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Lagarde to present IMF assessment of UK economy to Osborne – live

Discussion in 'Market News' started by Lily, Dec 11, 2015.

  1. Lily

    Lily Forum Member

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    • Stock markets are down for seventh trading day, with oil prices near seven-year lows
    • Sports Direct shares fall over 3% after broker target price cuts

    9.47am GMT

    Meanwhile, the official UK construction figures for October were weaker than expected. Output rose by 0.2% from September, far less than the 1% increase City analysts had predicted.

    Britain’s construction industry accounts for 6% of total economic output and was a drag on growth in the third quarter, when the economy was powered entirely by the services sector.

    9.40am GMT

    UK housebuilder Bellway has seen its shares jump 4.3%, making it the best performer on the FTSE 250 index, after the company said it would build 10% more homes in the year to 31 July. Broker Peel Hunt raised its target price on the shares to £28.90 from £28.20. Numis raised its target price to £28.60.

    9.34am GMT

    Back to oil prices: the International Energy Agency sees the oil glut worsening in coming months as demand growth slows. It is predicting that global oil markets will remain oversupplied until at least the end of next year.

    Additional output from Iran when/if western sanctions on the country are removed will put more oil on the market. Oil prices have fallen to near seven-year lows, below $40 a barrel, this week after the oil cartel OPEC failed to cap its output.

    World oil markets will remain oversupplied at least until late 2016… although the pace of global stock builds should roughly halve next year.”

    As extra Iranian oil hits the market, inventories are expected to swell by 300m barrels. Concerns about reaching storage capacity appear to be overblown.

    Much of the excess oil will be soaked up by 230m barrels of new storage capacity additions, while US inventories are only 70% full. As inventories continue to swell into 2016, there will still be a lot of oil weighing on the market.”

    9.21am GMT

    Citigroup has also cut its target price on Sports Direct shares, to 800p from 900p. Goldman Sachs reduced its target price to 725p from 850p earlier this morning.

    Sports Direct shares are now down 3.2% at 573.6p, making it the second-biggest faller on the FTSE 100 index.

    9.15am GMT

    The stock market as a whole is down in London, by 0.5%. Elsewhere in Europe, shares have fallen near two-month lows on the pan-European FTSEurofirst 300 index, which has lost 0.7%. Stock markets are falling for the seventh day in a row.

    Weak commodity prices, in particular oil, are putting pressure on markets ahead of the US Federal Reserve’s meeting next Wednesday when it is widely expected to hike interest rates.

    8.50am GMT

    Bubb added:

    When we got to the presentation room [yesterday] there was no sign of Mike Ashley! Last time the great man was himself late arriving, after a late night session with his property adviser, but he did eventually turn up to delight analysts with his views on online retailing and Europe.

    This time he seemed to be keeping a low-profile, for perhaps understandable reasons, given the recent bad press, although he apparently was in London for investor meetings later in the day.

    Amazingly, he insisted that even though H1 retail sales were only up by 2.5% on a constant currency basis, UK store LFL sales had been “positive”, despite an increase in UK selling space of over 10%...but that could only be true if new UK store space has been remarkably unproductive and Europe has been remarkably weak, notably Austria, and if there has been much slower Online growth (down from +14% to +7%, in fact).

    Asked about the success of rival JD Sports, he envied their ability to get the best new ranges from the branded suppliers...Asked about the lack of more acquisitions in the pipeline, he said that it’s hard to do deals because people know that Sports Direct is a buyer and the asking prices are too high...Asked about the disastrous experience in Austria, he refused to break out the performance, but tried to point people to the much more successful Baltics acquisition.”

    8.46am GMT

    Independent City analyst Nick Bubb said this morning:

    Well, the poor PR about Sports Direct’s corporate ethics and governance isn’t helping their cause, but the main reason for the slump in the share price yesterday was concern about weak UK sales and the problems with the recent acquisition in Austria...”

    8.43am GMT

    Shares in Sports Direct, the retail chain controlled by the billionaire Mike Ashley, have fallen another 3.1% this morning, after Goldman Sachs cut its target price on the stock.

    The shares tumbled 11% on Thursday, wiping more than £400m off the market value of Britain’s biggest sportswear retailer. City investors and MPs turned on the company following disappointing financial results and revelations over pay and working conditions unearthed by a Guardian investigation.

    8.32am GMT

    UK transport secretary Patrick McLoughlin has been on BBC Radio 4 defending the government’s postponement of its decision on whether to allow a third runway at Heathrow airport until next summer, over environmental concerns.

    Pressed why the government wasn’t making a decision by the end of the year as promised, McLoughlin said that a decision had been made – of sorts.

    We’ve come to the conclusion that extra airport capacity is needed.”

    Gatwick is still on the table. There could be a second runway at Gatwick.”

    8.03am GMT

    UK and European stocks have opened lower, as expected:

    7.59am GMT

    Crude oil prices are hovering near levels not seen since early 2009, with Brent crude at $39.65 a barrel (after falling to $39.38 earlier) and US crude at $36.65 a barrel.

    Richard Gorry, director of consultancy JBC Energy Asia, told Reuters:

    Can you rule out $20 per barrel? No, you can’t.”

    7.52am GMT

    Good morning, and welcome to our rolling coverage of the world economy, the financial markets, business and the eurozone.

    The head of the International Monetary Fund, Christine Lagarde, is in London and due to meet the UK chancellor, George Osborne, to present the fund’s latest assessment of the British economy (the concluding statement of the regular Article IV consultation). It will be released at 11.30 GMT.

    The near-term outlook for the stock market looks a lot less rosy while oil prices are tanking. Oil prices fell 40% after OPEC’s meeting in November last year, a similar decline this time would mean Brent crude at $25 per barrel.

    An additional cause for concern over the drop in crude this time is that it may cause a policy error by the Federal Reserve. The Fed looks set to raise interest rates at a time when a fall in the oil prices means inflation could be about to take another leg lower. The Bank of England just highlighted exactly this same risk factor in its meeting minutes.”

    Our European opening calls: $FTSE 6071 down 17 $DAX 10593 down 6 $CAC 4629 down 6 $IBEX 9767 down 12 $MIB 21416 up 7

    The US retail sales report is the penultimate piece of data that could derail a Fed rate hike with CPI [inflation] released next week. Expectations are for a rise of 0.2% in November up from 0.1% in October with sales ex-autos to rise 0.3%, up from 0.2%.

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