UK/Euro Financial Market Daily Morning Briefing 12-12-2013

London open: FTSE 100 at two-month low on taper fears

- FTSE 100 at levels not seen since mid-October
- US, Asian markets fall overnight
- Sports Direct, Wood Group fall sharply early on

techMARK 2,656.26 -0.69%
FTSE 100 6,481.31 -0.41%
FTSE 250 15,310.65 -0.56%

Markets across Europe were trading in the red on Thursday morning with the FTSE 100 on trading at levels not seen since mid-October on heightened speculation that the Federal Reserve will begin to trim its asset purchase programme as soon as next week.

A budget deal in Washington signed on Tuesday night was met with a mixed reaction on markets yesterday. While the agreement looks to ease spending cuts over the next two years and reduces the potential for political brinkmanship, many believe that it removes yet another obstacle standing in the way of the Fed's decision to taper following the strong labour-market figures out last week.

The FTSE 100 was trading around 6,481.31 early on, down 0.41% on the day; it has not closed below this level since October 10th when it finished at 6,430.49. This follows a sharp sell-off across US and Asian markets overnight.

"The negative market sentiment is caused by fears that the US budget deal will be the final sign the Fed needs to start tapering the $85bn [monthly] bond purchasing as early as December, spooking investors into pulling their money out of equities," said Alex Conroy, Financial Sales Trader at Spreadex.

Economic data from the States will be closely watched today, particularly the release of jobless claims numbers for the week ended December 7th. The consensus forecast is for a pick-up to 320,000, from 298,000 the week before.

Sports Direct underwhelms with H1 report

Sportswear and equipment retailer Sport Direct slumped early on despite delivering a near-17% jump in underlying profits during its first half, driven by an increase in online and international sales. However, the company did say that "[current] trading has now reverted to management's original expectations" following the outperformance in the first half.

Energy services firm Wood Group disappointed with a pre-close trading update this morning after saying that trading remaining mixed across its three main divisions. Nevertheless, it reiterated guidance for "good growth" in 2013. Sector peers AMEC and Petrofac fell in sympathy.

Imagination Technologies was a high riser on the FTSE 250 today, bouncing slightly after a steep fall on Wednesday following its first-half results, in which it warned of slowing growth in the high-end smartphone market. The stock this morning was upgraded by Liberum Capital to 'buy'.

Fashion retailer SuperGroup was lower after a strong first-half report as it warned that comparatives for the third quarter "are more challenging than those experienced so far this year".

Transport group Go-Ahead gained after saying it expects full-year results to come in a touch above previous expectations as after strong first half.

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FTSE 100 - Risers
Standard Chartered (STAN) 1,307.00p +1.28%
Antofagasta (ANTO) 767.50p +0.92%
Rio Tinto (RIO) 3,239.00p +0.79%
Sainsbury (J) (SBRY) 391.00p +0.77%
United Utilities Group (UU.) 647.50p +0.47%
Morrison (Wm) Supermarkets (MRW) 262.30p +0.42%
International Consolidated Airlines Group SA (CDI) (IAG) 370.20p +0.33%
Associated British Foods (ABF) 2,270.00p +0.22%
Glencore Xstrata (GLEN) 305.50p +0.18%
Hammerson (HMSO) 496.80p +0.08%

FTSE 100 - Fallers
Sports Direct International (SPD) 742.50p -3.70%
Amec (AMEC) 1,073.00p -2.81%
Petrofac Ltd. (PFC) 1,159.00p -2.52%
Mondi (MNDI) 921.50p -2.07%
Royal Bank of Scotland Group (RBS) 320.50p -1.96%
Aberdeen Asset Management (ADN) 456.00p -1.94%
Randgold Resources Ltd. (RRS) 3,974.00p -1.90%
Smith & Nephew (SN.) 825.50p -1.78%
Aggreko (AGK) 1,534.00p -1.67%
Melrose Industries (MRO) 283.80p -1.59%

FTSE 250 - Risers
Imagination Technologies Group (IMG) 196.70p +3.53%
Go-Ahead Group (GOG) 1,672.00p +2.70%
Crest Nicholson Holdings (CRST) 364.80p +2.53%
Bwin . party Digital Entertainment (BPTY) 117.20p +2.27%
Centamin (DI) (CEY) 44.10p +1.97%
AZ Electronic Materials SA (DI) (AZEM) 389.80p +1.64%
Inmarsat (ISAT) 773.00p +1.24%
Morgan Advanced Materials (MGAM) 293.70p +0.96%
Brewin Dolphin Holdings (BRW) 293.80p +0.96%
Domino's Pizza Group (DOM) 497.20p +0.93%

FTSE 250 - Fallers
Wood Group (John) (WG.) 711.50p -10.73%
Supergroup (SGP) 1,201.00p -4.23%
Computacenter (CCC) 651.50p -3.41%
Oxford Instruments (OXIG) 1,663.00p -3.09%
Kentz Corporation Ltd. (KENZ) 611.00p -2.86%
Ted Baker (TED) 2,105.00p -2.50%
Hunting (HTG) 772.50p -2.15%
Telecity Group (TCY) 677.50p -1.95%
Inchcape (INCH) 571.00p -1.81%

Thursday December 12

INTERIMS
Sports Direct International, Supergroup

INTERIM DIVIDEND PAYMENT DATE
London Security

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Bloomberg Consumer Confidence (US) (14:45)
Business Inventories (US) (13:30)
Continuing Claims (US) (13:30)
ECB Report (EU) (09:00)
Import and Export Price Indexes (US) (13:30)
Industrial Production (EU) (10:00)
Initial Jobless Claims (US) (13:30)
Manufacturing Inventories (US) (15:00)
Retail Sales (US) (13:45)
Retail Sales Inventories (US) (15:15)

Q3
Integra Group GDR (Each GDR Repr 2 A Com Shr) (RegS)

FINALS
Domino Printing Sciences, Terrace Hill Group

ANNUAL REPORT
Fenner

IMSS
Integra Group GDR (Each GDR Repr 2 A Com Shr) (RegS)

AGMS
Avanti Capital, Fidelity Special Values, Northern Venture Trust, Pipehawk, Savile Group, Scottish Oriental Smaller Companies Trust, Scottish Oriental Smaller Companies Trust, Trading Emissions, Wessex Exploration, World Careers Network

TRADING ANNOUNCEMENTS
Go-Ahead Group, Wood Group (John)

FINAL DIVIDEND PAYMENT DATE
Avingtrans, Hargreaves Services

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Europe open: Stocks fall ahead of Eurozone and US data

- Eurozone industrial output to be released
- US retail sales and jobless claims in focus
- ECB's Draghi to speak
- ECB monthly report out

FTSE 100: -0.39%
DAX: -0.48%
CAC 40: -0.15%
FTSE MIB: -0.60%
IBEX 35: -0.42%
Stoxx 600: -0.41%

European stocks declined ahead of the release of Eurozone industrial production data and reports on US retail sales and jobless claims.

Eurozone industrial output may have climbed 1.1% in October, in line with the previous month's rate of growth, according to the consensus estimate.

US retail sales are expected to have risen by 0.6% in November, up from the prior month's 0.4% increase.

Weekly jobless claims, which fell below 300,000 last week, is tipped to rise slightly this week to 320,000.

The reports come ahead of next week's Federal Reserve policy meeting when the central bank may announce a tapering of monetary stimulus.

"This is the final piece of the jigsaw ahead of the Fed meeting and could make the difference when it comes to the decision on tapering," according to Alpari analyst Craig Erlam.

According to a recent survey by Bloomberg, 12 out of 35 economists believe that the Fed will begin to taper at its December 17th-18th meeting, nine said a withdrawal will start in January while the remaining 14 don't expect a scaling back of stimulus until March.

Draghi speaks, ECB monthly report

European Central Bank (ECB) President Mario Draghi is scheduled to speak in Strasbourg today.

The market will be looking for insight on the ECB's next move on policy.

The ECB has reportedly been considering the use of negative deposit rates but Draghi has kept mum when quizzed on the topic. The central bank last month lowered its benchmark interest rate to 0.25% from 0.5% to curb falling inflation.

Today the ECB will also release its monthly report which is anticipated to mirror what Draghi said at a press conference following the policy meeting last week.

Peugeot's shares tumble

PSA Peugeot Citroen declined after disclosing a charge of about €1bn in its auto operation and lowering its estimate for savings from its partnership with General Motors.

Fortum Oyj gained after saying it will sell its Finnish power distribution business for €2.55bn to Suomi Power Networks Oy.

Metro AG edged higher after Germany's biggest retailer posted an increase in earnings for its shortened financial year.

The euro fell 0.01% to $1.3784.

Brent crude dropped $0.018 to $109.680 per barrel, according to the ICE.

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US close: Stocks drop sharply as taper bets increase

- Taper bets increase after budget accord
- Obama pledges to sign deal if Congress approves
- Markets suffer worst losses since November 7th
- Costco fails to hit forecasts in Q1

Dow Jones: -0.81%
Nasdaq: -1.40%
S&P 500: -1.13%

US markets finished with steep losses on Wednesday on concerns that a budget deal in Washington would remove one more obstacle standing in the way of a Federal Reserve's decision to taper stimulus.

The Dow Jones Industrial Average, Nasdaq Composite and S&P 500 indices all registered their worst daily losses since November 7th.

Chief Congressional negotiators Senator Patty Murray and Representative Paul Ryan last night worked out a deal that would set spending at about $1.01trn in the current fiscal year, up from the $967bn required in a 2011 budget plan. The budget still needs to be passed in both the Senate and the House.

If passed, it will end three years of impasse and fiscal instability in Washington that culminated in October with a partial government shutdown. The budget comes before a non-binding Friday deadline and more than a month before the January 15th date when existing funds to run many federal programmes expire.

President Barack Obama labelled the agreement as "a good first step" and said he would sign the deal into law if it is passed by Congress.

According to analyst Michael Gapen from Barclays, the agreement will cut the estimated drag from fiscal policy next year in half and, if passed, "would lead to a modest direct boost to gross domestic product (GDP) and some upside risk to our forecast of 2.4% for real GDP growth in 2014".

However, he said that while the deal reduces the potential for fiscal brinkmanship surrounding the budget, it "does not provide for an increase in the debt ceiling past February 7th, nor does it address longer-term structural budget issues".

Nevertheless, with Fed officials recently citing the negative impact that fiscal policy has had on the economy, some analysts believe that this new accord supports the case for a scaling back of stimulus at the central bank's policy meeting on December 17th-18th.

Michael Hewson, Chief Market Analyst at CMC Markets, said: "There was […] the prospect that having removed a potential road block to further political dysfunction in the New Year, prospects of some form of action from the [Fed] next week had increased, which […] appear[ed] to be weighing on risk appetite."

Economic news was thin on the ground on Wednesday; however, one important indicator showed that the US federal government recorded a budget deficit of $135.2bn in November, below the consensus forecast of $140bn and 21.4% less than a year ago.

Costco misses estimates

Costco Wholesale declined as the US warehouse-club chain said net income rose to $425m or 96 cents a share in its first quarter, up 2.2% year-on-year but below the 102 cents expected by analysts. Revenue grew 5.5% to $25.02bn but this also missed the forecast for $25.35bn.

Mastercard jumped after saying its board of directors approved an 83% dividend increase.

Avanir Pharmaceuticals dropped after the drugmaker said a phase II study of AVP for the treatment of multiple sclerosis did not meet the primary efficacy endpoint.

Cisco retreated after losing a European Union (EU) General Court bid to overturn EU approval of Microsoft Corp.'s 2011 takeover of Skype Technologies. The stock was also started at 'sell' on Wednesday by analysts at Citigroup.


S&P 500 - Risers
Scripps Network Interactive Inc. (SNI) $81.00 +7.64%
Mastercard Inc. (MA) $790.57 +3.53%
Visa Inc. (V) $205.66 +3.12%
Urban Outfitters Inc. (URBN) $36.84 +3.08%
Iron Mountain Inc. (IRM) $29.17 +2.21%
Walgreen Co. (WAG) $57.68 +1.91%
Gannett Co. Inc. (GCI) $25.98 +1.80%
AbbVie Inc (ABBV) $52.67 +1.02%
Dollar General Corp (DG) $61.31 +0.94%
Altria Group Inc. (MO) $37.67 +0.94%

S&P 500 - Fallers
Laboratory Corporation of America Holdings (LH) $88.25 -10.99%
Quest Diagnostics (DGX) $55.20 -5.80%
Electronic Arts Inc. (EA) $21.08 -4.44%
Avon Products Inc. (AVP) $17.03 -4.43%
Salesforce.Com Inc. (CRM) $51.43 -4.26%
Tenet Healthcare Corp. (THC) $40.78 -4.16%
Cliffs Natural Resources Inc. (CLF) $24.01 -4.11%
First Solar Inc. (FSLR) $54.20 -4.05%
Delta Airlines Inc. (DAL) $27.66 -3.86%
Allegheny Technologies Inc. (ATI) $31.93 -3.62%

Dow Jones I.A - Risers
Visa Inc. (V) $205.66 +3.12%
Coca-Cola Co. (KO) $40.13 +0.70%
Home Depot Inc. (HD) $79.00 +0.50%
Procter & Gamble Co. (PG) $84.02 +0.44%
Wal-Mart Stores Inc. (WMT) $79.09 +0.01%

Dow Jones I.A - Fallers
Nike Inc. (NKE) $76.84 -3.00%
Pfizer Inc. (PFE) $30.65 -2.20%
United Technologies Corp. (UTX) $108.66 -2.09%
General Electric Co. (GE) $26.58 -2.06%
E.I. du Pont de Nemours and Co. (DD) $60.29 -1.87%
American Express Co. (AXP) $83.90 -1.63%
Intel Corp. (INTC) $24.42 -1.61%
Cisco Systems Inc. (CSCO) $20.88 -1.56%
Travelers Company Inc. (TRV) $87.10 -1.52%
Exxon Mobil Corp. (XOM) $94.26 -1.51%

Nasdaq 100 - Risers
Nuance Communications Inc. (NUAN) $14.25 +1.21%
Dentsply International Inc. (XRAY) $48.49 +0.87%
Whole Foods Market Inc. (WFM) $56.18 +0.85%
Broadcom Corp. (BRCM) $28.68 +0.60%
Dollar Tree Inc (DLTR) $55.90 +0.47%
Sigma-Aldrich Corp. (SIAL) $89.65 +0.34%
Netflix Inc. (NFLX) $363.98 +0.24%
Mondelez International Inc. (MDLZ) $34.08 +0.06%
Applied Materials Inc. (AMAT) $16.83 +0.00%

Nasdaq 100 - Fallers
Randgold Resources Ltd. Ads (GOLD) $65.30 -3.91%
Baidu Inc. (BIDU) $173.24 -3.72%
Intuitive Surgical Inc. (ISRG) $366.62 -3.40%
NetApp Inc. (NTAP) $40.06 -3.38%
Gilead Sciences Inc. (GILD) $70.61 -3.02%
Sirius XM Holdings Inc (SIRI) $3.49 -2.92%
Alexion Pharmaceuticals Inc. (ALXN) $121.60 -2.91%
Mylan Inc. (MYL) $41.42 -2.78%
Vertex Pharmaceuticals Inc. (VRTX) $64.39 -2.78%
Micron Technology Inc. (MU) $22.50 -2.77%

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UK economy, EU banks, Co-op

The UK downturn is finally expected to be left behind next year as the size of the economy surpasses its pre-recession peak, according to a new forecast from the British Chambers of Commerce upgrading prospects for growth. – The Telegraph

The European Union has agreed a common rule book for handling failed banks, in a compromise that brings forward the date when senior creditors must face losses but still leaves room for governments to launch bailouts. – Financial Times

The troubled Co-operative Group has brought in former City minister Lord Myners on a salary of just £1 to help turnaround the bank after its reputation was left in tatters by the Paul Flowers scandal.- The Guardian

Asda Chief Executive Andy Clarke is looking to launch an own-brand tablet to rival Tesco’s Hudl as he signalled last week’s day of discounts known as ‘Black Friday’ would return next year. – The Daily Mail

Bank of England rate-setter Martin Weale yesterday said that Threadneedle Street's flagship forward guidance policy was likely to have had little impact on the economy and appeared to clash with Governor Mark Carney over the timing of possible rate rises. – The Independent

Consumers are splashing their cash again after several years of belt-tightening, new figures from Barclays revealed yesterday. Spending has jumped 3.3% in the year so far, outstripping inflation, as the recovery gathers speed and shoppers regain confidence. – City AM

A South Korean court has handed Samsung Electronics an unexpected loss on its home turf, dismissing claims that Apple violated three of Samsung’s mobile patents. – Financial Times

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