helicopters used by the US arm. The "indefinite delivery, indefinite quantity" contract is worth around $15m.
FTSE 100 - Risers
Evraz (EVR) 247.20p +9.04%
Royal Bank of Scotland Group (RBS) 243.00p +4.07%
Barclays (BARC) 200.85p +4.04%
Kazakhmys (KAZ) 620.50p +3.59%
Vedanta Resources (VED) 961.00p +3.56%
Xstrata (XTA) 1,013.00p +3.47%
Lloyds Banking Group (LLOY) 37.45p +3.45%
Rio Tinto (RIO) 2,933.50p +3.07%
Antofagasta (ANTO) 1,189.00p +2.77%
Eurasian Natural Resources Corp. (ENRC) 319.30p +2.70%
FTSE 100 - Fallers
Glencore International (GLEN) 376.50p -4.04%
Imperial Tobacco Group (IMT) 2,317.00p -1.15%
GlaxoSmithKline (GSK) 1,424.00p -0.94%
SABMiller (SAB) 2,816.50p -0.88%
British American Tobacco (BATS) 3,209.00p -0.86%
AstraZeneca (AZN) 2,920.00p -0.70%
Rexam (REX) 421.80p -0.66%
Reckitt Benckiser Group (RB.) 3,657.00p -0.60%
Tesco (TSCO) 348.20p -0.49%
Babcock International Group (BAB) 927.50p -0.48%
FTSE 250 - Risers
Ferrexpo (FXPO) 165.40p +6.92%
Ruspetro (RPO) 125.70p +5.36%
Ocado Group (OCDO) 67.40p +5.31%
Talvivaara Mining Company (TALV) 139.30p +5.13%
Henderson Group (HGG) 108.40p +3.34%
Cape (CIU) 234.90p +3.25%
Petra Diamonds Ltd.(DI) (PDL) 103.00p +3.15%
Electrocomponents (ECM) 233.00p +2.69%
Bodycote (BOY) 375.90p +2.68%
EnQuest (ENQ) 119.20p +2.67%
FTSE 250 - Fallers
Gem Diamonds Ltd. (DI) (GEMD) 165.60p -3.04%
Rathbone Brothers (RAT) 1,335.00p -2.55%
BH Global Ltd. USD Shares (BHGU) 11.34 -1.73%
New World Resources A Shares (NWR) 289.60p -1.50%
Shanks Group (SKS) 87.70p -1.46%
Moneysupermarket.com Group (MONY) 143.00p -1.24%
Bank of Georgia Holdings (BGEO) 1,159.00p -1.11%
Dunelm Group (DNLM) 574.50p -0.95%
Redrow (RDW) 149.70p -0.80%
Sports Direct International (SPD) 327.50p -0.76%
| European broker round-up |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Abertis: UBS downgrades to NEUTRAL from buy. ArcelorMittal: Kepler downgrades to UNDERWEIGHT from hold and lowers price target to €10 from €14. GDF Suez: Exane downgrades to UNDERWEIGHT from neutral and lowers price target to €18 from €21. L'Oreal: Morgan Stanley downgrades to UNDERWEIGHT from neutral and lowers price target to €91 from €95. Nokia: Nordea reiterates HOLD with a price target of €3. S&P downgrades to SELL from hold with a price target of €1.60. UK Event Calendar
INTERIM DIVIDEND PAYMENT DATE
Avon 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 Close Sharply Higher On ECB News, U.S. Data
With traders reacting positively to the latest news out of the European Central Bank along with a batch of upbeat U.S. economic data, stocks moved sharply higher during trading on Thursday after ending the previous session nearly flat.
The major averages moved roughly sideways going into the close, ending the session at their best levels of the day. The Dow jumped 244.52 points or 1.9 percent to 13,292.00, the Nasdaq surged up 66.54 points or 2.2 percent to 3,135.81 and the S&P 500 soared 28.68 points or 2 percent to 1,432.12.
The gains on the day lifted the Dow and the S&P 500 to four-year closing highs, while the Nasdaq ended the session at its best closing level in over eleven years.
The rally on Wall Street came on the heels of 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.
Buying interest was also generated by 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 generated some optimism about the outlook for the Labor Department's monthly jobs report, which includes government jobs.
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.
| FX and Commodities round-up | Euro in holding pattern ahead of NFP
The euro/dollar ended the session near unchanged at 1.264, following an initial feint lower after the ECB´s initial rate decision. That ahead –of course- of today´s reading on non-farm payrolls (NFP) in the UNiedt States, which some believe may hold the key to the result of the next Fed Meeting.
Nevertheless, the steps undertaken by ECB President Mario Draghi have been clearly positive.
The European Central Bank finally confirmed most of the information which had been drip-fed to the markets throughout the last few days today. In exchange for strict conditionality it may –at its discretion- carry out unlimited sovereign bond purchases.
Those will be fully sterilized and, furthermore, collateral rules will be eased, although the possibility of further non-standard liquidity measures was not discussed.
Asian currencies also performed well, and are set for a third weekly advance.
The peso has rallied 0.7% so far this week, while the Taiwan dollar has strengthened by 0.5%. South Korea’s won was up 0.3% and the Chinese Yuan seems headed for a sixth straight week of gains.
Fitch Ratings yesterday raised South Korea´s credit-worthiness to AA-, citing its “economic and financial stability in a volatile global environment.
Finally, Stateside, the ISM’s service sector purchasing managers’ index rose to 53.7 points in August, versus last month’s reading of 52.6. The ADP employment report showed the private sector creating 201,000 jobs in August (Consensus: 140,000).
Oil and agricultural futures fade lower
Yesterday was a a decidedly mixed day for commodities and precious metals, despite the very much risk-on environment which ensued after the European Central Bank´s press conference.
Nevertheless, many a trader will probably be wary of doing anything with any conviction before the release –this afternoon- of the latest non-farm payrolls numbers Stateside.
Thus, Dr.Copper finished the day higher by 0.60%, at 353.75 dollars per pound, as was to be expected given the general spike higher in market sentiment.
Even so, “global investors are losing faith in China, giving the country’s markets their worst rating in more than two years in the latest Bloomberg poll,” the newswire reports. That may also have played a role in yesterday´s price action.
West Texas crude futures for December delivery finished the day 0.33% down, at 95.21 dollars on the NYMEX. Agricultural futures were also decidedly mixed, with losses in wheat and corn but gains in cocoa, for example.
Gold futures ended lower by 0.56%, at 1,696 dollars per ounce, but still near a five month high. That as risk aversion faded ever so slightly and despite bullish calls from some analysts. |
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