| Losses erased after 'optimistic' fiscal cliff comments Comments from US Republican Speaker of the House John Boehner about the 'fiscal cliff' saw the FTSE 100 rally in afternoon trading to finish broadly flat.
Markets got off to a poor start this morning after Nevada Democrat Harry Reid said that “little progress” has been made so far on avoiding the fiscal cliff by year-end.
However, stocks pared losses after Boehner said that he was “optimistic that we can continue to work together to avert this crisis sooner rather than later.” He said that Republicans were willing to put “revenue on the table” as long as it is accompanied by spending cuts.
Market analyst Craig Erlam from Alpari said: “In the grand scheme of things this comment makes very little difference to people’s perceptions, but on a day when so little has happened in the markets, it has helped trim earlier losses.”
Erskine Bowles, co-Chairman of Obama’s 2010 fiscal commission, had said earlier in the day that it would be unlikely that the government will reach an agreement on the ‘cliff’ by the end of the year. FTSE 100: United Utilities gains after results; Burberry higher on Chinese hopes Water and sewage services group United Utilities made decent gains after reporting that revenue in the first half rose from £793m to £823m as regulated prices increases offset reduced commercial volumes and lower property sales associated with the water business.
Luxury brand Burberry was higher after Chinese Commerce Minister Chen Deming said that China will definitely hit its growth target of at least 7.5% this year. The company is heavily exposed to the Chinese market - one of its highest growth regions - and its share price often sensitive to swings in the economic outlook for the nation.
High Street giant Marks & Spencer also jumped after announcing that its pension deficit at March 31st was at £290m. "This represents a substantial reduction in deficit from £1.3bn as at March 31st 2009," the group said. The news prompted a revival of recent takeover talks.
Chip designer ARM Holdings moved higher after the Daily Mail reported about a possible 1,200p bid from US tech giant Intel. That compares with yesterday's close of 758p.
Distribution and outsourcing group Bunzl was leading the fallers after Citigroup cut its target from 1,250p to 1,190p, and kept a ‘neutral’ rating.
AMEC, Johnson Matthey, National Grid and Tate & Lyle were also registering losses today after going ex-dividend.
Medical technology group Smith & Nephew fell after announcing that it is to buy the assets of US-based Healthpoint Biotherapeutics for $782m in an attempt to bolster its position in advanced wound care. Analysts at Investec said that the acquisition takes the company into "riskier areas' where future performance will be linked to the outcome of clinical trials.
Asset manager Schroders was lower after announcing that its Chief Financial Officer Kevin Parry would step down next year. FTSE 250: Invensys jumps 27% after Rail disposal, capital return Industrial technology group Invenysys rocketed late on after saying that it has agreed to dispose of Invensys Rail to Siemens for £1.74bn and will return £625m in cash to shareholders. The sale will creates a “more focused industrial software, systems and control equipment business with significant exposure to higher margin and higher growth markets, and funds to invest in them,” the company said.
Kenmare Resources, the titanium feedstock miner, was down after warning that as a result of production issues, it expects its full-year production to be lower than previous guidance of 630,000 tonnes of ilmenite and 50,000 tonnes of zircon.
Nickel miner Talvivaara disappointed after re-assessing its production targets following the gypsum pond leakage which stopped operations earlier this month. The company now expects full-year output to reach 13,000t of nickel, well below the previous 17,000t estimate.
Insurance group Lancashire Holdings was another heavy faller after going ex-dividend. | AIM/Small Cap Report | FTSE 100 - Risers
United Utilities Group (UU.) 689.00p +2.99%
Burberry Group (BRBY) 1,268.00p +2.26%
Marks & Spencer Group (MKS) 386.00p +1.93%
Capita (CPI) 760.00p +1.20%
Aberdeen Asset Management (ADN) 332.10p +1.07%
ARM Holdings (ARM) 764.50p +0.86%
Kingfisher (KGF) 277.90p +0.72%
Severn Trent (SVT) 1,565.00p +0.71%
Reed Elsevier (REL) 629.50p +0.64%
Next (NXT) 3,639.00p +0.64%
FTSE 100 - Fallers
Evraz (EVR) 227.30p -5.09%
Bunzl (BNZL) 1,029.00p -4.19%
Eurasian Natural Resources Corp. (ENRC) 261.30p -3.29%
National Grid (NG.) 695.00p -2.46%
Amec (AMEC) 1,003.00p -2.43%
Polymetal International (POLY) 1,053.00p -2.41%
Lloyds Banking Group (LLOY) 45.31p -2.37%
Vedanta Resources (VED) 1,042.00p -2.25%
International Consolidated Airlines Group SA (CDI) (IAG) 166.50p -2.17%
Fresnillo (FRES) 1,938.00p -2.12%
FTSE 250 - Risers
Ultra Electronics Holdings (ULE) 1,577.00p +3.07%
TalkTalk Telecom Group (TALK) 219.10p +2.86%
New World Resources A Shares (NWR) 259.00p +2.66%
Menzies(John) (MNZS) 588.00p +2.62%
JD Sports Fashion (JD.) 718.50p +2.28%
Stagecoach Group (SGC) 281.20p +2.07%
Debenhams (DEB) 115.80p +2.03%
BBA Aviation (BBA) 207.00p +1.97%
Ruspetro (RPO) 86.50p +1.94%
Big Yellow Group (BYG) 337.90p +1.72%
FTSE 250 - Fallers
Kenmare Resources (KMR) 30.47p -8.94%
Lancashire Holdings (LRE) 785.50p -7.97%
Centamin (DI) (CEY) 55.50p -7.04%
Lonmin (LMI) 255.80p -6.98%
Talvivaara Mining Company (TALV) 93.50p -5.94%
Intermediate Capital Group (ICP) 285.80p -3.97%
Petropavlovsk (POG) 337.00p -3.88%
Dialight (DIA) 1,067.00p -3.18%
Mitchells & Butlers (MAB) 303.00p -2.92%
Dixons Retail (DXNS) 26.15p -2.79% |
| Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | | European Markets Finished Mixed On Fiscal Cliff Concerns
The European markets have ended Wednesday's trading session with mixed results. The looming fiscal cliff debate in the United States was a source of weakness in early trade. Statements made yesterday by Harry Reid led many to worry that the U.S. could potentially go over the fiscal cliff, which could push the U.S. economy back into recession. However, the markets came off their early lows after statements made today by John Boehner, which helped to reassure investors that a deal can be reached.
Senate Majority Leader Harry Reid, D-Nev., said Tuesday that lawmakers have made "little progress" on addressing the fiscal cliff, while his Republican counterpart Mitch McConnell, R-Ken., accused Democrats of remaining in campaign mode. However, U.S. House Speaker John Boehner stated today that he is optimistic that a deal on the fiscal cliff can be reached. Boehner reiterated that Republicans are willing to put revenues on the table, as long as Democrats agree to spending cuts.
The European Commission on Wednesday approved restructuring plans of four nationalized Spanish banks namely Bankia, NCG Banco, Catalunya Banc and Banco de Valencia and paved the way for more aid from Eurozone.
The approval of the restructuring plans is a milestone in the implementation of the Memorandum of Understanding between euro area countries and Spain, EU Competition Commissioner Joaquin Almunia said.
Today's EU approval allows Spanish banks to receive aid from the European Stability Mechanism (ESM) in the context of the financial assistance programme to recapitalize the banking sector. The nation was earlier given consent to access up to EUR 100 billion from euro area's permanent bailout fund.
The European Central Bank is ready to buy government bonds of Eurozone countries that agree to fiscal adjustment, Executive Board member Benoit Coeure said Wednesday.
The debt deal struck by Eurozone finance ministers and the International Monetary Fund earlier this week to stabilize the situation in Greece was the best of all other alternatives, European Central Bank Governing Council Member Ewald Nowotny reportedly said Wednesday.
"I believe in such a difficult situation as we see in Greece, there are no ideal solutions, but it is probably a solution that is better than all alternatives," reports said citing his interview with Austrian radio station OE1.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.22 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.21 percent.
The DAX of Germany rose by 0.15 percent and the FTSE 100 of the U.K. advanced by 0.06 percent. The CAC 40 of France climbed by 0.37 percent and the SMI of Switzerland gained 0.67 percent.
In Frankfurt, Deutsche Bank dropped by 1.90 percent and Commerzbank lost 1.17 percent. Jungheinrich decreased by 0.61 percent. Cheuvreux upgraded the stock to ''Outperform'' from ''Underperform.''
In Paris, Lafarge dropped by 1.76 percent. Berenberg downgraded the stock to ''Hold'' from ''Buy.'' UBS added Alcatel Lucent to its ''Least Preferred List'' in telecom equipment. The stock finished up by 0.11 percent.
LVMH gained 1.63 percent, after a positive broker recommendation.
In London, Smith & Nephew fell by 1.21 percent. The company announced an agreement to acquire Healthpoint Biotherapeutics for an all-cash offer of $782 million.
Vodafone finished up by 0.86 percent, following a broker downgrade.
Tour operator Thomas Cook reported a wider loss for the year, as revenues dropped in an unfavorable currency translation environment and the company incurred hefty fuel costs. However, the company said it is optimistic about future. The stock climbed by 4.17 percent.
United Utilities gained 2.91 percent. The water utility reported a higher first-half profit, as revenues grew by regulated price increase. The firm said it is on track to deliver its 2010-15 regulatory outperformance targets. Peer Severn Trent added 1.54 percent.
Swiss Life currently expects net profit in double-digit millions for fiscal year 2012. The company will cut 300 to 400 jobs in Germany and Switzerland over the next three years. The stock decreased by 1.04 percent in Zurich.
Eurozone broad monetary aggregate M3 grew at a faster pace of 3.9 percent in October from a year ago, the European Central Bank said Wednesday. The increase follows a 2.6 percent rise in September. The annual rate was forecast to accelerate to 2.8 percent.
Germany's EU measure of inflation slowed in November, in line with economists' expectations, preliminary data from Destatis showed Wednesday.
The harmonized index of consumer prices rose 2 percent annually, following October's 2.1 percent increase. The index, however, declined 0.1 percent from the previous month, which also matched expectations.
New home sales in the U.S. unexpectedly showed a modest decrease in the month of October, according to a report released by the Commerce Department on Wednesday, with the report also showing a substantial downward revision to the data for September.
The report said new home sales edged down 0.3 percent to a seasonally adjusted annual rate of 368,000 in October from the revised September rate of 369,000. The annual rate of new home sales in September was downwardly revised from the previously reported 389,000, which had represented a two-year high.
Economists had been expecting new home sales to inch up to 390,000 from the 389,000 originally reported for the previous month. |
| US Market Report | | Stocks Nearly Flat Amid Focus On Washington
Reflecting the focus on developments in Washington due to the looming fiscal cliff, stocks bounced well off their early lows following optimistic comments by House Speaker House John Boehner. Buying interest has waned since then, however, and the markets are nearly flat.
The major averages have moved roughly sideways in recent trading, lingering near the unchanged line. While the Dow is up 13.63 points or 0.1 percent at 12,891.76, the Nasdaq is down 2.09 points or 0.1 percent at 2,965.70 and the S&P 500 is down 0.92 points or 0.1 percent at 1,398.02.
The early weakness on Wall Street reflected lingering concerns about the fiscal cliff amid indications that lawmakers are encountering familiar disagreements over taxes on the wealthy and entitlement reform.
Senate Majority Leader Harry Reid, D-Nev., said Tuesday that lawmakers have made "little progress" on addressing the fiscal cliff, while his Republican counterpart Mitch McConnell, R-Ken., accused Democrats of remaining in campaign mode.
However, stocks staged a notable recovery following remarks by Speaker Boehner, who said he was "optimistic" that a deal could be reached to avert the crisis.
Boehner continued to express opposition to higher U.S. income tax rates but once again expressed a willingness to consider increasing revenues if accompanied by spending cuts.
"You're not going to grow the economy if you raise tax rates on the top two rates," Boehner said. "We're willing to put revenue on the table, as long as we're not raising rates."
As a result of the focus on the negotiations in Washington, traders have largely shrugged off a report from the Commerce Department that unexpectedly showed a modest drop by new home sales in the month of October.
The report said new home sales edged down 0.3 percent to a seasonally adjusted annual rate of 368,000 in October from the revised September rate of 369,000. The annual rate of new home sales in September was downwardly revised from the previously reported 389,000, which had represented a two-year high.
Economists had been expecting new home sales to inch up to 390,000 from the 389,000 originally reported for the previous month.
Sector News
Most of the major sectors are showing only modest moves, contributing to the roughly flat performance by the broader markets in recent trading.
While some strength is visible among brokerage and retail stocks, housing and computer hardware stocks have moved to the downside on the day.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 1.2 percent, while Hong Kong's Hang Seng Index fell by 0.6 percent.
In the bond market, treasuries continue to see modest strength but have pulled back well off their highs for the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.2 basis points at 1.623 percent after hitting a low of 1.601 percent. | Broker tips | | Smith & Nephew, Resolution, Compass Investec has kept its 'hold' rating and 670p target for medical technology group Smith & Nephew following Wednesday's proposed acquisition of Healthpoint Biotherapeutics.
The broker said that the purchase is a "good fit" but raises the risk profile of the company as a whole. "For us, whilst the acquisition is broadly about strategy, expanding S&N’s wound business, it takes S&N into riskier areas, with future performance linked to the outcome of clinical trials," Investec said.
Shares in insurance giant Resolution were in the red on Wednesday morning after UBS cut its rating on the stock from 'buy' to 'neutral', citing a 'less compelling' valuation.
The broker said: "Resolution’s disappointing nine-month trading, EV write-downs, UK restructuring charges, and recent share-price performance all point to a downgrade to 'neutral'.
Jefferies has upgraded its rating for contract caterer Compass Group from 'underperform' to 'hold', saying that last week's full-year results offset some concerns.
"Compass's £400m share buyback reload, 10% dividend increase and reiterated guidance for FY13E exudes confidence," the broker said in a research report on Wednesday. Broker snap: Credit Suisse singles out Rio as preferred large cap In a report on the mining sector, Credit Suisse has singled out Rio Tinto for its growth potential, keeping its 'outperform' rating for the stock with a price target of 3,500p.
Analysts at the Swiss broker labelled Rio Tinto as the preferred large cap company for the first half of 2013, pointing to leading growth driven by the start-up of massive iron ore growth projects from late 2013 and recovery from its copper mines.
"Our analysis shows that while prices are the dominant driver of overall sector performance, volume growth is an important driver of relative stock performance," they explained.
Credit Suisse went on to explain that large caps provide the best risk-reward on growth delivery and cash flows and that "investors should remain underweight companies with low or long dated growth and weak cash flows."
Shares of Rio Tinto were down 0.32% to 2,970p during mid-day trading on Wednesday.
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