UK/Euro Financial Market Daily Morning Briefing 27-02-2014

London open: FTSE edges higher as investors weigh results, Eurozone data

- FTSE opens marginally higher
- Strong results from Capita, Whitbread
- German jobless rate steady at 6.8 per cent

techMARK 2,896.69 -0.10%
FTSE 100 6,803.69 +0.07%
FTSE 250 16,484.09 +0.08%

The FTSE inched into positive territory this morning as strong results from Capita and an upbeat outlook from Whitbread helped lift sentiment and offset poor results from RBS and a disappointing operating margin from WPP.

The index climbed six points higher to 6,805 early on.

All eyes on Eurozone data

The number of people unemployed in Germany fell 14,000 compared to expectations of 10,000, while jobless claims declined by 28,000, according to the Federal Statistics Office. The jobless rate held steady at 6.8% as expected.

In Spain, the monthly gross domestic product figure came in below expectations with a rise to 0.2%, compared to 0.3% the previous month and expectations of the same figure.

February French consumer confidence declined, falling further below the long-term average of 100 to 85, compared to 86 the previous month.

Yellen to give testimony on monetary policy

Later on in the US attentions will turn to a testimonial from Federal Reserve Chair Janet Yellen on monetary policy and the economy.

Yellen has indicated that the Fed will probably continue to scale back monthly asset purchases at each policy until ending it all together later this year. The move has prompted concerns that it might hurt growth in emerging markets.

Today's testimony, which had been delayed due to bad weather, might provide further clues as to the Fed's next step ahead of its March policy.

Chief Economist at FXPro, Simon Smith, said the delay "does mean that it's going to catch more attention that would have otherwise have been the case, given that we have seen a fair amount of and events since her testimony on 11th February".

He added: "The dollar remains lower overall from that date, but has managed to recover from the mid-month lows and especially yesterday, with further gains being seen against the euro and sterling in early European trading."

Capita climbs on contract wins and revenue jump

Outsourcing specialist Capita led the upside after it said it had won £588m-worth of new contracts so far in 2014, as it lifted pre-tax profits by 14% to £215m for the 2013 full-year. Revenues rose 15% to £3.85bn and operating profits increased to £516m from £312m in 2102.

Whitbread also rose strongly after revealing it is on track to report full-year results at the top end of expectations. In the 50 weeks to February 13th, the hotels and restaurants saw its like-for-like sales climb 4.0%, driven by its Costa and Premier Inn chains, which rose 5.8% and 4.7%, respectively.

British American Tobacco was another big riser after it reported a 6% jump in 2013 core earnings to 216.6p per share, in line with analysts' expectations, as market share grew. The world's second largest cigarette maker said without the impact of adverse currency movements in three of its four regions it would have reported a 10% rise in earnings to 224.7p.

Meanwhile, advertising giant WPP fell after revealing a stronger pound in the second half of the year in key markets, including Australia, India, japan, South Africa, Brazil, Argentina and Indonesia, lowered reported margins by 0.2 margin points, causing the company to miss its margin target. Significantly, the group said: "All in all, 2014 looks to be another demanding year, as a strong UK pound and weak fast growth market currencies continue to take their toll on our reported operating margins." For its part, broker Jefferies said the numbers were "good, but probably not good enough".

Struggling UK insurer RSA was also in the red after it posted annual pre-tax losses of £244m and announced plans to launch a rights issue to raise £775m. RSA, whose shares have suffered since it revealed accounting problems in Ireland ripped a big hole in its balance sheet, said it faced an Irish underwriting loss of £220m from management irregularities, reserve strengthening and adverse weather in the fourth quarter.

Royal Bank of Scotland (RBS) fell after reporting its biggest annual loss since the height of the 2008 financial crisis as the lender underwent a major restructuring and paid fines. The state-backed bank reported an operating loss before tax of £8.24bn for the year through December 2013, up from a loss of £5.27bn in 2012, missing analysts' estimates of £6.7bn.

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FTSE 100 - Risers
Capita (CPI) 1,133.00p +4.42%
Whitbread (WTB) 4,363.00p +4.10%
Reed Elsevier (REL) 922.00p +1.43%
Tesco (TSCO) 330.65p +1.43%
British American Tobacco (BATS) 3,217.00p +1.35%
Antofagasta (ANTO) 923.50p +1.32%
Rolls-Royce Holdings (RR.) 974.00p +1.30%
Petrofac Ltd. (PFC) 1,365.00p +1.11%
Tullow Oil (TLW) 775.00p +1.11%
Persimmon (PSN) 1,450.00p +1.05%

FTSE 100 - Fallers
WPP (WPP) 1,252.00p -5.94%
Royal Bank of Scotland Group (RBS) 333.00p -5.93%
RSA Insurance Group (RSA) 98.10p -4.01%
Standard Life (SL.) 376.60p -2.23%
Intertek Group (ITRK) 2,919.00p -1.95%
Group (VOD) 242.45p -1.14%
Travis Perkins (TPK) 1,905.00p -1.09%
Old Mutual (OML) 185.10p -0.86%
Legal & General Group (LGEN) 238.30p -0.83%
Aviva (AV.) 469.30p -0.78%

FTSE 250 - Risers
Kazakhmys (KAZ) 283.90p +27.08%
Man Group (EMG) 91.70p +9.04%
Barratt Developments (BDEV) 433.10p +5.17%
Spirent Communications (SPT) 110.40p +4.74%
CSR (CSR) 749.50p +4.61%
Jupiter Fund Management (JUP) 416.00p +3.48%
Bodycote (BOY) 720.00p +3.45%
UDG Healthcare Public Limited Company (UDG) 379.70p +2.54%
Howden Joinery Group (HWDN) 381.50p +2.47%
RPS Group (RPS) 324.00p +2.47%

FTSE 250 - Fallers
BH Global Ltd. USD Shares (BHGU) 11.41 -3.22%
International Personal Finance (IPF) 544.00p -2.42%
Perform Group (PER) 225.00p -2.17%
Fidessa Group (FDSA) 2,450.00p -2.16%
Rank Group (RNK) 137.50p -2.14%
Grafton Group Units (GFTU) 644.50p -1.83%
AL Noor Hospitals Group (ANH) 884.00p -1.72%
Diploma (DPLM) 727.50p -1.69%
Hellermanntyton Group (HTY) 310.70p -1.68%
Tullett Prebon (TLPR) 318.10p -1.61%

Thursday February 27

INTERIMS
Barratt Developments, Hansard Global, Kier Group, Redrow, Ricardo

INTERIM DIVIDEND PAYMENT DATE
Livermore Investments Group Ltd.

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Bloomberg Consumer Confidence (US) (14:45)
Business Climate Indicator (EU) (10:00)
Continuing Claims (US) (13:30)
Durable Goods Orders (US) (13:30)
Economic Sentiment Indicator (EU) (10:00)
Initial Jobless Claims (US) (13:30)
M3 Money Supply (EU) (09:00)

Q4
Wentworth Resources Ltd (DI)

FINALS
Bodycote, British American Tobacco, Capita, COLT Group SA, Countrywide, Derwent London, Domino's Pizza Group, H&T Group, Howden Joinery Group, Jupiter Fund Management , Kazakhmys, Lavendon Group, Macfarlane Group, Man Group, Merlin Entertainments , National Express Group, New Britain Palm Oil Ltd. (DI), Premier Oil, Promethean World, Reed Elsevier, Royal Bank of Scotland Group, RPS Group, RSA Insurance Group, Societatea Nationala De Gaze Naturale Romgaz S.A. GDR (Reg S), Spectris, Sphere Medical Holding, Spirent Communications, Standard Life, Wentworth Resources Ltd (DI), WPP, Xchanging

EGMS
AXA Property Trust Ltd, Housing Securities Ltd 8.375% Debs 25/01/19 £

AGMS
Aberforth Smaller Companies Trust, Aluminium Bahrain B.S.C. GDR (Reg S), Driver Group, GCP Infrastructure Investments Ltd, IDOX, Jelf Group, Zytronic

TRADING ANNOUNCEMENTS
Hansard Global

UK ECONOMIC ANNOUNCEMENTS
Unemployment Rate (GER) (08:55)

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Europe open: Stocks little changed after German jobs data

- German unemployment and inflation reports out
- Eurozone consumer confidence due to be released
- Yellen to address Senate

FTSE 100: 0.12%
DAX: 0.01%
CAC 40: 0.23%
FTSE MIB: 0.19%
IBEX 35% -0.13%
Stoxx 600: 0.07%

European stocks were little changed as investors weighed German unemployment data and awaited reports on German inflation and Eurozone consumer confidence.

The number of people unemployed in Germany fell 14,000 compared to expectations of 10,000, while jobless claims declined by 28,000, according to the Federal Statistics Office. The jobless rate held steady at 6.8% as expected.

Also in Germany, inflation will be released at 13:00 and is expected to remain unchanged at 1.3% year-on-year in February. Harmonised consumer prices are tipped to fall slightly to 1.1% on the year in February from 1.2% a month before.

Another report on Eurozone consumer confidence at 10:00 GMT is projected by economists to show a slight fall in February. Analysts predict the sentiment index to drop to 100.7 from 100.9 in January.

In Spain, the monthly gross domestic product figure came in below expectations with a rise to 0.2%, compared to 0.3% the previous month and expectations of the same figure.

February French consumer confidence declined, falling further below the long-term average of 100 to 85, compared to 86 the previous month.

When markets open in the US this afternoon the attention will turn to Federal Reserve Chair Janet Yellen as she delivers her testimony to the Senate on monetary policy and the economy, which had been delayed due to bad weather.

Yellen has indicated that the Fed will probably continue to scale back monthly asset purchases at each policy until ending it all together later this year.
Other US news will include on durable goods orders and initial jobless claims.

Durable goods orders may have fallen 1.6% in January, compared to a 4.2% drop in December, according to the consensus forecast.

US initial jobless claims are predicted to have increased 335,000 in the week to February 21st, down slightly from 336,000 the previous week.

The Fed paying particularly close attention to jobs to gauge the health of the economy as it determines its next policy move ahead of its March .

RBS slides on biggest annual loss since 2008

Royal Bank of Scotland's shares declined after the state-back lender widened its 2013 pre-tax loss to £8.24bn from £5.27bn a year earlier, missing analysts' estimates of £6.7bn. It marked the bank's biggest loss since the height of the 2008 financial crisis.

Allianz dropped as Europe's largest insurer posted fourth quarter earnings the fell short of market forecasts and said operating profit may decline this year amid low interest rates.

WPP slumped as the advertising giant increased its share buyback programme to counter a hit from volatile emerging market exchange rates as it reported its 2013 results. Numis said shares could come under pressure from the impact to reported margins and slightly lower margin guidance.

Capita was the top riser on the FTSE 100 after the outsourcing specialist said it has won £588m of new contracts so far in 2014 and reported a 14% increase in 2013 pre-tax profits to £215m.

Whitbread rallied after the owner of the Costa and Premier Inn chains said it is on track to report full-year results at the top end of expectations.
The euro fell 0.20% to $1.3659.

Brent crude futures dipped $0.165 to $109.340 per barrel, according to ICE .

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US close: Stocks end off lows

- US new home sales race past expectations
- S&P 500 continues to push against resistance at 1,850

Dow Jones Industrials: 0.11%
Nasdaq Composite: 0.10%
S&P 500: 0.01%

The main US stock market averages managed to close off their lows for the session following a surprise rise in new home sales and despite frictions between Russia and Ukraine.

Sales of new single-family homes in the US rose by 9.6% over the month to reach an annualised rate of 468,000 during the month of January, according to the US Department of Commerce.

The consensus estimate was for growth of 405,000.

"The January US new home sales report is consistent with the idea that foot traffic may have slowed somewhat [...] but underlying demand and buying intentions have remained healthy, and we expect any drop-off in housing to be a pause and not a retrenchment," Barclays Research wrote.

It will otherwise be a quiet day of releases ahead of a busy end to the week.

Reports on US durable goods, initial jobless claims and continuing claims will be out Thursday while gross domestic product, University of Michigan's consumer confidence numbers and pending home sales figures will be unveiled on Friday.

Federal Reserve Chair Janet Yellen will testify to Senate on monetary policy and the economy, which had been delayed due to bad weather.

Yellen has signalled that the Fed is likely to continue cutting back monthly asset purchases until ending the programme all together at the end of the year.

The move has prompted concerns that it might hurt growth in other countries, especially emerging markets.

Hong Kong's Financial Secretary, John Tsang, today 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.

Lowe's, Aeropostale

Lowe's rallied as the US home improvement chain reported a rise in fourth quarter profit that matched analysts' estimates.

Aeropostale Inc. jumped following reports the teen apparel retailer is working with Barclays to explore options such as the sale of a convertible note or preferred stock to a private equity firm.

First Solar declined as the US solar panel manufacturer posted a drop in fourth quarter revenue.

DreamWorks Animation slumped as the independent animation studio said fourth quarter revenue fell as home video sales of Turbo missed forecasts.

From a sector standpoint the best performance was seen in the following sectors: Aluminium (3.42%), Home construction (2.90%) and Home improvement (2.25%).

Other asset classes little changed

Front month West Texas crude futures edged lower by 0.29% to the $102.29/barrel mark on the NYMEX.

10-year US Treasury yields were up by one basis point to 2.68%.


S&P 500 - Risers
Newfield Exploration Co (NFX) $27.54 +7.33%
Target Corp. (TGT) $60.49 +7.04%
Lowe's Companies Inc. (LOW) $50.72 +5.43%
Dollar Tree Inc (DLTR) $55.29 +4.95%
Staples Inc. (SPLS) $13.60 +4.62%
L Inc (LB) $56.57 +4.01%
Cablevision Corp. (CVC) $17.26 +3.85%
Alcoa Inc. (AA) $12.05 +3.70%
Sears Holdings Corp. (SHLD) $40.40 +3.62%
Lennar Corp. Class A (LEN) $43.78 +3.60%

S&P 500 - Fallers
QEP Resources Inc (QEP) $28.81 -10.02%
First Solar Inc. (FSLR) $52.74 -9.12%
Chesapeake Energy Corp. (CHK) $25.61 -4.94%
Apache Corp. (APA) $79.82 -3.94%
Frontier Communications Co. (FTR) $4.94 -2.76%
Celgene Corp. (CELG) $159.98 -2.65%
Centerpoint Energy Inc. (CNP) $23.55 -2.65%
Valero Energy Corp. (VLO) $50.72 -2.63%
Adt Corp (ADT) $30.90 -2.52%
Cliffs Natural Resources Inc. (CLF) $19.81 -2.51%

Dow Jones I.A - Risers
Wal-Mart Stores Inc. (WMT) $74.78 +1.95%
Unitedhealth Group Inc. (UNH) $76.06 +0.98%
E.I. du Pont de Nemours and Co. (DD) $65.51 +0.91%
Home Depot Inc. (HD) $81.70 +0.89%
Caterpillar Inc. (CAT) $97.20 +0.82%
Intel Corp. (INTC) $24.80 +0.73%
Merck & Co. Inc. (MRK) $56.27 +0.64%
Chevron Corp. (CVX) $115.51 +0.47%
International Machines Corp. (IBM) $184.06 +0.45%
Cisco Inc. (CSCO) $21.93 +0.41%

Dow Jones I.A - Fallers
McDonald's Corp. (MCD) $95.89 -0.76%
Exxon Mobil Corp. (XOM) $95.79 -0.54%
AT&T Inc. (T) $32.00 -0.53%
JP Morgan Chase & Co. (JPM) $56.75 -0.49%
Visa Inc. (V) $226.11 -0.44%
Goldman Sachs Group Inc. (GS) $162.80 -0.42%
Procter & Gamble Co. (PG) $77.86 -0.33%
American Express Co. (AXP) $89.73 -0.20%
Microsoft Corp. (MSFT) $37.47 -0.19%
Walt Disney Co. (DIS) $80.08 -0.16%

Nasdaq 100 - Risers
Dollar Tree Inc (DLTR) $55.29 +4.95%
Avago Technologies Ltd. (AVGO) $61.90 +4.92%
Staples Inc. (SPLS) $13.60 +4.62%
F5 Networks Inc. (FFIV) $113.89 +3.33%
Ross Stores Inc. (ROST) $71.69 +2.36%
Symantec Corp. (SYMC) $21.26 +2.31%
eBay Inc. (EBAY) $57.34 +2.12%
Seagate Technology Plc (STX) $51.73 +2.05%
Tesla Motors Inc (TSLA) $253.00 +2.02%
Tractor Supply Company (TSCO) $70.46 +1.82%

Nasdaq 100 - Fallers
Sba Communications Corp. (SBAC) $92.79 -2.67%
Celgene Corp. (CELG) $159.98 -2.65%
Verisk Analytics Inc. (VRSK) $63.78 -2.18%
Amgen Inc. (AMGN) $121.86 -2.01%
Illumina Inc. (ILMN) $176.69 -1.59%
Vimpelcom Ltd Ads (VIP) $10.07 -1.47%
Group Plc ADS (VOD) $40.57 -1.36%
O'Reilly Automotive Inc. (ORLY) $151.43 -1.25%
Green Mountain Coffee Roasters Inc. (GMCR) $116.10 -1.19%
Expedia Inc. (EXPE) $78.52 -1.16%

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Thursday newspaper round-up: RBS, Flotations, ITV

Political pressure is growing on George Osborne to rein in pay at Royal Bank of Scotland as the taxpayer-controlled bank prepares to grant more than 500m pounds of bonuses while reporting an annual loss of as much as 8bn pounds and sacking thousands of staff. The bank's total bonus pay-out will be lower than last year's 679m pounds but Labour MPs signalled the political storm ahead as they questioned RBS's plans to pay large bonuses at all when its already huge losses are mounting further. – Financial Times

Leading City fund managers say that they are being forced to make snap decisions about whether to buy shares in flotations without being given access to critical information. Institutional investors have said that investment banks running the recent wave of initial public offerings have been refusing to release the prospectus — which includes risk factors and details of court cases or related transactions, and can run to hundreds of pages — until the very last minute. – The Times

ITV has ruled itself out of any race to buy its rival Channel 5. Adam Crozier, its chief executive, said yesterday that while the broadcaster was on the acquisitions trail for production companies in both Britain and the United States, it was "not looking" at Richard Desmond's Channel 5, which makes very little of its own content. Bids for Channel 5, which comes with a £700m price tag, are due this morning. BSkyB and Discovery have discussed a bid and Saban Capital, the investment firm founded by Haim Saban, the Israeli billionaire who created the Power Rangers franchise, is also understood to be interested. – The Times

Vladimir Putin placed Russian armed forces on alert on Wednesday in a show of strength over the political direction of Ukraine that rattled financial markets and brought a swift warning from the US. Mr Putin ordered a surprise drill by forces in western Russia, including areas bordering Ukraine. Sergei Shoigu, defence minister, insisted the exercise was "largely unrelated to events in Ukraine", but John Kerry, US secretary of state, nevertheless made clear that any sign of intervention would not be acceptable to Washington. – Financial Times

The Co-op yesterday revealed it is to sell its farming and will look at offers for its pharmacy chain as part of a planned shake-up that is likely to ¬impact on thousands of jobs. It is part of a revamp of the group which is expected to post record annual losses of £2bn next month and has been rocked by a number of scandals. - Scotsman

Qantas, Australia's struggling national airline, will lay off 5,000 workers, sell its older gas-guzzling Boeing Jumbo jets and ditch routes including flights to Singapore. In a widely anticipated announcement, Alan Joyce, the Qantas CEO, said that the airline had posted an underlying first-half loss of A$252m – the largest loss since the airline's public flotation 20 years ago. The jobs cuts — more than a seventh of Qantas's 34,000 strong work force — will occur across the board and will include a savage cut of 1,500 in the airline's management and back office staffing. - The Times

Angela Merkel will set out the case for Britain to stay in the European Union in her address to both Houses of Parliament today, while warning that there are limits to the powers that can be won back from Brussels. Mrs Merkel will say that Germany and Britain have a common interest in reforming the single market, in a speech designed to be supportive of David Cameron's desire to stay in the EU after renegotiating the UK's relationship with it. – The Times

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