FTSE 100	5139.31, -113.84	Dow	10002.18, -268.37
FTSE 250	9223.84, -193.97	Nasdaq	2125,43, -65.48
FTSE All Share	2638.03, -57.8	S&P 500	1063.11, -34.17
Nikkei	10057.09, -298.89	Hang Seng	19665.08, -676.56
Oil (Crude)	$73.14	Gold	$1062.40
Base Rate	0.5%	10 Yr Gilt	3.85%
£/$	1.568	£/€	1.1471
1 month LIBOR	0.523	3 month LIBOR	0.616

 

Markets

London - Fears for the global economy pushed UK stocks to their lowest close in three months on Thursday as spiking risk aversion hammered banks and miners while energy stocks fell on weaker commodity prices. The FTSE100 closed 113.84 points lower at 5139.31, its lowest close since November 5. Banks were the biggest drag on the index. HSBC, RBS, Barclays and Lloyds Banking Group were 3.7 to 7.8 percent lower. As expected, the Bank of England kept rates at 0.5 percent and announced they would not extend the £200bn quantitive easing programme. The ECB also kept rates on hold at a record low of 1 percent.

Vodafone was one of the five stocks in positive territory, up 3.6 percent after the company raised its outlook and posted third quarter revenue ahead of forecasts. Autonomy rose 2.7 percent after it said it was confident about 2010 when posting rises in fourth quarter earnings that met forecasts. GlaxoSmithkline turned positive, after posting its fourth quarter results which beat forecasts, it closed 0.7 percent higher.

Miners fell as metal prices were knocked again as the dollar strengthened. Antofagasta, Lonmin, Rio Tinto, Xstrata and BHP Billiton fell 4 to 6 percent. Royal Dutch Shell fell 2.1 percent after it posted a 75 percent fall in fourth quarter profit to $1.8bn. BP fell 1.6 percent and Tullow Oil lost 1.9 percent. Unilever fell 3.5 percent after it warned of increasing competition from its rivals trying to attract cash strapped shoppers, overshadowing a forecast beating rise in quarterly underlying sales.

New York - Fears from a growing debt crisis in Europe dragged US shares lower on Thursday, sending the market to its lowest close in three months. The DJIA closed 268 points lower at 10002.26, its lowest point since November 4, the index dipped below 10,000 late in the day, falling to that level for the first time since early November. The S&P500 closed 34.17 points lower at 1063.11 and the Nasdaq closed 65.48 points lower at 2125.43. Debt woes propelled the dollar to a more than seven month high versus the euro, which hit dollar traded commodities such as oil and gold.

Weaker than expected labour market reports on both Wednesday and Thursday also played a role, making investors nervous ahead of today’s January jobs report. Employers are expected to have added 15,000 jobs to their payrolls after cutting 85,000 in the previous month while the unemployment rate is expected to have held steady at 10 percent. The number of Americans filing new claims for unemployment rose to 480,000 last week from a revised 472,000 the previous week. Economists expected 455,000 new claims. Continuing claims rose to 4,602,000 from 4,600,000 the previous week. Economists expected 4,581,000. December factory orders rose 1 percent versus forecasts for a rise of 0.5 percent. Orders rose 1 percent in the previous month.

After the close Wednesday, Cisco Systems reported better than expected quarterly sales and earnings.
Toyota Motor reported improved earnings in its most recent quarter and also lifted its estimates for the fiscal year ending in March. But the results did not include the impact of the huge recall of millions of vehicles due to gas pedal problems. Toyota estimates that the global recall could cost it as much as $2bn.

The dollar gained against the euro and on worries about sovereign debt in Greece, Spain and elsewhere in Europe. COMEX gold for April delivery fell $49 to settle at $1062.40 an ounce. US light crude for March delivery fell $3.84 to close at $73.14 a barrel on NYMEX. Treasury prices rallied, lowering the yield on the 10 year note to 3.61 percent from 3.70 percent.

Tokyo - The Nikkei average fell almost 3 percent to a two month closing low today, as risk aversion rose on growing sovereign debt problems in Europe, although Toyota shares managed to find a floor despite mounting recall woes. Mitsui & Co and other resource linked shares took a beating after a key commodities index saw its biggest daily loss in almost six months on Thursday, hit by a 5 percent fall in crude oil and a steep fall in gold. The 19-commodity Reuters-Jefferies CRB index, which counts U.S. crude oil as its main component, closed 2.6 percent lower, after trading to its lowest levels since October 12.

Toyota Motor Corp rose to become one of the few gainers on the Nikkei after it put a forecast beating third quarter and raised its annual outlook. The share gain came despite news it was also is preparing to recall its iconic Prius hybrid car to address more than 100 complaints about delayed braking, spreading its quality woes to one of its most important models. The stock gained 1.1 percent to Y3315. Nomura Securities cut their price target on the stock to Y4, 000 from Y4, 800, but reiterated their buy rating, saying that they expected substantial improvement in earnings even factoring in risk. As of Thursday, shares in Toyota had lost as much as 23 percent in the two weeks since it announced a multi-million-vehicle recall for sticky accelerator pedals in North America, which has spread to most regions in the world.

Hitachi gained 3.3 percent to Y315, after it exceeded market expectations by swinging to its first quarterly net profit in six quarters on cost cuts and a recovery in its power system operations. It also raised its forecast just below the market consensus. Sony added 0.3 percent, after it halved its annual loss forecast on a rebound in its flat TV business and cost cuts. After the bell, Panasonic Corp said its quarterly profit jumped more than threefold to the highest level in five quarters as it cut costs and enjoyed robust TV sales, and it lifted its outlook above market expectations.

Economics

UK PPI (Jan) 09:30 GMT

PPI has surprised to the upside in recent months as much as CPI. We expect a further rise to 5 percent in January, coinciding with a further increase in core inflation.

US Consumer credit (Dec) 20:00 GMT

Total consumer credit has fallen by 4.5 percent since it’s speak in mid-2008, reflecting a combination of household deleveraging and tighter credit conditions. Credit card debt, which accounts for just over one third of the total, is down by around 10% since its peak. An additional drop of USD7bn is expected for consumer credit in December

Corporate

BG Group Plc said it was targeting strong growth in oil and gas production in the coming decade as it reported a 38 percent drop in fourth quarter profits due to weak gas prices. BG said it expected to grow output at the upper end of its compound annual growth rate target range of 6 to 8 percent to 2020, after it made big oil and gas discoveries in Brazil and bought U.S. shale gas assets. BG said fourth quarter net profit was £465m. Excluding one-offs and non-operating items the result was £592m, just short of an average forecast of £606m. Gas prices have been hit by an increase in production in the U.S. and low demand caused by the global recession.

British Airways will make ‘record losses’ this year even though it posted its first quarterly operating profits for over a year. The company posted a third quarter operating profit of £25m, though its pre-tax loss still came in at £50m, down from £122m last time. For the nine months so far this year, BA has made an operating loss of £86m and a pre-tax loss of £342m, nearly five times the figure this time last year. Revenue in the third quarter fell by 12.9 percent and stripping out currency movements would have slumped by 18 percent. Chief Executive Willie Walsh said "While we are on the right track, we still expect to make record losses this year. Permanent structural change is being introduced in all areas and will return us to sustained profitability. "We are working with our staff, their unions and the trustees about solutions to address our £3.7 bn pension funds’ deficit and are discussing a range of changes to future pension benefits". BA’s cabin crew are set to ballot again over possible strike action because of the changes proposed. Passenger revenue was down 13% in the last three months, on capacity down 3.9%. Yields were down 11%, 15.8% excluding exchange, largely as a result of lower year on year surcharges and sales mix within cabin class. Premium traffic volumes have declined by 9.7% in the year to date, significantly better than industry figures as disclosed by IATA. Walsh added that" Volumes are stable and yields are starting to show improvement". Separately, BA said last months heavy snow took its toll as January traffic fell by 7 percent, with premium traffic sown by 2.1 percent and non premium traffic 7.9 percent lower. Cargo business traffic rose by 6.5 percent. The airline added that its passenger load factor rose by 1 percent to 74.2 percent, as cuts in capacity of 8.3 percent outweighed the decline in passengers. Passenger numbers in January fell from £2.33m to £2.14m.

Blacks Leisure plans to raise £22m in a share sale to speed up its turnaround plan, which includes opening and refurbishing stores, it said today. The group said it was conducting a fully underwritten placing and open offer of 40.74m new shares at 54 pence each, a 4.4 percent discount to last nights closing price. That will raise £20.28m net of expenses. CE Neil Gillis said "The proceeds will underpin a selective expansion of our outdoor retail estate by the addition of up to 35 new stores, in towns where we have previously traded successfully or which currently lack an outdoor retail offer and accelerate the refurbishment of our core estate which has suffered from years of underinvestment". The group will also cancel its seasonal peak working capital facility of £7.5m. The sale is underwritten by Singer Capital Markets, which is acting as sole financial adviser, sponsor and broker to the company.

ICAP said today, third quarter revenue was slightly higher than the year before, but a rebound in overall activity levels at the start of 2010 has been a little weaker than last year. Revenue for the three months to 31 December was also consistent with the performance for the nine months as new business coming on stream offset a fall in core voice revenues. The quarter began strongly before activity slowed significantly from mid-November leading into the seasonally quieter markets of December, said the group. This, along with the continuing investment in strategic initiatives, was reflected in lower operating margins for the period. ICAP now expects profit before tax, amortisation and impairment of intangibles arising on consolidation and exceptional items for the financial year ending 31 March 2010 of £295m-£315m. It made £346m last year. On US plans for regulation of proprietary trading, it said it continues to expect that our electronic broking business will be a substantial beneficiary of a shift to more transparent markets arising from increased electronic trading. Voice broking will continue to be required for more complex, less liquid products which are unsuitable for electronic broking,’ it said. CE Michael Spencer said "We expect to be able to take advantage of the likely restructuring of the financial markets post crisis and remain positive about the medium term outlook for the business".

The above details are provided for information only and are not intended to be construed as solicitation for the sale or purchase of any particular investment nor as specific investment advice.

 

Posted: February 5th, 2010 under Asset Management.
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