Stocks decline ahead of US GDP
Market Movers
techMARK 2,088.78 -0.35%
FTSE 100 5,780.50 -0.42%
FTSE 250 11,932.65 -0.33% The FTSE 100 index declined in early trading on Friday as markets showed caution ahead of a pivotal gross domestic product (GDP) report due out in the US this afternoon.
The report, scheduled for realise at 13:30 (London time), is expected to see the US economy expand at an annualised rate of 1.9% in the third quarter, an acceleration from the 1.3% growth in the preceding three months.
However, sentiment was dampened overnight after corporate earnings for some American heavyweight disappointed over night - specifically Apple and Amazon.
Markus Huber, the head of German HNW at ETX Capital said this morning: "So far as a whole the US earnings season has turned out mixed at best, despite expectations coming into the reporting season had already been reduced substantially many especially heavyweights like Google, IBM and Apple haven’t been able to live up to expectations.
"At least so far it seems to be the case that the recent improvement seen in some of the US economic data hasn’t completely filtered through to the corporate sector yet; also with other parts of the world - mainly China and especially Europe - still struggling badly, many of those global companies are expected to ‘suffer’ under the harsh business environment for at least a couple more quarters," Huber said.
Stocks finished flat the day before despite a better-than-expected reading in UK GDP: the UK economy expanded by 1.0% in the third quarter, compared with the 0.4% decline seen in the second quarter and well ahead of the 0.6% increase expected. That was the strongest reading since late 2007 and means that the economy exited from its double-dip recession.
In other news, Greece is thought to be close to agreeing a deal with the Troika which should then be voted on by parliament.
Market analyst Craig Erlam from Alpari explained: "The deal appears to centred around the idea that Greece will have an extra two years to hit its fiscal targets, something Germany has refused to confirm at this point. There is still no guarantee it will be signed off by Greece's creditors, however they are likely to respect the Troika's report." FTSE 100: Banks take a hit on LIBOR probe
Banking stocks were under pressure this morning after The Wall Street Journal reported last night that the probe into the manipulation of the London Interbank Offered Rate (LIBOR) has spread to nine more banks.
These nine, which include Lloyds, Credit Suisse and Bank of America, have received subpoenas in connection with a probe, the paper said citing a person close to the matter. In London, Lloyds, RBS and Barclays were among the worst performers.
Pharmaceuticals giant Shire was a heavy faller despite Deutsche Bank, UBS and Credit Suisse reiterated their 'buy' and 'overweight' ratings on the stock this morning. Shares were pulling back after a solid rise yesterday on the back its third-quarter results.
Leading the risers was diversified mining titan Anglo American after announcing that it is on the look out for another CEO after Cynthis Carroll revealed her decision to resign. "It is a very difficult decision to leave, but next year I will be entering my seventh year as Chief Executive and I feel that the time will be right to hand over to a successor who can build further on the strong foundations we have created," she said. FTSE 250: Elementis sinks on oilfield drilling slowdown
Speciality chemicals group Elementis was a heavy faller after saying that full-year headline operating profits will be hit by a temporary slowdown in oilfield drilling. Nevertheless, the group said it remains on track to hit earnings per share (EPS) forecasts this year due to a lower tax rate.
African Barrick Gold also dropped after scaling back its production guidance for the full year following a "challenging" third quarter which saw output and sales shrink dramatically year-on-year.
Berendsen, the work-wear and wash-room facilities provider, also fell after reporting that trading in the three months to the end of September was in line with expectations with group underlying revenue up 2%. | AIM/Small Cap Report | FTSE 100 - Risers
Weir Group (WEIR) 1,732.00p +2.61%
Anglo American (AAL) 1,891.50p +1.83%
Pearson (PSON) 1,234.00p +1.82%
British Sky Broadcasting Group (BSY) 723.00p +0.42%
Sainsbury (J) (SBRY) 354.80p +0.37%
Associated British Foods (ABF) 1,380.00p +0.36%
Admiral Group (ADM) 1,108.00p +0.36%
Morrison (Wm) Supermarkets (MRW) 271.10p +0.33%
Bunzl (BNZL) 1,024.00p +0.29%
InterContinental Hotels Group (IHG) 1,551.00p +0.26%
FTSE 100 - Fallers
Kazakhmys (KAZ) 713.50p -3.06%
Shire Plc (SHP) 1,727.00p -2.37%
Aviva (AV.) 327.00p -1.86%
Eurasian Natural Resources Corp. (ENRC) 327.30p -1.83%
Rio Tinto (RIO) 3,048.00p -1.68%
Lloyds Banking Group (LLOY) 40.05p -1.59%
Fresnillo (FRES) 1,900.00p -1.55%
CRH (CRH) 1,097.00p -1.53%
Prudential (PRU) 840.00p -1.52%
Polymetal International (POLY) 1,092.00p -1.44%
FTSE 250 - Risers
NMC Health (NMC) 189.70p +3.10%
JD Sports Fashion (JD.) 775.00p +3.06%
Diploma (DPLM) 484.70p +2.15%
Computacenter (CCC) 376.90p +1.95%
Utilico Emerging Markets Ltd (DI) (UEM) 163.90p +1.17%
Oxford Instruments (OXIG) 1,352.00p +1.12%
Barr (A.G.) (BAG) 447.90p +1.06%
Raven Russia Ltd (RUS) 67.40p +1.05%
Cairn Energy (CNE) 278.40p +0.80%
BH Global Ltd. GBP Shares (BHGG) 1,135.00p +0.80%
FTSE 250 - Fallers
Elementis (ELM) 204.90p -5.58%
Lonmin (LMI) 483.00p -3.03%
Centamin (DI) (CEY) 97.00p -2.71%
African Barrick Gold (ABG) 469.20p -2.55%
F&C Asset Management (FCAM) 99.00p -1.98%
Ferrexpo (FXPO) 190.30p -1.91%
Bodycote (BOY) 364.20p -1.59%
Pace (PIC) 167.30p -1.59%
SIG (SHI) 105.10p -1.59%
Ashtead Group (AHT) 356.80p -1.57% |
| European broker round-up |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Air Liquide: CM-CIC reiterates HOLD rating with a price target of €100. Atos: Natixis reiterates BUY rating with a price target of €62. bioMérieux: AlphaValue downgrades to ADD from buy and raises price target to €85.80 from €85.70. Nexity: AlphaValue downgrades to ADD from buy and raises its price target to €28 from €27.90. Volvo: AlphaValue downgrades to REDUCE from add. INTERIMS
African Medical Investments, Gail (India) Ltd GDR (Reg S)
INTERIM DIVIDEND PAYMENT DATE
Amati Vct 2, Brightside Group, British Smaller Companies VCT 2, Costain Group, Dignity, EMIS Group, F&C Asset Management, Fairpoint Group, Filtrona PLC, Good Energy Group, H.R. Owen, Henry Boot, InterQuest Group, Kentz Corporation Ltd., Morgan Sindall Group, North American Income Trust (The), Primary Health Properties, Quarto Group Inc., Real Estate Investors, Rentokil Initial, Severfield-Rowen, Smurfit Kappa Group, Vitec Group
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
GDP (Advance) (US) (13:30)
U. of Michigan Confidence (Final) (US) (15:00)
Q2
Gail (India) Ltd GDR (Reg S)
Q3
Norwegian Property ASA, Polski Koncern Naftowy Orlen S.A. GDR(Reg S)
IMSS
CPP Group, Elementis
AGMS
Transense Technologies, URU Metals Ltd. (DI)
FINAL DIVIDEND PAYMENT DATE
Consort Medical, Development Securities |
| US Market Report | Stocks Close Modestly Higher But Well Off Best Levels
After once again failing to sustain an initial upward move, stocks turned in a lackluster performance over the course of the trading day on Thursday. Nonetheless, the markets eventually ended the day showing a slightly positive bias.
The major averages managed to close modestly higher but well off their best levels of the day. The Dow edged up 26.34 points or 0.2 percent to 13,103.68, the Nasdaq inched up 4.42 points or 0.2 percent to 2,986.12 and the S&P 500 climbed 4.22 points or 0.3 percent to 1,412.97.
The initial strength on Wall Street was partly due to a positive reaction to a batch of largely upbeat economic data, including a report showing that the U.K. emerged from recession in the third quarter.
The report from the U.K. Office for National Statistics said the U.K. economy grew by 1 percent in the third quarter after contracting in each of the three previous quarters.
The U.S. Labor Department also released a report showing a bigger than expected drop by initial jobless claims in the week ended October 20th.
The report showed that initial jobless claims dropped to 369,000 from the previous week's revised figure of 392,000. Economists had been expecting jobless claims to fall to 372,000 from the 388,000 originally reported for the previous week.
Additionally, a report from the Commerce Department showed that durable goods orders rebounded by more than expected in September after falling sharply in August.
The report said durable goods orders jumped by 9.9 percent in September after tumbling by 13.1 percent in August. Economists had been expecting durable goods orders to increase by about 7 percent.
However, many economists pointed to the report's reading on orders for non-defense capital goods excluding aircraft, which is seen as an indicator of business spending. The report showed that the orders were unchanged in September following a 0.2 percent increase in August.
A separate report from the National Association of Realtors showing a much smaller than expected increase in pending home sales also helped to limit the upside for the markets.
NAR said its pending home sales index edged up by 0.3 percent to 99.5 in September after falling by 2.6 percent to 99.2 in August. Economists had been expecting a more substantial rebound by the index of about 2.5 percent.
Stocks subsequently gave back some ground amid rumors that Fitch Ratings intends to downgrade its AAA credit rating for the U.S.
A Fitch spokesman later referred to the agency's July statement indicating that its negative outlook on the rating is unlikely to be resolved until late 2013.
While many of the major sectors ended the day showing only modest moves, considerable strength was visible among gold stocks. The NYSE Arca Gold Bugs Index surged up by 3.2 percent, bouncing off its lowest closing level in over a month.
The strength among gold stocks was partly due to an increase by the price of the precious metal, with gold for December delivery climbing $11.40 to $1,713 an ounce. Agnico-Eagle Mines (AEM) and Goldcorp (GG) also posted notable gains after reporting better than expected quarterly earnings.
Semiconductor stocks also saw significant strength on the day, with the Philadelphia Semiconductor Index rising by 1.4 percent after ending Wednesday's trading at a three-month low. Trucking, brokerage, and natural gas stocks also posted notable gains.
On the other hand, housing stocks came under pressure on the heels of the disappointing pending home sales data, dragging the Philadelphia Housing Sector Index down by 1.7 percent. Meritage Homes (MTH) helped to lead the sector lower, falling 8.2 percent after releasing its third quarter results.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index advanced by 1.1 percent, while Hong Kong's Hang Seng Index edged up by 0.2 percent.
In the bond market, treasuries ended the session firmly in the red despite some mid-day volatility. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 5.3 basis points to a one-month closing high of 1.828 percent.
Looking Ahead
Trading on Friday is likely to be impacted by reaction to quarterly results from Apple (AAPL), with the iPad and iPhone maker releasing its fiscal fourth quarter results after the close of today's trading.
Amazon (AMZN), Expedia (EXPE), and Las Vegas Sands (LVS) are also releasing their quarterly results after today's close, while Merck (MRK), Comcast (CMCSA), and Goodyear (GT) are among the companies due to release their results before the start of trading on Friday.
Economic data may also attract attention on Friday, with the Commerce Department scheduled to release its initial report on U.S. GDP in the third quarter. |
| Friday newspaper round-up | ECB, Apple, Libor Data from the European Central Bank (ECB) show that the tentative rebound in the money supply over the summer may have stalled again in September. The broad M3 gauge -- watched by experts as an early warning signal for the economy a year or so ahead -- shrank by 30bn euros and is now down by 143bn euros since April. This is highly unusual. The narrow M1 gauge watched for signals of activity six months head has held up better but also contracted in September, falling by 16bn euros. "The message is clear," said Lars Christensen from Danske Bank. "The ECB needs to stop obsessing about fiscal issues and do real quantitative easing (QE) if it wants to stop the eurozone going the way of Japan." Loans to firms and households fell 1.3 per cent as banks continue to shrink their balance sheet to meet tougher rules. Private bank lending has been falling almost continuously since April, The Telegraph says.
Shares in the technology company Apple were briefly suspended before the release of its results and then fell up to 4% in after-hours trading in New York. A drop in iPad sales in the fourth quarter left profits at $8.22bn, trailing the $8.3bn that analysts had forecast. While sales of iPad, Apple's newest product, missed forecasts, iPhone sales beat them. The stunning success Apple has enjoyed since the launch of the iPhone in 2007 has left the Californian company facing ever higher bars to sustain its valuation as the world's most valuable company. "What people are going to focus on is that the iPad was a bit weak and the iPhone was solid during the quarter," said Shannon Cross, an analyst at Cross Research, The Telegraph reports.
Nine of the world’s biggest banks are facing increased scrutiny from US state prosecutors probing alleged attempts to manipulate the lending gauge known as Libor. Eric Schneiderman, New York attorney-general, and George Jepsen, Connecticut attorney-general, have sent subpoenas to Bank of America, Bank of Tokyo Mitsubishi UFJ, Credit Suisse, Lloyds Banking Group, Rabobank, Royal Bank of Canada, Société Générale, Norinchukin Bank and West LB as they investigate whether the banks participated in any schemes to rig the London Interbank Offered Rate, a person familiar with the matter said, according to the Financial Times.
It was once the dirtiest coal-fired carbon dioxode-emitting power plant in Western Europe. From next year Drax will become Britain’s biggest weapon in the race to produce renewable energy. Drax has been Britain’s single biggest electricity-producing plant for decades, providing at times as much 10% of the nation’s energy production. However, in plans unveiled yesterday, the South Yorkshire-based plant is to convert three of its six units to burning biomass rather than the black stuff. It is a move that will produce 2 gigawatts of green electricity, enough to power millions of homes a year. Dorothy Thompson, the chief executive of Drax, which is a £1.8bn stockmarket-listed company, said the leap to pushing Britain into a greener future was “enormous,” The Times explains.
Troubled fund manager Man Group drew the market’s attention yesterday after the company revealed Crispin Odey has been building up a stake in the business. Man said Odey Asset Management, the hedge fund founded and run by Mr Odey, held 5.15% of the group’s voting rights, including ordinary shares and contracts for difference. The announcement gave a lift to the shares, which traded at over 150p in March, but closed up 3 at 80.05p today. The FTSE 250 company has come under pressure as it struggles to stop clients from withdrawing money from its funds. The group revealed net third-quarter outflows of $2.2bn (£1.4bn) earlier in October, the fifth consecutive quarter of withdrawals, The Telegraph explains.
The vicious circle linking the outlook for banks with their economies continued on Thursday night after Standard & Poor’s rating agency cited increased economic risks as the main reason for downgrading BNP Paribas, France’s biggest bank and changed the outlook to negative for 10 other French banks, including Societe Generale and Credit Agricole. “The economic risks under which French banks operate have increased in our view, leaving them moderately more exposed to the potential of a more protracted recession in the eurozone,” S&P said in a statement. BNP Paribas’s rating was downgraded by one notch to A plus from AA minus with a negative outlook. The A rating of SocGen and Credit Agricole rating was confirmed but their outlook was cut to negative from stable, The Telegraph writes.
Oilfield engineering firm Sparrows Offshore has landed financial backing from a US-private equity firm understood to be worth more than £100m. The Aberdeen-based company said the support from AEA Investors LP would give it “funds for acquisitions and organic growth and will help the company fast track its global expansion strategy”. The heavily indebted crane engineering specialist grew sales from £149.5m in 2011 to £172m and narrowed pre-tax losses from £66.6m to £20.1m. The investment from the New York and London-based private equity firm comes well ahead of a debt repayment deadline. In August Sparrows had refinanced its £200m net debt which was brought forward to be repayable in June next year, The Scotsman reports.
Santander has raised the prospect of a fresh wave of mis-selling claims against banks by taking a £232m provision to cover future payments. The Spanish-owned lender refused to give details, but banks are braced for a raft of legal claims from small businesses over allegations that they were mis-sold insurance products to cover the risk of rising interest rates. Further claims may also come in the form of compensation to customers who dealt with CPP, the credit card protection company. The bank said yesterday that the £232m provision was made in September “in relation to conduct remediation for historic customer conduct issues,” The Times says.
EE, which owns Orange and T-Mobile, will employ the frequencies it uses for 2G services for 4G when it launches Britain’s first service on Tuesday, ahead of its rivals who cannot go live until next summer. However, the airwaves that will be used for EE’s new network are in a high-frequency range that means the mobile phone signals will struggle to penetrate the walls of buildings. An EE spokesman told The Times that it had initially focused its efforts on building out its 4G network to cover outdoor areas and that it would fill in gaps to boost indoor coverage over the coming months. He said customers would receive a 4G signal indoors and could connect to Wi-Fi for a stronger signal. Vodafone, one of EE’s main rivals, has warned that this could leave many early adopters of the new 4G network frustrated when using their new smartphones at home, at work or in a shopping centre. |
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