Burberry back in fashion
Market Movers
techMARK 2,104.89 +0.15%
FTSE 100 5,785.60 +0.15%
FTSE 250 11,851.20 +0.19% London has, for once, decided not to dance to Wall Street's tune and has opened little changed, despite the shake-out yesterday stateside. Another credit ratings downgrade for troubled economy Spain has also been shrugged off. In company news, Burberry, the luxury fashion chain which issued a profit warning last month, confirmed like-for-like (LFL) sales growth in its stores slowed dramatically in the July-September quarter, but the good news is that towards the end of the period things started to pick up again. LFL sales over the half-year were up 3%, but much of the heavy lifting was done in the first quarter, when LFL sales were up 6%, while in the second quarter LFL sales growth eased to 1%. However, that second quarter performance was better than some market observers were expecting; Seymour Pierce, for instance, was wrong footed by the late September revival as it had predicted second quarter like-for-like retail sales would be down 2%. Burberry also had good news on the operating margin front, saying the Retail/wholesale operating margin in the six months to September 30th 2012 is now expected to be at least in line with the same period last year (14.9%), rather than lower as previously guided. Elsewhere in the world of retail investors are far from sanguine about the impending departure of Kate Swann, the Chief Executive Officer of newsagent chain WH Smith. The share price fall is recognition of how well Swann has maximised returns from what was considered at the onset of her stewardship a cash cow with little growth potential. She will leave the company on June 30th 2013 after nine years as boss and will be replaced by Steve Clarke, Managing Director of the firm's high street business. Greggs, the hot pastry-based snack dispenser of choice for British politicians seeking a photo-opportunity, left a sour taste after it said LFL sales will remain negative in the final quarter of 2012. LFL sales fell 2.6% year-on-year in the 14 weeks to October 6th as consumers continued to tighten their purse strings. Royal Bank of Scotland (RBS) said it has priced Direct Line at 175p a share, valuing the insurance firm at over £2.6bn. The offer comprises 450m existing shares, representing 30% of the 1.5bn total, raising RBS £787m. The flotation price is in the bottom half of the indicated range of between 160p and 195p a share. Assets under management at fund manager Ashmore picked up sharply in the July - September quarter, largely on the back of a positive investment performance. The quarter saw assets under management increase 6.8% to $68.0bn, driven by positive investment performance of $3.7bn and net inflows of $0.6bn. Investment performance was positive across all investment themes, it said. Hot on the heels of its failed merger with Airbus owner EADS, defence firm BAE Systems has confirmed that trading since its interim results at the beginning of August has been in line with management expectations. Peace could be about to break out at Bumi, the Indonesia-focused mining giant. It has received a proposal from major shareholder, the Bakrie Group, which wants to swap its stake in the group for a stake of equivalent value in Bumi Resources, Bumi's Indonesia-listed affiliate which is under investigation for alleged financial irregularities. The group has been the subject of a board room battle between the influential Bakrie family and blue-blooded London financier Nat Rothschild. The shares shot up on hopes that the complicated cross-holdings situation at the firm would be simplified by the new proposals.
| AIM/Small Cap Report | FTSE 100 - Risers
Burberry Group (BRBY) 1,072.00p +6.88%
Tate & Lyle (TATE) 701.00p +1.82%
Evraz (EVR) 246.40p +1.73%
Croda International (CRDA) 2,259.00p +1.71%
Kazakhmys (KAZ) 734.00p +1.52%
Petrofac Ltd. (PFC) 1,606.00p +1.26%
Lloyds Banking Group (LLOY) 38.95p +1.22%
British Land Co (BLND) 516.50p +1.18%
Wolseley (WOS) 2,679.00p +1.09%
CRH (CRH) 1,127.00p +1.08%
FTSE 100 - Fallers
Morrison (Wm) Supermarkets (MRW) 271.00p -1.09%
Antofagasta (ANTO) 1,279.00p -0.93%
Polymetal International (POLY) 1,121.00p -0.80%
SSE (SSE) 1,416.00p -0.63%
Unilever (ULVR) 2,289.00p -0.52%
National Grid (NG.) 687.00p -0.51%
Next (NXT) 3,576.00p -0.47%
InterContinental Hotels Group (IHG) 1,626.00p -0.43%
United Utilities Group (UU.) 726.00p -0.41%
Legal & General Group (LGEN) 130.90p -0.38%
FTSE 250 - Risers
Bumi (BUMI) 203.40p +9.53%
Smith (DS) (SMDS) 199.00p +4.74%
Fidessa Group (FDSA) 1,367.00p +3.72%
JD Sports Fashion (JD.) 785.00p +3.43%
Bovis Homes Group (BVS) 497.00p +2.05%
Soco International (SIA) 338.70p +1.93%
Taylor Wimpey (TW.) 57.65p +1.77%
SDL (SDL) 651.50p +1.72%
Barratt Developments (BDEV) 177.40p +1.66%
Salamander Energy (SMDR) 202.10p +1.56%
FTSE 250 - Fallers
WH Smith (SMWH) 615.00p -5.67%
Greggs (GRG) 494.10p -4.34%
Heritage Oil (HOIL) 181.90p -4.21%
Kenmare Resources (KMR) 37.30p -3.24%
African Barrick Gold (ABG) 464.40p -2.27%
Synergy Health (SYR) 911.00p -2.10%
Renishaw (RSW) 1,721.00p -1.66%
New World Resources A Shares (NWR) 270.80p -1.53%
Beazley (BEZ) 166.70p -1.36%
Daejan Holdings (DJAN) 2,782.00p -1.35% |
| UK Event Calendar |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | INTERIM DIVIDEND PAYMENT DATE
Berendsen, Macfarlane Group, Molins, Standard Chartered, UBM, Zotefoams
QUARTERLY PAYMENT DATE
XP Power Ltd. (DI)
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Trade (US) (13:30)
Bloomberg Consumer Confidence (US) (14:45)
Consumer Price Index (GER) (07:00)
Continuing Claims (US) (13:30)
Crude Oil Inventories (US) (15:30)
ECB Report (EU) (09:00)
Import and Export Price Indexes (US) (13:30)
Initial Jobless Claims (US) (13:30)
Treasury Budget Statement (US) (19:00)
FINALS
Air Partner, WH Smith
IMSS
Ashmore Group, Greggs
AGMS
Angle, Goodwin Plc, Monitise, Standard Life UK Smaller Companies Trust
TRADING ANNOUNCEMENTS
Burberry Group
FX round-up
Euro down after Spain downgrade
The euro fell against the dollar on Wednesday after Standard & Poor's downgraded Spain's credit rating, citing concern about the nation's capacity to deal with the current financial crisis.
The single currency fell around 0.1% at $1.2873 in late trading in the US as S&P Spain’s rating cut to just one notch above junk fuelled nerves about Europe's debt crisis and spurred safe haven demand.
The ICE dollar index, which measures the US currency against a basket of six major currencies, rose above the 80-level for the first time in a month, to trade at a high of 80.185. It later traded at around 80.056 versus 79.972 the previous session.
The dollar added to the previous session's gains after the International Monetary Fund downgraded its global growth estimates for 2012 and 2013.
Elsewhere the greenback was hardly changed against the safe haven Japanese yen, changing hands at ¥78.18 from ¥78.25 on Tuesday.
Sterling bought $1.6003 compared to $1.6002 and was little changed against the euro.
The Australian dollar advanced to $1.0228 from $1.0205 previously.
| US Market Report | Stocks Close Firmly Negative Amid Lingering Economic Worries
With traders expressing continued concerns about the outlook for the global economy, stocks saw notable weakness during trading on Wednesday. The losses on the day extended a recent downward move for the markets, with the major averages falling to their lowest levels in about a month.
The major averages ended the day firmly in negative territory, near their lows for the session. The Dow plunged 128.56 points or 1 percent to 13,344.97, the Nasdaq fell 13.24 points or 0.4 percent to 3,051.78 and the S&P 500 slid 8.92 points or 0.6 percent to 1,432.56.
The weakness on Wall Street was partly due to a negative reaction to earnings news from aluminum giant Alcoa (AA), which kicked off the earnings season after the close of trading on Tuesday.
While Alcoa reported third quarter results that exceeded analyst estimates, the company also lowered its forecast for global aluminum demand growth in 2012 to 6 percent from 7 percent. Shares of Alcoa tumbled by 4.6 percent on the news.
The release of results from Alcoa is seen as the start of earnings season, and the lower guidance led to worries about the possibility of disappointing forecasts from other companies.
Adding to the negative sentiment, oil giant Chevron (CVX) warned that it expects its third quarter earnings to be substantially lower than in the second quarter. Shares of Chevron fell by 4.2 percent.
Chevron said it expects upstream earnings to be hurt by foreign exchange losses and lower liftings and realizations, while timing effects, lower realized margin and the negative effects of several smaller unrelated items are expected to drag downstream earnings lower.
Meanwhile, traders largely shrugged off the release of the Federal Reserve's Beige Book, which said economic activity generally expanded modestly since the last report.
The report said consumer spending was generally reported to be flat to up slightly but also noted improvement in residential real estate conditions.
Conditions in the manufacturing sector were described as mixed but were said to have improved somewhat from the previous report.
Sector News
While most of the major sectors moved to the downside on the day, substantial weakness was visible among electronic storage stocks. The NYSE Arca Disk Drive Index fell by 3.8 percent to its lowest closing level in well over two months.
Hutchinson Technology (HTCH) and NetApp (NTAP) turned in two of the storage sector's worst performances, falling by 4.7 percent and 3 percent, respectively.
Oil stocks also came under pressure on the day on the heels of the news from Chevron. A notable decrease by the price of crude oil also contributed to the weakness in the sector. With crude for November delivery sliding $1.14 to $91.25 a barrel, the NYSE Arca Oil Index fell by 1.8 percent.
Significant weakness was also visible among semiconductor stocks, as reflected by the 1.4 percent loss posted by the Philadelphia Semiconductor Index. Steel, networking, and biotech stocks also posted notable losses.
Looking Ahead
Trading on Thursday could be impacted by reaction to reports on the U.S. trade balance, weekly jobless claims, and import and export prices.
On the earnings front, Safeway (SFY) and Fastenal (FAST) are among the companies due to release their quarterly results before the start of trading on Thursday. |
| Thursday newspaper round-up | Direct Line, Spain, BAE Retail shareholders are to invest a greater sum in Direct Line’s initial public offering than any other UK flotation in at least the past five years after about 25,000 individual investors applied to take part. Private investors are set to account for about 15 per cent of shares offered in Royal Bank of Scotland’s insurance arm, which is scheduled to begin trading on the London Stock Exchange this morning. Bankers were still finalising the details Wednesday night but the part-nationalised lender was expected to raise about 115m pounds from the public. The retail allocation is set to be the biggest for a London IPO since that of Hargreaves Lansdown in 2007, people with knowledge of the flotation said, The Financial Times reports.
Setting the stage for another volatile market session on Thursday, Standard & Poor’s cut Spain’s credit rating by two notches citing the country’s deepening economic recession and inability to handle mounting borrowing costs. S&P cut the country’s debt to triple B minus from triple B plus, just one notch above junk level and said the country’s outlook is negative. The rating agency’s move came after markets had closed in New York, but the euro still fell slightly on the news to trade 0.1% lower at $1.2870, The Financial Times says.
Christine Lagarde has called for decisive action from world leaders to end uncertainties in the global economy that are prolonging “terrifying and unacceptable” levels of unemployment. Rounding on Europe and the US in particular, the managing director of the International Monetary Fund said this week’s annual meetings in Tokyo needed to be marked by “courageous action on behalf of our members”. Speaking just days after the IMF slashed its global growth forecasts for both this year and next, Ms Lagarde said the economic weakness was not just a result of “tail risks” such as a eurozone break-up but “the degree of uncertainty in many corners of the world – whether it is Europe or America”. “It is deterring investors from investing and creating jobs,” she said. “We need action to lift the veil of uncertainty.” She also reiterated the softening of the IMF’s position on austerity, saying that governments should no longer pursue specific debt reduction targets but focus on implementing reforms, The Telegraph says.
The future of Britain’s biggest manufacturer has been thrown into doubt after German Chancellor Angela Merkel personally blocked a proposed £30bn merger between BAE Systems and Franco-German EADS. BAE’s management were forced to defend the company’s prospects and their own positions as chairman Dick Olver admitted he did not think the deal had a “hugely high probability of succeeding” from the outset, adding: “It was never something that I thought was more than 50/50.” Mr Olver said that he did not expect to resign over the collapsed talks, while chief executive Ian King insisted “we haven’t damaged the business by pressing ahead [with talks]”. However, some investors and analysts said failure of the talks left the company far more vulnerable to a break up or takeover approach, The Telegraph says.
Powerful Indonesian backers behind the troubled coal group Bumi have stoked tensions prior to a board meeting on Thursday by alleging their phones and emails have been hacked. Indonesia’s Bakrie family and its companies were infiltrated, according to Bakrie Group spokesman Christopher Fong, who said the group had “strong suspicions” as to who was behind the attacks. “Our email servers and telephones have been compromised or 'hacked’ and we have reported this to the Indonesian National Police, Cyber Crime Unit,” he told Reuters. The complaint came as Bumi’s board prepared to meet in Singapore, where they will be updated on its investigation into “potential financial irregularities” at its major Indonesian subsidiary, The Telegraph explains.
Turkish fighter jets forced a Syrian passenger aircraft to land after it entered Turkey’s airspace last night, further heightening tensions between the two countries. The airliner, with 35 passengers on board, was intercepted en route from Moscow to Damascus. Ahmet Davutoglu, the Turkish Foreign Minister, said that it was forced down because it was carrying “illegal cargo” which Turkey believed was “objectionable” and destined for the Assad regime, The Times reports. |
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