UK/Euro Financial Market Daily Morning Briefing 26-02-2014

London open: FTSE in the red ahead of GDP data, ITV sinks

- Stocks start lower, ITV falls despite strong results
- German consumer confidence surprises on the upside
- Weir, miners lead the gains

techMARK 2,900.00 -0.11%
FTSE 100 6,811.55 -0.28%
FTSE 250 16,459.53 -0.41%

UK stocks started today's session in negative territory, weighed by ex-dividends, a surprise fall by ITV, as well as choppy sessions in both the US and Asia overnight.

The FTSE 100 fell 19 points to 6,811 early on.

US stock markets finished lower last night after data came in below expectations, while Asia equities did their best to claw back the previous day's losses, ultimately ending in a mixed fashion.

German consumer confidence comes in better-than-expected

German consumer confidence was released this morning, registering a surprise lift to its highest level since January 2007.

The GfK March survey showed German consumer confidence rose to 8.5 points from the prior revised 8.3, surprising the consensus that had expected no changes to February's initial reading of 8.2.

GfK said: "Income expectations were able to top, once again, the already very high level of the previous month. Consumers remain confident that the economy is recovering."

Turning back to today's session, an announcement is due out shortly on fourth quarter UK economic growth from the Office for National Statistics, which is expected to confirm a quarter-on-quarter rise of 0.7%.

The report follows the preliminary estimates for GDP, which also showed year-on-year growth of 2.8% in the fourth quarter.

This afternoon will see the release of new home sale figures in the US, in what will otherwise be a quiet session Stateside.

Ofgem tackles lack of competition between energy companies

The finances of the "big six" energy companies will be given further scrutiny following industry regulator Ofgem's new measures announced this morning. The firms have been told they must publish wholesale power prices two years in advance.

Ofgem Chief Executive, Andrew Wright, said: "Our rules for a simpler, clearer, fairer energy market are coming into force, meaning that it is getting easier for consumers to pick out the best deals. Now we are also breaking down barriers to competition for new entrant suppliers.

"These reforms give independent suppliers, generators and new entrants to the market, both the visibility of prices and opportunities to trade that they need to compete with the largest energy suppliers."

Weir rises on strong 2014 outlook

Engineering solutions provider Weir rose strongly after posting an in-line set of full-year results on Wednesday, as a positive performance by the Minerals division helped to offset a "challenging" year for the group. The group also said that in 2014 it anticipates a return to underlying growth, despite mixed end market conditions.

Mining stocks were erasing some of yesterday's heavy losses, with Fresnillo and Randgold both moving higher early on. The former was performing particularly well after it announced that a debilitating suspension on the use of explosives at its key Herradura mining operation has been lifted.

Likewise, GKN moved back into positive territory after falling sharply on Tuesday after the group reported a flat full-year performance in Europe, while both Japanese and Indian production fell 4%

Leading the downside was easyJet, which fell after the stock went ex-dividend.

ITV was lower despite a strong set of full-year results, which saw it boost its dividend and announce an additional special pay-out to shareholders. Broker Jefferies was upbeat on the stock, saying "ITV remains our key European Media pick for 2014", rating it a 'buy' with a price taget of 231p.

In unlisted company news, the Co-op Group is set to report much bigger than anticipated losses for 2013 next month. BBC Business Editor, Robert Peston, revealed the results would by "by far the worst in its history", saying he understood the group was planning to sell its farming operation and potentially its pharmacies too.

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FTSE 100 - Risers
Weir Group (WEIR) 2,475.00p +5.23%
GKN (GKN) 414.40p +0.90%
Aberdeen Asset Management (ADN) 388.00p +0.67%
ARM Holdings (ARM) 981.00p +0.56%
Babcock International Group (BAB) 1,463.00p +0.55%
GlaxoSmithKline (GSK) 1,683.00p +0.51%
Mondi (MNDI) 1,056.00p +0.48%
Experian (EXPN) 1,116.00p +0.36%
Ashtead Group (AHT) 871.00p +0.35%
BG Group (BG.) 1,101.00p +0.32%

FTSE 100 - Fallers
easyJet (EZJ) 1,708.00p -3.56%
ITV (ITV) 200.00p -2.96%
Tesco (TSCO) 326.10p -2.71%
Admiral Group (ADM) 1,463.00p -1.88%
United Utilities Group (UU.) 775.00p -1.71%
Diageo (DGE) 1,868.00p -1.48%
Travis Perkins (TPK) 1,935.00p -1.43%
CRH (CRH) 1,765.00p -1.29%
Persimmon (PSN) 1,445.00p -1.23%
Prudential (PRU) 1,353.00p -1.17%

FTSE 250 - Risers
CSR (CSR) 720.50p +6.19%
International Personal Finance (IPF) 524.50p +4.07%
Greencore Group (GNC) 253.80p +2.75%
Hays (HAS) 141.00p +2.17%
Diploma (DPLM) 757.00p +1.27%
Stagecoach Group (SGC) 386.30p +1.18%
BH Global Ltd. GBP Shares (BHGG) 1,202.00p +1.18%
Genesis Emerging Markets Fund Ltd Ptg NPV (GSS) 496.80p +1.16%
Alliance Trust (ATST) 449.80p +1.08%
PayPoint (PAY) 1,180.00p +0.94%

FTSE 250 - Fallers
Beazley (BEZ) 258.20p -7.26%
Essar Energy (ESSR) 67.70p -5.64%
Playtech (PTEC) 800.00p -4.36%
Kentz Corporation Ltd. (KENZ) 746.00p -3.93%
St. Modwen Properties (SMP) 392.50p -3.92%
Regus (RGU) 226.40p -3.45%
Taylor Wimpey (TW.) 124.00p -3.05%
Hellermanntyton Group (HTY) 315.10p -2.87%
Brewin Dolphin Holdings (BRW) 324.30p -2.79%
Xaar (XAR) 1,076.00p -2.62%

FTSE TechMARK - Risers
Dialight (DIA) 795.00p +1.40%
Consort Medical (CSRT) 1,052.00p +0.38%
E2V Technologies (E2V) 166.06p +0.34%
IShares Euro Gov Bond 7-10YR UCITS ETF (IEGM) € 183.84 +0.04%

FTSE TechMARK - Fallers
NCC Group (NCC) 212.97p -1.63%
Wolfson Microelectronics (WLF) 123.25p -1.40%
Sepura (SEPU) 142.00p -1.39%
Oxford Biomedica (OXB) 3.10p -0.80%
Vectura Group (VEC) 160.50p -0.62%
Anite (AIE) 86.00p -0.58%
SDL (SDL) 377.50p -0.53%
Ricardo (RCDO) 719.00p -0.14%

Wednesday February 26

INTERIMS
Animalcare Group, Asian Citrus Holding, Avingtrans, Clinigen Group, Hays, The Renewables Infrastructure Group Limited

INTERIM EX-DIVIDEND DATE
Bluefield Solar Income Fund Limited, Carclo, Diageo, Heath (Samuel) & Sons, Mobeus Income & Growth 2 Vct, Stewart & Wight

QUARTERLY PAYMENT DATE
Merchants Trust

QUARTERLY EX-DIVIDEND DATE
Canadian General Investments Ltd., Energy XXI (Bermuda) (DI), Real Estate Credit Investments PCC Ltd

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Budget Statement (US) (19:00)
Crude Oil Inventories (US) (15:30)
GFK Consumer Confidence (GER) (07:00)
MBA Mortgage Applications (US) (12:00)

Q4
CSR

FINALS
CSR, Direct Line Insurance Group, EKF Diagnostics Holdings , Greggs, Henderson Group, International Personal Finance, ITV, Microgen, Molins, Petrofac Ltd., Quarto Group Inc., Restaurant Group, SEGRO, Synectics, Taylor Wimpey, Travis Perkins, Vitec Group, Weir Group

IMSS
Stagecoach Group

SPECIAL EX-DIVIDEND PAYMENT DATE
Beazley, easyJet, Independent Inv Trust, Masawara, Playtech, Rights & Issues Inv Trust Capital Shares, Rights & Issues Inv Trust Income Shares

AGMS
Bankers Inv Trust, Gooch & Housego, LED International Holdings Ltd (DI)

UK ECONOMIC ANNOUNCEMENTS
GDP (output, income & expenditure) (09:30)
Index of Services (09:30)

FINAL EX-DIVIDEND DATE
Arden Partners, Brewin Dolphin Holdings, easyJet, Henderson Value Trust, Independent Inv Trust, LPA Group, Playtech, Rights & Issues Inv Trust Capital Shares, Rights & Issues Inv Trust Income Shares, Treatt, Zytronic

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Europe open: Stocks mixed after German consumer confidence

- German consumer confidence rises
- UK GDP data to be released
- US new home sales out later
- Hong Kong forecasts rise in 2014 GDP

FTSE 100: -0.23%
DAX: -0.05%
CAC 40: -0.23%
FTSE MIB: 0.14%
IBEX 35: 0.13%
Stoxx 600: -0.27%

European stocks were mixed as investors weighed a report on German consumer confidence and awaited UK economic growth data.

GfK's forward-looking index for German consumer confidence rose to 8.5 in March from a revised 8.3 in February, surprising analysts who had expected a reading of 8.2.

The report said Germans were optimistic overall and continued to see Europe's biggest economy on the path to recovery.

In the UK, gross domestic product (GDP) figures for the fourth quarter will be released at 09:30 GMT. The Office for National Statistics is expected to confirmed its preliminary estimate of 0.7% GDP growth on the quarter. Year-on-year growth of 2.8% in the fourth quarter is also to be established, economists predict.

Later on in the US will be the release of new home sales, which is anticipated to have fallen 3.4% in January, compared to a 7% drop in December. It will otherwise be a quiet session in the US in terms of data releases.

"Today is really the calm before the storm with the next couple of days offering huge amounts of economic data across Europe, the US and Asia," said Craig Erlam, analyst at Alpari.

Chinese yuan, Hong Kong GDP

The Chinese yuan fell as the central bank lowered its daily reference rate amid speculation it is trying to halt appreciation of the currency.

The People's Bank of China cut the yuan's fixing by 0.01% to 6.1192 per dollar, the weakest since December 20th.

Nevertheless, stocks rose in China as Hong Kong forecast 3% to 4% GDP growth in 2014, slightly up from 2.9% last year.

Financial Secretary John Tsang, however, warned that the global outlook remains uncertain, highlighting the potential impact of cuts of the US Federal Reserve's monetary stimulus.

"The US economy may see some improvement in 2014. Nevertheless, there is still uncertainty over the Federal Reserve Board's exit strategy and interest rate policy. Possible market fluctuations and the risk of reversal of capital flows will cast shadows over global economic growth this year," Tsang said during his budget speech.

Capital Economics added that "because of the dollar peg, Hong Kong is forced to adopt the same monetary policy stance as the US Fed. Tighter monetary policy is needed to guard against the economy overheating".

Airbus, InBev

Airbus Group gained after the maker of consumer and military aircraft forecast profit will grow in 2014.

Anheuser-Busch InBev NV, the world's biggest brewer, advanced as it reported a rise in fourth quarter earnings that beat analysts' expectations.
Jeronimo Martins declined after the Portuguese retailer posted 2013 net income that missed market consensus.

Swiss Life climbed as the life insurer raised its 2013 dividend to 5.50 francs a share from the previous year's 4.50 francs against analysts' predictions for no change.

The euro fell 0.04% to $1.3739.

Brent crude futures rose $0.009 to $109.520 per barrel, according to data from the ICE.

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US close: Stocks end the day off slightly

- Consumer expectations slipped in February
- Drop in Chinese yuan raises some growth concerns
- House prices rise slightly more than expected

Dow Jones Industrials: -0.17%
Nasdaq Composite: -0.12%
S&P 500: -0.14%

US equity benchmarks ended the day a tad lower following a slightly weaker-than-expected reading on consumer confidence and in reaction to an overnight drop in the Chinese yuan.

Some observers fear that moves by Beijing to further lay the foundations for currency convertibility could impact negatively on the outlook for the economy, at least in the near-term. With a more medium-term view, the possibility exists that the Chinese central bank may be adopting a more neutral bias, according to Barclays Research.

Another important reason for the drop is thought to be Chinese authorities increasing desire to avoid the Yuan being seen as a "one-way bet".

The Conference Board's consumer confidence index for February slipped to a reading of 78.1 from 79.4 the month before, led by a slide in the expectations component.

House prices in the 20 main US cities increased at a slower pace in December, albeit more quickly than had been foreseen. The S&P/Case-Schiller Index climbed 13.4 % from a year earlier. It rose 13.71% in November.

Alpari Market Analyst Craig Erlam commented: "The chances are that both of these were negatively impacted by the unusually poor weather in recent months, but I get the feeling that people are becoming tired of this excuse and want to see some actual evidence that this is just a blip and not something to worry about."

Acting as a backdrop, markets were closely watching geopolitical events in Ukraine.

Western Union, Office Depot

Western Union Co. declined after disclosing it got subpoenas in November under an investigation into fraud-induced money transfers.

Office Depot slumped after reporting an unexpected loss in the fourth quarter.

Home Depot gained following fourth quarter earnings that beat forecasts.

Zulily Inc. advanced after the online children's fashion retailer said it expects first quarter sales that missed analyst's estimates.

From a sector stand-point the best performance was seen in the following industrial groups: Coal (-1.56%), Mobile Telecommunications (-1.51%) and Investment services (-1.47%). Home improvement stocks rose by 3.18%.

Other asset classes little changed

Front month West Texas crude futures were lower by 0.14% to the $101.71/barrel mark on the NYMEX.

Ten-year US treasury yields ended the day higher by one basis point to the 2.71%.

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Wednesday newspaper round-up: Tax-cuts, Tesco, Ukraine

George Osborne, chancellor, is under pressure from Tory MPs to use next month's Budget to announce pre-election tax cuts to offset the prospect of a politically damaging rise in interest rates before polling day. One Tory MP said the idea of the Bank of England raising base rates from a historic low of 0.5 per cent before the May 2015 election was like an "iceberg" and the chancellor needed to take pre-emptive action. - Financial Times

The opening salvo in a supermarket price war was fired yesterday by Tesco as it announced a multi-mil pound investment in price cuts. Britain's biggest supermarket was also forced to concede publicly that it had scrapped a key profit target, set in the wake of a profit warning two years ago, in a wide-ranging update to the City aimed at reassuring investors on the turnaround of its British business. - The Times

The leaders of Ukraine's revolution have told Western governments that they have three days to find €5bn to avert economic collapse. A senior Western diplomat said last night that, according to one of the most influential figures in the former opposition, "they need €5bn [£4.1bn] by the end of the week". - The Times

Credit Suisse made false claims in US visa applications, conducted business with clients in secret elevators and shredded documents to help more than 22,000 American customers avoid US taxes, according to a scathing report by a US congressional committee. The Swiss investment bank handed account statements to one client tucked inside a Sports Illustrated magazine as part of its "cloak and dagger tactics", according to Senator Carl Levin, chairman of the US Senate Permanent Subcommittee on Investigations. - Financial Times

Savers have been dealt another blow as banks and building societies continue to cut the rates they pay on fixed-rate bonds and cash Isas. Yorkshire BS has closed its top 2% deal fixed for 18 months. The account was on offer for just three weeks. Other deals to disappear include Post Office, Virgin Money, Sainsbury's Bank, Principality BS and Aldermore Bank. - Daily Mail

It may have fallen behind the field in the performance stakes, but Ladbrokes appears to have got a jump on its rivals on the issue of problem gambling by announcing plans to link the matter to executive pay. The move, amid growing political disquiet over big-jackpot betting terminals in bookmakers' shops and claims that they are encouraging gambling addiction, prompted Coral to confirm that it would consider a similar move, while William Hill claimed that Ralph Topping, its chief executive, already counted social responsibility as one of his objectives. - The Times

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