FTSE 100	5278.22, -64.69	Dow	10321.03, -53.13
FTSE 250	9226.94, -132.24	Nasdaq	2234.22, -1.68
FTSE All Share	2698.61, -33.81	S&P 500	1102.93, -2.31
Nikkei	10101.96	Hang Seng	20608.70
Oil (Crude)	$78.17, -$1.83	Gold	$1108.50, +$11.30
Base Rate	0.5%	10 Yr Gilt	4.04%
£/$	1.529	£/€	1.1274
1 month LIBOR	0.539	3 month LIBOR	0.643

 

Markets

London - The FTSE 100 lost 64.69 points to close at 5,278.22 yesterday. Miners were dragged lower by falling metal prices, while the broader market suffered on the back of the jobs data from the US. Xstrata and Rio Tinto both dropped more than 3%, weighing heavily on the index. British American Tobacco declined 2.3% after reporting net income that missed analysts’ estimates. This morning the index is 45.19 points higher at 5323.41. Serco leads the risers, jumping 6.8% while Lloyds is the biggest faller, down 1.8%, after both companies released their full year reports.

New York - US markets finished lower yesterday following a continued spate of weak economic data. Jobs data showed the number of Americans filing new claims for unemployment jumped last week to 496,000. Claims have now risen 12% over the past two weeks, although this is due in part to the impact from the severe winter storms on the east coast. Elsewhere, durable goods orders excluding transportation fell 0.6% in January, having risen 2% in December. The Dow Jones lost 53.13 points to close at 10,321.03, the S&P 500 fell 2.31 points to 1,102.93 and the Nasdaq slipped 1.68 points to 2,234.22. Coca-Cola caused the heaviest weight on the Dow after announcing plans to buy the North American operations of its biggest bottler, Coca-Cola Enterprises. Coca-Cola shares plunged 4% while CCE shares surged 33% higher. Apple helped diminish the Nasdaq’s losses after rumours of a 4 for 1 stock split emerged. In other news, Federal Reserve Chairman Ben Bernanke told Senators Thursday that the central bank is looking into whether Goldman Sachs and other big banks worsened Greece’s debt crisis.

Tokyo - The Nikkei rose 24.07 points to close at 10,126.03 this morning following positive economic data. Factory production rose 2.5% from a month earlier, the 11th straight gain. The numbers suggest the economy will keep expanding on the back of Asian demand and the central bank is unlikely to act unless financial markets become volatile.

Hong Kong - The Hang Seng jumped 209.13 points to 20,608.7 today.

Economics

UK GfK consumer confidence (Feb) 00:01 GMT

Rising house prices and relatively fewer concerns about unemployment are likely to have led to a further gain in consumer confidence in February.

UK GDP (Q4, 2nd release) 09:30 GMT

According to the initial estimate, the UK economy crawled out of recession in Q4. Initial estimates of GDP tend to be at least 0.2% points below the ‘final’ estimate produced two months later. In fact, most of the revisions happen over the next two years and are often unrecognisable from the initial estimates. Indeed, the industrial production data released last week already point to a 0.1% point upward revision. With this release we get the expenditure breakdown. Analysts expect ongoing de-stocking to have acted as the main drag on activity.

US GDP (Q4, 2nd estimate) 13:30 GMT/ 08:30 EST

Analysts think net trade’s contribution to Q4 GDP could be revised down by around 0.5ppts, but some of the impact should be offset by stronger fixed investment. Analysts look for Q4 GDP to be revised to 5.4%, down from 5.7%.

US Chicago PMI (Feb) 14:45 GMT/ 09:45 EST

Results from February’s Empire and Philadelphia Fed manufacturing surveys have been generally impressive, and analysts look for the Chicago PMI index to remain robust at around 61.

US Uni. Michigan Confidence (Feb, final) 14:55 GMT/ 09:55 EST

The weekly ABC News consumer survey has failed to show any improvement since the beginning of the month, ranging between -48 and -49 for the past five weeks. Analysts expect the final reading of Michigan sentiment reading for February to stay at 73.7.

US Existing home sales (Jan) 15:00 GMT/ 10:00 EST

The 17% fall in December existing home sales followed the initially scheduled expiration of the first-time home-buyer tax credit in November. The impact of this deadline was clear, as the share of first-time buyers fell from 51% in November to 43% in December, essentially explaining the entire drop in sales. Although the tax credit was extended and expanded to existing home owners, the 1% rise in December pending home sales suggests that the impact has been limited so far. Analysts look for existing home sales to rise to 5.55m. 

Corporate

Lloyds Banking Group said today that its full-year pre-tax loss narrowed as impairment charges continued to haunt the U.K. bank, but it said performance should improve starting in 2010. Lloyds, 41%-government owned, echoed comments made by Royal Bank of Scotland Group on Thursday that the worst has passed for U.K. banks. "We have established positive trends in margin, cost and impairments and are well positioned," Chief Executive Officer Eric Daniels said in a statement. "We are building strong earnings momentum and expect our performance to improve significantly in 2010 and beyond," he added. Both Lloyds and RBS received state aid during the financial crisis as their loan portfolios quickly turned sour since mortgage borrowers and companies had trouble repaying debt. The bank reported a pre-tax loss for its combined businesses of GBP6.3 billion for the year ended Dec. 31, compared with a GBP6.71 billion loss a year ago. The 2009 figure included a fair value gain related to the HBOS PLC buy of GBP6.1 billion.  The figures were made on a pro-forma basis to combine the results of Lloyds and HBOS for both 2009 and 2008. The pre-tax loss was lower than analysts’ expectations of GBP6.7 billion. Impairment charges for the year were of GBP24 billion, up from GBP14.88 billion in 2008. Analysts were expecting GBP23.18 billion. Lloyds, however, said second-half of 2009 impairments were down 21% from the first half, and it expects "to see a similar pace of half yearly improvement through 2010, with further substantial reductions in 2011 and beyond." The bank’s woes largely come from its acquisition of ailing mortgage lender HBOS in January 2009, which was pushed by the U.K. government. HBOS’ bad loans cost the bank around GBP10 billion in impairment charges in the first half of last year. On the contrary of RBS, however, Lloyds opted out of a government scheme to insure bad loans and instead raised GBP22.5 billion through the largest-ever rights issue and a debt-to-equity swap. By doing that, Daniels, who along with other U.K. bank heads has waived his 2009 bonus, avoided having his bank fall further into state hands. Nonetheless, the bank has received funding support from the government and the central bank. It said at Dec. 31, the overall support it has received totalled GBP157 billion, with a significant portion maturing within the next two years. The bank, however, said its plan to reduce the balance sheet will avoid much of the refinancing. For 2009, the bank reported total income of GBP24.6 billion, up from GBP21.8 billion a year ago, mostly due to a strong performance from the wholesale division. Its bread-and-butter retail business, however, was hit by high impairments and lower income, as net-interest margins fell. When including a GBP11.17 billion goodwill credit related to the HBOS acquisition, Lloyds reported a profit attributable to shareholders of GBP2.83 billion, up from GBP772 million a year ago.  

U.K. support services provider Serco today said it expects further progress in 2010 as continued fiscal pressures on companies and governments boost demand for its services, after reporting a 30.1% increase in full-year pre-tax profit. The company–which provides services in the private and public sectors such as education, IT, security and business process outsourcing as well as running prisons and detention centres–posted organic growth of 9.4%, which was better than rival outsourcing provider Capita Group reported Thursday. Serco said it expects continued strong organic revenue growth this year and further progress towards its 2012 margin guidance. It aims at achieving revenue of some GBP5 billion, excluding acquisitions, disposals and currency effects, and an adjusted operating profit margin of approximately 6.3% by the end of 2012. Chief Executive Christopher Hyman told Dow Jones Newswires that he doesn’t expect a slowdown in demand this year although he reiterated Capita’s view that discretionary spending has fallen. The CEO said he hasn’t seen a slowdown in demand from governments because of the recession, but rather that he expects more demand to come through as cost pressures continue. "We work with civil servants…and they have to continue running critical services," he said, adding "they’ve got to do more with less." Serco is also setting up competition to Capita by planning to enter the business process outsourcing market, in which Capita is market leader. "BPO is an area we are interested in so we will build it, partner with someone or buy the capability," he said, adding that he would prefer to build this organically but if a good opportunity arises he will consider an acquisition. Lapwood also welcomed Serco’s contract wins as it represents a significant improvement on 2008 contracts which came in at GBP3.2 billion. Serco was awarded contracts worth GBP5.8 billion during 2009, signed contracts valued at GBP4.5 billion and has been appointed preferred bidder for GBP1.3 billion of contracts. It also has a strong revenue visibility with a GBP17.1 billion order book. Full-year pre-tax profit to Dec. 31 rose to GBP177.1 million from GBP136.1 million while revenue rose 27.1% to GBP3.97 billion. Including the acquisition of SI International, which increased its platform in the U.S., and currency impact, revenue rose a more modest 10.2%. Serco has remained largely resilient throughout the recession as governments and large commercial organizations continue to face challenges to deliver better services while providing improved productivity. Industry experts still believe that pressure to cut costs, for government and private companies, will ensure good growth at outsourcing companies. Its dividend rose 25% to 6.25 pence per share.

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 26th, 2010 under Asset Management.
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