UK/Euro Financial Market Daily Morning Briefing 03-03-2014

London open: Stocks drop sharply as Ukraine tensions rise

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Monday March 03

INTERIMS
Earthport, Tristel

INTERIM DIVIDEND PAYMENT DATE
Murgitroyd Group

QUARTERLY PAYMENT DATE
JPMorgan Claverhouse Inv Trust

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Auto Sales (US) (15:00)
Construction Spending (US) (15:00)
Personal Consumption Expenditures (US) (13:30)
Personal Income (US) (13:30)
Personal Spending (US) (13:30)
PMI Manufacturing (EU) (09:00)
PMI Manufacturing (GER) (08:55)

GMS
Serabi Gold

FINALS
AL Noor Hospitals Group, Amlin, British Polythene Industries, FBD Holdings, Hellermanntyton Group, Intertek Group, Johnson Service Group, Keller Group, Robert Walters, Senior, TCS Group Holding GDR (Each Repr 1 A Shr) (Reg S), Ultra Electronics Holdings

AGMS
Image Scan Holdings

UK ECONOMIC ANNOUNCEMENTS
Consumer Credit (09:30)
M4 Money Supply (09:30)
M4 Sterling Lending (09:30)
Mortgage Approvals (09:30)
PMI Manufacturing (09:30)

FINAL DIVIDEND PAYMENT DATE
Renew Holdings

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Europe open: Stocks slide ahead of manufacturing data releases

- Manufacturing data out in Eurozone, UK and US
- Chinese manufacturing activity contracts
- Ukraine crisis intensifies

FTSE 100: -1.23%
DAX: -2.31%
CAC 40: -1.71%
FTSE MIB: -1.66%
IBEX 35: -1.86%
Stoxx 600: -1.62%

European stocks declined before the release of a slate of manufacturing data in the Eurozone, the UK and the US.

The purchasing managers' index (PMI) for Eurozone manufacturing is expected to come in at 53 in February, in line with the previous month and above the 50 level that signals expansion.

UK manufacturing PMI is predicted to rise slightly to 56.8 in February from 56.7 in January.

Later on US manufacturing PMI may show the reading increased to 52 last month from 51.3 in January.

Ahead of the release, HSBC's China manufacturing PMI fell to 48.5 in February from 49.5 in January, fuelling fears of a slowdown in the world's second largest economy.

"We think the outlook for the sector remains downbeat," said Capital Economics.

"Despite the recent surge in liquidity we suspect that policymakers will make further efforts to slow credit growth which should continue to weigh on domestic demand and manufacturing activity."

Ukraine tensions

US Secretary of State John Kerry is travelling to the Ukraine today to offer the nation support as Russian troops occupy Crimea.

Ukraine has readied its forces after Russian President Vladimir Putin received parliamentary approval over the weekend to send troops into the neighbouring country.

US President Barack Obama and UK Prime Minster David Cameron have agreed Russia must face "significant costs" if it does not change its course.

Roche, Kuehne & Nagel

Cancer drug maker Roche declined after a study showed no clinical benefits of its METLung lung cancer treatment.

Kuehne & Nagel dropped as the world's biggest sea-freight forwarder reported 2013 earnings that missed analysts' estimates.

Bouygues slumped as Chief Executive Officer Martin Bouygues met with French President Francois Hollande to seek government support for a purchase of SFR, according to Le Journal du Dimanche.

The euro fell 0.19% to $1.3776.

Brent crude futures jumped $1.606 to $110.850 per barrel, according to the ICE.

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US close: S&P 500 closes at all-time high despite mixed data

- S&P 500 hits record high
- US GDP revised lower for fourth quarter
- Chicago PMI, consumer confidence beats forecasts

Dow Jones: 0.30%
Nasdaq: -0.25%
S&P 500: 0.25%

Rising concerns over Ukraine failed to deter investors from pushing the benchmark S&P 500 to a record high on Friday, ending a strong February for the US stock market.

Traders were also shrugging off a worse-than-expected downwards revision to US economic growth, after Chicago manufacturing data and consumer confidence figures came in ahead of predictions.

Despite a pull-back in afternoon trading, the S&P 500 rose 0.25% to a new all-time high of 1,859.53, finishing the month with gains of around 4.3%. The Dow Jones Industrial Average ended 0.30% up, closing February up 3%. The Nasdaq, meanwhile, lost 0.25% but still finished the month up 4.5%.

Markets were extending gains made Thursday when Federal Reserve Chair Janet Yellen delivered a dovish testimony to the Senate. While she noted the recent batch of weak economic releases, Yellen said she believes it could be down to the harsh winter weather.

"What we will be doing in the weeks ahead is to try to get a firmer handle on exactly how much of that set of soft data can be explained by weather and what portion, if any, are due to a softer outlook," the central banker said.

She also said the Fed was likely to continue winding back its monthly asset purchases until the programme ends later this year, but reiterated that tapering is not on a "pre-set course".

Data comes in mixed

US gross domestic product (GDP) rose at a revised annualised pace of 2.4%, compared to 3.2% in the third quarter and the consensus forecast for a revision to 2.5%.

However, Capital Economics pointed out that "the good news is that business investment increased by 7.3%, revised up from the initial estimate of a 3.8% gain. That gain helped to offset an 8.7% decline in residential investment, which was hit by the drop back in existing home sales that has reduced brokers' commissions."

Pending US home sales edged 0.1% up in January, well below what was expected, although the previous month's number was revised higher.

The University of Michigan's consumer confidence index for the month of February increased from 81.2 to 81.6  consensus: 81.2 , although the expectations sub-index was off slightly.

MNI's Chicago manufacturing sector Purchasing Managers' Index for the month of February edged higher by 0.2 points to reach 59.8, well above ahead of the consensus estimates.

Southwestern drops

Southwestern Energy fell sharply despite beating forecasts with fourth-quarter earnings of 41 cents per share, compared with a loss of $1.02 previously.

Customer-management software firm Salesforce also slumped after guidance for its first quarter profits came in slightly below estimates.

KBR Inc. slumped as the military contractor forecast 2014 earnings per share of $1.75 to $2.10, below analysts' estimates of $2.49, and reported fourth-quarter revenue that missed forecasts.

Jos. A. Bank advanced as the menswear chain rejected a $1.78bn bid from Men's Wearhouse late yesterday.

Arena Pharmaceuticals declined as the maker of the weight-loss drug Belviq widened its fourth-quarter loss.

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Monday newspaper round-up: Russia, Rolls Royce, Ladbrokes

Europe's two biggest states were on the brink of armed conflict last night after Russia tightened its grip by surrounding Ukrainian military bases and President Putin defended the invasion as "an appropriate response". Ukraine warned that it was "on the brink of disaster" as it put its military on high alert on a day of increasing tensions. – The Times

Rolls-Royce is facing a new corruption inquiry over allegations that it paid bribes to win lucrative contracts to supply Hawk trainer jet engines to an aircraft manufacturer owned by the Indian government. According to officials, Indian defence minister A. K. Antony called in detectives from the Central Bureau of Investigation (CBI), which handles high-profile cases, after allegations of bribes were made in an anonymous letter. – The Telegraph

Chris Bell, the former Chief Executive of Ladbrokes, is planning to bring an Israeli gaming marketing company to the London market with a $100m (£60m) capitalisation. Mr Bell, who stood down from the bookmaker in 2010 after a 20-year career, is chairman of XL Media. – The Telegraph

Research to be released today shows that the take-up of industrial space rose by 24% to 94.2m sq ft last year and is expected to grow even further this year. Lambert Smith Hampton said that the "economic recovery, an improving manufacturing sector and the drive by retailers and the e-commerce industry to improve supply chains" was boosting demand. – The Times

The surging housing market has broadened out beyond London and the south-east, with prices up in more than half the country for the first time in 10 years, according to data from property researchers Hometrack. In England and Wales, prices rose for 51% of postcodes in February, the highest proportion since July 2004, researchers said. This pushed average prices up 0.7%– the biggest monthly rise since April 2007. – The Guardian

Business leaders are today calling on the Chancellor to use his upcoming Budget to prioritise measures to boost investment and export trade in order to rebalance the economy. In a wide-ranging submission ahead of George Osborne's March 19th speech, the CBI also proposes bringing in an energy package to encourage investment in generation, amid fears that the lights could go out if new capacity is not created. – The Scotsman

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