Date: Thursday 24 May 2012
-JP Morgan suggests ECB rate cut, LTRO restart
-EU leaders make little progress
-UK contracts more than expected in Q1
An underwhelming EU summit and a barrage of disappointing economic figures failed to hold back gains on Thursday, as the Footsie rebounded following yesterday’s steep sell-off.
Comments from JP Morgan boosted buying late on after the US bank said in a research note that the European Central Bank (ECB) is likely to react to the ongoing crisis by cutting interest rates and launching another round of cheap funding operations (otherwise known as LTROs). Given the economic data released today, “the ECB will feel more pressure to deliver a monetary response, even though it feels that it has already done a lot to support the region. This response could, for example, be done through interest rate cuts or through further liquidity measures,” analyst Greg Fuzesi said.
There was also speculation that the EU could look at increasing the resources of the European Investment Bank to bolster investment in infrastructure.
Meanwhile, the outcome of last night's informal meeting of the European Council was as expected, with leaders reiterating their stance that they want to keep Greece in the Eurozone as long as it meets the terms of its bailout. The 'eurobonds' issue was a contentious topic, with French and German leaders clashing over the joint debt sales.
Several economic reports from home and abroad disappointed today – though that wasn’t seen in equity markets – painting a gloomy picture of the global economy: Chinese manufacturing slipped further into contraction; Germany's IFO business index fell sharply; while purchasing managers’ indices across the Eurozone came in weak.
In the UK, the Office for National Statistics revealed that first-quarter estimate of gross domestic product was revised lower, from -0.2% to -0.3%. Economists had been expecting the initial reading to be confirmed.
Economic data from the US was a little better though, helping Wall Street stocks broadly higher after the opening bell; both durable orders and jobless claims data were in line with consensus expectations.
Randgold Resources surged today, tracking gold prices higher. Data from the International Monetary Fund (IMF) showed today that central banks in Turkey, Ukraine, Mexico and Kazakhstan were building their positions in the precious metal in April on the back of its safe-haven appeal.
Stocks in the oil sector were also making gains today as crude prices picked up after the P5+1 group of world powers – China, France, Germany, Russia, UK and US – continued to argue with Iran over its nuclear programme. Oil and gas E&P peers BP and BG Group were among the best performers, both gaining around 3%; oil services firm Amec was also wanted.
Shell was on the up after extending the offer deadline for AIM-listed Cove Energy after its previously recommended offer was trumped by Thai firm PTT Exploration and Production (PTTEP) on Wednesday.
“With the Euro crisis set to continue, at least until June 17th when the second round of Greek elections will be held, we can expect to see Oil and Gold fall further as the dollar is expected to continue to appreciate making all dollar priced commodities effectively more expensive,” said analyst Craig Erlam from Alpari.
United Utilities was higher after saying that it has seen a marked improvement in customer satisfaction in the last year or so, and it is on track to meet regulatory out-performance targets.
Financial stocks, having borne the brunt of risk aversion in yesterday’s session, were performing well today. Barclays, Admiral, Royal Bank of Scotland and HSBC were making gains, while Standard Chartered was lifted higher after JP Morgan reiterated its overweight rating on the stock.
International mobile operator Cable & Wireless Communications rocketed after underlying earnings came in at $901m in the year to the end of March, better than the $887m estimate. Investors didn't seem too phased that the group expects to halve its dividend in the current year.
Food wholesaler Booker was also in demand after saying that increased customer numbers and higher internet sales helped revenue increase by 7.3% in the 52 weeks to March 23rd.
FTSE 100 - Risers
Randgold Resources Ltd. (RRS) 5,170.00p +8.00%
Vedanta Resources (VED) 999.50p +5.04%
Prudential (PRU) 686.00p +3.39%
BP (BP.) 407.00p +3.33%
BG Group (BG.) 1,269.00p +3.21%
Wolseley (WOS) 2,272.00p +2.95%
United Utilities Group (UU.) 637.00p +2.74%
Fresnillo (FRES) 1,347.00p +2.67%
Barclays (BARC) 185.30p +2.66%
ARM Holdings (ARM) 495.20p +2.65%
FTSE 100 - Fallers
Rexam (REX) 393.90p -1.33%
Aberdeen Asset Management (ADN) 238.40p -1.20%
IMI (IMI) 894.00p -1.16%
Hargreaves Lansdown (HL.) 466.10p -0.68%
Evraz (EVR) 308.70p -0.61%
Man Group (EMG) 72.70p -0.55%
GKN (GKN) 183.20p -0.49%
Antofagasta (ANTO) 1,027.00p -0.48%
Reckitt Benckiser Group (RB.) 3,380.00p -0.32%
Burberry Group (BRBY) 1,365.00p -0.29%
FTSE 250 - Risers
Cable & Wireless Communications (CWC) 33.01p +17.64%
Booker Group (BOK) 78.45p +7.47%
Petra Diamonds Ltd.(DI) (PDL) 135.10p +4.89%
Hunting (HTG) 785.00p +4.67%
QinetiQ Group (QQ.) 152.00p +4.61%
Domino's Pizza UK & IRL (DOM) 475.30p +4.21%
Dunelm Group (DNLM) 505.00p +4.12%
TR Property Inv Trust (TRY) 146.20p +3.91%
Investec (INVP) 325.90p +3.62%
RPS Group (RPS) 206.30p +3.36%
FTSE 250 - Fallers
Homeserve (HSV) 144.00p -4.70%
Aquarius Platinum Ltd. (AQP) 72.20p -3.48%
Spirit Pub Company (SPRT) 50.25p -3.37%
COLT Group SA (COLT) 114.90p -3.20%
Home Retail Group (HOME) 75.40p -3.08%
Ocado Group (OCDO) 104.70p -2.88%
Bumi (BUMI) 398.90p -2.45%
PZ Cussons (PZC) 316.80p -2.34%
Kesa Electricals (KESA) 49.03p -2.33%
Redrow (RDW) 112.20p -2.18%
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