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 |  Subject: ADVFN Morning Euro Markets Bulletin - June 7th 2010  Mon Jun 07, 2010 8:52 am | |
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The FTSE 100 looks like getting off to a terrible start this week as investors respond to Friday’s collapse on Wall Street as Hungary brought the European debt crisis back into view.
Hungary warned that it was in danger of default, sending stocks lower across Europe and the US. American jobs data also upset the apple cart.
But the Dow Jones kept falling long after London closed for the week, ending more than 300 points lower beneath 10,000.
Experts here suggest the FTSE 100 will open down almost 80 points. Far East markets have already given up over 3%.
On the companies front, life insurer Prudential moved to head off likely calls for the replacement of its senior management at its AGM today by revealing strong trading figures for April and May. Sales for the first five months of 2010 rose 27% to £1.37bn, with Asia and the US the main drivers. Asia sales rose by 33% to £579m and US sales by 41% to £454m. The UK was steady, up 4% to £322m. In April and May, sales overall rose by 28%.
The Gulf of Mexico oil spill has now cost BP $1.25bn (£865m) and is expected to keep rising for many months as the latest attempt to stop the leak is only capturing half the oil. The figure doesn’t cover the $360m (£249m) in funds for the Louisiana barrier islands construction project and the $500m (£346m) for a new research facility into oil disasters. BP’s lower marine riser package (LMRP) containment cap, installed on June 3, collected 10,500 barrels of oil on Saturday and 16,600 barrels from June 3-5.
Oil engineering services provider Lamprell said performance has been in line with expectations since its last statement in April. “We continue to see high levels of enquiries for our services in most sectors of our business but, most importantly, our efforts to diversify the scope of our operating markets is beginning to bear fruit, as evidenced by the contracts wins we have secured, so far, in 2010,” said the group.
Electrical components maker e2v technologies saw sales fall 14% for the year, reflecting the anticipated reduction in demand. Sales for the year dropped to £201.2m from £233.2m before. Adjusted operating profit slipped 45% to £15m. But pre-tax losses narrowed 66% to £9.7m from £28.4m previously due to lower exceptional costs. |
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| | UK Event Calendar for today |
Fans of board room drama should get their fill of thrills on Monday at the annual general meeting of insurance giant Prudential, where Tidjane Thiam and Harvey McGrath, the management duo responsible for Prudential's failed attempt to buy AIG's Asian business, are expected to come under fire.
Neither man seems willing to fall on his sword, judging by recent press interviews.
Chief executive Thiam told the Telegraph, "It is a clever thing to try and connect my inability to seal a $35bn deal with my broad ability to run a company, but it is a fallacy."
Chairman McGrath was even more forthright in his own defence in the FT.
"There are a couple of shareholders calling for change, but they are outliers," he said in an interview. "The vast majority of our biggest investors are saying they don't want to see change at the top. They are supportive of management and of Tidjane to drive the performance of the group."
At the meeting, Prudential's shareholders will also have the opportunity to voice publicly their opinions over the series of events that eventually saw the life group drop its planned $35.5bn purchase of AIG's Asian arm (AIA).
Dropping the AIA offer means the Pru will have pay advisory and penalty costs of £450m.
Those costs also prompted ratings agency Standard & Poor's to keep the Pru on credit watch with "negative implications" even though the collapse of the AIA deal removed a key reason why it decided to review its stance.
The £450m could "exacerbate pre-existing pressures on cash flow and funding metrics," S&P said.
On the trading front a number of familiar names from the High Street – plus online retailer ASOS - will be giving trading updates.
Newsagent WH Smith is first in to bat on Tuesday, still smarting from recently being voted the worst retailer for customer service.
Online clothes retailer ASOS reports on Wednesday where it will be seeking to shake off a growing perception that the days of exceptional sales growth are in the past.
Argos and Homebase owner Home Retail weighs in on Thursday. B&Q owner Kingfisher moaned on Thursday about adverse weather conditions hitting first quarter performance and Home Retail is likely to voice similar grumbles.
Monday June 07
INTERIM DIVIDEND PAYMENT DATE
Baronsmead VCT 2, Lok'n Store Group, Smart (J) & Co.
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Consumer Credit (US) (20:00)
Factory Orders (GER) (11:00)
Unemployment Rate (EU) (10:00)
GMS
imJack, Nippon Telegraph & Telephone Corp., Prudential, Total Systems
FINALS
E2V Technologies, Latchways, Phoenix IT Group, Prologic, UBC Media Group, Vectura Group, Workspace Group
ANNUAL REPORT
Nostra Terra Oil and Gas - Company, Transense Technologies
EGMS
China Real Estate Opportunities
AGMS
Afren, Ashley (Laura) Holding, Beowulf Mining, Climate Exchange, IGas Energy, Lamprell, London and Associated Properties, Prudential, Walcom
TRADING ANNOUNCEMENTS
IG Group Holdings
FINAL DIVIDEND PAYMENT DATE
Michael Page International, Robinson |
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| | European Markets Report |
The euro traded at a fresh four year low against the dollar on Friday after weaker than expected US job figures and on increasing fears about the Hungarian economy.
Concern was sparked after comments from Hungary’s spokesman for the Prime Minister who compared the country’s fiscal position to that of Greece.
Peter Szijjarto said, “It’s clear that the economy is in a very grave situation. It’s not an exaggeration at all to talk about a default.”
Jitters were made worse following disappointing US jobs number, which came in below market expectations at 431,000 for May. The euro fell to a fresh four year low of $1.1954 after losses of 2.7% over the week.
Safe haven interest took the dollar and yen higher at the end of the week.
Sterling fell against the dollar as it mirrored the euro’s losses ahead of the US nonfarm payrolls.
Europe seems to be the story that keeps on giving as rumours of derivative losses at French bank Societe Generale, comments by the French Prime Minister that he is relaxed about the Euro trading at parity against the US dollar, and the Hungarian Prime Minister’s spokesman compared Hungary’s fiscal position to that of Greece has sent investors bailing out of the Euro as it traded at fresh 4 year lows against the US dollar.
When will politicians learn that political candour aimed at local audiences has the effect of unsettling financial markets and today’s comments have done the Euro no favours. They certainly won’t help stabilise the single currency and further undermine credibility in the political will to support the single currency.
This negative sentiment was further reinforced by a disappointing US jobs number which came in way below market expectations at 431k for May; however 411k of that figure was made up of temporary hires for the US census.
Whichever way you slice and dice it this number was a massive disappointment to the market, even though it was the 5th successive month of job gains, and has resulted in further risk aversion across asset classes, due to the high expectations.
EURUSD – the break below 1.2135 needs to be confirmed by a daily and weekly close, which then translate into a break below 1.2000 the 1.1700 level, and 2005 lows. 1.2135 now becomes resistance on an intraday basis and we need to close back above this level to delay downside scenario.
GBPUSD – the pound has so far been unable to re-test the 1.4780 level of earlier this week. The break below trend line support at 1.4570, suggest we could now see the 1.4535/45 area, a break of which would then re-target the lows around the 1.4430/40 area.
Key support level remains around the 1.4230/50 level and remains the key barrier to any further sterling declines in the short - term. The 1.4000 level remains a key support on a monthly close.
EURGBP - the Euro has declined to the 0.8250 target and while this level holds we could see rallies back towards 0.8340. The 0.8400 break-out level remains key resistance behind that. A break of today’s lows around 0.8250 targets the move towards the 0.8170 level.
The 0.8170 level is a 50% retracement of the up move from the 2007 lows at 0.6537 to the 2008 highs at 0.9801.
USDJPY – risk aversion has seen the yen strengthen away from today’s USDJPY highs around 92.80/85 after the election of Naoto Kan as Japanese Prime Minister this morning. This level remains the key obstacle to further moves towards 93.30.
The 91.45 area remains a key support on today’s break below the support at the 92.20/30 area. Recent range support remains around the 90.70/80 area. |
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| | US Markets Report |
US stocks slumped over 300 points on renewed fears over the euro and weaker than expected jobs figures.
The Dow closed down 323 points at 9,931. The S&P shed 37 at 1,064 while Nasdaq tumbled 83 at 2,219.
The jobs figures started the rout. Worries about European debt and the financial problems of Hungary added to the gloomy mood.
The number of Americans on company payrolls grew by 431,000 in May, but most of the increase was down to hiring of temporary workers to carry out the US census.
With 411,000 out of last month’s increase a result of census hirings, payrolls were up just 20,000, according to the Labor Department. Economists had been hoping for a big figure above 500,000. There were also downward revisions to payrolls in March and April, both 22,000 lower at 208,000 and 290,000 respectively.
The unemployment rate fell to a seasonally adjusted 9.7%, down from 9.9% in April and less than expectations for 9.8%, helped by a drop in employment of 35,000. Unemployment was down 287,000 to 15m.
The slump in the euro followed some gloomy comments from Hungary’s Peter Szijjarto, the spokesman for Prime Minister Viktor Orban.
“It’s clear that the economy is in a very grave situation,” Szijjarto said today in Budapest. “It’s not an exaggeration at all” to talk about a default, he added.
“In Hungary, the previous government falsified data. In Greece, they also falsified data. In Greece the moment of truth has arrived. Hungary is still before that,” he is reported to have said.
Recruitment companies, such as Monster Worldwide and Manpower, were lower due to the jobs data. BP said a capping device placed over the well in the Gulf of Mexico has begun to funnel oil to the surface.
President Obama is fuming at BP’s lack of success in tackling what is now the biggest oil slick in US history. He feels the company has not made "the kind of rapid response" to the disaster that he would have liked. BP has already "felt his anger", he told CNN.
S&P 500 - Risers
People's United Financial Inc. (PBCT) $14.09 +1.21%
Ebay Inc. (EBAY) $22.40 +0.98%
Frontier Communications Company (FTR) $8.34 +0.85%
Novellus Systems Inc. (NVLS) $26.72 +0.11%
S&P 500 - Fallers
Monster Worldwide Inc. (MWW) $13.35 -10.88%
Tellabs Inc. (TLAB) $7.21 -8.32%
Textron Inc. (TXT) $18.96 -8.18%
Jacobs Engineerng Group (JEC) $40.14 -8.15%
Dow Jones I.A - Fallers
Caterpillar Inc. (CAT) $57.76 -5.48%
American Express Inc. (AXP) $38.41 -5.25%
Boeing Co. (BA) $61.23 -4.79%
Alcoa Inc. (AA) $10.84 -4.66% |
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| | Monday newspaper round-up |
Some of Prudential’s biggest shareholders have approached Mark Tucker about replacing Tidjane Thiam as chief executive of the embattled UK insurer, The Times has learnt.
Pru investors said last night that they had sounded out the man who served as chief executive from 2005 until last September within the past two weeks about his appetite to return to the job. One Pru shareholder said: “Tucker really knows the business, particularly in Asia. He was resigned to leaving for something different. But he’ll hate what’s happening and might be prepared to come back to restore some stability,” the Times reports.
The embattled board of Prudential will try to draw a line under its failed $35.5bn (£24.5bn) bid for AIG's Asian business AIA as it outlines a "business as usual" strategy at Monday's annual meeting. Despite assurances that the company's strategy has not changed, Harvey McGrath, the chairman, and Tidjane Thiam, the chief executive, are likely to face calls to resign at what could be a stormy meeting, the Telegraph reports.
BP saw the first significant progress in its seven-week attempt to capture oil pouring from its leaking well in the Gulf of Mexico on Sunday, but was still catching only about half of the estimated flow. Tony Hayward, chief executive, said he hoped the cap lowered over the well last week would eventually catch the “vast majority” of the leaking oil. But US authorities warned that there was a “long way to go” before it reached that point, the FT reports.
David Cameron launches a campaign on Monday to prepare Britain for an era of public sector “pain”, laying the ground for decisions that would “affect our economy, our society – indeed our whole way of life”. With just over two weeks until the Budget, Mr Cameron will promise an unprecedented level of public and business consultation before unleashing cuts that would hit “every single person in our country”. George Osborne, chancellor, will say on Tuesday that he is looking at the possible creation of a Canadian-style “star chamber” of senior ministers and officials to grill cabinet members on their proposed spending plans, the FT reports.
George Osborne, chancellor, is to press ahead with plans for a levy on UK-based banks, in spite of the G20 finance ministers at the weekend scrapping worldwide plans for a banking tax. Mr Osborne is expected to outline his thinking on a unilateral British bank tax in his Budget on June 22, undeterred by the hostile reaction to the idea from some ministers at the G20 meeting at Busan in South Korea. The prospect of a global bank levy died at 5am on Saturday when weary finance ministers agreed to drop the proposal from their final communiqué in the face of a wave of opposition, led by Canada, the FT reports.
The campaign by Lloyds shareholders to win back some of the £14bn lost in the value of their shares after the HBOS merger will start on Wednesday. Lloyds’ leaders and the Treasury could be sued by Lloyds Banking Group shareholders aggrieved by the merger. A campaign to recruit more of Lloyds’ 800,000 shareholders to pursue the claim will start in Reading on Wednesday. About 500 shareholders have joined the group already, the Times reports.
The recovery in the manufacturing sector picked up pace in the second quarter as factory output and new orders hit record highs. A snapshot of manufacturing activity between March and the end of May, compiled by the EEF manufacturing organisation and by BDO Stoy Hayward, the accountant, showed that the output among factories rose to the highest level since 1995. The gauge of output jumped to 30, up from the previous reading of 8 in March and well up from the low of -52 hit last June, the Times reports.
Inflation is a greater risk to the British economy than deflation, a majority of economists polled by The Daily Telegraph have said. They fear policymakers will try to inflate their way out of the debt crisis. Their concerns are not expected to be reflected in the Bank of England's decision this week on interest rates, with the Monetary Policy Committee expected to leave the rate at 0.5%.
PricewaterhouseCoopers is facing an inquiry by accounting regulators into its failure to notice that JP Morgan was paying up to £16 billion of clients’ money into the wrong bank accounts. Last week the Financial Services Authority fined the investment bank £33.3m — the largest penalty that the City regulator has imposed — for breaches of client money rules under which customers’ funds became mixed with the bank’s own cash over a seven-year period, the Times reports.
The nation's leading tax experts have warned the Treasury that it risks "unintended consequences" from rushing capital gains tax (CGT) reform. In a sharp intervention into what is becoming one of the most divisive issues between the coalition parties, the Chartered Institute for Taxation (CIT) is calling for a more considered approach to this and other tax reforms., the Independent reports.
Shares in Hitachi plummeted earlier today amid fears that the possible cancellation of £7.5bn worth of train orders by the British government could trigger similar capitulation by other countries. The 6.5% plunge in Hitachi’s stock followed signs that the Japanese engineering conglomerate may become an early and deliberately high-profile foreign victim of the UK government’s new spending cuts – part of the “pain” promised over the weekend by David Cameron, the Times reports |
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