Back in the blue ... just
Market Movers
techMARK 2,115.78 +0.24%
FTSE 100 5,779.42 +0.20%
FTSE 250 11,754.40 +0.14% Having briefly broken above 5800 shortly after the start of trading, on the back of news of stimulus measures in China, the top share index move into negative territory in the afternoon session, before rallying near the close. Mixed macro data
Second quarter gross domestic product contracted at a 0.4% quarter-on-quarter rate of change, a revision to the previous estimate of a 0.5% decline. The market had been expecting no change to the previous estimate.
The news was less good on the UK trade front, with the current account deficit widening to an unprecedented £20.8bn in the second quarter from £15.4bn in the previous three month period.
There has been no news yet on Spain's austerity budget. It was scheduled to be unveiled at lunch-time, but a Cabinet meeting overran. China lends a hand
Miners were back in fashion today, after China's central bank pumped record amounts of liquidity into the banking system this week. Rio Tinto, Xstrata and Anglo American were among the big gainers.
Anglo American Platinum (Amplats) is to initiate disciplinary action the 80% of its workforce at its Rustenburg mines that continues to strike illegally. The firm has made repeated calls for the strikers to return to work since it re-opened the mines on Tuesday 17th September, having previously halted operations amid a wave of labour unrest.
One mining stock not on the rise was controversy-magnet Bumi. The shares were hit by reports of a rift between two of its major shareholders: the Bakrie family and Smin Tan.
Since Tan pumped a billion dollars into the company the shares have fallen around 80%. The battle between the two factions could risk the $3.0bn deal that was signed in 2010 with the aim of making Bumi one of the world's largest coal exporters.
Shares in Bumi have been hit this week after Bumi said it was investigating allegations of financial and other irregularities at its Indonesian operations.
Atlantic Coal, the open cast coal production and processing company, was also clobbered. The AIM-listed tiddler saw a widening of half year losses after exceptional expenses and rising administrative expenses offset a 79 per cent leap in gross profit. Food for thought Sweeteners group Tate & Lyle said first half adjusted operating profit will be similar to last year's level, in line with expectations. The company saw an improved performance in the second quarter in its Speciality Food Ingredients business. "Overall, while recognising the current level of uncertainty around the wider economy and volatile corn markets, we continue to expect to make progress this financial year," the group said.
Sticking with the food theme, contract caterer Compass's expectations for the full year remain unchanged after a strong performance in the fourth quarter as its US and emerging markets continue to underpin growth. After rising initially on the release of the figures, the stock turned south as brokers weighed in with their views.
"We remain positive on Compass and stick with a 770p target. However, further share progress may depend on more returns of capital, which could now be delayed. We move from Buy to ADD (Buy since 31 March 2009)," said Seymour Pierce,
Compass announced a restructuring of its Southern Europe operations which should yield £95m of cost savings a year a couple of years down the line. The restructuring will lead to exceptional cash charge of £150m over two years and a non-cash exceptional charge of £195m, however, which could persuade the company not to renew its share repurchase programme when the current bout of buy-backs finish.
Numis Securities downgraded the stock to "hold", while leaving its target at 750p.
Package tour operator TUI Travel is flying high after it said it remains on track to meet its full year expectations, following strong trading in the summer high season, with improved margins and load factors versus the prior year.
The reshaping of Aviva under Executive Chairman John McFarlane continues apace, with the insurance titan announcing the sale of its controlling interest in its Sri Lankan joint venture, Aviva NDB Holdings Lanka.
Pharmaceuticals colossus Shire is in rude helath after Jefferies Hoare Govett upgraded the stock from "hold" to "buy", and moved the target up to 2400p from 2100p.
"We anticipate upcoming news to potentially boost expectations for Shire's longer-term organic growth prospects," the broker said, while it sees fewer risks to the firm's lucrative attention deficity hyperactivity disorder (ADHD) franchise from competitors peddling generic versions of Shire's drugs.
Internet video security firm IndigoVision is awash with cash after a strong start to the new financial year and so has announced a special dividend of 70p per share. Other markets
Metals prices rose on the futures markets. Gold for December delivery wiped out yesterday's losses to rise $13.10 to $1,766.70 an ounce, while the December copper futures contract surrendered the morning's gains wand was down 50 cents to $370.95 a pound at the London close.
Brent crude for November delivery finished 152 cents dearer at $111.56 a barrel in early London trading.
Investors turned their backs on gilts to ride the equities rally. The yield on the benchmark 10-year gilt rose to 1.72% from 1.69% overnight. Yields move inversely to prices.
| AIM/Small Cap Report | FTSE 100 - Risers
Melrose (MRO) 245.70p +2.72%
Evraz (EVR) 244.50p +2.64%
BAE Systems (BA.) 327.30p +2.38%
Tate & Lyle (TATE) 670.00p +2.37%
Randgold Resources Ltd. (RRS) 7,475.00p +1.91%
Barclays (BARC) 217.25p +1.69%
Wood Group (John) (WG.) 801.00p +1.65%
Amec (AMEC) 1,156.00p +1.58%
Rio Tinto (RIO) 2,884.00p +1.51%
GKN (GKN) 217.20p +1.40%
FTSE 100 - Fallers
International Consolidated Airlines Group SA (CDI) (IAG) 151.50p -1.56%
Pennon Group (PNN) 718.50p -1.37%
Tesco (TSCO) 335.55p -1.29%
Capital Shopping Centres Group (CSCG) 328.90p -1.02%
Carnival (CCL) 2,276.00p -1.00%
Compass Group (CPG) 704.50p -0.98%
RSA Insurance Group (RSA) 112.00p -0.97%
Morrison (Wm) Supermarkets (MRW) 287.50p -0.83%
InterContinental Hotels Group (IHG) 1,617.00p -0.80%
Rexam (REX) 436.90p -0.77%
FTSE 250 - Risers
NMC Health (NMC) 188.00p +4.39%
Talvivaara Mining Company (TALV) 153.90p +4.20%
Dairy Crest Group (DCG) 346.10p +3.97%
Imagination Technologies Group (IMG) 487.90p +3.81%
QinetiQ Group (QQ.) 187.20p +3.37%
JPMorgan Indian Inv Trust (JII) 366.00p +3.30%
F&C Asset Management (FCAM) 97.75p +2.89%
Shanks Group (SKS) 81.00p +2.53%
Unite Group (UTG) 256.70p +2.43%
Filtrona PLC (FLTR) 512.50p +2.40%
FTSE 250 - Fallers
Bumi (BUMI) 147.10p -5.71%
Supergroup (SGP) 604.50p -4.05%
JD Sports Fashion (JD.) 701.00p -3.97%
Euromoney Institutional Investor (ERM) 766.00p -3.34%
Ladbrokes (LAD) 174.00p -3.01%
Rank Group (RNK) 147.00p -2.46%
Spectris (SXS) 1,692.00p -2.14%
Pace (PIC) 159.00p -2.09%
Hays (HAS) 78.80p -1.87%
Domino's Pizza Group (DOM) 531.00p -1.76%
FTSE TechMARK - Risers
Sepura (SEPU) 83.50p +7.74%
DRS Data & Research Services (DRS) 18.00p +4.35%
Phoenix IT Group (PNX) 154.50p +4.04%
Optos (OPTS) 196.75p +2.34%
Vectura Group (VEC) 84.50p +1.50%
Ricardo (RCDO) 386.75p +1.38%
XP Power Ltd. (DI) (XPP) 1,000.00p +1.32%
Innovation Group (TIG) 21.25p +1.19%
FTSE TechMARK - Fallers
Hiwave Technologies (HIW) 1.65p -7.04%
Promethean World (PRW) 23.00p -4.17%
Oxford Biomedica (OXB) 2.60p -3.35%
Ark Therapeutics Group (AKT) 3.35p -2.90%
Gresham Computing (GHT) 69.75p -1.76%
Emblaze Ltd. (BLZ) 47.50p -1.55% |
| Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | European Markets Finished With Modest Gains Ahead Of Spanish Budget
The European markets ended Thursday's session with modest gains, as investors await the Spanish budget for the year. The release of the budget was delayed until this evening, but it is expected to include further economic reforms. Weak economic data from China fueled expectations of further stimulus measures in the world's second largest economy. The economic data out of the U.S. was also largely negative, with a downward revision to second quarter GDP and a larger than expected decrease in new orders for durable goods.
Chinese industrial firms' profits dropped for a fifth successive month in August, official data showed, signaling that the economic slowdown probably extended into the third quarter. Industrial profits fell 6.2 percent year-on-year to 381.2 billion yuan in August, the National Bureau of Statistics said. This was faster than the 5.4 percent drop in July.
Investor concerns over Greece and Spain continued to linger in the background Thursday. Spain is presenting its draft budget for 2013 later today, which is expected to include more economic reforms, including further cutbacks, pension reform and new taxes on greenhouse emissions. Protests continued in Madrid against the expected austerity measures, which may pave the way for an official aid request.
Italy witnessed yet another decline in borrowing costs at an auction of its five and ten-year bonds on Thursday as investors took a favorable view on the country over Spain. Meanwhile, the lingering uncertainty regarding a bailout request from Spain continued to push the country's borrowing costs higher today.
The Italian Treasury sold EUR 6.6 billion of bonds at today's sale, which was close to the EUR 7 billion maximum target set for the auction. The yield on the 10-year bond due November 2022 fell to 5.24 percent from 5.82 percent in the previous sale on August 30.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.33 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.34 percent.
The DAX of Germany climbed by 0.19 percent and the CAC 40 of France gained 0.72 percent. The FTSE 100 of the U.K. rose by 0.20 percent and the SMI of Switzerland advanced by 0.08 percent.
In Frankfurt, RWE rose by 0.74 percent. HSBC upgraded its rating on the stock to "Overweight" from "Underweight." However, the brokerage also lowered its rating on E.ON, which finished down by 0.37 percent. Hochtief closed higher by 1.04 percent, after ING initiated the stock with a "Buy" rating.
Volkswagen declined by 2.15 percent, after the company expressed concerns about the European auto market at the Paris Motor Show. Daimler also fell by 0.38 percent. Dialog Semiconductor dropped by 1.90 percent, after JPMorgan initiated the stock with a "Neutral" rating.
In Paris, Credit Agricole climbed by 3.82 percent. Societe Generale gained 1.63 percent and BNP Paribas added 1.50 percent. Unibail-Rodamco fell by 1.03 percent, after HSBC reduced its rating on the stock.
In London, TUI Travel climbed by 1.26 percent. The company said it remains on track to meet full-year expectations. Hays lost 1.87 percent, after Credit Suisse downgraded the stock to "Neutral" from "Outperform."
Compass Group declined by 0.98 percent, after the company announced that it will restructure operations in southern Europe, due to the continued worsening of economic conditions.
Tate & Lyle advanced by 2.37 percent, after the company stated that its profit for the 6-month period ended September 30th will meet expectations.
Barclays rose by 1.68 percent and Lloyds Banking added 0.85 percent. HSBC also climbed by 1.01 percent. |
| US Market Report | Stocks Moving Higher On Chinese Stimulus Hopes
Stocks remain mostly positive in mid-day trading on Thursday, regaining some ground after trending lower in recent sessions. Buying interest has remained somewhat subdued, however.
The major averages have moved to the upside in the past few minutes, with the Nasdaq and the S&P 500 reaching new highs. While the Dow is up 37.47 points or 0.3 percent at 13,450.98, the Nasdaq is up 25.07 points or 0.8 percent at 3,118.77 and the S&P 500 is up 8.27 points or 0.6 percent at 1,441.59.
The strength on Wall Street is partly due to optimism about the possibility of further stimulus from China, with reports suggesting that the China Securities Regulatory Commission will take steps to prop up the domestic equity market.
The rumors out of China contributed to a late-day rally by the Shanghai Composite Index, which surged up by 2.6 percent on the day.
Buying interest has also been generated by a report from the Labor Department showing a much bigger than expected drop in weekly jobless claims.
The report showed that jobless claims fell to 359,000 in the week ended September 22nd from the previous week's revised figure of 385,000. Economists had expected jobless claims to drop to 376,000 from the 382,000 originally reported for the previous week.
With the bigger than expected drop, jobless claims fell to their lowest level since coming in at 357,000 in the week ended July 21st.
On the other hand, traders are also digesting disappointing Commerce Department reports on durable goods orders and second quarter GDP.
A report from the Commerce Department showed that durable goods orders plummeted by 13.2 percent in August amid a sharp drop in orders for transportation equipment, while a separate report showed that GDP grew by less than previously estimated in the second quarter.
Traders have mostly focused on the upbeat jobs data, as the reports from the Commerce Department are largely backward-looking and are seen as providing further support for the Federal Reserve's decision to enact a third round of quantitative easing.
Sector News
While most of the major sectors are showing relatively modest moves to the upside, considerable strength is visible among natural gas stocks. The NYSE Arca Natural Gas Index is up by 2 percent after trending lower for much of the past two weeks.
Ultra Petroleum (UPL) and Southwestern Energy (SWN) are turning in two of the natural gas sector's best performances, advancing by 3.7 percent and 3.8 percent, respectively.
Computer hardware stocks are also regaining some ground after coming under pressure in recent sessions, with the NYSE Arca Computer Hardware Index up by 1.9 percent. The gain by the index comes after it ended the previous session at its worst closing level in well over a month.
Significant strength has also emerged among gold stocks, which are moving higher along with the price of gold. Semiconductor, internet, and healthcare provider stocks are also posting notable gains.
| Broker tips | Compass, Nighthawk, Rexam Seymour Pierce has turned less positive on Compass Group, despite the contract caterer's fourth quarter numbers coming in ahead of expectations.
According to the broker's calculations, the company's £0.5bn budget to buy back shares should be blown by the end of the year, at which point the questions becomes: "is there more to come?"
Although the net debt to equity ratio is still healthy, by the broker's reckoning, at less than 30%, the need to spend money to sort out Southern Europe may make the company more cautious over announcing a further buyback.
The group has announced a restructuring of its Southern Europe operations which should yield £95m of cost savings a year a couple of years down the line. The restructuring will lead to exceptional cash charge of £150m over two years and a non-cash exceptional charge of £195m.
The broker is making no change to its forecasts for the current financial year, which puts the shares on an earnings multiple of 15.5.
French quoted peer Sodexo, is on a prospective multiple of 19.2 for August 2012 falling to 17.4 in fiscal 2013 and currently yields of 2.7%, which is less than Compass's yield of 2.9%.
"We remain positive on Compass and stick with a 770p target. However, further share progress may depend on more returns of capital, which could now be delayed. We move from Buy to ADD (Buy since 31 March 2009)," Lapwood concludes.
Panmure Gordon, however, is sticking with its "buy" recommendation, as its discounted cash-flow derived target of 820p implies potential upside of around 15%.
Oriel Securities has also reiterated its "buy" recommendation, as has Espirito Santo Execution Noble but Numis Securities has downgraded the stock to "hold", while leaving its target at 750p. Shore Capital is also a holder.
Westhouse Research, the house broker for US-focused shale oil development and production company Nighthawk Energy, said Thursday morning's poorly received full year results are of historical interest only.
The results cover the period of the transfer between the David Bramhill management and the new team under Stephen Gutteridge and therefore include significant legacy items, Westhouse's Peter Bassett and Andrew Matharu observe.
"The period is also before the results of the John Craig 6-2 drilled with the Gutteridge team as operator, which appears to be much more successful than any of the wells drilled under the operatorship of Running Foxes," they add.
"The initial flow results from the John Craig 6-2 encourages optimism over the current drilling programme under Nighthawk’s operatorship. The recent Chesapeake asset sale to Shell and Chevron underlines the continuing interest of majors in shale plays," the broker said.
As one would expect of a house broker, Westhouse has a positive view of the shares and the future outlook for the company. It reiterated its "Strong Buy" recommendation with a target of 10.7p per share.
If relative strength is one of your key investment metrics then packaging giant Rexam might be a stock for you, reckons merchant bank Beaufort International.
Kenneth Pio D'Mello, a senior analyst at the bank, said Rexam has been added to the Beaufort top relative strength buy list. The chart-gazer recommends an entry point of between 430p and 440p and to get out quick if the shares dive below 400p. In D'Mello's view, 420p is a support level while a reading of the runes suggests an exit point for short-term traders of 490p.
Restructuring and cost reductions should improve operating profits, D'Mello suggests, in a nod of the head towards fundamental analysis. Those of you who put more stock in technical analysis might want to note than the moving average convergence-divergence indicator - which is designed to spot momentum changes and shows the relationship between two moving averages of prices - is positive, and the relative strength index is above 50. |
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