Monday 10 September 2012
QUOTE OF THE DAY
We were hoping to build a small profitable company; and of course, what we've done is build a large, unprofitable company
- Jeff Bezos
ON THE SHARECRAZY BLOG
How many times have we been here before? Draghi or Merkel or someone else you would really not wish to be trapped alone with on a desert island announced a grand new plan. The press headlines use the world bazooka. The BBC announces that the Euro has been saved and starts to wonder if Britain really should have joined after all. The markets rally as the crisis is over. And then... a few folks start to point out that there are serious flaws in this plan. It may not work. It is unworkable. And we lurch on until the next announcement/crisis summit.
And so we turn to "super" Mario Draghi's latest offering - unlimited bond purchases. I offer up three reasons why this may not in fact solve anything.
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THIS MORNING IN LONDON
FTSE 100
5,794.62
-0.18 -0.00%
FTSE 250
11,845.84
37.83 0.32%
FTSE 350
3,090.84
1.24 0.04%
FTSE All Share
3,024.99
1.00 0.03%
AIM 100
3,185.30
9.78 0.31%
AIM All Share
699.47
2.02 0.29%
11:59 am
Stocks flat ahead of another busy week
- Markets await German ruling on ESM and FOMC meeting
- Trade data in China disappoints
- Miners gain on hopes for QE
The FTSE 100 was trading within a narrow range on Monday morning, with just 20 points between the intraday high and low, as investors continued to show caution ahead of what's likely to be another busy week on the markets.
"European financial markets are little changed heading into the lunch today, with investors cutting exposure to risk ahead of key events this week including the German court ruling on the ESM and the Fed's monthly policy meeting," said market strategist Ishaq Siddiqi from ETX Capital.
"Both events present plenty of risk as traders feel increasingly uncertain over the outcomes, unlike last week's ECB meeting in which it looked almost certain the certain the central bank was on course to deliver stimulus."
Stocks were given a boost towards the end of last week after European Central Bank (ECB) President Mario Draghi unveiled details of the bank's bond-buying programme, which included unlimited and sterilised purchases of sovereign debt with maturities of between one and three years.
The plan has received the backing of the International Monetary Fund (IMF) with Managing Director Christine Lagarde throwing her support behind its this weekend: "Our sense is that now the euro partners know exactly what they have to do," she said.
However, markets are likely to be under pressure today by some gloomy economic data from China. The world's second-largest economy reported significantly worse-than-expected import figures for August, falling for the first time in a non-holiday period since 2009. This after industrial production data released on Sunday came in slightly below forecasts for August, revealing an 8.9% year-on-year pace of expansion.
FTSE 100: Miners leading the way
Mining stocks were performing well this morning, with Xstrata among the risers following Friday's eleventh-hour adjustment to the offer by Glencore. Glencore released its proposal to Xstrata this morning, saying that "it is content with Xstrata's request for Xstrata management and senior employees to receive appropriate retention and incentive packages."
UBS said that the outlook for the UK mining sector is improving with quantitative easing (QE) measures now expected. The broker said: "QE triggers a return of capital flows to emerging markets, incentivising companies to stop running for cash and embark on a commodity bullish restocking phase. As in the past, QE is likely to drive up commodity prices and in turn mining equities." Fresnillo, Vedanta, Rio Tinto and Kazakhmys were high risers early on.
Banking group Barclays was making gains after UBS raised its target price for the stock from 205p to 235p and reiterated its 'buy' recommendation. The broker said that there is "potentially significant upside if new CEO changes strategy".
Oil major BP rose on rumours that it is in advanced talks to sell a group of oilfields in the Gulf of Mexico to US outfit Plains Exploration & Production.
Primark and sugar group AB Foods was out of favour despite saying that adjusted operating profits in the second half will be well ahead of last year and in line with expectations. Investec said this morning it expects to lower its full-year EPS estimate due to the weaker-than-expected profits in the Ingredients division.
FTSE 250: Goldman upgrades Spirax-Sarco, takes down Laird
Spirax-Sarco was performing well after Goldman Sachs upgraded the stock to 'buy' and raised its target price from 2,100p to 2,510p. Meanwhile, Laird headed the other way after the US broker cut its recommendation to 'sell'.
Pubs group Mitchells & Butlers advanced after appointing Alistair Darby, the former Chief Operating Officer at Marston's, as its new Chief Executive.
Reinforced polymer technology firm Fenner edged higher after saying that current trading remains in line with expectations in spite of the continuing macroeconomic uncertainty.
FTSE 100 - Risers
Fresnillo (FRES) 1,794.00p +4.06%
Vedanta Resources (VED) 1,014.00p +3.95%
Kazakhmys (KAZ) 682.50p +3.80%
Marks & Spencer Group (MKS) 373.20p +3.32%
Antofagasta (ANTO) 1,266.00p +3.26%
Rio Tinto (RIO) 3,110.50p +2.96%
Xstrata (XTA) 1,038.50p +2.42%
Royal Bank of Scotland Group (RBS) 250.30p +2.37%
Anglo American (AAL) 2,013.00p +2.05%
Eurasian Natural Resources Corp. (ENRC) 345.30p +1.95%
FTSE 100 - Fallers
SABMiller (SAB) 2,701.50p -2.21%
Associated British Foods (ABF) 1,281.00p -1.91%
British American Tobacco (BATS) 3,116.00p -1.81%
Unilever (ULVR) 2,239.00p -1.58%
National Grid (NG.) 683.50p -1.30%
Hammerson (HMSO) 462.60p -1.26%
United Utilities Group (UU.) 692.50p -1.21%
Reckitt Benckiser Group (RB.) 3,596.00p -1.21%
Glencore International (GLEN) 373.60p -1.18%
Tesco (TSCO) 343.10p -1.14%
FTSE 250 - Risers
Spirax-Sarco Engineering (SPX) 2,133.00p +4.82%
Bwin.party Digital Entertainment (BPTY) 100.60p +4.57%
Bank of Georgia Holdings (BGEO) 1,300.00p +4.25%
Petropavlovsk (POG) 391.80p +3.65%
Dunelm Group (DNLM) 600.00p +3.54%
Dixons Retail (DXNS) 19.90p +3.22%
Hays (HAS) 79.20p +3.12%
Ferrexpo (FXPO) 188.50p +3.12%
Centamin (DI) (CEY) 84.75p +2.73%
Lonmin (LMI) 611.00p +2.52%
FTSE 250 - Fallers
Laird (LRD) 232.30p -3.45%
Wetherspoon (J.D.) (JDW) 453.20p -2.52%
Dairy Crest Group (DCG) 350.00p -2.02%
BH Global Ltd. USD Shares (BHGU) 11.34 -1.73%
Premier Oil (PMO) 380.80p -1.70%
Salamander Energy (SMDR) 198.00p -1.64%
Millennium & Copthorne Hotels (MLC) 494.10p -1.48%
BTG (BTG) 305.80p -1.45%
Premier Farnell (PFL) 188.00p -1.42%
Derwent London (DLN) 1,908.00p -1.24%
WHAT THE BROKERS SAY
THE LATEST ON THE CRAZY BOARD
The top 5 hot company threads on the Bulletin Board:
Falkland Oil & Gas
Taylor Wimpey
Cluff Gold
Yule Catto
Running trading thread
Click here to discuss shares with other ShareCrazy members
BOOK OF THE WEEK
By Nicolas Sarkis
A book review by James Faulkner of watshot.com
"While less sophisticated players may well prefer to kneel and pray that the poor returns on stocks since 2000 will soon somehow be miraculously transformed into a new bull market, serious investors should instead delve into the history books." These are the words of warning Nicolas Sarkis conveys to his readers as he heralds a "lost era" for equities in the opening chapter of his refreshing appraisal of the investment landscape, Fear and Greed. Sarkis, the founder of investment firm AlphaOne Partners and notable for being the youngest ever Goldman Sachs Associate, sets out to equip readers with the insight necessary to avoid the pitfalls of investing in a "lost era"; indeed, he is well placed to do so, having preserved and increased his clients' wealth throughout the turbulent years of the financial crisis.
The book can broadly be divided into two parts; the first six chapters deal with specific investments and market themes - equities, deleveraging, gold, emerging markets, government defaults, and the euro - while the last four address some of the broad sweeping issues that will colour the investment environment for years to come - fearfulness among investors, regulation, fraudsters, and central bankers (perhaps he should have put the last two in the same chapter?). Sarkis is particularly bullish on gold due to the fact that it has a low correlation to equities, making it "a great asset for balancing out risks on equity investments and vice versa". However, for those looking to diversify into emerging markets he cautions that a renewed downturn would probably see them among the worst performing asset classes, particularly in Asia, where China shows many symptoms of a bubble.
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