FTSE 100 climbs for fourth day as oil prices hit $52 a barrel

Discussion in 'Market News' started by Lily, Jun 8, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
    Likes Received:
    Commodity companies in demand as US crude stocks fall

    Leading shares rose for the fourth day in a row as oil prices hit their highest level since early October in volatile trading.

    With Brent crude currently up more than 1% at $52 a barrel as US oil stocks dropped by more than was forecast and Nigerian production continued to be hit by militant attacks, commodity companies were among the major gainers. Anglo American added 32p to 697.5p, while Glencore was up 5.7p at 145.70p amid a Bloomberg report it was close to selling a10% stake in its agricultural business.

    A topsy turvy day for UK stocks has seen initial losses turn to gains for the FTSE as a bullish open for the US pushed the Dow and S&P 500 closer to all-time highs.

    Rising commodity prices have provided a boost to the FTSE, which has outperformed its European counterparts owing to the disproportionately large number of energy and mining firms in the index.

    Last week’s announcement that BHS is to be wound down should ease pressure on its competitors. We expect M&S to be the biggest beneficiary. While it is unlikely to change M&S’s longer-term prospects, it increases our conviction that the nearer-term risk reward is now very favourable.

    Coca-Cola Hellenic hosted an investor day in London, which focused on mid-term revenue and margin drivers, and brought to focus [its] compelling margin recovery story, which seems to be underappreciated by investors. Management’s confident tone reinforced our view that mid-term fundamentals are improving.

    The company gave an EBIT margin target of 11% by 2020, which is back to its pre-crisis level (10.9% in 2007). There is no consensus available for 2020, but prior to the presentation, we forecast a margin of 9%, and the 2018 Vuma [independent website] consensus margin is 8.3%. So the target is well above where investors currently expect Coca-Cola Hellenic to get its margins. The company’s medium-term organic sales growth target of 4-5% is close to consensus of 4%, so is less controversial.

    Domino’s has shown its appetite for acquisitions, with a £24m acquisition in the master franchises in Iceland, Norway and Sweden. The acquisition will give it a significant minority interest and the ability to appoint a director to the board of the three territories. It is a positive announcement and gives the group access to territories with a strong potential in Norway and Sweden.

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