| Unemployment data boosts sentiment
Market Movers
techMARK 2,108.57 -0.22%
FTSE 100 5,910.91 +0.69%
FTSE 250 12,045.88 +0.51% The Footsie finished the day firmly in the blue and just short of the day's high after better-than-expected unemployment figures lifted sentiment.
Miners were also playing their part, boosted by investor confidence ahead of the third quarter growth data due out from China, which is expected to increase demand for commodities. Metals futures were higher for gold, silver, platinum and copper.
Chinese Premier Wen Jiabao was quoted as saying that the Chinese government is confident of achieving 2012 growth targets of 7.5%.
The number of people in the UK out of work fell by 50,000 between June and August to 2.53m. This put the unemployment rate at 7.9%, down 0.2% from the March to May figure.
Most analysts had expected the figure from the Office of National Statistics to remain steady at 8.1%.
Dr Howard Archer, chief UK economist at IHS, said the figures marked "another set of impressively resilient and healthy labour market data which gives a lift to recovery hopes".
However, he added that the employment figures were being propped up by ongoing restrained earnings growth as well as significant increases in part-time jobs and self-employment.
The day's other big economic news related to the October meeting of the Bank of England’s Monetary Policy Committee (MPC).
“There were some differences of view between members about the outlook and the likelihood that further easing in policy would be required,” the minutes of the meeting, released this morning, revealed.
Some members of the MPC felt that there was still considerable scope for asset purchases to provide further stimulus. Other members, while acknowledging that asset purchases had the scope to lower long-term yields further, questioned the magnitude of the impact that lower long-term yields on corporate debt and equity would have on the broader economy at the present juncture.
Most economists remain convinced that the central bank will go ahead in any case with a widely expected increase in the size of its asset repurchase programme by £50bn. BP bounces BP rose on reports that the company and its Russian billionaire partners are in talks to sell their TNK- BP venture to OAO Rosneft. The billionaires, represented by the AAR group, are seeking to sell their 50% holding to Rosneft for $28 billion, according to news agency reports.
BP is also negotiating to sell at least some of its shares, an unnamed source told the news service.
Guinness brewer Diageo saw organic net sales growth of 5% in the July to September, while volumes were up 2%. Europe remains a problem area for the drinks brands giant, but the US market is resilient and it is achieving fast growth in emerging markets.
The firm is in talks to buy a stake of about 20% in Vijay Mallya’s in a deal that would give it management control of the Indian distiller, according to news agency reports.
Diageo would buy new shares in United Spirits and also purchase part of Mallya’s 28% stake, said the news agencies sources. Diageo would get the right to appoint United Spirits’s Chief Executive Officer and other key managers, while Mallya is expected to remain Chairman, they said.
The Royal Bank of Scotland is set to leave the government insurance scheme that was set up at the height of the financial crisis to protect the company from collapse. Analysts said this could pave the way for RBS to be sold back into the private sector. It is currently 82%-owned by the UK taxpayer after receiving a £45bn bailout in 2008.
The banking sector rose despite comments from Paul Tucker, the Deputy Governor of the Bank of England, who warned that the worst could be yet to come for the sector.
There was a flood of mining companies providing third quarter production updates this morning. Anglo-Australian mining giant BHP Billiton saw iron ore output rise year-on-year in the third quarter, but fall from the previous quarter's production levels as a result of the planned shut-down associated with the Inner Harbour expansion project in Western Australia. Iron ore production was up 1% year-on-year but down 3% quarter-on-quarter to 39.8m tonnes.
Xstrata, the Switzerland-based miner which looks set to merge with commodities trader Glencore, said volumes of thermal coal, zinc and lead in concentrate and zinc metal in the third quarter increased year-on-year. Volumes of copper and nickel declined, however.
The third quarter of 2012 was a strong one for mining firm Polymetal International, prompting the company to revise up its 2012 production guidance.
Quarterly gold equivalent production hit a new high of 317,000 ounces, and was up 48% on the corresponding quarter of 2011 and up 7% on the previous quarter of 2012.
Beowulf, the Sweden-focused mineral exploration company, jumped after it said latest assay results from its completed drill programme at its Kallak North mine were "most encouraging". The results included indications of further high grade iron mineralisation on the southerly extension of the deposit, the company said. It has also received approval from the County Administrative Board of Norrbotten for test mining at the site.
Shares in Shanta Gold dropped like a stone after it went back to equity markets to raise another 30 million dollars "to address short-term financing requirements". The firm also said initial production had been lower than anticipated at its flagship New Luika Gold Mine in Tanzania. | AIM/Small Cap Report | | Bumi row rumbles on Financier Nat Rothschild is "completely, 100 per cent wrong" about the controversial deal with the Bakrie Group that could end the feud at Indonesian mining firm Bumi, according to the firm's Deputy Chairman.
Rothschild resigned from the board of Bumi on Monday, saying he had lost confidence in the management's ability to stand up for investors. In his resignation letter he accused the company's Chairman of being "complicit" in oppressing minority shareholders.
The company was also in the news today after announcing that it has appointed the Rothschild Group to evaluate the proposed deal.
Cable & Wireless Communications, already in talks with the Bahrain Telecommunications Company (Batelco) about a possible sale of its Monaco & Islands business unit, has confirmed that it is also in talks regarding a potential sale of its business in Macau. Responding to recent press speculation, the international mobile communications networks operator confirmed it is in discussions with CITIC Telecom International Holdings Limited regarding a potential sale of its 51% shareholding in Companhia de Telecomunicações de Macau (CTM). CITIC is a 20% shareholder in CTM.
Online gaming firm 888 has raised full year earnings guidance after a strong third quarter and a good start to the fourth.
"The final quarter has started positively with average daily revenues more than 7% ahead of the strong Q4 2011. A disciplined approach to our costs, and our analytics driven marketing spend proving highly efficient, means we now expect our EBITDA [earnings before interest, tax, depreciation and amortisation] for the full year to be significantly ahead of current market expectations," revealed Brian Mattingley, 888's Chief Executive Officer.
Also motoring higher after a well-received trading update was car dealer Vertu Motors, which served notice to analyst to bump up their full year earnings forecasts after a solid first half of the financial year. Pre-tax profit was up 26.8% to £5.2m (2011 H1: £4.1m). Underlying profit before tax rose 16.3% to £5.0m from £4.3m the year before. Other markets Brent crude for November delivery fell a dollar to $113 a barrel on the InterContinental Exchange (ICE).
FTSE 100 - Risers
Eurasian Natural Resources Corp. (ENRC) 352.20p +7.25%
Kazakhmys (KAZ) 760.00p +7.19%
Anglo American (AAL) 1,905.50p +5.33%
Vedanta Resources (VED) 1,147.00p +4.37%
Rio Tinto (RIO) 3,184.00p +4.02%
Evraz (EVR) 252.60p +3.65%
BHP Billiton (BLT) 2,014.00p +3.33%
Xstrata (XTA) 993.60p +3.07%
Tullow Oil (TLW) 1,468.00p +3.02%
BP (BP.) 448.35p +2.99%
FTSE 100 - Fallers
BAE Systems (BA.) 321.30p -2.37%
Pearson (PSON) 1,217.00p -2.09%
Bunzl (BNZL) 1,099.00p -1.61%
Compass Group (CPG) 684.00p -1.51%
Lloyds Banking Group (LLOY) 42.14p -1.45%
Centrica (CNA) 332.00p -1.34%
Serco Group (SRP) 571.00p -1.13%
Admiral Group (ADM) 1,162.00p -1.11%
United Utilities Group (UU.) 724.00p -0.96%
Experian (EXPN) 1,071.00p -0.93%
FTSE 250 - Risers
Ferrexpo (FXPO) 206.50p +6.17%
Lonmin (LMI) 520.50p +6.01%
Inchcape (INCH) 377.40p +5.83%
New World Resources A Shares (NWR) 272.70p +5.45%
Home Retail Group (HOME) 108.90p +5.22%
Heritage Oil (HOIL) 202.30p +4.76%
Talvivaara Mining Company (TALV) 139.90p +4.56%
Petropavlovsk (POG) 460.00p +4.55%
Chemring Group (CHG) 353.00p +4.41%
Fidessa Group (FDSA) 1,381.00p +3.76%
FTSE 250 - Fallers
CSR (CSR) 330.90p -2.99%
Interserve (IRV) 368.20p -2.85%
Rightmove (RMV) 1,593.00p -2.51%
BTG (BTG) 359.00p -2.50%
Close Brothers Group (CBG) 842.00p -2.38%
COLT Group SA (COLT) 118.70p -2.38%
Oxford Instruments (OXIG) 1,252.00p -2.34%
Dialight (DIA) 1,163.00p -2.02%
Brown (N.) Group (BWNG) 301.00p -1.92%
Micro Focus International (MCRO) 558.50p -1.85%
FTSE TechMARK - Risers
CML Microsystems (CML) 394.00p +4.37%
Innovation Group (TIG) 23.00p +2.79%
BATM Advanced Communications Ltd. (BVC) 16.25p +2.36%
Corin Group (CRG) 58.00p +1.31%
Phytopharm (PYM) 10.38p +1.22%
Consort Medical (CSRT) 753.00p +0.53%
Sepura (SEPU) 89.00p +0.14%
Kofax (KFX) 300.00p 0.00%
Triad Group (TRD) 6.25p 0.00%
Parity Group (PTY) 19.25p 0.00%
FTSE TechMARK - Fallers
Ricardo (RCDO) 366.00p -3.68%
Vislink (VLK) 27.75p -3.06%
Phoenix IT Group (PNX) 170.38p -2.78%
DRS Data & Research Services (DRS) 17.75p -2.74%
RM (RM.) 82.25p -2.23%
Timeweave (TMW) 22.12p -2.21%
Optos (OPTS) 205.00p -1.56%
Torotrak (TRK) 33.00p -1.49%
Emblaze Ltd. (BLZ) 46.50p -1.06%
NCC Group (NCC) 980.00p -1.01% |
| Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | | European Markets Climbed On Spanish Optimism Again Wednesday
The European markets finished in positive territory again on Wednesday, after Moody's Investors Service left its Spanish sovereign rating unchanged. The Spanish government is also reportedly close to making an official bailout request. The markets also received a boost from the unexpected drop in the British unemployment rate and the strong increase in U.S. housing starts.
The possibility of Spain requesting financial aid through a precautionary credit line from the EUR 500 billion rescue fund, the European Stability Mechanism, is currently under discussion, the Financial Times reported Wednesday.
This money could then be used to purchase Spanish bonds at auction in an emergency, the newspaper said citing senior officials. Because the aid would only be a credit line rather than a bailout, the scheme is expected to face less political opposition in northern creditor countries, it said.
Offering some respite to the Spanish government that is under pressure to officially request a European bailout, Moody's Investors Service on Tuesday left its Spanish sovereign rating unchanged at investment grade, but with a 'negative' outlook.
For today's rating decision, the rating agency cited a number of positive developments since June, including the European Central Bank's announcement of the bond-purchase program and evidence of the Spanish government's continued commitment to implement the fiscal and structural reform measures.
Moody's has a Baa3 rating on Spanish government bonds. The ratings agency found that the risk of the Spanish sovereign losing market access has been materially reduced by the willingness of the ECB to undertake outright purchases of Spanish government bonds to contain their price volatility.
The German government on Wednesday lowered its 2013 economic growth forecast to 1 percent from 1.6 percent.
Economy Minister Philipp Roesler, however, said gross domestic product will grow 0.8 percent this year, marginally higher than the earlier projection of 0.7 percent. The economy expanded 3 percent in 2011.
Bank of England policymakers unanimously decided to leave the current size of asset purchases unchanged in early October, but they split over whether to add more stimuli over the next month. According to the minutes of the Monetary Policy Committee meeting, the nine-member panel unanimously voted to maintain quantitative easing at GBP 375 billion and the interest rate unchanged at 0.50 percent.
There was an agreement among policymakers that there was little to be gained at this meeting in changing the current quantitative easing programme, the minutes showed Wednesday. The meeting was held on October 3 and 4.
Some members said there was still considerable scope for asset purchases to provide further stimulus, while other members questioned the magnitude of the impact that lower long-term yields on corporate debt and equity would have on the broader economy at the present juncture.
The Euro Stoxx 50 index of Eurozone bluechip stocks increased by 0.89 percent and the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.55 percent.
The DAX of Germany climbed by 0.25 percent and the CAC 40 of France advanced by 0.76 percent. The FTSE 100 of the U.K. gained 0.69 percent and the SMI of Switzerland rose by 0.17 percent.
In Frankfurt, Lanxess gained 2.92 percent, after some positive comments from Nomura.
In Paris, Credit Agricole declined by 3.08 percent. The lender signed a contract to sell the entire share capital of its Greek unit Emporiki to Alpha Bank SA for a token price of one euro.
Danone fell by 2.87 percent, after the company announced that its third quarter sales have been negatively impacted by the situation in Europe.
In London, Diageo finished lower by 0.70 percent. The company reported an increased in quarterly sales, but cautioned of softness in Asia.
BP gained 3.22 percent, following reports that the company is close to a deal to sell its interest in TNK-BP to OAO Rosneft.
Royal Bank of Scotland climbed by 2.07 percent. The company has reached an agreement with the Treasury to exit its Asset Protection Scheme on the 18th of this month.
Zurich Insurance Group dropped by 2.74 percent in Zurich. The company said it would write-off about $550 million following a review of its General Insurance business in Germany.
Eurozone construction output grew for the second straight month in August, Eurostat reported Wednesday. In construction sector, output climbed at a faster pace of 0.7 percent from a month ago, when it gained 0.1 percent.
Jobless rate in the U.K. declined unexpectedly in the three months through August, to the lowest level in more than a year as the labor market absorbed record number of workers during the Olympics, data from the Office for National Statistics revealed Wednesday.
The unemployment rate, under the definition of the International labor Organization, declined to 7.9 percent in the June-August period from 8.1 percent during March-May.
Investor confidence in Switzerland improved in October amid less pessimistic view of the economy's prospects in the coming six months, a survey by the Center for European Economic Research (ZEW) showed Wednesday. The ZEW-Credit Suisse Indicator of Economic Sentiment improved by 6 points to -28.9 in October. |
| US Market Report | | Stocks Mostly Higher But Dow Remains In The Red
While stocks have moved mostly higher over the course of the trading day on Wednesday, the major averages continue to turn in a mixed performance in mid-day trading. Notable losses by Intel (INTC) and IBM (IBM) have helped to keep the Dow in the red.
The Dow has climbed well off its worst levels of the day but currently remains down by 7.42 points or 0.1 percent at 13,544.36. Meanwhile, the Nasdaq is up 8.91 points or 0.3 percent at 3,110.08 and the S&P 500 is up 5.51 points or 0.4 percent at 1,460.43.
The markets have benefited from a positive reaction to a report from the Commerce Department showing a substantial increase in housing starts in the month of September.
The report said housing starts jumped 15 percent to an annual rate of 872,000 in September from the revised August estimate of 758,000. Economists had expected starts to climb to 765,000 from the 750,000 originally reported for the previous month.
With the much stronger than expected monthly growth, the annual rate of housing starts reached its highest level since July of 2008.
Building permits, an indicator of future housing demand, also surged up by 11.6 percent to an annual rate of 894,000 in September from the revised August rate of 801,000. The increase in building permits also exceeded expectations.
However, a mixed batch of earnings news has helped to limit the upside for the markets, with tech giants Intel and IBM under pressure after reporting their quarterly results.
While Intel reported better than expected third quarter results, the semiconductor giant warned of a difficult environment ahead. Shares of Intel are down by 3 percent on the news.
IBM is down by 4.8 percent after reporting third quarter earnings that came in just above analyst estimates on revenues that fell by more than expected.
Meanwhile, Bank of America (BAC) is posting a modest gain after the financial giant reported third quarter earnings that showed a notable decrease year-over-year but exceeded analyst estimates for a loss. At the same time, the company reported revenues that fell by more than expected.
Sector News
While many of the major sectors are showing only modest moves, housing stocks have moved sharply higher on the heels of the housing starts data. The Philadelphia Housing Sector Index has surged up by 4.1 percent, reaching a five-year intraday high.
Hovnanian (HOV) and KB Home (KBH) are turning in two of the housing sector's best performances, jumping by 9.8 percent and 8.8 percent, respectively.
Considerable strength has also emerged among steel stocks, as reflected by the 1.7 percent gain being posted by the NYSE Arca Steel Index. With the gain, the index has risen to its best intraday level in almost a month.
Biotechnology, airline, banking, and oil stocks have also moved notably higher on the day, while weakness remains visible among electronic storage, railroad, and software stocks.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Wednesday, adding to yesterday's gains. Japan's Nikkei 225 Index surged up by 1.2 percent, while Hong Kong's Hang Seng Index advanced by 1 percent.
The major European markets also moved to the upside on the day. While the German DAX Index edged up by 0.3 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index advanced by 0.7 percent and 0.8 percent, respectively.
In the bond market, treasuries have come under pressure on the heels of the upbeat housing data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 6.9 basis points at 1.789 percent. |
| Broker tips | | Carpetright, Pearson, Ashtead Analysts at Panmure Gordon have today issued a biting note on Carpetright, with analyst Philip Dorgan indicating that: 'We are slightly surprised to see that UK second quarter like-for-like sales growth slowed from quarter one, given kitten soft comparables. However, gross margin guidance is retained and, despite a marked deterioration in the Netherlands, we don't expect that consensus forecasts will change. We remain sellers, because it will be a while before profits catch up with the valuation (66.2x prospective earnings).'
The broker has placed a target of 400p on the shares of the flooring retailer.
Nomura comments this morning on Pearson’s acquisition of Embanet for $650m dollars (£406m), or five times sales, calling attention to the similarities between Embanet and the Deltak business acquired recently by John Wiley for $220m (4x sales). Furthermore, its analysts highlight how –in their opinion: “the business provides more scale to Pearson’s existing college solutions business (e.g., Arizona State and Calstate), and allows the company to capture more of the college’s value chain without the significant working capital in books.”
Nomura adds that: “There will be some accretion in fiscal year 2013 but limited by integration charges. We estimate a 0.5% boost to organic growth. To reach targets, we estimate the revenue growth will have to be over 50% in fiscal year 2013 and circa 25% in fiscal year 2014, which poses some execution challenges. Post-acquisition valuation remains high and free-cash flow (FCF) around 7-8%.”
Following on from the above, Nomura has raised its price target to 1,250p from 1,200p, while maintaining its reduce rating.
Analyst Kevin Lapwood at Seymour Pierce believes that US construction confidence reaching its highest level since 2006, coupled with the announcement by one of Ashtead’s main US competitors, United Rentals (URI), of top of the range results for its third quarter results, bodes well for Ashtead’s US business.
Lapwood writes that: "URI’s results showed the robustness of the equipment hire industry with the shift from ownership to rental showing no signs of abating. Ashtead’s shares are trading on a prospective price earnings ratio of 13.1 times, which we believe is undemanding for a company expecting to deliver double digit earnings growth over the next three years. We reiterate our BUY recommendation and raise our target to 400p (previously 350p), equivalent to a prospective PE of 14.8 times." |
|
No comments:
Post a Comment