UK/Euro Financial Market Daily Morning Briefing 14-03-2014

London open: Stocks down for sixth day on Ukraine, China fears

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Friday March 14

INTERIMS
Wetherspoon (J.D.)

INTERIM DIVIDEND PAYMENT DATE
Jupiter Primadona Growth Trust, Penna Consulting

QUARTERLY PAYMENT DATE
Carnival, Duet Real Estate Finance Ltd, Energy XXI (Bermuda) (DI)

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Consumer Price Index (GER) (07:00)
Producer Price Index (US) (12:30)
U. of Michigan Confidence (Prelim) (US) (13:55)

GMS
Range Resources Ltd. (DI)

FINALS
Tribal Group

ANNUAL REPORT
Herald Inv Trust, Norsk Hydro ASA, Senior

IMSS
SThree

AGMS
Henderson Diversified Income Ltd., LG Chem Ltd GDS (Reg S), LG Electronics Inc GDS (Reg S), Posco ADS (Level II), Samsung C&T Corp. GDR

FINAL DIVIDEND PAYMENT DATE
Future, JPMorgan Russian Securities, Octopus Eclipse VCT 1, Zytronic

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Europe open: Stocks fall as US and Russia hold talks on Ukraine

- US and Russia meet in London
- German inflation rises in line
- Banks lower forecast for Chinese economic growth

FTSE 100: -0.32%
DAX: -0.75%
CAC 40: -0.70%
FTSE MIB: -0.27%
IBEX 35: -0.62%
Stoxx 600: -0.62%

European stocks declined as the US and Russia prepared for key talks on Ukraine in London.

US Secretary of State John Kerry and Russian counterpart Sergei Lavrov will meet today ahead of referendum in Crimea on Sunday.

US President Barack Obama has said the referendum on Crimea leaving Ukraine to join Russia will not be internationally recognised.

Kerry is expected to warn such a move could prompt concerted US and EU sanctions.

In other developments, Russia launched new military exercises near its border with Ukraine yesterday involving more than 8,000 troops and large artillery units such as rocket launchers and anti-tank weapons.

German inflation

German inflation rose by 1.2% year-on-year in February, in line with expectations. Month-on-month consumer prices gained 0.55.

Meanwhile, Bank of America Corp., UBS, JPMorgan Chase & Co. and Nomura Holdings lowered their forecasts for Chinese economic growth in 2014 following the release of a batch of weak data this week.

Reports yesterday showed factory output eased and retail sales increased at the slowest rate for the period since 2004.

Later on attention will turn to the release of the University of Michigan's US consumer confidence index which is expected to rise to 82 in March from 81.6 a month earlier.

Miners slide on China concerns

Mining stocks, including Rio Tinto, edged lower over concerns of slowdown in China.

Novo Nordisk slumped following a report that the pharmaceutical company is spending 550m Danish kroner on a new factory in Bagsvaerd, Denmark to be used for developing new diabetes products.

Daimler declined after the car maker said it is selling 500m yuan of bonds in China.

The euro rose 0.06% to $1.3877.

Brent crude futures fell $0.065 to $107.320 per barrel, according to the ICE.

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US close: Stocks suffer heavy losses despite strong US data

- China, Ukraine concerns outweigh strong US data
- S&P 500 turns negative year-to-date
- Dollar General disappoints with guidance

Dow Jones: -1.42%
Nasdaq: -1.46%
S&P 500: -1.17%

US stocks plunged on Thursday, registering their worst losses in five weeks, as ongoing concerns about China and Ukraine outweighed upbeat data from closer to home.

The S&P 500, which had been treading water since hitting a record high last Friday of 1,878.04, dropped 1.2% to 1,846.34 on Thursday, turning negative for the year to date.

The index, along with the Dow Jones Industrial Average which fell 1.4%, had their biggest declines since February 3rd. The Nasdaq, meanwhile, finished down 1.5%.

Markets had started the session in positive territory after Commerce Department figures showed that retail sales climbed 0.3% on the month in February after a revised 0.6% fall in January. This ended two straight months of declines and came in better than the consensus forecast for an increase of 0.2%.

The Labor Department said the number of Americans filing for new claims for jobless benefits last week unexpectedly dropped 9,000 to a seasonally adjusted 315,000. The consensus estimate had been for 330,000 claims.

Another report from the Bureau of Labor Statistics revealed US import prices increased by 0.9% on the month in February (1.1% year-on-year). The consensus estimate had been for a gain of 0.6% month-on-month.

However, sentiment was quickly dampened by lingering fears of a slowdown in China. Amid tightening Chinese credit conditions that spooked global markets earlier in the week, data out on Thursday showed that growth in industrial production, retail sales and fixed asset investments all eased last month.

Meanwhile, tensions between Russia and the West stepped up a gear after US Secretary of State John Kerry told a Senate panel that the US and Europe will take "very serious" actions following the Crimea referendum this weekend if he does not see a sign of a resolution to the crisis.

"The worries surrounding Ukraine are gradually heightening, with the Crimean referendum now only three days away. Despite continued attempts from the West to avert the vote, it has become increasingly clear that Russia is unwilling to back down over the region, which will likely be part of the Russian Federation," said Market Analyst Craig Erlam from Alpari.

Dollar General misses on Q4 results, guidance

Discount retail chain Dollar General dropped after saying that earnings per share in the first quarter would not exceed 74 cents, under the consensus forecast of 81 cents. This came after the company reported a worse-than-expected 1.5% increase in profits in the fourth quarter.

The company's Chief Executive Rick Dreiling blamed the "severe winter weather, including many days with significant store closures, an aggressive competitive retail landscape and our customers` uncertainty about spending in the current economic environment".

Sector peer Family Dollar Stores also fell on the news.

Williams-Sonoma jumped strongly as the seller of cookware and home furnishings predicted sales this year will increase more than expected by analysts.

Krispy Kreme Doughnuts gained after boosting its 2015 fiscal year profit-per-share forecast from 71-76 cents to 73-79 cents.

Activision Blizzard jumped after Bank of America Corp. raised its rating on the US video-game publisher to 'buy' from 'neutral'.

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Friday newspaper round-up: BP, Daisy Group, RBS

Oil giant BP has reached an agreement with the US environmental Protection Agency (EPA) over the firm's 'blacklisting' following the 2010 Gulf of Mexico oil spill. The firm had argued that it lost out on billions of dollars' worth of contracts while at the same time being prevented from new exploration licenses, threatening its dominant position in the region. Those restrictions left the company with a net loss in federal contracts in the last full year of $654m, versus $2.51bn of awards in 2012, The Times reports.

The owner of Virgin Media, Liberty Global, has held talks aimed at acquiring Daisy Group, in a transaction thought to be worth at least £500m. Nonetheless, it remains unclear whether a formal bid will finally be launched. Price seems to be the main sticking point, with Daisy holding out for 220p a share, valuing the company at nearly £600m, The Times says.

RBS's long-term credit ratings continue to slide. Rating agency Moody's last night cut the lender's own, following the sixth consecutive year of losses at the majority state-owned bank, and warned that further downgrades were a possibility. Nonetheless, a senior credit officer at Moody's added: "Over a longer-term horizon, RBS's restructuring plan should be beneficial for creditors if executed according to plan," The Guardian reports.

Philip Hammond, the Defence Secretary, unveiled a £300m contract to refurbish BAE Systems' submarine yard in Cumbria. That is a nod regarding the likelihood that the firm will indeed be given a contract to construct the Royal Navy's next generation of nuclear missile submarines. A decision is expected in 2016, following the elections, according to The Daily Telegraph.

Shares of ISS, owned by the family behind Lego, rose by 14% in their stock market debut in Copenhagen. The Ontario Teachers' Pension Plan holds a 26% stake in the company, alongside Kirkbi, the family's investment vehicle. The shares floated at DKr160 (£17.90) and finished at DKr182.7, valuing the company at £3.8bn, The Times writes.

When delivering his fifth budget next week Chancellor George Osborne will claim success on the economic front, arguing the country is on the road back to prosperity. He will also warn of the dangers inherent in any backtracking towards the bad old days (and ways) of Labour. That would mean higher taxes, more borrowing and more spending. A highly political statement is thus expected – which is hardly surprising given the General Election is just 14 months away, The Daily Mail muses.

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