UK/Euro Financial Market Daily Morning Briefing 05-03-2014

London open: Stocks edge lower as investors await data

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Wednesday March 05

INTERIM DIVIDEND PAYMENT DATE
Cohort, Stagecoach Group

INTERIM EX-DIVIDEND DATE
Alumasc Group, Ashmore Group, BHP Billiton, Casdon plc, Clinigen Group, Colefax Group, Darty, Genus, Gleeson (M J) Group, Hansard Global, Hays, JPMorgan Mid Cap Inv Trust, Kier Group, Oxford Instruments, Park Group, Redrow, Renishaw, Ricardo, Ruffer Investment Company Ltd Red PTG Pref Shares

QUARTERLY EX-DIVIDEND DATE
Premier Energy & Water Trust, Utilico Investments Ltd (DI)

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Beige Book Fed Survey (US) (19:00)
Crude Oil Inventories (US) (15:30)
GDP (1st release) (EU) (10:00)
ISM Services (US) (15:00)
MBA Mortgage Applications (US) (12:00)
PMI Composite (EU) (09:00)
PMI Composite (GER) (08:55)
PMI Services (EU) (09:00)
PMI Services (GER) (08:55)
Retail Sales (EU) (10:00)

Q4
OJSC Megafon GDR (Reg S)

FINALS
Admiral Group, BBA Aviation, Belgravium Technologies, Capital & Regional, Carillion, Dignity, Grafton Group Units, Legal & General Group, Lookers, Melrose Industries, Michael Page International, Novae Group, OJSC Megafon GDR (Reg S), Soco International, Sportech

SPECIAL DIVIDEND PAYMENT DATE
Masawara

SPECIAL EX-DIVIDEND PAYMENT DATE
Premier Energy & Water Trust

AGMS
CQS Rig Finance Fund Ltd., JPMorgan Russian Securities

UK ECONOMIC ANNOUNCEMENTS
BRC Shop Price Index (00:01)
Official Reserves (09:30)
PMI Composite (09:30)
PMI Services (09:30)

FINAL EX-DIVIDEND DATE
BlackRock World Mining Trust, Brunner Inv Trust, CRH, Domino Printing Sciences, Electronic Data Processing, Hazel Renewable Energy VCT 1, Hazel Renewable Energy VCT 2, Lavendon Group, Octopus Titan VCT 1, Octopus Titan VCT 2, Octopus Titan VCT 3, Octopus Titan VCT 4, Rio Tinto, Sanderson Group, Sinclair (William) Holdings, Spirent Communications, St. Modwen Properties, SWP Group, Telecity Group, TUI Travel, W H Ireland Group

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Europe open: Stocks mixed before Eurozone data as ECB meeting looms

- Eurozone GDP to be released
- Eurozone PMI services data out
- ECB meeting nears
- US and Russia meet

FTSE 100: -0.19%
DAX: -0.01%
CAC 40: -0.07%
FTSE MIB: 0.45%
IBEX 35: 0.84%
Stoxx 600: 0.07%

European equities were little changed ahead of the release of reports on Eurozone gross domestic product (GDP) and services activity.

The Eurozone economy is expected to have grown by 0.5% year-on-year in the fourth quarter, according to economists ahead of the GDP data from Eurostat.

Another report on Eurozone services purchasing managers' index (PMI) is predicted to come in at a reading of 51.7 in February, in line with the previous month. A reading above 50 signals expansion.

The Eurozone composite, which measures service and manufacturing activity, is tipped to hold at 51.7 in February.

The data comes a day ahead of the European Central Bank's (ECB) meeting. Economists are mixed on whether the ECB will change its policy to tackle high unemployment and low inflation.

ECB President Mario Draghi has indicated that the central bank would consider taking action at its March meeting following the release of more comprehensive data, including economic forecasts.

"While the firmer-than-expected euro area February inflation data reduced the market expectation for ECB action at this meeting, our economists continue to expect them to announce further easing by cutting refi rate by 15bp to 0.10% and the deposit rate by 10bp to -0.10% on the back of growing risk of a very prolonged period of low inflation," according to Barclays.

"While we think this will be a very close call, a combination of refi rate cut and negative deposit rate would likely trigger a knee-jerk EUR selling, in our view."

Later in the session will be a batch of US data including mortgage applications, ISM's non-manufacturing composite, and ADP's employment report. The Federal Reserve will also release its Beige Book.

Ukraine crisis

US Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov are set to hold talks to try to ease tensions in the Ukraine.

Russia has been accused of deploying troops into the Ukraine's Crimea region, which the US called an "act of aggression". However, Russian President Vladimir Putin denied the claims yesterday, saying they were local self-defence forces to protect bases from "nationalists" and "anti-Semites".

Kerry and Lavrov are expected to meet on the sidelines of a long-planned conference on Lebanon in Paris.

Subsea, Bourbon

Subsea 7 slumped as the offshore oil-services provider reported fourth quarter net income that missed analysts' estimates.

Bourbon rallied after the marine-services company posted annual earnings that beat forecasts.

Adidas declined after forecasting results this year would be hurt by currency effects.

Tele2 AB gained following reports the Swedish firm is considering a sale of its Norwegian phone business.

The euro fell 0.1% to $1.3741.

Brent crude futures fell $0.312 to $108.960 per barrel, according to data from the ICE.

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US close: S&P 500 hits new record as tensions ease between Ukraine, Russia

- Putin sees no need to send troops to Ukraine
- S&P 500 hits 49th record in 12 months
- Industrials, financials recover

Dow Jones: 1.41%
Nasdaq: 1.75%
S&P 500: 1.53%

US markets soared on Tuesday, rebounding strongly after a sell-off the day before as the geopolitical crisis in Ukraine and Russia eased slightly, helping the S&P 500 to hit another record high.

The benchmark S&P 500 finished 1.5% higher at an all-time high of 1,873.91, surpassing its previous high of 1,859.45 reached on Friday; this was the index's 49th record in the last 12 months.

Meanwhile, the Dow Jones Industrial Average added 1.4% and the Nasdaq rose 1.75%.

Sentiment recovered today after Russian President Vladimir Putin said he saw no need yet to send troops into Ukraine, with heavyweight blue chips in the industrial and financial sectors helping markets to rebound after being hit by a reduction in risk appetite on Monday.

"Equities have continued on their tear […] as markets re-price risk in light of the worst-case scenario for Ukraine being avoided," said Trader David White from Spreadex.

Speaking for the first time since the ousting of former Ukraine President Viktor Yanukovych last month, Putin said that the situation in the Crimea had "dissipated" and he would only send soldiers to Ukraine in an extreme case.

He told reporters today that Yanukovych had asked Russia to send forces into Ukraine to protect Russian citizens within the country.

Nevertheless, tensions still remain high given the Western condemnation of actions by Moscow.

Speaking in Kiev on Tuesday, US Secretary of State John Kerry said: "The Russian government would have you believe that Russian actions are legitimate. The larger point is that diplomacy, not force, can solve disputes like this in the 21st century."

Meanwhile, US President Barack Obama said that Putin's rationale for Russia's increased presence in Crimea was not "fooling anybody".

No major economic data was released in the States during the session, though things are likely to pick on macro-wise in the coming days as investors await ISM services data, the Federal Reserve's Beige Book and the all-important non-farm payrolls report.

Blue chips recover, Facebook jumps

Industrial stocks such as Boeing and General Electric bounced after a weak performance the previous session, along with financial giant Citigroup, Bank of America and Goldman Sachs.

Facebook rallied on reports the social-network site owner may buy Titan Aerospace for $60m, makers of solar-powered, high-altitude drones that can stay aloft for up to five years at a time.

Abercrombie & Fitch gained after Credit Suisse raised its recommendation on the company to 'outperform' from 'neutral', saying a more competitive pricing strategy and tighter cost controls will help bolster earnings.

Lorillard was higher on speculation Reynolds American will make a bid to buy the third-largest seller of cigarettes in the US.

SunEdison rose after Morgan Stanley raised the solar-energy technology developer to 'overweight', meaning investors should buy the shares.

Molycorp dropped as the owner of the largest rare-earth deposits outside of China reported fourth quarter revenue that fell short of analysts' estimates.

Electronics retailer Radioshack plummeted after missing analysts' estimates with its quarterly results and saying that it will close a fifth of its stores.

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Wednesday newspaper round-up: BP, Virgin Money, Bank bonuses

Due to the volatility of American oil and gas prices shale producers need to be quick and nimble, adjusting their production higher or lower as a function of their commodity price forecasts. Unfortunately, such agility clashes with the predominant business model of the oil majors. Hence, BP has decided to put its 'tight' US oil and gas assets into a standalone business so as to improve operating performance and then sell it off, The Times reports.

Close on the heels of its return to profitability after its acquisition of collapsed mortgage bank Northern Rock, Virgin Money“s latest annual report shows that an initial public offering is a distinct possibility. The lender is also gearing up for the launch of a current account in the first half of this year, The Scotsman says.

The Governor of the Bank of England confirmed that the Bank will this month begin to analyse a toughening of the Remuneration Code on the basis of the recommendations made to it by the banking commission of MPs and peers. That means that bank bosses could be stripped of their bonuses even after having cashed them in, as opposed to as at present, according to The Daily Mail.

Manchester-based online fashion retailer Boohoo.com is understood to have set the price for its upcoming flotation at 50p per share. That would allow the latest aspirant from the retail sector to become a quoted company, or to sell shares, at a market valuation of £500m, although the firm declined to comment. At the moment the Kamani family own an 82% stake in the business, The Daily Telegraph says.

The message for Britain from the Geneva Motor show is that the country“s automobile manufacturers will have more work heading their way soon. Little surprise then that the sector is being pushed to capacity, with over four decade-old production records set to be hit again at some point over the next few years. Jaguar Land Rover announced its decision to put its new baby Jag into production at Solihull in 2015, while Nissan will ramp up production of its all-electric Leaf car at its Sunderland plant, The Times says.

The public debate over the effects of the Bank of England“s record low interest rates is heating up again ahead of tomorrow“s meeting of the Monetary Policy Committee meeting. For Ros Altmann, a former Saga director-general, what has been witnessed over the last few years is a dramatic redistribution of wealth between borrowers and savers that would have caused an uproar had it been done through the tax system. Consultancy McKinsey also suggested in 2013 that persistently low rates could damage growth via lowered consumption, The Times explains.

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