Wednesday 1 August 2012
QUOTE OF THE DAY
We believe that according the name 'investors' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a 'romantic'
- Warren Buffet
THIS MORNING IN LONDON
FTSE 100
5,679.02
43.74 0.78%
FTSE 250
11,159.13
22.44 0.20%
FTSE 350
3,013.44
20.98 0.70%
FTSE All Share
2,947.44
20.17 0.69%
AIM 100
3,014.60
8.81 0.29%
AIM All Share
669.74
1.50 0.22%
11:54 am
Footsie shrugs off PMI disappointment
Footsie ended the morning close to its highest level of the day, despite UK manufacturing data giving investors pause for thought earlier on.
UK manufacturing production fell at its fastest pace in over two years in July, recording substantial declines in output and new orders.
Markit's Purchasing Managers Index registered a reading of 45.4, down from 48.6 in June - anything below 50 shows a contraction in the sector. The figures come on the back of a 1.4% decline in manufacturing production in the second quarter.
Forecasters had predicted the number would stay steady with a reading of 48.5.
Output and new orders both contracted sharply during July, as companies faced weaker demand from domestic and export clients, Markit said.
As is often the case, any setback on the macro-economic front is interpreted by the bulls as increasing the chance of more fiscal stimulus.
Joshua Raymond, Chief Market Strategist, City Index commented: "Traders eyes remained focused on tonight's FOMC decision by the Federal Reserve and tomorrow's ECB [European Central Bank] rate decision, which could see more stimulus announced."
The FOMC, or Federal Open Market Committee, is the US central bank's policy-making team.
"Whilst there are minimal expectations of more stimulus, traders will be keeping an eye out for surprises. A wait and see policy with more 'we are ready to act' rhetoric may well be just what is seen but of course Ben Bernanke and the Fed have thrown a surprise or two beforehand," Raymond noted.
Raymond reckons that "the real event" is more likely to take place tomorrow with ECB President having put himself in "somewhat of a corner after last week ramping up of rhetoric that the ECB will do everything to preserve the euro."
"This rhetoric has increased optimism that there will be some form of stimulus announcement tomorrow. Failure to do so will badly disappoint a market exerting heightened expectations," Raymond reckons.
The market also shrugged off a downbeat house price report from the Nationwide building society. The price of a typical UK house fell by 0.7% in July to a level 2.6% lower than one year ago.
The lender´s chief economist, Robert Gardner, points out that "with the Eurozone situation deteriorating again in recent weeks and few signs of a recovery in domestic demand, we continue to expect only a modest recovery in the quarters ahead, both for the UK economy and the housing market."
In particular, Gardner is worried by the risk that the resiliency of the UK´s labour market could give way should the economy continue to contract.
The housing data did not prevent Rightmove advancing strongly after a sparkling trading update from the property web site.
Miners slowed by manufacturing data
Mining stocks spent the morning in the doghouse as China's manufacturing data provided no more encouragement for bulls of the sector than did the UK's.
The final HSBC Chinese manufacturing sector purchasing managers´ index (PMI) was revised down to 49.3 points in July from a preliminary reading of 49.5, although the July value - while still below 50 - was at least an improvement on June's reading of 48.2.
In parallel, the official Chinese government PMI fell slightly during that same month, coming in at 50.1 points versus 50.2 in June (Consensus:50.4).
Russian steel giant Evraz turned lower on the data, as did miners Vedanta, Fresnillo and ENRC, the last mentioned after a run of the mill production update. Chilean copper miner Antofagasta defied the trend, however, rising after it reaffirmed full year production guidance in its second quarter output update.
West African gold miner Avocet is also wanted as the market applauded its decision to suspend its dividend payment after a profits slump in the second quarter.
The response to trading updates from FTSE 100 heavyweights Standard Chartered and Next has been positive.
The assertion from Peter Sands, the Chief Executive Officer of banking giant Standard Chartered, that there is "some virtue in being boring" received several nods of approval from an investment community tired of bankers "living in interesting times" (as the old Chinese proverb has it).
The emerging markets focused bank saw profit before tax for the six months to the end of June was up 9% to $3,636m from $3,139m the year before, in line with operating income, which improved to $9,511m from $8.764m in the first half of 2011.
Fashion firm Next continues to march to a different drum in the retail sector, with its online and catalogue sales coming to the rescue in a period when umbrellas were the must-have accessory to any outfit.
Total sales for the first half of 2012 were up 4.5% against last year, the firm said, topping its prediction of growth between 1% and 4%.
Like-for-like sales came in at 2%, beating some analysts' expectations of a rise of just 1%.
Sales at its online and catalogue Next Directory arm were up 13.3% on last year making up for high street retail sales which crept up just 0.2%.
Can maker Rexam is getting a bit of a kicking and must be looking forward to getting shot of its loss-making Personal Care unit, which ensured that the packaging giant's bottom line was written in red at the halfway point of the year.
If Rexam is looking a bit battered, Cape, the support services firm focused on the energy sector, is getting a right going over after a profit warning.
The group is unlikely to meet previous expectations for 2012, with problems likely to continue into 2013, despite a restructure of the Australian part of its business.
All quiet in bonds and commodities markets
The benchmark 10-year gilt has dipped a bit as investors focus on equities. The yield has edged up from 1.47% to 1.49%.
The most widely traded contract for Brent Crude has reversed its earlier fall and is up 61 cents at $105.53 a barrel.
FTSE 100 - Risers
Next (NXT) 3,425.00p +6.40%
Standard Chartered (STAN) 1,531.00p +4.54%
Aggreko (AGK) 2,104.00p +3.04%
Admiral Group (ADM) 1,123.00p +2.84%
Old Mutual (OML) 161.90p +2.66%
Aviva (AV.) 298.00p +2.19%
Smiths Group (SMIN) 1,090.00p +2.16%
ITV (ITV) 76.95p +1.92%
British Land Co (BLND) 544.50p +1.87%
Antofagasta (ANTO) 1,092.00p +1.87%
FTSE 100 - Fallers
Rexam (REX) 422.50p -2.76%
Whitbread (WTB) 2,096.00p -1.87%
Evraz (EVR) 233.50p -1.68%
Vedanta Resources (VED) 960.50p -1.59%
Fresnillo (FRES) 1,442.00p -0.96%
Sainsbury (J) (SBRY) 320.50p -0.87%
Eurasian Natural Resources Corp. (ENRC) 390.20p -0.71%
BP (BP.) 422.20p -0.67%
Pennon Group (PNN) 763.50p -0.59%
United Utilities Group (UU.) 679.50p -0.51%
FTSE 250 - Risers
Avocet Mining (AVM) 82.80p +10.40%
Rightmove (RMV) 1,610.00p +7.91%
Filtrona PLC (FLTR) 485.20p +4.34%
Ruspetro (RPO) 151.10p +4.21%
Jupiter Fund Management (JUP) 225.10p +3.73%
Fidessa Group (FDSA) 1,452.00p +3.57%
Barratt Developments (BDEV) 136.90p +3.56%
Rank Group (RNK) 118.40p +2.96%
Mitie Group (MTO) 278.90p +2.76%
FirstGroup (FGP) 228.60p +2.33%
FTSE 250 - Fallers
Cape (CIU) 187.70p -35.25%
Atkins (WS) (ATK) 647.00p -12.57%
Bwin.party Digital Entertainment (BPTY) 99.00p -3.70%
BTG (BTG) 361.90p -3.18%
Bumi (BUMI) 345.10p -3.09%
COLT Group SA (COLT) 109.20p -2.59%
Dexion Absolute Ltd. GBP Shares (DAB) 132.20p -2.58%
Gem Diamonds Ltd. (DI) (GEMD) 193.00p -2.08%
Aberforth Smaller Companies Trust (ASL) 584.00p -1.85%
Kenmare Resources (KMR) 36.78p -1.84%
WHAT THE BROKERS SAY
FREE SHARE TIP OF THE DAY
A report by Growth Equities & Company Research
- Quindell Portfolio is a leading provider of software, consulting and outsourcing services to a broad portfolio of clients, primarily in the insurance and telecommunications sectors.
- Through its acquired subsidiaries and services, Quindell can deliver clients cost savings of more than 20%.
- Significant Growth - Quindell has made many acquisitions and announced considerable contract wins since listing last year, with the purchase of Ai Claims Solutions Plc in 2012 increasing annual revenues to in excess of GBP150 million.
- Future Opportunities - Quindell has more than GBP500 million of contracts currently under discussion and has cash resources available to acquire additional value-enhancing businesses.
- We expect revenues of GBP154 million in 2012 and GBP247 million in 2013. We recommend the shares as buy at 7p with a 21p target price.
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THE LATEST ON THE CRAZY BOARD
The top 5 hot company threads on the Bulletin Board:
Falkland Oil & Gas
HSBA
Hi Wave Technologies
Ruspetro
Running trading thread
Click here to discuss shares with other ShareCrazy members
BOOK OF THE WEEK
By Peter Lynch and John Rothchild
A book review by Ross Jones
From when Lynch took over the management of Fidelity's Magellan Fund in 1977, until his departure in 1990 he delivered his investors an annualised return of 29.2%, outperforming the benchmark US markets by 13.4%, growing funds under management from $18 million to circa $14 billion. This is pretty spectacular and warrants investigation into how this was achieved.
Click here to view the rest of the article
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