UK/Euro Financial Market Daily Morning Briefing 14-01-2014

London open: Markets pull back from 10-week high, Ashmore drops

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Tuesday January 14

INTERIMS
Ideagen, IG Group Holdings

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Business Inventories (US) (13:30)
Import and Export Price Indexes (US) (13:30)
Industrial Production (EU) (10:00)
Manufacturing Inventories (US) (15:00)
Retail Sales (US) (13:45)
Retail Sales Inventories (US) (15:15)
Speech President US Federal Reserve bank of Philaldephia
Speech President US Federal Reserve bank of Dallas

IMSS
Big Yellow Group, Carr's Milling Industries

AGMS
Baring Emerging Europe, Carr's Milling Industries, European Investment Trust, Frutarom Industries Ltd GDR (Reg S), Spirit Pub Company

TRADING ANNOUNCEMENTS
Barratt Developments, Countrywide, Dragon Oil, Michael Page International, SABMiller

UK ECONOMIC ANNOUNCEMENTS
Consumer Price Index (09:30)
Producer Price Index (09:30)
Retail Price Index (09:30)

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Europe open: Stocks fall ahead of UK inflation, US retail sales data

- UK inflation data to be released
- US retail sales report in focus
- ECB addresses bad-debt rules in bank review

FTSE 100: -0.51%
DAX: -0.94%
CAC 40: -0.67%
FTSE MIB: -0.71%
IBEX 35: -0.77
Stoxx 600: -0.66%

European stocks fell as investors awaited reports on UK inflation and US retail sales.

The UK consumer price index (CPI) for December is expected to have risen 2.1% year-on-year, in line with the prior month, according to the consensus forecast.

It comes at a time when the market is observing against the risk of even lower inflation readings in the Eurozone and the US.

However, in France this morning CPI figures showed a rebound last month, easing concerns that a struggling economy could add to deflationary pressures. Prices rose by 0.3% in national CPI terms in December after measures were unchanged in November, the national statistics institute Insee revealed. The rise was driven by seasonal increases in air travel and vacation packages.

Later in the day, US data on retail sales is anticipated to show a gain of 0.1% month-on-month in December, following an increase of 0.7% in November.

"The US retail sales figure will be very closely watched for signs that consumer sentiment is improving in line with the economic outlook," said Alpari Market Analyst, Craig Erlam.

"Consumer spending is hugely important to the economy and given that we've just seen a very disappointing jobs report, investors could do with a bit of a boost. A poor figure here would only add to calls for the Fed not to taper in January, after getting the ball rolling last month."

The Federal Reserve is turning to economic data to gauge the health of the world's biggest economy in weighing whether to announce a further scaling back of monetary stimulus at its next meeting at the end of the month.

The US central bank began unwinding monthly bond purchases by $10bn to $75bn last month.

ECB fears bad-debt rules could hurt bank review

The European Central Bank (ECB) is concerned that bad-debt rules could hurt its review into the health of European banks, according to an internal document obtained by Bloomberg.

The central bank fears that national differences in how bad-debt is classified could "severely affect the consistency and credibility of the exercise".

The ECB is conducting a three-stage review of bank assets before taking over responsibility of about 130 lenders in the bloc in November.

Volkswagen, Celesio

Volkswagen edged lower after UBS cut its rating of the carmaker to 'sell' from 'neutral'.

Celesio declined after McKesson said it failed to receive enough backing from shareholders to buy the drug distributor.

Jeronimo Martins slumped after the Portuguese retailer reported a slowdown in sales growth in Poland, its biggest market.

The euro rose 0.15% to $1.3691.

Brent crude futures climbed $0.56 to $106.810 per barrel, according to the ICE.

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US close: Markets suffer heavy falls ahead of earnings

- Lockhart supports 'similar tapering steps' at next meeting
- Analysts warn of lofty valuations ahead of earnings
- Suntory offers 16bn dollars for Beam

Dow Jones: -1.09%
S&P 500: -1.47%
Nasdaq: -1.26%

A flat start turned into a sell-off for US equities on Monday, with markets falling by their most so far this year, as uncertainty regarding the Federal Reserve's stimulus programme weighed heavily on sentiment.

In spite of Friday's much worse-than-expected jobs report, Atlanta Fed President Dennis Lockhart said in a speech that he supports "similar tapering steps" as the one taken in December, adding that the economy is on a "solid footing".

Investors were concerned that December's mere 74,000 increase in non-farm payrolls will not have deterred policymakers from reducing its asset purchases at its next policy meeting later this month.

"The prospect of another reduction of stimulus at the end of this month, set against rather lofty valuations has seen investors decide to take some money off the table in a week that sees US earnings start to come in thick and fast," said Michael Hewson, Chief Market Analyst at CMC Markets.

It will be a busy week in terms of corporate earnings though some analysts have warned that improved profit growth is necessary in order for stocks to continue their advance.

Goldman Sachs strategist David Kostin recently said that the price-to-earnings multiple on the S&P 500 "is lofty by almost any measure". He estimates that the benchmark S&P 500 will close the year at 1,900, representing just a 3% gain from current levels.

A number of US bellweathers will be in focus this week with JPMorgan Chase & Co, Wells Fargo, Bank of America, Goldman Sachs and Citigroup all expected to report their fourth-quarter earnings in the coming days. They are among the 29 constituents on the S&P 500 to release their results this week.

According to a survey of analysts by Bloomberg, earnings for companies on the S&P 500 are expected to have increased by an average 4.9% in the fourth quarter on 1.8% higher sales.

Beam surges on Suntory takeover

Beam, the maker of spirits such as Jim Beam and Maker's Mark, advanced after Japanese firm Suntory Holdings said it will buy the company in a $16bn deal. The deal is expected to make Suntory the third-largest manufacturer of distilled drinks in the world. Shares in the US-listed stock jumped by as much as a quarter in morning trade.

Social media group Twitter was also a high riser after Goldman Sachs lifted its price target for the stock from $46 to $65, citing the company's product innovation.

Lululemon Athletica slumped after the sportswear company lowered its profits and sales forecast for the fourth quarter.

Symantec retreated after Morgan Stanley recommended a 'sell' rating for the anti-virus software maker.

MGM Resorts International edged higher as Bank of America upgraded the gaming and hospitality company to 'buy' from 'neutral'.


S&P 500 - Risers
Beam Inc. Common Stock (BEAM) $83.42 +24.56%
Juniper Networks Inc. (JNPR) $25.32 +7.56%
Merck & Co. Inc. (MRK) $53.12 +6.50%
Brown Forman Corp. Class B (BF.B) $78.22 +4.02%
F5 Networks Inc. (FFIV) $92.01 +3.94%
Xerox Corp. (XRX) $12.21 +1.83%
Hewlett-Packard Co. (HPQ) $28.12 +1.52%
Netflix Inc. (NFLX) $336.81 +1.41%
Expeditors International Of Washington Inc. (EXPD) $44.22 +1.40%
Red Hat Inc. (RHT) $57.56 +1.32%

S&P 500 - Fallers
J.C. Penney Co. Inc. (JCP) $6.72 -8.45%
Scripps Network Interactive Inc. (SNI) $76.31 -6.95%
Intuitive Surgical Inc. (ISRG) $393.07 -6.44%
Kohls Corp. (KSS) $53.46 -6.19%
Symantec Corp. (SYMC) $22.20 -5.41%
Biogen Idec Inc. (BIIB) $283.67 -5.23%
McKesson Corp. (MCK) $167.14 -4.73%
Tesoro Corp. (TSO) $54.81 -4.69%
First Solar Inc. (FSLR) $49.86 -4.06%
Gap Inc. (GPS) $38.25 -3.99%

Dow Jones I.A - Risers
Merck & Co. Inc. (MRK) $53.12 +6.50%

Dow Jones I.A - Fallers
Microsoft Corp. (MSFT) $34.98 -2.94%
Walt Disney Co. (DIS) $73.27 -2.81%
Nike Inc. (NKE) $75.18 -2.26%
Exxon Mobil Corp. (XOM) $98.55 -1.96%
American Express Co. (AXP) $86.99 -1.76%
International Business Machines Corp. (IBM) $184.16 -1.66%
Verizon Communications Inc. (VZ) $47.03 -1.51%
Coca-Cola Co. (KO) $39.53 -1.50%
Chevron Corp. (CVX) $119.25 -1.45%
Goldman Sachs Group Inc. (GS) $175.88 -1.41%

Nasdaq 100 - Risers
F5 Networks Inc. (FFIV) $92.01 +3.94%
Randgold Resources Ltd. Ads (GOLD) $63.70 +3.46%
Vimpelcom Ltd Ads (VIP) $12.24 +1.58%
Netflix Inc. (NFLX) $336.81 +1.41%
Expeditors International Of Washington Inc. (EXPD) $44.22 +1.40%
Sba Communications Corp. (SBAC) $89.12 +0.91%
Garmin Ltd. (GRMN) $45.41 +0.80%
eBay Inc. (EBAY) $52.54 +0.73%
Apple Inc. (AAPL) $535.73 +0.52%
Catamaran Corp (CTRX) $50.28 +0.40%

Nasdaq 100 - Fallers
Intuitive Surgical Inc. (ISRG) $393.07 -6.44%
Symantec Corp. (SYMC) $22.20 -5.41%
Biogen Idec Inc. (BIIB) $283.67 -5.23%
Baidu Inc. (BIDU) $171.00 -4.82%
Tesla Motors Inc (TSLA) $139.34 -4.38%
Tractor Supply Company (TSCO) $73.40 -4.15%
Akamai Technologies Inc. (AKAM) $46.30 -3.94%
Facebook Inc. (FB) $55.91 -3.50%
Alexion Pharmaceuticals Inc. (ALXN) $130.61 -3.40%
Twenty-First Century Fox Inc Class A (FOXA) $32.35 -3.32%

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Tuesday newspaper round-up: StanChart, US Congress, Time Warner

Seasoned Standard Chartered investors will not be surprised that the emerging markets-focused bank has yet again become the source of takeover talk. Stanchart shares were trading flat in Hong Kong in morning trading, even after Citigroup analysts commented in a research note that Australian lender ANZ may explore a buyout. – Financial Times

The US Congress has agreed a broad spending deal for the first time since 2009, but it has left the International Monetary Fund in disarray by refusing to fund its latest capital increase. The $1.012tn package lays out how the US will spend the budget agreed after tense negotiations in December. A full appropriations bill marks another step in the return to regular budgeting in Washington and will prevent another government shutdown by funding the government until September. – Financial Times

A battle for the future of the US cable industry burst into the open on Monday as Charter Communications went public with an offer for Time Warner Cable worth $61bn including debt, only for its larger rival to reject its advances as "grossly inadequate". Backed by John Malone's Liberty Media, Charter has circled Time Warner Cable since last summer, publicly advocating for consolidation in an industry battling new competition, new technology and shifting consumer habits. – Financial Times

Google continued its push into becoming a maker of consumer electronics by acquiring Nest, a company that sells "smart" thermostats and smoke alarms, in a deal worth $3.2bn (£1.95bn). The deal marks a remarkable rise for a three year old company which has only released two products to date. The Nest Thermostat, a device that controls heating in the home through a mobile phone sold around a million units worldwide last year. – The Times

The Detroit auto show opened Monday with manufacturers announcing a fleet of new models amid an air of optimism unseen since before the recession. "The auto industry's back," US transportation secretary Anthony Foxx told reporters, "And of course, we're going to do everything we can to help Detroit come back as well". All three major US car firms are using this year's show to unveil major new vehicles they hope will power their future success after strong growth in 2012. Car sales have remained up even as the data on other consumer purchases have wobbled. – The Guardian

The inflation rate is expected to have crept up slightly from a four-year low due to petrol price rises and household energy bills, according to figures due to be released on Tuesday. The Consumer Prices Index (CPI) fell to 2.1% in November but economists expect it will have nudged ahead to 2.2% over the latest period. Petrol price rises and household energy bill hikes are expected to have driven the rise but easing food inflation and aggressive high street discounting in the run-up to Christmas should have kept the lid on the increase in the cost of living. – Daily Mail

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