Monday 8th October 2012 - Market News

After a strong last week boosted by a larger than expected fall in US unemployment on Friday, the FTSE 100 has started this week with 0.7% decline as the Chinese markets opened down after their Golden week holiday and the World Bank cut its economic growth forecasts for the East Asia and Pacific region, warning that the slowdown in China could get worse and last longer than expected . The focus will fall back on Spain and Greece later today as the European Finance Ministers meet again to discuss the ever worsening debt crisis in the region.

Corporate News

• Cookson, down 15%, warned that weak trading in its division which makes products for the global steel industry would cause it to miss its profit forecasts for the year.

• BAE Systems largest shareholder Invesco Perpetual, issued a long list of objections to the group's proposed $45 billion merger with EADS.-0.4%

• Michael Page, the recruitment firm said that it expects its full year profit to be below market expectations as economic uncertainty and weak confidence drag on results. Group gross profit for the three months to end-September was 126.5 million pounds, 11 percent down on a year ago. -4.25%

• Cranswick, was off 2.5% although it stated First half performance has been in line with management's expectations and underlying turnover in the six months to 30 September was up 5 per cent.

• Mondi was raised to outperform at Credit Suisse

• EasyJet was raised to a buy at Deutsche Bank

 

Economic Data Releases

• 09.30 Euro zone -Sentix index

Friday 5th October 2012 - Market News

 

The FTSE 100 opened up a touch higher this morning at 5840, but as it is the first Friday of the month  the whole market is waiting for the Non Farm Payroll numbers out of the US at 1330. Expectations are high for the US employment market with 113,000 jobs predicted to have been added in the last month, and if the good results from the ADP Employment report (162,000) on Wednesday are true. the actual number could be significantly higher providing a further boost to world indices.

Corporate News

 

• Rentokil Initial up 0.7% the pest control to mail delivery firm was up on rumours that a 2.63 billion (145p) private equity bid may be forthcoming.

 

• John Wood Group up 1.4% reported this morning that it was confident of achieving full year performance in line with expectations and that the engineering division is performing well and our order book and future prospects remain strong

 

• Telecom Plus up 2.6% said it expects to post a higher pretax profit for the first half of the year as it added more customers and that shareholders can expect a significant increase in the interim dividend payment

 

• Great Portland Estates, British Land and Land Securities have all been cut to Neutral by Goldman Sachs

 

• Mitchells and Butlers has been raised to a Buy at Peel Hunt

 

• Kingfisher was cut to equal weight by Morgan Stanley

Economic Data Releases

 

• 11:00 German August Factory Orders, -0.3% exp. 0.5% previous

 

• 13:30 US September Unemployment Rate, 7.3% exp. 7.3% previous

 

• 13:30 US September Change in Non Farm Payrolls, 113k exp. 96k previous

 

• 13:30 US September Unemployment Rate 8.2% exp. 8.1% previous

Thursday 4th October 2012 - Market News

The FTSE is holding on to its early gains up 14 points as Asian markets rebounded after a sell off earlier in the week. However, all eyes this morning are looking towards a Spanish debt auction as it aims to sell between 3 and 4 billion Euros of 2,3 and 5 Year bonds. Spanish bondholders would like to see the country asking for a rescue package that would pave the way for the ECB to buy its debt. Both the BofE and the ECB will be announcing their rate decisions at 12.00 and 12.45 respectively, but both are expected to remain unchanged. The real excitement could come in the ECB press conference afterwards at 13.30 where Mario Draghi  will surely be given the Spanish inquisition. 

Corporate News

·       Ted Baker, the fashion retailer saw profits rise 10.4% in the first half boosting its shares 1.5%

·       Carillion up 2% this morning reported Q3 results in line with expectations but continues to see full year revenue lower than 2011

·       Halfords was up 14% as it reported strong summer sales as bicycles sales soared as customers were inspired by the Tour de France and Olympic cycling success

·       Gulf Keystone is to raise $200 million via convertible bonds due in Oct 2017 to bolster its resources as it pushes to expand the commercial oil find made at its Shaikan block in Kurdistan and explore neighbouring blocks. The share opened down 2%

·       Promethean World, the Interactive whiteboard maker, crashed 35% as it expects full-year results to be below market expectations after facing a slump in its key education markets

·       Sports Direct raised to a buy at Seymour Pierce

·       Tate & Lyle raised to outperform at Credit Suisse

Economic Data Releases

·       12:00 UK Bank of England Rate Announcement, 0.5% Unchanged exp.

·       12:45 ECB Rate Announcement, 0.75% Unchanged exp.

·       13:30 US Weekly Initial Jobless Claims, 365k exp. 359k exp.

·       15:00 US August Factory Orders, -0.2.5% exp. 2.8% previous

·       19:00 US Fed Meeting Minutes

Wednesday 3rd October 2012 - Market News

The FTSE opened slightly lower this morning at 5790.0 after small declines in Asia overnight as investors continue to be wary over global growth prospects. Spain may not be as close to a bailout as some had predicted with the Spanish Prime Minister last night saying that a request for European aid is not imminent, although this could be politically motivated as it tries to negotiate better terms.


Corporate News

·        Sportingbet, currently a bid target of William Hill saw growth in its key Australian market of 82% as it reported earnings of £56.8 million. Commenting on the bid it said it "significantly undervalues" it, but left the door open for a higher bid.

·        Tesco posted a small rise in quarterly underlying sales of 0.1 in the UK but first half group trading profit fell 10.5 percent to 1.6 billion pounds. The shares are down 0.8% at 334p

·        Sainsbury posted better than expected sales growth of 1.9% in its second quarter and saw a 20% growth in its online business and is opening its smaller convenience stores at the rate of 2 a week.

·        Easyjet was up 2 % as it raised its full year profit guidance after a summer of strong demand to European beach routes from London. It also stated that a third of seats in the first quarter of its new fiscal year had already been sold.

·        FirstGroup fell 15% after the government cancelled its West Coast rail franchise that it thought it had won off Virgin 2 months ago.

·        Lamprell, the UAE based Oil rig maker plunged 31% after it released its 4th profit warning since the spring after problems delivering 2 wind farm vessels.

·        Schroders was cut to a sell by UBS

 

Economic Data Releases

·        10.00 Euro zone August Retail Sales

·        12.00 United States-MBA - MBA 30-yr mortgage rate

·        13.15 United States-ADP - ADP National Employment

·        15.30 United States-EIA OIL STOCKS - EIA weekly crude stocks

The FTSE 100 shed 25 points on the open giving back a portion of yesterday’s gains after a decline on Wall Street and concerns ahead of a Euro Group meeting as to whether Spain will ask for a bailout . Australia in contrast had a strong session after the  RBA cut interest rates by a quarter to 3.25%.

 

Corporate News

·        Wolseley, the British plumbing and building supplies group posted a 10 percent rise in full-year profit, underpinned by growth in its core U.S. business, and said it proposed a special dividend of 350 million pounds but was down 1%

·        First Group, up 1.5% said that trading in the first six months of the year was in line with expectations and it was committed to dividend growth of 7 percent

·        Babcock International, up 1.4% said it had a strong first half as it continues to benefit from the governments farming out more work to the private sector to cut costs.

·        Hammerson was upgraded to a hold by Investec with a price target of 465.

·        ITV was up 2% as it was reported that private equity firms CVC partners and Apax Partners were lining up a 140p cash bid.

Economic Data Releases

·        09:30 UK September PMI Construction, 50.0 exp. 49.0 previous

·        10:00 Eurozone August PPI 0.5% exp. 0.4% previous

FTSE has posted modest gains this morning to stand at 5785 at the time of writing.This slight improvement comes after news broke over night the Bank of Japan would embark on a further round of QE in effort to head off deflation and weaken the yen. However after nearly two decades of unorthodox monetary policy in the land of the "rising sun" we are reminded of the famous Einstein quote on insanity, of which he said “Insanity is doing the same thing, over and over again, but expecting different results.”

 

As far as individual movers are concerned this morning Kazakhmys and United Utilities top the pile of winners both are better by more than 2.5% on the day and are being given a run for their money by Rexam and Fresnillo which are up by 2.17 & 1.64% respectively.

 

Whilst Barclays Bank are the top faller down by 1.64% on the day.

Volumes are however frankly pathetic with only 242 million shares traded  at just after mid day  and almost half of that volume can be accounted for by Lloyds, Vodafone and Barclays. That concentration of volume and the limited turnover elsewhere will be of great concern to all market participants.

London markets have sold off by some 40 points or more this morning with the FTSE testing back to and below 5850. The weakness can be attributed to the ongoing crisis in Spain and the perception in the markets that for all the rhetoric over recent weeks from European leaders - they have done little to change the situation on the ground or to halt what some see as the inevitability of Spain having to be bailed out.

 

Figures this morning which showed a continued and worsening rise in bad debts at Spanish banks have done nothing to ease those fears. The Euro has eased against the US$ this morning whilst yields on Spanish bonds have risen once more.

 

As far as individual stock are concerned the biggest faller in London's top flight today is Aviva which have fallen  by some 4.8% sector peer prudential are also lower by 2.8%.

 

There are few gainers in what can genuinely be called a broad based sell off  and only 5 stocks led by the defensive favourite Imperial Tobacco are up by more than one percent the day at the time of writing. Volumes remain on the low side with just over 300 million shares traded in London's topflight as we approach 13.00 hours.

 

Ahead of the US open futures markets suggest a weaker start for  New York equities and both Gold and Crude oil will go into the North American session weaker on the day.

FTSE has traded lower this morning giving back around 17 points on the day so far the biggest faller in the top flight is luxury fashion group Burberry down by more than 18% as I type. Burberry spooked the market this morning with the release of what amounted to a profits warning  for its full year prospects. The company highlighted falling sales growth on a global basis and said that profits for the full year to March will be at the lower end of market estimates. Luxury brands such as Burberry have enjoyed  high ratings and earnings multiples over the last two to three years as sales boomed in Asia and other emerging markets.  But with sales in China falling off dramatically it seems that sector could come back down to earth with a bang.

 

Mining stocks have also taken a knock this morning despite a buy recommendation for the sector from strategist at a leading Swiss bank  names like Vedanta, Anglo American and Kazakhmys are down by at least 3% and given the influential sectors weakness its a wonder that London is not down much more sharply.

 

Modest gains in defensive names are offsetting the cyclical miners but  the  diggers and drillers are much more volatile as a group  and a betting man would think that the miners will win  out in this tug of war.

London's FTSE 100  index has moved up once more this morning to stand at 5790  these gains of some 13 points follow the sharp bounce that occurred on Thursday after the ECB said it would be buying the bonds of Euro zone members in effort to bring down borrowing costs for sovereign sates and provide the markets with the clearest possible signals that  the single currency is not  a "dead duck".

 

M&A was also centre stage this morning as Glencore launched and 11th hour improvement to the terms of its all share offer for  Xstrata.  The increased terms will give major share holders such a Qatar something to think about over the weekend and could swing the balance into Glencore's favour once more.  Though some analysts and commentators continue to ask what genuine additional synergies a full blown merger will bring? Given the existing cross holding and close business relationship that already exists  between the two groups.

As you would expect  many of the Mining stocks are better in London this morning as a result but they are being given a run for their money by Barclays Bank which are up by 5.36% to 203p, whilst RBS add 4.3% to stand at 243.1p. If cyclical stocks such as Miners and Banks are up on the day then you would expect defensive names to be weaker and indeed they are with the like of Imperial Tobacco down by 1.9%, Glaxo are easier by 1.6%  and drinks giant Diageo are down by 1.56%.

 

All eyes today though will be focused on the key Non Farm Payrolls number due out at 13.30 pm, this important measure of US employment will provide markets with clues to the health of the underlying US economy and therefore the likelihood or otherwise of further QE  from the Federal reserve.  Estimates range from 70,000 to 185,000 with the average forecast coming at a headcount of  130,000, versus last month figure of 163,000.

 

Of course markets will also be  closely watching the rate of unemployment though perversely a higher unemployment rate may be  seen as positive for the markets as it may hasten the Fed to introduce additional stimulus measures.

FTSE remains virtually unchanged on the day  as we approach the half way stage in today's session. Though notably we remain well below the key 5700 level which was broken  earlier this week. Oil majors BP and BG are the days biggest losers down 3% a piece.

 

Wolsey, Xstrata and Smith and nephew are the top gainer up by at least 1.9% each. Outside of Vodafone, BP and Lloyds volumes are thin.  Those three names account for over 85 million shares  out of a total turnover of 202 million shares which is a low turnover  by anyone standards 

 

A poor German bond auction has given the market pause for thought the auction was effectively under subscribed this is first time in recent months that German paper has not flown of the shelf.  Whether this marks a turning point in investor attitudes in regards to yields that they are willing to to safely park their cash remains to be seen. But with the  Alice in wonderland world of negative interest rates a genuine possibility in the Eurozone going forward it marks and interesting turning point if nothing else.

FTSE has sold off once more this morning giving back some 38 points to trade at 5718 as I type.

London's blue chip index is outperforming its European peers on the downside this morning no doubt helped in part by the sharp fall in one of its most active stocks Vodafone. The mobile phone operator is weaker by 1.75% following a note from a leading US broker, other notable fallers include RBS, Bats and Land Securities.

The days largest gainer is Oil Service group Petrofac which are up by 1.45%.

US Futures suggest Wall Street will return from the long weekend modestly better but ongoing developments in Europe could change that call before we get to the open.

FTSE is up by some 25 points this morning at 5736  in a quiet European session that comes on the US Labor Day holiday, which officially marks the end of Summer as far as the markets are concerned. With  Wall Street closed this afternoon we have probably seen the best of London market for today already, though the end of the week will see the release of the August Non Farm Payrolls data ( US Unemployment) which will be keenly scrutinised  for clues about the health or other wise of the US economy and what that means in regard to the likelihood of a third round of QE in the USA.

London has been led higher by Mining stocks once more ( they are better on hopes of  further stimulus measures  for the Chinese economy ) indeed all but 2 of the top 10 gainers are from that sector. 

Vedanta  and Fresnillo are the best performers up by 3.5% and 4.2% respectively. The days principal fallers are  Admiral Group and ARM  Holdings which have given back 3.46% and 2.44% respectively.

Volumes are on light side as we would expect on a Monday, though Glencore has traded 16 million shares in the session  so far, as the company decides not to improve its offer for Xstrata. The bid, which has not received the backing of key shareholders,  may now fall at the last hurdle.

London's blue chip equity index has made gains of around 15 points this morning and for now at  least the 5700 level remains intact, London's blue chip equity index has made gains of around 15 points this morning and for now at  least the 5700 level remains intact, though we have printed as low 5708 this morning. 

 

Mining stocks have helped the index into positive territory  with Kazakhmys up by 2.8% and Glencore better by 2.35%. The  move looks more sustainable however as it is supported by trade in around 4 million shares.

 

Vodafone is the most active security in the top flight today with turnover above 15 million shares though it is being run a close second by Lloyd's bank.

 

WPP are the days biggest  faller weaker by 1.41% as I type and I note that ITV, which we mentioned earlier in the week, have slipped back to 83.6p  down by just under 1% this morning.

 

Futures markets suggest  that US markets may open modestly better this afternoon.

FTSE has weakened further  this morning as concerns about Europe come to the fore once again. The semi autonomous state of Catalonia has asked the Madrid government for €5 billion to help it make ends meet . The economy of Catalonia is bigger than that of Portugal and the regional government has more than €40  billion of outstanding debt, so these are not insignificant developments.

FTSE has tested back to as low as 5739 this morning but should selling momentum pick up  then tests of 5700 and recent lows around 5685 are likely to be on the cards.

Miners and banks are  the days principal fallers whilst Utilities are the notable gainers presumably finding favour  for the defensive qualities.  Mobile phone operator Vodafone regains its spot as the most active blue chip with turnover on the day at more than 20 million shares, comfortably outstripping Lloyds and Barclays which have traded around 14 million shares each on the days so far.

Overall  however volumes  are very much on the light side and it feels  very much as though  many participants have extended their bank holiday break. US markets are seen as opening fractionally lower this afternoon and the malaise  in European markets  may spread across  the pond as well.

FTSE resumes trading today in a similar fashion to Fridays uninspiring session.

The index of blue chip equities is down by 10 points in a thin morning with few standout features . One stock that does standout however is DIY retailer Kingfisher, owner of the B&Q chain here in the UK which have fallen by 3.78% this morning, following a downgrade by respected US broker BOA Merrill Lynch, who cite the poor French retail market and who have sharply reduced their 2014 forecast for the home improvements group.

Gong in the opposite direction are broadcaster ITV which have added 2.2% this morning, having been written up at both Deutsche Bank and Citi Group today. The stock has printed as high as 85.4p in the session and though that's still well below the 52 week high of 91.25p be aware that the stock has historically struggled to break cleanly above 87/88p.

On the Macro front the meeting of the world’s Central Bankers at Jackson hole Wyoming is occupying traders’ minds.

The possible contents of Federal Reserve chief Ben Bernanke’s speech from the mountain retreat and ECB chief Mario Draghis non attendance are just two of the variables on their mind. However last year’s event was also highly anticipated and turned out to be an major anti climax so we could be in for more of the same.