UK/Euro Financial Market Daily Morning Briefing 24-02-2014

London open: Chinese data pushes stocks into the red

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Monday February 24

INTERIMS
International Ferro Metals Group

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Consumer Price Index (EU) (10:00)
Harmonised Index of Consumer Prices (EU) (10:00)
IFO Business Climate (GER) (09:00)
IFO Current Assessment (GER) (09:00)
IFO Expectations (GER) (09:00)

Q4
Nord Gold NV GDR (Reg S)

GMS
Henderson Value Trust, Xtract Resources

FINALS
Aer Lingus Group, All Leisure Group, Bovis Homes Group, Bunzl, Dialight, Hellenic Carriers Ltd., Hiscox Ltd, HSBC Holdings, Nord Gold NV GDR (Reg S), XP Power Ltd. (DI)

EGMS
Bwin party Digital Entertainment, OJSC Magnitogorsk Iron & Steel Works GDR (Reg S), ZCCM Investments Holdings 'B' Shares

AGMS
Armour Group, Ducat Ventures , Henderson Value Trust, OMG, Treatt

TRADING ANNOUNCEMENTS
Associated British Foods

FINAL DIVIDEND PAYMENT DATE
Compass Group, UDG Healthcare Public Limited Company

How to Know when the Bull Market Ends - Given that the stock market rally has now lasted nearly five years and in view of new all-time highs, many market participants are faced with the question when will there be a top at the major share indexes. After all, everybody wants to exit the market near a high and lock in their profits before the market turns downwards again.   Read more.

Europe open: Stocks mixed ahead of German Ifo, Eurozone CPI

- German business confidence data out
- Eurozone inflation data to be released
- ECB signals March policy action
- Renzi appointed Italy PM
- Chinese house prices rise

FTSE 100: -0.15%
DAX: -0.08%
CAC 40: 0.08%
FTSE MIB: 0.11%
IBEX 35: 0.26%
Stoxx 600: -0.06%

European stocks were little changed ahead of the release of a report on German business confidence and Eurozone inflation figures.

Kicking off the session, the Ifo Institute's business climate index for Germany, based on a survey of 7,000 executives, is tipped to fall to 110.5 in February from 110.6 last month.

Eurozone inflation data will follow and is expected to confirm consumer prices rose by an annualised 0.7% in January, down from 0.8% in December - well below the European Central Bank's (ECB) 2% target.

The preliminary release last month added to pressure on the ECB to implement greater measures to combat falling prices. However, the central bank decided to hold back on policy action at its meeting earlier this month until the release of more comprehensive data in March.

"Despite ECB President Mario Draghi's best efforts to convince the markets that inflation expectations in the long term are for the rate to return to 2%, the markets are not convinced and are growing increasingly concerned about the rapid rate of disinflation," according to Alpari UK analyst Craig Erlam. "Should we see another drop in the figure today, the ECB may have no choice but to act next week."

ECB President Mario Draghi yesterday reiterated that the central bank's March policy meeting could be critical in determining whether the ECB will provide additional stimulus.

"By then we'll have the full set of information needed for us to decide whether to act or not," Draghi said at the Group of 20 Finance Ministers meeting in Sydney.

On Saturday the ECB's chief economist Peter Praet acknowledged the persistent weak price pressures in the Eurozone. However, Praet and Draghi dismissed fears of deflation.

In China, house prices in Beijing and the southern business hub of Shenzhen increased by 0.4% in January from a month earlier, the National Bureau of Statistics revealed, the slowest pace since October 2012.

Italy's Renzi faces confidence vote

Italian Prime Minster Matteo Renzi faces his first confidence vote in parliament today since taking office last week. He will address the Senate at 14:00 in Rome to lay out its plans for governance and introduce his 16-member cabinet.

Separately, Renzi's chief of staff Graziano Delrio said Italy may raise taxes on gains from investing in financial instruments including government bills.

"We will consider whether we should rework the taxes on capital gains from financial investments, which at the moment are not in line with the European average of 25%," Delrio told the Italian television programme In Mezz Ora yesterday.

Volkswagen, G4S

Volkswagen declined after the European automaker offered to buy the remaining stake in Swedish truckmaker Scania AB for €6.7bn.

G4S slid after the Financial Times reported that a whistleblower named Malcolm Batki claimed in court proceedings that the company made an internal charge of as much as £4m to a key unit to conceal its profitability, while that unit was negotiating contracts with the Ministry of Justice.

PostNL NV slumped after the Dutch mail service reported a full-year loss that was wider than forecast by analysts.

RSA Insurance Group dropped after saying it is considering a share sale in an effort to boost capital.

The euro rose 0.04% to $1.3751.

Brent crude futures climbed $0.145 to $110.010 per barrel, according to data from the ICE.

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US close: Stocks erase gains after housing data, Fed comments

- Fisher, Bullard comments suggest taper will continue
- S&P, Dow finish with weekly losses
- Housing data continues to disappoint

Dow Jones: -0.19%
Nasdaq: -0.10%
S&P 500: -0.19%

Despite a strong start, US stocks slipped into the red by Friday's close with the S&P 500 pulling back after coming close to its record high earlier in the session.

Stocks erased earlier gains after comments from Federal Reserve officials suggested that the central bank is unlikely to slow the pace of further cuts to stimulus despite recent weak economic data.

Dallas Fed President Richard Fisher said that the Fed has provided "more than enough" monetary stimulus to help the economy, saying: "I've been such a strong proponent of dialling back our large-scale asset purchases and will continue advocating that we do so."

Meanwhile, St Louis Fed President James Bullard played down the recent softness in macro figures, saying that the weather was largely to blame.

Given these comments, this weekend's Group of 20 (G20) meeting will be closely watched as finance ministers and central bankers meet in Sydney to discuss how to reduce volatility in the market as the Fed scales back its bond-buying programme.

The S&P 500 finished 0.2% lower at 1,836.25 after hitting an intraday high of 1.846.13 early on, just a couple of points below the all-time high close of 1,848.38 reached on January 15th. Friday's loss meant that the benchmark index ended the week down 0.1%, snapping two straight weeks of gains.

The Dow Jones Industrial Average also closed 0.2% lower, finishing the week down 0.3%; the Nasdaq fell 0.1% but still closed 0.5% higher on the week.

Yet more disappointing economic data from the US housing market also dampened sentiment on Wall Street during the session. Existing home sales fell by 5.1% in January to a seasonally adjusted annual rate of 4.62m, according to the National Association of Realtors, from 4.87m in December. This was the slowest pace since July 2012 and compares with the consensus forecast of 4.67m.

This follows some gloomy economic data earlier in the week which showed that housing starts slumped 16% in January, while building permits dropped 5.4%. Meanwhile, a key gauge of homebuilder sentiment fell to its lowest level in nine months in February.

H-P, Amazon and Groupon fall

Hewlett-Packard erased earlier gains to finish with losses after posting first-quarter revenue and profit that comfortably beat analysts' estimates. Revenues, in particular, fell by just 1% year-on-year, compared with the 4% decline expected by the market.

Amazon.com also gave up gains after The Wall Street Journal reported that the online retailer has discussed adding listings for 10 brands including J. Crew, Ralph Lauren and Lord & Taylor.

Online voucher group Groupon plummeted despite forecast-beating results for the fourth quarter, as it said higher expenses for acquisitions and marketing will have an impact on first-quarter profit.

CommScope Holding Inc. surged after the telecoms company forecast first-quarter adjusted earnings that exceeded market predictions.

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Monday newspaper round-up: BP, G4S, RSA

The future of BP's flagship Rumaila oilfield in southern Iraq is in jeopardy after a bureaucratic snarl-up in Baghdad forced the company to axe a hundred crucial contractor jobs. The move highlights the mounting challenges facing western oil majors in Iraq, and bodes ill for the country's ambitious plans to revive an oil industry still recovering from years of war and sanctions. Some oil majors are so disenchanted with the difficulties of doing business in Iraq that they are considering leaving the country for good. - Financial Times

Fresh allegations have emerged about accounting irregularities at G4S, the outsourcer facing a criminal investigation for allegedly overcharging the UK government. A whistleblower named Malcolm Batki has claimed in court proceedings obtained by the Financial Times that G4S made an internal charge of as much as £4m to a key unit to conceal how profitable it was, while that unit was negotiating contracts with the Ministry of Justice. - Financial Times

Last year UK companies took three places amongst the top ten dividend payers worldwide, with Shell in pole position. Energy major Royal Dutch Shell paid the highest returns to shareholders in 2013, in a year when global dividends broke through the $1trn barrier for the first time. Henderson says the average annual dividend growth of 9.4% over the last five years is due to "breakneck" growth in emerging markets, which last year made up $1 in every $7 of global payouts, led by the BRIC economies of Brazil, Russia, India and China. - The Daily Telegraph

David Cameron will use his first ever cabinet meeting in Scotland to promise a revolution in North Sea oil and gas extraction worth up to £200bn over two decades – but that this will only be affordable if the union stays together. As the PM and his entourage make the trip to Aberdeen, he will set out steps to revive the industry, which has suffered declining production for years. His visit to Scotland comes as two new polls found a growing number likely to vote no to independence, with 37% for and 47-49% against. - The Guardian

Embattled insurer RSA confirmed on Sunday that it was considering asking shareholders for cash to repair its finances, which have been battered by accounting irregularities in its Irish division and stormy weather. The fundraising, which could amount to £800m, is part of the rescue strategy being devised by Stephen Hester, the former boss of Royal Bank of Scotland appointed to the insurer three weeks ago. - The Guardian

Finance ministers from the 20 largest economies have agreed to embrace an "ambitious" goal of boosting the world's GDP by more than $2trn (£1.2trn) over the coming five years. Progress on returning economic growth to pre-crisis levels has been hampered by austerity measures across Europe and a slowdown in China, but the G20 finance leaders said they were encouraged by signs of improvement in Japan, the UK and US "and the resumption of growth in the euro area". - The Scotsman

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