FTSE 100 falls back after recent gains, with Rolls-Royce down 4%

Discussion in 'Market News' started by Lily, Oct 12, 2015.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
    Likes Received:
    Investors cautious after FTSE records best week for nearly four years

    After the FTSE 100’s biggest weekly rise since December 2011, it was perhaps inevitable the market would pause for breath.

    So the index is currently down 25.59 points at 6390.57, although elsewhere in Europe, Germany’s Dax has moved sharply higher as utility companies benefited from reports they had set aside enough to cover decommissioning of the country’s nuclear reactors.

    The latest leg of Standard Chartered’s 26% 8-session “surge” appears to have been driven by market enthusiasm around media reports (Reuters) of plans to “cut about 1,000 top staff”. Although (if true) this may have potential to extend our own cost reduction forecasts, we caution that despite a raft of recent downgrades, consensus revenue/earnings forecasts remain far too high, in our view. On 0.8 times 2015-17 estimated total net asset value, we do still regard Standard Chartered as slightly cheap, but see much clearer value elsewhere.

    [The £1.7bn] splits £400m Rail (new with electrification strong), £311m in UK construction (a mix of new and old), £960m of other construction contracts (a mixture of new and old, but with encouraging and rapid progress on two Canadian hospital PPP contracts), and £90m of Middle Eastern contracts, which are new to us. In total, roughly half of the £1.7bn is new information.

    Carillion make an unambiguous statement that they ‘remain confident of achieving this year’s targets’, which should re-assure those that are fretting about trading. As we said only last week, there is a possibility that the most shorted stock in the market will then become the most squeezed. A 2016 PE of 8.7 times and yield of 6.0% is not pricing in much good news.

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