By Benjamin Chiou
Date: Friday 07 Sep 2012
- Markets buoyed by ECB's plans
- QE3 hopes increase as jobs data disappoints
- Xstrata and the miners jump, though Glencore bucks the trend
In spite of some massive gains the day before, the FTSE 100 and most other stock markets in Europe finished moderately higher on Friday on hopes that central banks are acting to prevent a slowdown in the global economy.
“Another positive day for equity markets in Europe as policymakers continue to worry about economic and jobs growth, or rather the lack of it. Markets appear to continue to take the view that central banks will continue to keep the pedal flat on the floor with further measures to boost liquidity,” said Michael Hewson, a market analyst at CMC Markets.
London's benchmark index soared by 2.11% on Thursday after European Central Bank (ECB) President Mario Draghi announced that the bank would embark on unlimited bond-buying on the secondary market, buying notes with maturities between one and three years. They would be ‘sterilised’ so as to avoid the inflationary pressures which excessive growth in the money supply is thought to engender in the long-run. The purchases would also be tied to “strict and effective conditionality".
"ECB chief Mario Draghi finally delivered on his promise with a bond buying plan unlike one we have seen before, soothing immediate concerns about tensions in the debt markets," said market strategist Ishaq Siddiqi from ETX Capital.
10-year bond yields in Spain and Italy have fallen dramatically today: the borrowing rate on Spanish notes was down 40 basis points at 5.635% while Italy's dropped 20.3 basis points to 5.074%.
Meanwhile, hopes for more quantitative easing to be announced next week at the Federal Open Market Committee (FOMC) meeting increased today after US non-farm payrolls rose by just 96,000 in August, well below the 130,000 rise expected by the consensus. Meanwhile, the figures for the previous two months were revised lower.
Economists at Barclays Research said today: "In our view, the August employment report will leave the FOMC dissatisfied with the pace of progress and, as a result, we look for the Fed to ease further at next week's FOMC meeting."
Shares in mining giant Xstrata were firmly higher today after adjourning its shareholder vote on the merger with Glencore as the latter amended the original terms of its merger. Glencore is now offering 3.05 Glencore shares per Xstrata share (up from 2.8 previously) and the deal is now being seen as a ‘takeover’ opposed to a ‘merger’. As part of the new deal, Glencore’s CEO would take the helm of the new entity (if approved) instead of Xstrata’s CEO.
However, Xstrata released a statement this afternoon saying that the new offer, which represents a 22% premium to its closing price yesterday, is “significantly lower than would be expected in a takeover.” Glencore was trading firmly in the red.
Iron ore peers Evraz and Ferrexpo rocketed today on hopes over the global economy. Both stocks have dropped by around half over the past year with concerns about infrastructure spending in China and worries about a slowdown worldwide hammering sentiment in the industrial metals sector. However, remarks in a Credit Suisse research report yesterday could be providing a lift to the shares this afternoon:
“Pricing power remains cyclical and not structural as a consequence and returns could be muted for many years. But the performance of global steel equities over the past 24 months (down 39% relative to MSCI World up 13%) suggests the market is aware of this trend; thus we see a cyclical window of opportunity to own steels.”
Banking group Barclays was higher after Deutsche Bank upgraded the stock to 'buy' this morning. Royal Bank of Scotland and Lloyds were also in demand with the latter today announcing plans to sell off its Uruguayan retail, commercial and corporate banking operations to scale back its international presence.
Resolution and Aviva gained after Credit Suisse said of the UK life insurance sector this morning: "we expect the relatively defensive balance sheets and resilient growth of the UK insurers to remain appealing in the near- to mid-term, with the valuation premium to European peers likely to be sustained." However, as part of its review of the category, the broker downgraded its rating for Legal & General to ‘neutral’, causing its share price to slip a tad.
FTSE 100 - Risers
Evraz (EVR) 260.40p +14.87%
Kazakhmys (KAZ) 657.50p +9.77%
Eurasian Natural Resources Corp. (ENRC) 338.70p +8.94%
Anglo American (AAL) 1,972.50p +7.17%
Barclays (BARC) 206.40p +6.92%
ICAP (IAP) 344.90p +6.22%
Rio Tinto (RIO) 3,021.00p +6.15%
Antofagasta (ANTO) 1,226.00p +5.96%
Vedanta Resources (VED) 975.50p +5.12%
Burberry Group (BRBY) 1,374.00p +4.73%
FTSE 100 - Fallers
Glencore International (GLEN) 378.05p -3.64%
Diageo (DGE) 1,702.00p -3.54%
Imperial Tobacco Group (IMT) 2,262.00p -3.50%
SABMiller (SAB) 2,762.50p -2.78%
Associated British Foods (ABF) 1,306.00p -2.25%
Shire Plc (SHP) 1,935.00p -2.03%
GlaxoSmithKline (GSK) 1,409.00p -1.98%
British American Tobacco (BATS) 3,173.50p -1.96%
Compass Group (CPG) 705.00p -1.88%
Unilever (ULVR) 2,275.00p -1.56%
FTSE 250 - Risers
Ferrexpo (FXPO) 182.80p +18.16%
Tullett Prebon (TLPR) 315.50p +8.91%
Hunting (HTG) 867.50p +8.03%
Ocado Group (OCDO) 68.60p +7.19%
Talvivaara Mining Company (TALV) 141.20p +6.57%
Bank of Georgia Holdings (BGEO) 1,247.00p +6.40%
Morgan Crucible Co (MGCR) 282.20p +6.21%
International Personal Finance (IPF) 322.60p +6.19%
Man Group (EMG) 80.65p +5.42%
Hays (HAS) 76.80p +5.13%
FTSE 250 - Fallers
Dixons Retail (DXNS) 19.28p -2.87%
Ophir Energy (OPHR) 614.50p -2.85%
Barr (A.G.) (BAG) 468.00p -2.82%
Moneysupermarket.com Group (MONY) 140.90p -2.69%
Daejan Holdings (DJAN) 2,869.00p -2.25%
De La Rue (DLAR) 1,007.00p -2.14%
Britvic (BVIC) 356.00p -1.93%
Rightmove (RMV) 1,599.00p -1.90%
Rathbone Brothers (RAT) 1,350.00p -1.46%
Stagecoach Group (SGC) 291.00p -1.39%
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