| Barclays limits gains after PPI confession
Market Movers
techMARK 2,112.67 +0.19%
FTSE 100 5,917.05 +0.10%
FTSE 250 12,071.25 +0.21% After swinging between gains and losses for most of the session, UK stocks finished flat on Thursday despite some robust growth figures from China as some worse-than-expected jobless claims in the US and the EU summit weighed on investors' minds.
Chinese gross domestic product (GDP) grew at a 7.4% year-on-year rate in the third quarter of the year as expected, down from the 7.6% in quarter two. While this was the slowest rate of expansion in 12 years - except for that seen in the first quarter of 2009 - economists reckons that they can see hopeful signs which point to a stabilisation, such as a better tone to exports and a progressive improvement in residential investment.
"China, one of the few global economies still experiencing strong growth is very much viewed as one of the engines to keep global demand high," said trader Simon Furlong from Spreadex.
Stocks fell in afternoon trade after US weekly initial jobless claims rose by 46,000 last week to 388,000, as the seasonal factors evident in last week's data were unwound. Consensus estimates were for a rise to 365,000.
Investors were also keeping a close eye on the EU summit in Brussels today at which leaders are expected to discuss several topics such as the bailout for Spain, the situation in Greece and the banking union although only this last item is officially on the agenda.
Despite the enormous importance of the issues at stake, and as is often the case, market expectations are low ahead of this meeting of the heads of state of the 27 member countries. It's no wonder as there have been some 22 summits since the crisis in Greece began to intensify in 2009, including four already in 2012 alone.
In domestic economic news, UK retail sales volumes rose 0.6% from August to September, according to the Office for National Statistics. Consensus expectations were for a gain of 0.4%. FTSE 100: Barclays drops into red after PPI revelation Barclays was unwanted after revealing a shock additional £700m provision against payment protection insurance (PPI) compensation claims. Analysts believe that this will lead the bank to unveil a third-quarter pre-tax loss of at least £100m. Sector peer Lloyds also finished lower after Investec downgrade its rating for the stock from 'hold' to 'sell' as it trades at a 12-month high.
Airline group IAG was a high flyer after the International Air Transport Association said that premium traffic rebounded strongly in August, up 8.5%. Investec retained its 'buy' rating on the stock today, saying that IAG has the "management desire and ability to effectively transform the Iberia business and drive margin and strategic improvements at BA."
Retail-focused real estate investment trust Capital Shopping Centres was among the worst performers after Barclays placed shares in the company, according to media reports that cite two people familiar with the deal.
Miners were performing well this afternoon after the decent figures from China strengthened prices. Kazakhmys, EVRAZ, Rio Tinto and ENRC were all firmer by the close. Steel giant EVRAZ was in demand even though it saw production decrease in the third quarter while prices were hit by tough conditions in global steel markets.
Supermarket giants Tesco, Morrison and Sainsbury's were on shopping lists this morning after the better-than-expected retail sales data.
Drinks giant SABMiller was among the fallers this morning despite seeing good growth in lager volumes shipped across most regions in the first half of its financial year. Weighing on the shares was a ratings downgrade by Shore Capital to 'hold'.
Oil firm Royal Dutch Shell was also hit after Goldman Sachs lowered its recommendation for the oil titan to 'sell' and cut its target for the shares from 2,840p to 2,260p.
Sector peer BP was making gains after Rosneft offered $28bn in cash and shares for its 50% interest in Russian joint venture TNK-BP. FTSE 250: Man down as funds flow the wrong way Fund manager Man Group dropped 10% today despite a 14% rise in funds under management in the third quarter. The market was alarmed, however, to see net outflows in the quarter increase to $2.2bn, compared with net outflows of $1.4bn in the second quarter, although Man said these were concentrated in lower margin product lines.
Credit Suisse reiterated its 'neutral' stance on the shares today, saying that they trade "on an estimated 2013 fiscal year price-to-earnings multiple of 14.9-times which appears fully valued, in our view."
Leading the upside on the second-tier index was cash and carry group Booker after saying that like-for-like sales rose 3.1% for the 24 weeks to September 14th.
Transport group Go-Ahead also gained after reporting that bus operating profits should be £100m by 2015/16, compared with the £64-70m range over the past five years.
| AIM/Small Cap Report | | FTSE 100 - Risers
International Consolidated Airlines Group SA (CDI) (IAG) 163.80p +3.93%
IMI (IMI) 943.50p +3.51%
GKN (GKN) 214.00p +3.38%
Kazakhmys (KAZ) 780.50p +2.70%
Evraz (EVR) 258.90p +2.49%
Rio Tinto (RIO) 3,260.00p +2.39%
Eurasian Natural Resources Corp. (ENRC) 359.80p +2.16%
Weir Group (WEIR) 1,821.00p +2.02%
Resolution Ltd. (RSL) 222.10p +1.93%
Wolseley (WOS) 2,745.00p +1.82%
FTSE 100 - Fallers
Fresnillo (FRES) 1,918.00p -2.34%
Randgold Resources Ltd. (RRS) 7,570.00p -2.26%
British Sky Broadcasting Group (BSY) 733.50p -2.13%
SABMiller (SAB) 2,599.00p -2.09%
Capital Shopping Centres Group (CSCG) 333.40p -1.80%
Bunzl (BNZL) 1,082.00p -1.55%
Barclays (BARC) 240.70p -1.51%
Royal Dutch Shell 'B' (RDSB) 2,202.00p -1.37%
Smith & Nephew (SN.) 656.50p -1.28%
Reed Elsevier (REL) 610.00p -1.21%
FTSE 250 - Risers
Booker Group (BOK) 100.60p +6.62%
Brown (N.) Group (BWNG) 320.70p +6.54%
Go-Ahead Group (GOG) 1,365.00p +5.81%
Cookson Group (CKSN) 567.00p +4.23%
Dechra Pharmaceuticals (DPH) 618.00p +3.78%
Kenmare Resources (KMR) 42.34p +3.27%
Premier Farnell (PFL) 177.80p +3.25%
International Personal Finance (IPF) 343.20p +3.22%
Jupiter Fund Management (JUP) 272.00p +3.11%
Halfords Group (HFD) 335.40p +2.92%
FTSE 250 - Fallers
Man Group (EMG) 83.40p -9.89%
UBM (UBM) 696.50p -3.60%
Capital & Counties Properties (CAPC) 223.50p -3.58%
Petra Diamonds Ltd.(DI) (PDL) 100.40p -3.55%
Bumi (BUMI) 245.10p -3.50%
Stobart Group Ltd. (STOB) 113.40p -3.49%
Ophir Energy (OPHR) 553.50p -3.49%
F&C Asset Management (FCAM) 95.60p -3.34%
Jardine Lloyd Thompson Group (JLT) 750.00p -2.98%
PayPoint (PAY) 750.00p -2.79%
| Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | | European Markets Struggled To Find Direction Following Mixed U.S. Reports
The European markets ended a choppy trading session with mixed results on Thursday. Afternoon trading was impacted by some mixed economic reports from the United States. The larger than expected increase in weekly jobless claims put pressure on the markets, but then the strong Philly Fed report provided a boost in late trade. Also, Spain sold more government bonds than its maximum target on Thursday at lower cost, ahead of European Union leaders gathering for a two-day summit in Brussels.
Moody's affirmation of Spain's sovereign rating at investment grade and expectations among investors that the nation is moving closer to a bailout request helped to lower borrowing costs. Also, German Chancellor Angela Merkel's comment in Parliament about stability taking hold as well as creation of a new fund to finance ailing European economies supported today's auction.
The benchmark 10-year bonds were sold at a yield of 5.458 percent, down from 5.666 percent on September 20.
The borrowing cost for July 2015 bonds fell to 3.227 percent from 3.68 percent on September 6. Likewise, the yield on 2016 bonds came in at 3.977 percent, down from 4.60 percent last time.
Bad loans at Spanish banks surged to a new record high in August, the latest figures from the Bank of Spain showed Thursday. The value of loans at risk of not being repaid rose to EUR 178.6 billion or 10.5 percent of the total lending from EUR 173.2 billion in the previous month.
German Chancellor Angela Merkel has proposed giving stronger powers to the European Union to intervene in national budgets while suggesting creation of a new fund to finance ailing European economies, reports said Thursday.
Speaking at the lower house of Parliament, ahead of the EU summit in Brussels, she recommended setting up of a new aid fund at EU level to finance specific projects in struggling nations.
Citing Cyprus's failure to clinch a timely deal with the troika after officially requesting European financial support in June, Standard and Poor's on Thursday downgraded the nation's credit rating deeper into junk status.
Cyprus' long-term sovereign credit rating was cut by three-notches to 'B' from 'BB', with a 'negative' outlook. S&P put much of the blame for not having a deal on "domestic political constraints."
The Euro Stoxx 50 index of Eurozone bluechip stocks increased by 0.20 percent and the Stoxx Europe 50 index, which includes some major U.K. companies, advanced by 0.22 percent.
The DAX of Germany climbed by 0.58 percent and the CAC 40 of France gained 0.22 percent. The FTSE 100 of the U.K. rose by 0.20 percent, but the SMI of Switzerland declined by 0.07 percent.
In Frankfurt, ThyssenKrupp rose by 1.12 percent. Exane BNP upgraded its rating on the stock to "Neutral" from "Underperform."
In Paris, Remy Cointreau dropped by 6.06 percent. The company's second quarter revenue growth slowed from the strong results of the previous quarter. Shares of Pernod Ricard also declined by 2.90 percent.
Total dipped by 0.34 percent, after Goldman Sachs reiterated its "Sell" rating on the stock. Alcatel Lucent climbed by 7.87 percent, after the company announced that it plans to cut 5,550 jobs.
In London, BP gained 1.05 percent. The company is reportedly nearing a deal to sell its 50 percent shareholding in troubled Russian oil producer TNK-BP to Anglo-Russian state oil company OAO Rosneft.
Cairn Energy finished higher by 0.55 percent, after issuing an interim management statement.
Rolls-Royce Holdings fell by 0.40 percent, despite winning a contract to supply its Spinline digital safety instrumentation and control to the China Guangdong Nuclear Power Corp.
SAB Miller lost 2.09 percent, following the company's half-year report. The report also showed that demand in Latin America has weakened.
Shares of Nestlé declined by 1.69 percent in Zurich. The food and nutrition products giant reported an 11 percent increase in sales for the nine-month period, with an organic growth of 6.1 percent, helped by continuous growth in all of its regions.
The French leading index improved for two straight months, but the index's six-month growth rate remained just moderately positive, the Conference Board reported Thursday. The leading economic index rose 0.6 percent in August and gained 0.3 percent in July. Although six of the seven components of the leading economic index increased in August, the board said the weaknesses among the leading indicators have remained widespread in recent months.
U.K. retail sales growth exceeded economists' forecast in September on healthy clothing and school uniform sales, boosting hopes of economic recovery in the third quarter. |
| US Market Report | | Mixed Economic Data Leads To Choppy Trading On Wall Street
Stocks have shown a lack of direction over the course of the trading day on Thursday after trending higher over the past few sessions. The choppy trading comes on the heels of the release of a mixed batch of economic data.
The major averages are currently turning in a mixed performance, with the Nasdaq posting a modest loss. While the Nasdaq is down 4.08 points or 0.1 percent at 3,100.04, the Dow is up 25.19 points or 0.2 percent at 13,582.19 and the S&P 500 is up 2.17 points or 0.2 percent at 1,463.08.
Early selling pressure was generated by the release of a report from the Labor Department showing a bigger than expected rebound by initial jobless claims.
The report showed that jobless claims jumped to 388,000 in the week ended October 13th after falling to a four-year low 342,000 in the previous week. Economists had been expecting jobless claims to rise to 365,000 from the 339,000 originally reported for the previous week.
The rebound from the four-year low set in the previous week was partly due to the normalization of distortions caused by seasonal adjustment challenges in California.
However, a positive reaction to a batch of largely upbeat Chinese economic data helped to limit the downside for the markets.
China reported a 7.4 percent increase in third quarter GDP, which was slower than the 7.6 percent growth recorded in the second quarter but in line with estimates. The communist country also reported stronger than expected industrial production and retail sales growth in September.
Stocks subsequently regained some ground following the release of a pair of upbeat reports on Philadelphia manufacturing activity and leading U.S. economic indicators.
The Philly Fed said its diffusion index of current activity jumped to a positive 5.7 in October from a negative 1.9 in September, with a positive reading indicating an increase in regional manufacturing activity. With the increase, the index returned to positive territory for the first time since April.
Separately, the Conference Board said its leading economic index rose by 0.6 percent in September following a revised 0.4 percent drop in August. Economists had expected the index to edge up by 0.2 percent compared to the 0.1 percent dip originally reported for the previous month.
Traders are also reacting to the latest batch of earnings news, including results from big-name companies such as Morgan Stanley (MS), Verizon (VZ), and Travelers (TRV).
Sector News
Despite the lack of direction being shown by the broader markets, gold stocks are seeing significant weakness on the day. Reflecting the weakness in the gold sector, the NYSE Arca Gold Bugs Index has fallen by 1.4 percent.
The weakness among gold stocks comes amid a decrease by the price of the precious metal, with gold for December delivery sliding $6.70 to $1,746.30 an ounce.
On the other hand, railroad stocks have shown a strong move to the upside on the day, driving the Dow Jones Railroads Index up by 1.3 percent. Union Pacific (UNP) has helped to lead the sector higher after reporting slightly better than expected third quarter earnings.
Housing stocks are also seeing considerable strength in mid-afternoon trading, adding to the standout gains posted in the previous session. |
| Broker tips | | Jefferies has maintained its 'hold' rating and 1,220p target for transport group Go-Ahead, saying that while the new target for bus profits should be well-received, there is still some uncertainty surrounding rail franchises.
Go-Ahead said that bus operating profit should grow to £100m by 2015/2016, which Jefferies says is "feasible" as long as there is a "step change in performance".
Analyst Joe Spooner said that this new target "should be well received as the observation to date has been that the group has needed rail to provide the cushion in its dividend cover, but rail faces the uncertainty of expiring franchises. The new target implies existing rail profits will be replaced by bus by FY16."
Panmure Gordon has retained its 'buy' rating for cash and carry chain Booker after the firm's better-than-anticipated interim results and synergies expected from the Makro deal.
The broker said that since returning to the stock market, Booker has delivered strong earnings and dividend growth and cash generation. "We think that the addition of Makro will enhance Booker's growth and we remain buyers of the shares with a target of 108p."
Seymour Pierce has retained its 'sell' recommendation for baby and mother products retailer Mothercare despite the group's well-received second quarter trading update on Thursday.
"We do not believe Mothercare is an easy fix and brand repositions tend to take longer than expected. It will be difficult to make Mothercare relevant again for the modern mother as it has strong competition from Amazon and the supermarkets." Broker snap Investec maintains positive outlook on IAG Despite reducing its full-year EBIT (earnings, before, interest and tax) estimate, Investec has retained its buy recommendation for British Airways owner International Consolidated Airline Group (IAG).
The company is reporting its third quarter figures on November 9th, and the broker expects these to show EBIT of €227m (vs €363m a year earlier), which factors in a predicted 17% year-on-year rise in fuel costs to €1.60bn and losses from the disposal of the BMI airline earlier this year (estimated at €60m), driving a 3.5 percentage point fall in EBIT margin from 8.1% to 4.6%. The load factor is expected to improve by one-fifth of a percentage point at 84.7%.
Investec believes the full year will show an estimated loss of €64m versus previous guidance of break-even, with the negative adjustment resulting from the spot jet fuel price, which it believes is sufficiently above expectations to justify the altered forecast.
However, the broker has maintained its 'buy' recommendation and 190 price target, saying: "We continue to believe that IAG has the management desire and ability to effectively transform the Iberia business (securing a material portion of the targeted €500m FY15E [full year 2015] synergies programme) and drive margin and strategic improvements at BA." |
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