|CATEGORY: MARKET REPORT - CLOSE SECTOR: BANKING
Fri 03 Aug 2012
LONDON (SHARECAST) - - US payrolls smash expectations
techMARK 2,104.69 +1.39%
FTSE 100 5,787.28 +2.21%
FTSE 250 11,301.14 +2.03%
- Short-term EZ periphery bond yields plummet
- FTSE Mibtel and Ibex 35 finish 6% higher each
- Euro bounces back
- Expectations for further QE in US tempered
Equity markets across Europe surged on Friday, rebounding strongly after a poor run the day before, as some better-than-expected economic data from the US contributed to improved sentiment in the afternoon.
While the US jobless rate increased from 8.2% to 8.3% in July, the US economy increased payrolls by 163,000, much better than the 100,000 gain expected. "A stronger-than-expected report, despite the small increase in the unemployment rate, and one that should partially ease the concerns of policymakers," said analyst Peter Newland from Barclays Capital.
Meanwhile, analyst Craig Erlam from Alpari said this afternoon that the figures are only going to act as a short-term distraction: "It in no way demonstrates that the US has turned a corner after the economy significantly slowed in the second quarter. However, it is a welcome distraction after stocks suffered heavy losses in recent days."
All of the above on the back of a sharp drop in short-term Eurozone periphery bond yields as investors apparently turned less negative on Draghi´s remarks from yesterday. A more conciliatory tone out of some German politicians may have been a key factor. As well, Spain´s PM seems to have left the door open to formally requesting aid in bond markets.
Stocks sank yesterday after a press conference with European Central Bank (ECB) President Mario Draghi failed to live up to expectations. This one week after Draghi excited investors by saying that the Bank would do "whatever it takes to preserve the euro", he explained that while it is ready to intervene in the bond markets (to bring down elevated bond spreads), this is subject to a number of conditions that Eurozone members must adhere to first.
The HSBC/Markit Chinese service sector purchasing managers' index (PMI) rose from 52.3 to 53.1 in July. Combined with the manufacturing data, the composite index improved from 50.6 to 51.9. The news increased speculation that China would be slow to step up policy easing to boost economic growth.
In contrast, the Markit UK services PMI fell from 51.3 to 51.0 in July, worse than analysts' expectations of 51.5, held back by poor weather and Olympic-related disruption.
FTSE 100: Financials and miners benefit from bullish mood
Royal Bank of Scotland advanced after some well-received first-half results. RBS's operating profit in the first half of 2012 fell from £1,966m to £1,834m, after a £125m provision for costs arising from the technology incident in June 2012 and a £50m provision for interest rate swap mis-selling.
Investec said this morning that it "remains a mystery as to why nationalisation might be considered practical or desirable" as the bank is "more than capable of responding to any uptick in credit-worth demand for finance". Sector peers Barclays and Standard Chartered were also in demand.
Insurance giant Aviva was also making strong gains ahead of its interim results next week, with both Credit Suisse and Investec retaining their 'outperform' and 'buy' ratings for the stock today. Investec said this morning that the shares "have the potential, we believe, to re-rate once the market has seen the first two or three disposals" of the group's non-core business disposal programme, details of which may be revealed alongside the results.
Mining stocks also rose strongly, with Kazakhmys, Vedanta and ENRC leading the charge. Sector peer BHP Billiton gained after saying that its Chief Executive Officer would forgo his 2012 bonus after a $2.84bn write-down on US shale gas assets.
Meanwhile, just a few stocks on the Footsie finished the day in the red with IAG being the prominent faller after saying that it would fail to achieve its 'break-even' operating target this year as it registered a steep loss in the six months to June 30th. Surging fuel costs and increased losses at its Spanish airline were the blame.
FTSE 250: Inmarsat and Rentokil provide a lift
Second-quarter earnings at Inmarsat were down but the satellite operator was encouraged by progress in returning its core Global MSS business to growth, causing shares to jump.
Rentokil Initial, the laundry and pest control conglomerate, also rose after saying its troubled courier division will turn a profit by the end of the year, while first-half profits across the whole business have risen dramatically.
FTSE 100 - Risers
Aviva (AV.) 306.20p +7.36%
Kazakhmys (KAZ) 723.50p +6.55%
Prudential (PRU) 791.50p +6.10%
Vedanta Resources (VED) 954.50p +5.88%
Petrofac Ltd. (PFC) 1,531.00p +5.66%
Royal Bank of Scotland Group (RBS) 216.00p +5.62%
Barclays (BARC) 171.35p +5.58%
Aggreko (AGK) 2,205.00p +5.00%
Ashmore Group (ASHM) 346.10p +4.88%
Admiral Group (ADM) 1,156.00p +4.81%
FTSE 100 - Fallers
International Consolidated Airlines Group SA (CDI) (IAG) 151.00p -5.21%
Diageo (DGE) 1,707.50p -0.58%
Smith & Nephew (SN.) 675.00p 0.00%
FTSE 250 - Risers
Inmarsat (ISAT) 537.00p +10.88%
Tullett Prebon (TLPR) 288.00p +6.86%
Bumi (BUMI) 373.90p +6.83%
Rentokil Initial (RTO) 76.00p +6.07%
Ferrexpo (FXPO) 181.50p +5.77%
Ashtead Group (AHT) 264.70p +5.75%
Cape (CIU) 192.50p +5.60%
Hays (HAS) 76.45p +5.52%
Dixons Retail (DXNS) 16.16p +5.48%
Homeserve (HSV) 219.30p +5.43%
FTSE 250 - Fallers
Fidessa Group (FDSA) 1,394.00p -2.52%
New World Resources A Shares (NWR) 290.00p -2.03%
Telecity Group (TCY) 838.50p -1.64%
Anite (AIE) 125.00p -1.42%
Dechra Pharmaceuticals (DPH) 485.10p -1.30%
Daejan Holdings (DJAN) 2,995.00p -1.25%
Millennium & Copthorne Hotels (MLC) 473.50p -0.94%
Brown (N.) Group (BWNG) 264.20p -0.83%
Oxford Instruments (OXIG) 1,250.00p -0.79%
Centamin (DI) (CEY) 63.55p -0.70%
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