| Stocks end flat after BoE and ECB decisions
Market Movers
techMARK 2,150.84 +0.40%
FTSE 100 5,827.78 +0.03%
FTSE 250 11,954.42 +0.69% The Footsie swung between gains and losses for most of Thursday’s session but finished the day broadly flat following a busy day on the global economic calendar, which saw policy decisions in the UK and Europe, a news conference with Mario Draghi and some better-than-expected economic figures from the US.
At midday, the Bank of England’s Monetary Policy Committee (MPC) maintained the Bank Rate at 0.5% and the asset purchase programme at £375bn. The decision was more or less as expected, though many analysts are expecting the Bank to embark on further easing and possibly a rate cut in November.
The European Central Bank (ECB) also remained in ‘wait-and-see’ mode this afternoon, leaving its key interest rate at 0.75% after it was cut by 25 basis points earlier in the year. In the following press meeting with ECB President Draghi, he said the "euro is irreversible" and explained that last month’s decision to announce a bond-buying programme will act as an effective backstop for the Eurozone.
Analyst Craig Erlam from Alpari said this afternoon: “It’s very difficult to argue with this point, all you have to do is look at the borrowing costs of the peripheral countries to see that investors are much more comfortable with the situation in the Eurozone than they were a few months ago.”
Stateside, initial weekly jobless claims increased to 367,000 last week, more than the 363,000 recorded the week before but under the 370,000 expected by the consensus. Factory orders fell by 5.2% in August, the second fall in three months, according to the Commerce Department. This was better than the 5.9% decline forecasted.
In Eurozone news, Spain's Treasury sold €3.99bn in two-, three- and five-year debt, the top end of its targeted range. While bid-to-cover ratios fell across all maturities, so did the yields on offer. Meanwhile, the Troika has said it expects the Greek economy to contract by 5% in 2013, notably worse than the 3.8% fall in gross domestic product (GDP) expected by Greece's own government. FTSE 100: Retailers mixed; Tesco continues to fall
Supermarket groups Tesco and Sainsbury were stuck in the red today after announcing interim results and a trading update (respectively) yesterday. Both Exane BNP Paribas and Credit Suisse reduced their target prices for Tesco’s shares today.
Retailing peers Next, Kingfisher and Marks & Spencer were heading the other day, with Next topping the risers list on the Footsie after an upbeat broker note from Nomura. The broker said that cotton prices should start to benefit clothing retailers: “We believe retailers will start to benefit from lower input costs over the next few quarters, from a lagged benefit from the fall in cotton prices, and also increasing productivity levels in Chinese factories.”
BHP Billiton is among the companies talking to Petrobras about buying a stake in its Gulf of Mexico oilfields. The miner was trading in the red today after analysts at Morgan Stanley lowered their price target for the shares from 2,180p to 2,100p.
Pharmaceuticals behemoth GlaxoSmithKline gained after saying its joint venture company, Shionogi-ViiV Healthcare, has completed an initial clinical registration package for dolutegravir, its treatment for HIV patients.
Sweeteners and food products group Tate & Lyle was the high riser after Credit Suisse raised its rating for the stock from 'neutral' to 'outperform'. The broker said: "There is no easy way to value Tate & Lyle, but it does seem to us to be a better business for all the changes we have seen and that this is not reflected in the share price (which is down 8% year to date versus a staples sector up 18%)." FTSE 250: Halfords accelerates after impressive Q2
Car and bike parts retailer Halfords jumped after appointing a new Chief Executive Officer following the abrupt departure of David Wild in the summer, as it revealed that full-year profits would be at the top end of guidance after a strong second quarter.
The company expects pre-tax profit to be in the region of £40-42m in the first half on the back of its second quarter performance and an acceleration of operating cost investment. The consensus estimate prior to the announcement stood at £35.8m. Both Panmure Gordon and Seymour Pierce raised their target prices for the shares today.
Transport company FirstGroup was firmer following the 20.7% drop the day before after the Department for Transport cancelled the decision to award the group the West Coast rail franchise. UBS this morning has upgraded the stock from 'sell' to 'neutral' after yesterday's big fall, but said that there are still "major challenges ahead". Morgan Stanley also raised its rating to 'equal weight', while HSBC downgraded to 'underweight'.
FTSE 100 - Risers
Next (NXT) 3,592.00p +2.66%
Weir Group (WEIR) 1,800.00p +2.16%
Tate & Lyle (TATE) 687.00p +1.85%
InterContinental Hotels Group (IHG) 1,669.00p +1.83%
Pearson (PSON) 1,252.00p +1.79%
Tullow Oil (TLW) 1,420.00p +1.72%
Aggreko (AGK) 2,347.00p +1.65%
Carnival (CCL) 2,350.00p +1.60%
Kingfisher (KGF) 268.70p +1.59%
Smiths Group (SMIN) 1,055.00p +1.54%
FTSE 100 - Fallers
Tesco (TSCO) 318.15p -2.99%
Xstrata (XTA) 948.30p -2.08%
Johnson Matthey (JMAT) 2,369.00p -1.99%
Lloyds Banking Group (LLOY) 38.02p -1.98%
BHP Billiton (BLT) 1,912.50p -1.57%
Morrison (Wm) Supermarkets (MRW) 280.40p -1.54%
G4S (GFS) 264.30p -1.38%
Croda International (CRDA) 2,380.00p -1.20%
CRH (CRH) 1,175.00p -1.18%
Royal Dutch Shell 'B' (RDSB) 2,200.00p -1.10%
FTSE 250 - Risers
Halfords Group (HFD) 303.50p +14.10%
Sports Direct International (SPD) 382.80p +6.33%
Bwin.party Digital Entertainment (BPTY) 116.10p +6.22%
Rentokil Initial (RTO) 87.25p +5.12%
New World Resources A Shares (NWR) 276.00p +3.72%
FirstGroup (FGP) 200.60p +3.72%
Victrex (VCT) 1,380.00p +3.68%
Imagination Technologies Group (IMG) 496.20p +3.59%
Workspace Group (WKP) 281.90p +3.37%
PayPoint (PAY) 765.00p +3.24%
FTSE 250 - Fallers
Petra Diamonds Ltd.(DI) (PDL) 113.40p -2.49%
Heritage Oil (HOIL) 186.90p -2.10%
IP Group (IPO) 118.50p -1.66%
NMC Health (NMC) 191.50p -1.64%
Afren (AFR) 139.50p -1.62%
Bovis Homes Group (BVS) 493.90p -1.32%
Euromoney Institutional Investor (ERM) 774.50p -1.27%
Kenmare Resources (KMR) 39.70p -1.12%
Essar Energy (ESSR) 118.00p -1.09%
Tullett Prebon (TLPR) 293.90p -1.08%
| Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | | European Markets Finished Mixed After Central Bank Announcements
The European markets ended Thursday's session with mixed results. Investors exercised caution ahead of the interest rate decisions by the central banks and Friday's upcoming U.S. jobs report. Both the European Central Bank and the Bank of England decided to leave interest rates unchanged. There was no news with regards to the delayed bailout request from Spain.
The European Central Bank adopted a wait-and-watch stance on Thursday while leaving euro area interest rates unchanged, amid uncertainty regarding a Spanish request for bailout and its fallout. The central bank of 17 nations held the refinancing rate unchanged at 0.75 percent for a third consecutive month, following the Governing Council meeting in Ljubljana, the capital of Slovenia.
The decision was in line with economists' expectations. The central bank also kept its deposit rate at zero and the marginal lending facility rate at 1.50 percent.
The U.K. central bank also refrained from a quantitative easing increase, as a slight economic improvement eased the pressure on policymakers to expand the ongoing stimulus at this stage.
The Monetary Policy Committee of the Bank of England headed by Governor Mervyn King retained the size of the quantitative easing programme at GBP 375 billion. The asset purchases, which were last initiated in July, will continue until early November.
The European Banking Authority (EBA) has asked banks in the European Union to hold on to more than EUR 200 billion capital buffer raised between December 2011 and June 2012, given the still challenging market environment.
Disclosing the final report on its EU-wide recapitalization exercise and the data on all individual banks on Wednesday, the EBA said 27 banks with an initial shortfall that submitted capital plans have strengthened their capital position by 116 billion euros.
Spain successfully raised EUR 3.99 billion from bond auction on Thursday amid continuing uncertainty whether the nation seek a bailout or not. The auction met the upper end of the EUR 3 billion to EUR 4 billion target range, the Madrid-based Treasury said. The average yield on the new three-year benchmark debt rose to 3.956 percent from 3.845 percent at the prior auction on September 20.
Portugal on Wednesday announced a number of austerity measures, including higher tax on incomes, to help the government achieve the deficit target in 2013, despite mounting opposition to the ongoing fiscal consolidation efforts.
Finance Minister Vitor Gaspar said the tax measures, which the finance ministry termed as "enormous", included an additional 4 percent surcharge on annual income in 2013.
The Euro Stoxx 50 index of eurozone bluechip stocks decreased by 0.32 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.24 percent.
The CAC 40 of France dropped by 0.14 percent and the DAX of Germany fell by 0.23 percent. The FTSE 100 of the U.K. climbed by 0.03 percent and the SMI of Switzerland gained 0.41 percent.
In Frankfurt, Deutsche Telekom declined by 4.50 percent. Deutsche Bank upgraded its rating on the stock.
Volkswagen climbed by 2.90 percent, BMW gained 3.44 percent and Daimler rose by 1.27 percent.
Gerresheimer dropped by 2.27 percent, after reporting a 25 percent drop in third-quarter profit.
In Paris, EDF fell by 0.71 percent. The utility announced plans to recruit around 6000 people in 2013, including more than 1,700 engineers / managers to support its development and future challenges.
Societe Generale climbed by 1.73 percent, BNP Paribas gained 0.62 percent and Credit Agricole added 1.47 percent.
In London, mining stocks were under pressure. BHP Billiton fell by 1.57 percent, Antofagasta lost 0.23 percent and Eurasian Natural Resources declined by 0.51 percent.
Energy stocks also turned in a negative performance. Royal Dutch Shell dropped by 0.85 percent and BP decreased by 1.10 percent.
Barclays rose by 1.04 percent, Royal Bank of Scotland gained 0.66 percent and HSBC added 0.87 percent.
Tate & Lyle climbed by 1.85 percent, after Credit Suisse upgraded it to "Outperform" from "Neutral."
Halfords Group, whose new CEO Matt Davies assumed office today, surged by 14.10 percent. The automotive products retailer reported a 6.2 percent increase in second-quarter revenues, with 5.6 percent growth in like-for-like revenues.
Nobel Biocare dropped by 2.14 percent in Zurich, after the company issued a profit warning.
The downturn in Germany's construction activity eased in September, helped by an upturn in home-building, survey data from Markit Economics showed Thursday. The Construction Purchasing Managers' Index rose to a five-month high of 48.6 in September from 47.8 last month.
House prices in the U.K. declined for a third consecutive month in September and are expected to remain broadly stable over the rest of the year and into 2013, a survey by Lloyds Banking Group's Halifax division showed Thursday.
The house price index declined unexpectedly by 0.4 percent in September from a month ago. This was the third consecutive monthly fall. Economists had forecast no change in prices after a 0.5 percent drop in August.
| US Market Report | | Stocks On The Upside Ahead Of Monthly Jobs Report
Stocks continue to see some strength in mid-day trading on Thursday, although buying interest has remained relatively subdued. Uncertainty about tomorrow's monthly jobs report has helped to limit the upside for the markets.
The major averages are currently all in positive territory, although the tech-heavy Nasdaq is up only 1.92 points or 0.1 percent at 3,137.15. The Dow is up 64.97 points or 0.5 percent at 13,559.58 and the S&P 500 is up 7.02 points or 0.5 percent at 1,458.00.
The strength on Wall Street is partly due to a positive reaction to the latest batch of U.S. economic data, including a report from the Labor Department showing that initial jobless claims rose by less than expected in the week ended September 29th.
While jobless claims edged up to 367,000 from the previous week's revised figure of 363,000, economists had expected jobless claims to climb to 370,000.
Peter Boockvar, managing director at Miller Tabak, said, "Bottom line, it's encouraging to see the pace of firing's moderate over the past 2 weeks but we'll see tomorrow how the recent pace of hiring's are going."
A separate report from the Commerce Department showed a notable decrease in factory orders in the month of August, although orders actually rose when excluding a steep drop in orders in the volatile transportation sector.
Traders have also reacted positively to comments from European Central Bank President Mario Draghi, who spoke following the central bank's widely expected decision to leave interest rates unchanged.
Draghi said the ECB is prepared to start buying government bonds and said the decision to institute the bond buying program has helped to alleviate tensions in euro area financial markets.
The ECB President also said the risks to the outlook for the European economy continue to be on the downside but said the risks to the outlook for inflation continue to be broadly balanced.
Sector News
While many of the major sectors are showing only modest moves in mid-day trading, considerable strength remains visible among gold stocks. Reflecting the strength in the gold sector, the NYSE Arca Gold Bugs Index is up by 1.8 percent.
The strength among gold stocks comes amid an increase by the price of the precious metal, with gold for December delivery climbing $13.70 to $1,793.50 an ounce.
Banking stocks are also holding on to strong gains, resulting in a 1.6 percent advance by the KBW Bank Index. Regions Financial (RF) and Bank of America (BAC) are turning in two of the banking sector's best performances.
Brokerage, steel, and railroad stocks also continue to perform well, while considerable weakness has emerged among networking stocks. The NYSE Arca Networking Index is down by 1.2 percent, falling to a nearly two-month intraday low.
Healthcare provider stocks have also come under pressure over the course of the trading day, dragging the Morgan Stanley Healthcare Provider Index down by 1 percent. |
| Broker tips | | Tate and Lyle, Halfords, FirstGroup
Credit Suisse has raised its recommendation for sweeteners and food products group Tate and Lyle from 'neutral' to 'outperform' and raised its target from 700p to 750p despite leaving its forecasts unchanged.
Credit Suisse said: "Tate has spent a few years getting its house in order, disposing large tranches of the more cyclical/commodity earnings and investing behind the added-value operations (now 60% of profits versus 38% in 2007). Despite this the shares have seen no rating change, still trading 11-12x earnings.
"Perhaps the market requires evidence of growth to see this re-rating? Tate is investing for that right now. Certainly it looks to us that the business is in better shape and is being set up to deliver growth – there is rather more going on in the business than might be apparent from the P&L."
Seymour Pierce has raised its target for car and bike parts retailer Halfords from 300p to 340p and reiterated its 'buy' rating following the appointment of a new Chief Executive Officer (CEO) and better-than-expected trading in the second quarter.
The broker said that the valuation remains undemanding - shares are trading at 9.3 times full-year earnings on new numbers - given the "profit recovery potential of the business".
UBS has upgraded its rating for FirstGroup from 'sell' to 'neutral' following Wednesday's steep sell-off on the back of the failure to secure the West Coast franchise.
The broker said that firm needs to up investment to improve long-term profitability and cash generation; this, along with the loss of cash inflows from West Coast means that there is an increased risk to the dividend. Meanwhile, the IAS 19 pension adjustment and UK Bus disposals are also highlighted as "headwinds". |
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