UK/Euro Financial Market Daily Morning Briefing 10-04-2012

London open: Stocks drops on US jobs report

Market Movers

• techMARK 2,021.46 -0.78%
• FTSE 100 5,664.35 -1.04%
• FTSE 250 11,244.70 -1.19%

- Markets digest Friday's US jobs data
- Rising exports push China into trade surplus
- Randgold bounces back after Malian settlement

After a long weekend, the FTSE 100 fell sharply in early trade on Tuesday on the back of a mixed performance by the miners and a decline in the banking sector, as investors digested a gloomy jobs report from the US on Friday.

There were signs that the recovery in the US employment market is running out of steam, as US non-farm payrolls data for March disappointed. The US generated 120,000 jobs (seasonally adjusted) in March, well below the 200,000 expected by the market. Private sector payrolls rose by 121,000 while government payrolls were more or less unchanged.

The unemployment rate dipped to 8.2% from 8.3% in February, but the decline was entirely down to people taking themselves out of the recruitment market. Pundits suggest, therefore, that the fall in the unemployment rate is a bad sign, as it indicates people are giving up the ghost when it comes to chasing a new job.

China's trade balance came in at a surplus of $5.35bn in March, compared with a deficit of $31.48bn the month before, as exports grew by 8.9% year-on-year (consensus: +7%). However, imports increased by 5.3% (consensus: +9%), down from the near-40% jump in February, spreading fears of a slowdown in domestic demand.

Meanwhile closer to home, the Royal Institute of Chartered Surveyors (RICS) UK house price balance for the month of March showed a small improvement, to -10 points - the highest reading since June 2010 - from -13 the month before. The consensus estimate was for a reading of -12.

FTSE 100: MINERS MIXED, BANKS TUMBLE

The banks were leading the decline in London early on, with Barclays, Royal Bank of Scotland and Lloyds registering heavy losses. Banks across Europe were the worst performers on Tuesday morning on the back of weak US data - the STOXX Europe 600 Banks index fell by 2.3%. HSBC was falling after saying that it is in talks about a possible sale of its retail banking and wealth management business in Korea.

Mining giant Vedanta Resources continues to see reduced iron ore sales as a result of the mining ban in the Karnatka state of south-western India. Sales of iron ore in the three months to the end of March were 5.2m tonnes, compared with the 6.6m sold in the same period of 2011. Shares fell by nearly 4%.

Glencore International fell after confirming that it is embroiled in a legal dispute as a result of its aluminium supply deal with UC RUSAL, the world's largest aluminium producer.

In contrast, gold miner Randgold Resources jumped over 8% after the announcement of a political settlement in Mali which will see the lifting of sanctions against the country by its West African neighbours. "Our production guidance for 2012 remains unchanged, although we have not completed our assessment of the impact this situation has had on costs," Chief Executive Mark Bristow revealed.

Russian miner Polymetal was also in demand after it celebrated its first gold pour at the Amursk POX facility last week and expects full capacity at the plant later this year.

FTSE 250: RATHBONE RISES, COBHAM FALLS

Investment manager Rathbone Brothers was the high riser on the second-tier index after announcing on Thursday afternoon that its wholly owned subsidiary, Rathbone Investment Management, has completed the acquisition of the wealth management firm RM Walkden & Co.

Cobham, which specialises in meeting the demand for data, connectivity and bandwidth in defence, security and commercial environments, fell after announcing that it is to have another crack at Danish satellite communications outfit Thrane and Thrane.

Insurance firm Lancashire Holdings was out of favour after rolling over a credit facility with its bankers for another five years.

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Tuesday April 10

INTERIM DIVIDEND PAYMENT DATE
Alumasc Group, Carclo, Colefax Group, Dechra Pharmaceuticals, Diageo, Hays, Oxford Instruments, Park Group, Quayle Munro Holdings, Renishaw, Ricardo

QUARTERLY PAYMENT DATE
Africa Opportunity Fund Ltd., Small Companies Dividend Trust

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Trade (GER) (07:00)
Current Account (GER) (07:00)
Factory Orders (GER) (11:00)
Retail Price Index (GER) (07:00)
Wholesales Inventories (US) (15:00)

GMS
Bank Audi SAL (Audi Saradar Group) GDR (Reg S)

SPECIAL DIVIDEND PAYMENT DATE
Independent Inv Trust

EGMS
Bank Audi SAL (Audi Saradar Group) GDR (Reg S), OJSC OC Rosneft GDRS (Reg S)

AGMS
Zhejiang Southeast Electric Power Co Ltd. GDR (Reg S)

UK ECONOMIC ANNOUNCEMENTS
RICS Housing Market Survey (09:30)

FINAL DIVIDEND PAYMENT DATE
Brewin Dolphin Holdings, Domino Printing Sciences, Electronic Data Processing, Independent Inv Trust, TUI Travel

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Europe open: Banks lead losses in early trading

-Banks deposit €784.8bn overnight at ECB
-Spain´s Prime Minister reiterates will meet 2012 deficit target
-North Korea finalizing preparations for satellite launch

FTSE-100: -1.01%
Dax-30: -1.22%
Cac-40: -1.51%
Stoxx 600: -1.16%

The main European equity benchmarks have begun the week with moderate losses, as traders rush to react to what at first glance seems to have been a weaker than expected employment report out Stateside last Friday.

US non-farm payrolls were reported to have grown by 120,000 in March, versus the 205,000 figure which had been estimated by economists.

Putting further pressure on stocks perhaps is the latest Chinese consumer price data for the month of March, released last night, which showed a 3.6% year-on-year rise, instead of the 3.3% increase projected by economists.

From a sector stand-point the worst performing industrial groups on the DJ Stoxx 600 at this moment are: banks (-2.06%), basic resources (-2.01%) and automobiles (-1.91%).

MACROECONOMY

French manufacturing production grew by 1.2% month-on-month in February, versus expectations for a gain of 0.0%.

The German trade surplus rose to €14.7bn in February, versus expectations for a somewhat smaller positive reading, closer to €12bn.

Dutch industrial production contracted at a 0.7% month-on-month rate during February.

OTHER MARKETS

Front month Brent crude futures are down 0.71% to the $121.8/barrel mark in ICE trading.

The euro/dollar is now off slightly, by 0.22%, to the 1.3080 dollar level.

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US close: Jobs data pares losses

Dow Jones: -0.11%
S & P 500: -0.06%
NASDAQ: +0.40%

BUSINESSES

Alcoa, the aluminium producer, will reveal its first quarter results on Tuesday, kicking off the first quarter results season.

Bed Bath & Beyond on Wednesday night after the bell said earnings per share would come in at $1.48, way ahead of the consensus forecast of $1.33.

PPG Industries, the world's second biggest paint maker, announced 2,000 jobs cuts and forecast earnings per share of $1.75 and $1.80 for the first quarter, exceeding the consensus forecast of $1.44.

Constellation Brands, the US's biggest wine seller, got trampled after its forecasts for 2012 were well below expectations.

VOLUME AND BALANCE

The NYSE saw trades for 3.266bn shares, on the NASDAQ the figure was 1.534bn.

The ratio of fallers to risers was 3 to 2 on the NYSE and 5 to 4 on the NASDAQ.

OTHER MARKETS

Futures contracts for May delivery of a barrel of West Texas crude were up 1.08% at $103.72 on the NYMEX.

10-year treasury bonds gained 14/32 dollars; the yield dropped to 2.177%.

The euro fell 0.62% against the dollar to hit $1.3061.

S&P 500 - Risers
Bed Bath & Beyond Inc. (BBBY) $71.85 +8.49%
IntercontinentalExchange Inc. (ICE) $138.60 +3.03%
Avon Products Inc. (AVP) $23.42 +2.95%
Whole Foods Market Inc. (WFM) $83.67 +2.56%
PPG Industries Inc. (PPG) $96.29 +2.52%

S&P 500 - Fallers
Constellation Brands Inc. Class A (STZ) $21.61 -12.47%
Carmax Inc. (KMX) $33.23 -4.84%
Supervalu Inc. (SVU) $5.13 -4.82%
Alpha Natural Res (ANR) $14.20 -3.79%
Western Digital Corp. (WDC) $39.74 -3.73%
First Solar Inc. (FSLR) $20.98 -3.45%
R.R. Donnelley & Sons Co. (RRD) $11.70 -3.23%
Kohls Corp. (KSS) $50.32 -3.19%

Dow Jones I.A - Risers
Home Depot Inc. (HD) $50.62 +1.54%
American Express Co. (AXP) $58.10 +1.27%
McDonald's Corp. (MCD) $98.62 +1.17%

Dow Jones I.A - Fallers
AT&T Inc. (T) $30.94 -2.00%
Verizon Communications Inc. (VZ) $37.66 -1.90%
Alcoa Inc. (AA) $9.63 -1.83%

Nasdaq 100 - Risers
Bed Bath & Beyond Inc. (BBBY) $71.85 +8.49%
Whole Foods Market Inc. (WFM) $83.67 +2.56%
Ross Stores Inc. (ROST) $59.81 +2.47%
Baidu Inc. (BIDU) $148.25 +2.46%
Starbucks Corp. (SBUX) $58.18 +2.14%

Nasdaq 100 - Fallers
Seagate Technology Plc (STX) $25.72 -6.27%
First Solar Inc. (FSLR) $20.98 -3.45%
Mylan Inc. (MYL) $22.59 -2.46%
NetApp Inc. (NTAP) $43.72 -2.21%
Foster Wheeler AG (FWLT) $22.50 -2.17%
Qiagen N.V. (QGEN) $15.44 -2.03%

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Tuesday newspaper round-up: Thomas Cook, Mortgages, North Korea

Debt-laden tour operator Thomas Cook is in advanced talks with its banking group about agreeing a £1.2bn deal to secure the future of the company. The beleaguered company said it was close to striking the agreement with its banking group, just months after the latest refinancing deal which secured an extra £200m. Thomas Cook will give away 5% of the company's shares to the banking consortium and pay a one-off fee in exchange for a two-year extension on its loans to 2015. The group is also exploring a possible sale and leaseback of up to 20% of its aircraft fleet, as part of the deal, which could take place in the next few months and generate about £100m. The group owns 91 planes at present, according to The Telegraph.

Iconic electronics giant Sony is expected to shed 10,000 jobs worldwide over the next year as it tries to return to profit. The retailer is attempting to carry out sweeping reforms which would result in 6% of its global workforce being cut as it struggles with weak TV sales and swelling losses, Japanese media reported yesterday. About half of the job cuts will come from Sony's restructuring of its chemical unit, the Nikkei said. Sony is also merging its liquid crystal display (LCD) panel operation with Toshiba and Hitachi, The Telegraph reports.

North Korea is preparing to carry out a third nuclear test after the planned launch of a ballistic rocket this week, according to South Korea's spy agency — an act that would provoke a new diplomatic crisis in East Asia. The National Intelligence Service in Seoul has reported that large amounts of soil are being used to fill in a mine at North Korea's underground nuclear testing site. The information, gleaned from US satellite images, suggests that engineers are burying a nuclear warhead close to the northeastern town of Punggye-ri, where North Korea performed tests in 2006 and 2009, writes The Times.

Shipyards have been turning out new vessels at a pace designed to service global demand that has simply failed to materialise, meaning the industry is now sinking under massive overcapacity given the downturn in shipping, new figures show. In the worst hit sectors, the fall in the ships' value and the rise in the price of steel – driven by rapacious demand from China as it builds itself anew – means that the difference between the prices fetched if vessels are sold on to keep sailing and those if they are broken up for scrap is now minimal, The Telegraph says.

The poorest families are enduring the steepest price rises in a reversal of last year's trend, according to new research. Households with an income of less than £8,300 are suffering a 4.2% rate of inflation, according to Alliance Trust. Meanwhile, the highest earning households, those with income of more than £71,000, face an inflation rate of just 3.3%. The official consumer prices index measure of inflation stood at 3.4% for the same month, February. Researchers at the investment trust said that the worse inflationary climate for poor households was a consequence of rising utility and food prices, which form a greater proportion of their weekly budget than is the case for affluent families., according to The Times.

Facebook will hand over $1bn to buy the photo-sharing software company Instagram, owner Mark Zuckerberg announced today. The app, which allows users to alter and post images on their smart-phones and tablets, will be paid for in cash and Facebook stock. Facebook will complete its initial public offering of stock next month. The service - used by 30 million people, including celebrities Hilary Duff, Mandy Moore and Jessica Alba - is increasingly becoming a rival for Facebook, which also relies on people posting pictures. The deal comes just days after the service began offering a version for Android phones in addition to its popular Apple app, The Daily Mail reports.

Hundreds of thousands of households owing billions of pounds on interest-only mortgages are struggling to afford their debts, alarming new figures show. Estimates from the chief City watchdog suggest that more than 300,000 borrowers with these types of loans, which are supposed to be more affordable, have missed or were late with at least one payment. Collectively they owe between £14.8bn and £23.7bn to the banks, according to the Financial Services Authority (FSA). Last year the FSA raised concerns that banks were using strategies, such as moving borrowers on to interest-only loans, to mask the full extent of bad debt on their books, The Times says.

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