- US data beats forecasts in September
- Reports imply Germany may soften stance on Greece
- Banks and miners rise strongly in London
- Credit Suisse says Spanish stress test a "generally credible exercise"
- Credit Suisse says larger top-down questions remain in stress tests
Better-than-forecast manufacturing figures from the US and encouraging newsflow from Europe drove impressive gains on stock markets on Monday, with the FTSE 100 kicking off the fourth quarter with a bang and finishing up 1.4 per cent on the day.
Economic figures from the US came in above expectations this afternoon, driving strong gains on Wall Street from the off. The ISM's manufacturing guage rose from 49.6 to 51.5 in September, its best level since May and above the 49.7 consensus estimate.
"The number, at 51.5, shows significant growth compared to forecasts, potentially illustrating a forthcoming uptick in the broader US economy," said financial trade David White from Spreadex. "Not surprisingly, then, high beta stocks have diverged from their VWAPs [volume-weighted average prices], allowing the move to continue into the European close."
Investors were seemingly shrugging off the news that both UK and Chinese manufacturing purchasing managers' indices (PMIs) remained below the 50-point mark in the same month, the level which separates contraction with expansion.
Friday's release by Oliver Wyman on the Spanish financial sector was among the factors lifting sentiment on markets today. The independent auditor estimated that banks would need €59.3bn in funds in order to stay afloat, well within the €100bn limit given by the European Union. A positive outcome then? Well, this is some of what analysts at Goldman Sachs had to say: "The MoU stated that "the main objective ... is restoring [the banks'] market access". In our view, this goal cannot be reached through bank recapitalizations. Bank funding is inextricably linked to that of the sovereign, and here the "bank problem" has ceased to be the "main problem". This, at least, is confirmed by this test."
Having said that, some observers, such as Kathleen Brooks at Forex.com, believe or emphasize that the market has taken the tests seriously because they have been carried out by an independent company. Also, she points out, "the [Spanish] finance minister said that Spain was "analysing" an ECB aid proposal. This isn't a confirmation that it will make a request, but it leaves the door open for a formal request in the near-future, which would then (finally) activate the OMT programme."
On what seems to be a possibly similarly positive note, according to a report in WirtschaftsWoche Greece will receive 31bn euros in aid despite the fact that the Troika report will say that the country has not yet fulfilled all the conditions which had been set out for it.
FTSE 100: Banks and miners lead the rise
Banking stocks were in demand with Royal Bank of Scotland, Lloyds and Barclays benefiting from ratings upgrades from Liberum Capital, which lifted its recommendation on all three to 'buy'.
The big news of the day was that the so-called merger of equals between commodities trader Glencore and mining titan Xstrata is back on after the independent directors of the latter agreed to Glencore's terms. Jefferies reiterated its positive stance on both stocks this morning, saying that they while they may underperform after the shareholder votes later this year, the combined 'Glenstrata' entity will be one of its top picks for the long term.
British Airways and Iberia owner IAG was flying high after the International Air Transport Association (IATA) lifted its profit forecast for the global airline industry for this year by a third.
Supermarket group Sainsbury was in the red ahead of its second-quarter trading statement on Wednesday. Sector peer Tesco, which reports its interim results on the same day, was also down after a ratings downgrade from Seymour Pierce from 'hold' to 'reduce'; the broker cited poor visibility as a reason behind the move.
Defence group BAE Systems was wanted this morning after itself and aerospace titan EADS revealed details of its proposed £28bn tie-up. "There comes a time when it is right to seize the moment, and to create something that is even stronger and better. We believe that time is now," the companies' CEOs said in a joint statement.
Meanwhile, tobacco groups British American and Imperial were up after some positive comments from Investec today. "The NHS wants us to stop smoking for October. We respond by going long on UK tobaccos," said analyst Martin Deboo. The broker has raised its rating on BATS from 'hold' to 'buy' and renewed its 'buy' recommendation for IMT.
Shares in drugs giant AstraZeneca were hit in afternoon trading after the company revealed that it has suspended its share repurchase programme. The company has repurchased a net $0.7bn of shares
since the end of the first half, bringing the year-to-date total to $2.3bn. The group's initial full-year target for repurchases stands at $4.5bn.
FTSE 250: SuperGroup continues to be super
SuperGroup continues to extend gains after its impressive results announced last month, in which it reported a 10% increase in total sales in the first quarter. Including today's near-9% rise, shares have gained 35% in the past month.
Shares finished the day around technical resistance (at 650p) with the next key level being at 700p, according to technical analysts at Digital Look. "There does not seem to have been any fundamental trigger for the move, although shares had been 'thrown back' towards technical support at 600p," they said.
House builder Taylor Wimpey was a high riser after Citi upgraded its rating on the stock. Sector peer Barratt Developments was also on the up.
International investment group Caledonia rose after buying a portfolio of five industrial business from US-based operating company Latshaw Enterprises for $42m.
FTSE 100 - Risers
Anglo American (AAL) 1,891.00p +4.07%
Polymetal International (POLY) 1,125.00p +3.69%
Royal Bank of Scotland Group (RBS) 266.40p +3.66%
IMI (IMI) 932.50p +3.61%
International Consolidated Airlines Group SA (CDI) (IAG) 154.30p +3.56%
Schroders (SDR) 1,572.00p +3.56%
Barclays (BARC) 222.35p +3.49%
Croda International (CRDA) 2,501.00p +3.13%
Lloyds Banking Group (LLOY) 39.98p +2.95%
Kazakhmys (KAZ) 712.50p +2.89%
FTSE 100 - Fallers
AstraZeneca (AZN) 2,925.00p -1.02%
Sainsbury (J) (SBRY) 345.80p -0.49%
Babcock International Group (BAB) 922.50p -0.49%
Morrison (Wm) Supermarkets (MRW) 283.90p -0.46%
CRH (CRH) 1,187.00p -0.42%
Glencore International (GLEN) 342.00p -0.32%
Tesco (TSCO) 331.00p -0.30%
Kingfisher (KGF) 264.00p -0.08%
G4S (GFS) 266.00p +0.11%
Intertek Group (ITRK) 2,746.00p +0.22%
FTSE 250 - Risers
Supergroup (SGP) 649.00p +8.62%
NMC Health (NMC) 195.70p +8.12%
Pace (PIC) 169.90p +6.65%
Morgan Crucible Co (MGCR) 278.10p +5.30%
Spectris (SXS) 1,810.00p +4.93%
Jupiter Fund Management (JUP) 254.20p +4.31%
Rank Group (RNK) 150.80p +3.93%
Hochschild Mining (HOC) 505.00p +3.91%
Rotork (ROR) 2,351.00p +3.89%
ICAP (IAP) 333.00p +3.71%
FTSE 250 - Fallers
WH Smith (SMWH) 625.00p -3.33%
Stobart Group Ltd. (STOB) 114.00p -3.14%
Telecom Plus (TEP) 821.00p -3.01%
Talvivaara Mining Company (TALV) 148.90p -2.30%
Ruspetro (RPO) 105.20p -1.68%
Fidessa Group (FDSA) 1,447.00p -1.63%
Computacenter (CCC) 374.70p -1.39%
Provident Financial (PFG) 1,355.00p -1.31%
London Stock Exchange Group (LSE) 933.00p -1.06%
Ladbrokes (LAD) 171.00p -1.04%