Government bond prices were up and yields fell on Thursday in response to a decision by the US Federal Reserve to keep interest rates steady for the time being as well as its comments following the decision that did not sound too strong a warning on inflation. Also helping prices higher was new data on durable goods orders showing that, excluding transportation goods, orders were up just 0.1 percent in September. The ten-year US Treasury bond dropped 3.8 basis points to a yield of 4.73 percent.
In Europe, meanwhile, ten-year yields also fell in response to the Fed decision. The ten-year Bund dropped 1 basis point to 3.85 percent, while the ten-year gilt was 4 basis points lower to a yield of 4.66 percent. The price gains came as the president of the European Central Bank said that inflation would be an issue for the rest of this year and into next year.
In Japan, government bonds were helped by the US bond market, with the ten-year JGB falling 5 basis points to 1.750 percent. Shorter-dated bonds also saw prices go up and yields drop after an auction of two-year issues saw demand quadruple supply. Yields on two-year bonds were 0.3 basis points lower to 0.755 percent.
The London equities markets were higher on Wednesday on gains in the tobacco and oil sectors. The oil sector was higher after US inventory numbers showed that stockpiles of crude oil, gasoline, and heating oil were all lower last week. The FTSE 100 added 0.5 percent to 6,214.6 percent, while the FTSE 250 gained 0.2 percent to close at 10,425.4, another new record.
Imperial Tobacco Group was 1.6 percent higher to £18.55 ahead of its full-year report, due next week. British American Tobacco, which is scheduled to release its third quarter report later on Wednesday, added 2.5 percent to £14.82 on strong results from Reynolds American. BAT holds 42 percent of Reynolds, which also learned that a US appeals court on the federal level will hear arguments concerning whether a case looking for $200 billion from tobacco companies can be conducted as a class action suit. Meanwhile, Gallaher gained 3.1 percent to 884½p on bids rumors and positive comments.
The pharmaceuticals sector was mixed after UBS upgraded the sector to “overweight”. GlaxoSmithKline added 1.5 percent to £15.11 ahead of the announcement of its third quarter results, but AstraZeneca fell 1.2 percent to £35.92.
Chipmaker Wolfson Microelectronics added 6.4 percent to 287¼p on a perceived vulnerability to bids and on an upgrade to “buy” from Bridgewell Securities. Meanwhile, software maker Misys added 2.4 percent to 205p on the news that an activist group of investors from the US had taken a 4.4 percent stake in the company and on a reiteration of a “buy” recommendation from UBS.
Equities markets on London were higher on Tuesday, with the FTSE 100 adding 0.3 percent to 6,182.5 and the FTSE 250 finishing at a new high of 10,401.6, a gain of 0.4 percent on the session.
Retailers were higher. J Sainsbury added 1.2 percent to 396¾p after bids rumors surfaced late in the session, with private equity said to be interested. Marks & Spencer was helped by an increased target share price and increased earnings forecasts for both 2006 and 2007 from JP Morgan. M&S gained 1.3 percent to 656p.
In the leisure sector Whitbread, which owns Premier Travel Inns, added 4 percent to £14.05 on talk that it is ripe for offers after lower than predicted cash returns.
Miners were lower on the session, with BHP Billiton 0.6 percent lower to £10.14. Anglo American dropped 1.5 percent to £23.79 after the appointment of a new executive that was said to make Anglo more vulnerable to a bid.
British Energy was lower, as well, declining 3.5 percent to 422p after Societe General issued comments that indicated it thinks the energy generator ‘s output could drop by 8.5 tera-watt hours if it has to cut boiler temperatures at its older power plants. It was estimated that such an output decline could send shares down by 110p.
The London equities markets were mixed on Friday and closed out the week lower than they began. The FTSE 100 was 0.01 percent lower on the session and 2.1 points lower on the week to 6,155.2, while the FTSE 250 added 0.1 percent Friday but lost 43.1 points over the week to close at 10,356.5.
Banks were lower, with Lloyds TSB down 1 percent to 562½p, while Northern Rock dropped 1.2 percent to £11.76 on the news that the Office of Fair Trading has recommended that the Payment Protection Insurance market be looked at by the Competition Commission. Both Lloyds and Northern Rock make from 14 to 18 percent of their profits from PPI commissions.
Among other losers, PartyGaming was 7.2 percent lower to 29p on a disappointing trading update, while in the semiconductors sector Wolfson Microelectronics fell to 279p on a profits warning.
Ladbrokes added 2.6 percent to 401¼p and 12 million shares changed hands on rumors that a private equity group would make a bid. Still in the leisure sector, Intercontinental Hotels Group was 2.5 percent higher to 997p.
Amvescap gained 1.6 percent to 614p on positive comments from Deutsche Bank. Meanwhile, media group Pearson was up 0.9 percent to 784½p.
Prices were up and yields lower on US Treasury bonds during the week as investors remained wary ahead of the next meeting of the Federal Reserve, scheduled for next week. Data releases during the week did not help determine the economy’s direction, although most analysts expect the Fed to hold interest rates at 5.25 percent again this month. At midday on Friday the ten-year Treasury bond was 0.4 basis points lower for the day to a yield of 4.786 percent. The ten-year issue had begun the week at 4.796 percent.
In the Eurozone, ten-year Bund yields were 0.2 basis points higher to 3.827 percent late in the session. European bonds were affected by the move on Thursday by two ratings agencies to downgrade Italy’s debt.
The yields on UK gilts were also higher on the day, on the expectation that the Bank of England will raise interest rates at their meeting next month. The two-year gilt was 3.8 basis points higher to a yield of 5.064 percent, while the ten-year gilt gained 2.8 basis points on the session to 4.693 percent. At the beginning of the week the two-year gilt was yielding 5.019 percent, while the ten-year gilt was at 4.642 percent. Friday’s two-year yield was its highest level since July 2002.
London equities markets were lower on Thursday, mainly on declines in financial sectors. The FTSE 100 dropped 0.2 percent to 6,136.5. Meanwhile, the FTSE 250 was 18.6 points lower to 10,323.1.
Losers among financial institutions included HSBC, down 0.8 percent to £10.05. Also lower were Northern Rock, which fell 0.9 percent to £11.91 and Bradford & Bingley, 1.5 percent lower to 466p. Alliance & Leicester dropped 1.8 percent to £11.09. Ironically, life assurer Prudential, which sent the sector lower when it blamed its predicted losses in the second half on a loss in its internet bank, Egg, itself added 0.9 percent on the day to 635p.
In the tobacco sector, Imperial Tobacco was 0.4 percent lower to £18.24 on a downgrade from “buy” to “neutral” from Goldman Sachs.
The oil sector was lower even in the face of expected cuts in production from the Organization of Petroleum Exporting Companies. Royal Dutch Shell dropped 0.6 percent to £18.14, while BP fell 1 percent to 595p.
Vodafone declined 0.6 percent to 128p on news from the European telecommunications sector. Nokia was down on the session, and there were worries that an offer from Telefonica to not charge for incoming calls to customers traveling in Europe could set off a tariff war.
The pharmaceuticals sector saw advances as GlaxoSmithKline added 1 percent to £14.90 and AstraZeneca was 1.5 percent higher to £34.74, its highest share price in nearly five years.
The London equities markets saw gains on Wednesday, with the FTSE 100 adding 0.7 percent to 6,150.4 and the FTSE 250 gaining 1.2 percent on the session to close at 10,342.
The media sector saw gains after upgrades for the sector. BSkyB was 0.9 percent higher to 552½p after JP Morgan said that it could top its target for subscribers for 2010. Elsewhere in the sector, Johnston Press added 2.3 percent to 428¾p, while Trinity Mirror gained 3 percent to 502½p and Daily Mail & General Trust was up 3.1 percent to 657p.
Steelmaker Corus added 1.7 percent to 487p on rumors that CSN, the Brazilian steelmaker was ready to top Tata Steel’s bid, worth 455p per share. The bid rumors were denied after the close of the session.
In the energy sector, British Energy was up 5.2 percent to 474p on rumors that a European utility could bid for the UK government’s 65 percent of the company. On the other hand, National Grid dropped 1.6 percent to 674½p.
The retail sector was also mixed, with Tesco up 1.5 percent to 390p, a record high share price, on speculation that it will raise its earnings forecast. However, clothing retailer Next dropped 1 percent to £18.51 on rumors that it is preparing to issue a profits warning.
London equities markets were mixed on Monday as the FTSE 100 hit a five-year high, gaining 21 points to 6,178.3 but the FTSE 250 dropped 14.9 points to 10,384.1.
Lloyds TSB was 1.3 percent higher to 588½p on rumors that it turned down a bid for its Scottish Widows life assurance unit from Swiss Re and Axa. Some analysts are not optimistic that such a deal would be completed, and Lloyds would not comment on the offer, which was said to have been for £8 billion.
Also seeing a gain on the session was ITV, which added 2 percent to 102¾p on an upgrade from “equal-weight” to “overweight” from Morgan Stanley on the theory that the broadcaster’s shares have reached its low and that better news on advertisements could attract private equity.
PartyGaming dropped 7.2 percent to 32p, a new low share price, after UBS cut its target share price on the online gamer to only 26p. Online gamers have been in a slump since the signing of legislation making most online gambling illegal in the United States.
Among other loses on the session, Cadbury Schweppes was 1.5 percent lower to 549½p on a downgrade from “buy” to “neutral” from Merrill Lynch, while EMI dropped 0.2 percent to 269½p after a warning that the music group expects total revenues to drop by around 3 percent for the half-year that ended September 30.
Prices on US Treasury bonds were down and yields rose on Friday on strong new sales data and figures showing consumer sentiment up more than had been expected in the US in October. Meanwhile, comments from Federal Reserve officials signaled worries about inflation and growth that seemed to indicate that there would be no interest rate cuts coming anytime soon.
By mid-morning in New York on Friday, the two-year Treasury bond was up 3 basis points to 4.87 percent, while ten-year issues had also gained 3 basis points to a yield of 4.81 percent. The two-year bond had started the week yielding 4.75 percent, while ten-year bonds began the week at a yield of 4.71 percent.
In the Eurozone, the October bulletin from the European Central Bank indicated that it could be near the end of its series of interest rate hikes, even though it also said that more hikes could be needed if the region’s economy continued to grow as it is now expected to do.
The two-year Schatz was up by 1.3 basis points to 3.67 percent after starting the week yielding 3.60 percent. The ten-year Bund added 1.5 basis points to a yield of 3.83 percent, from a starting yield of 3.77 percent on Monday.
Meanwhile, in the UK, longer-dated gilts saw prices decline as most analysts said they expect interest rates there to rise again in November.
London equities markets saw gains on Thursday as the FTSE 100 added 0.8 percent to 6,121.3 and the FTSE 250 gained 1 percent to 10,347.3. The 100’s close was its highest since April 21, while the 250 closed at an all-time high.
There were losers on the day, however, some of them taking substantial losses. Carphone Warehouse declined 14 percent to 310p on the announcement by Vodafone that it was awarding an exclusive retail contract in the UK to rival Phones4U. Vodfone dropped 0.2 percent to 130p after the news.
Cairn Energy was also lower on the session, dropping 2.8 percent to £18.35 after dropping as low as £16.73 earlier in the day. The initial drop came after a downgrade from ABN Amro, but investors came to the conclusion that the reduction was not as bad as first thought.
Supermarket chain William Morrison dropped 0.1 percent to 249½p after Brandes cut its holding in the company to 13 percent.
Gainers on the day included the mining sector, which advanced as commodities prices rose. Anglo American was 2.7 percent higher to £23.69, while Vedanta Resources added 3.2 percent to £13.62 and Rio Tinto gained 3.5 percent to £26.65. Anglo American was helped by rumors of bids and stake building.
Prices for US Treasury bonds were up a bit on Wednesday, and yields were lower, as investors looked for safe places to put their money in the wake of the North Korean nuclear test earlier this week and comments following that Pyongyang will treat any increased pressure from the US as a declaration of war. In addition, trade was muted ahead of the release of minutes from the most recent Federal Reserve meeting and a speech from Richmond Fed President, who was the only board member who voted for an increase in interest rates at the meeting.
In morning trade in New York, the two-year Treasury bond dropped 3.8 basis points to 4.79 percent, while the ten-year issue fell 1.8 percent to a yield of 4.74 percent.
Most government bonds in Europe, meanwhile, held steady after a successful Schatz auction and economic growth forecasts for the last half of this year and the first half of next year that were lowered by the European Commission. Yields on the ten-year Bund dropped 0.9 percent to 3.811 percent, but the two-year Schatz was steady at a yield of 3.669 percent. In the UK, gilts held firm as well, with the two-year gilt at 5.011 percent and the ten-year gilt yielding 4.614 percent.
In Japan, meanwhile, yields were up as prices fell as the ten-year Japanese government bond added 2 basis points to 1.745 percent.
London equities markets were higher on Tuesday due to advances in a wide variety of sectors. The FTSE 100 added 0.7 percent to 6,072.7, while the FTSE 250 gained 0.9 percent to a new high of 10,244.5.
Asset managers had a good day as Schroders added 4.2 percent to £10.04, Amvescap gained 5.3 percent to 629p, and Man Group was 8.2 percent higher to 478p. Amvescap benefited from the news that the funds under its management have gone up from $428.9 billion in August to $440 billion in September. The September figure was a full $2 billion higher than some estimates.
In the telecommunications sector, Vodafone added 2.6 percent to 120¼p on an upgrade to “outperform” by Bernstein Research, which also set a target share price of 155p for the telecom company.
The oil sector was higher on gains in exploration companies despite another drop in crude oil prices. Premier Oil advanced by 4.5 percent to £11.70, a record high. Dana Petroleum, rumored to be interested in Premier, added 6.4 percent to £12.62. Tullow Oil and JKX Oil & Gas were both 6.1 percent higher, to 391p and 290p respectively.
Plumber and building materials company Wolseley added 3.9 percent to £12.11 on positive comments from JP Morgan concerning US homebuilders. Wolseley gains around 60 percent of its revenues from the US market every year.
Among losers on the session, Shire dropped 4.6 percent to 961p as investors decided that its 15 percent advance on Monday was out of proportion to the news that the drug maker had gained approval for its hyperactivity drug, NRP 104, for use in the United States.
The London equities markets were mixed on Monday, with the FTSE 100 adding 0.5 percent to 6,030.9 but the FTSE 250 dropping 0.2 percent to 10,152.3.
The pharmaceuticals sector was higher on the session. Glaxo-Smith-Kline gained 0.6 percent to £14.54 on talk that it is engaged in discussions with Novartis concerning a merger. Shire added 14.9 percent for the best performance among blue-chips, to £10.08 when the Food and Drug Administration in the United States approved its NRP104 treatment for attention deficit hyperactivity disorder for use there.
Media companies didn’t have nearly so good a day. Reed Elsevier dropped 1 percent to 588½p on rumors that a profits warning is forthcoming. EMI fell 1.9 percent to 264¾p in anticipation of a less than encouraging trading update due next week. ITV, meanwhile, was 2.2 percent lower to 100¼p when UBS lowered its advertising growth prediction for the broadcaster, removed it from its “buy” list, and cut its earnings per share forecast for both this year and next.
Homebuilders were mixed, with Redrow up 1.4 percent to 630p but Barratt Developments 1.6 percent lower to £10.98 as rumors that Barratt is interested in a takeover of Redrow continued to ciruclate.
In the steel sector, Corus added 2.7 percent to 494p on reports that Tata Steel of India could be close to an offer worth £5 billion.
Marks and Spencer was 1.3 percent higher to 662½p, near a record high, on positive comments and an increased target share price from Morgan Stanley.
October 2, 2006
Japanese government bond yields up on Tankan figures
The Bank of Japan’s latest Tankan Survey of business sentiment sent most Japanese government bond yields higher on Monday. The ten-year bond saw yields 6.5 basis points higher to 1.740 percent. The two-year bond yields were also higher, but some issues that mature in less than a year saw yields decline.
Bond yields were lower in the United States, where the September figures from the Supply Management Institute were lower, showing manufacturing down more than had been expected. At late morning in New York, two-year Treasury bonds were down 4.1 basis points to a yield of 4.65 percent, while ten-year issues were yielding 4.60 percent, a decline of 3 basis points.
In Europe, Eurozone bond yields were lower as well after a more positive purchasing managers’ index report, which seemed to be trumped by higher prices in US bond markets. The two-year Schatz was 2.4 basis points lower to 3.553. The ten-year Bund, meanwhile, was down 2.6 basis points to a yield of 3.680 percent.
The latest purchasing managers’ index in the UK was also stronger than had been expected, sending yields on gilts higher. The two-year gilt gained 1.5 basis points to a yield of 4.939 percent, while the ten-year gilt added 0.5 basis points to 4.529 percent.
The London equities markets were mixed on Friday as the FTSE 100 closed lower after a brief journey above the 6,000 level but the FTSE 250 ended the day higher. The 100 dropped 0.2 percent on the session to 5,960.8, while the 250 added 0.2 percent to 9,996.8 after going above 10,000 for a short time during the day.
Construction materials company Hanson was 3.7 percent higher on the day to 773½p on positive analyst comments and bids rumors.
Politics resulted in declines in the mining sector as populist opposition leader, Michael Sata, seemed ready to claim victory in an election in Zambia. With major operations in Zambia, Vedanta Resources dropped 2.5 percent to €11.63 on Mr. Sata’s declaration that he will be tough on foreign ownership of copper in that country.
The banking sector was mixed. While Royal Bank of Scotland added 1.5 percent to £18.39 on an upgrade from “neutral” to “overweight” from JPMorgan, Standard Chartered dropped 2.1 percent to £13.68 after it said it would place shares in order to raise £1.2 billion to purchase a bank in Taiwan.
British Energy was 1.6 percent lower to 580½p as it cut its output forecast and as investors worried about inspections and repairs to two of its nuclear power generators ahead of a scheduled explanation of the issue on Monday.
In London on Wednesday, equities markets were higher in reaction to gains in the Dow Jones Industrial Average in New York. The FTSE 100 added 1 percent to 5,930.1, while the FTSE 250 was up 0.7 percent to 9,911.9.
Miners were up on the session after comments from Deutsche Bank that recent declines were larger than were warranted. BHP Billiton and Antofagasta each gained 3.4 percent, to 921p and 448½p respectively, while Anglo American added 3.6 percent to £22.20.
Pallet maker Brambles Industries added 1 percent to 468p in heaving trading after it gained 3.5 percent in overnight trading in Australia on bids rumors.
Utilities in the UK were higher on mergers and acquisitions activity in Europe. Drax Group was 2.7 percent higher to 836½p, while British Energy added 3 percent to 448½p and Scottish & Southern Energy was 3/5 percent higher to £13.10.
Construction materials company Hanson dropped 1.2 percent to 721p even though ABN Amro repeated its “buy” recommendation and set a target share price of £10.60 and despite recent rumors that Mexican cement company Cemex is preparing to bid. The decline was attributed to profit-taking after recent gains of 10 percent on the deal rumors.
The equities markets were up in London on Tuesday, helped by new data that shows consumer confidence in the United States up more than had been expected in September. The FTSE 100 was 1.3 percent higher to 5,873.6, while the FTSE 250 gained 0.9 percent to 9,844.9. Mergers and acquisitions speculation was another driving force on the session.
In the steel sector, Corus added 3.6 percent to 377¼p on continuing talk about its pursuit of a low-cost steel slab producer in the BRIC (Brazil, Russia, India and China) region. Morgan Stanley recently said that such a deal could produce a 100p per hike in Corus’ share prices.
Other bids rumors sent Scottish Power up 3 percent to 634p as rumors spread that Eon could bid for the utility if its effort to buy Endsea doesn’t work out. In the airlines sector, rumors that British Airways is in merger talks with Iberia sent BA 0.6 percent higher to 429p.B
Plumber and building materials group Wolseley gained 4.1 percent to £11.39 on a better than expected full-year report. Elsewhere in the sector, building materials supplier Hanson added 6.2 percent to 730p as rumors continued that Cemex is preparing a bid.
Among miners, Rio Tinto gained 3.5 percent to £24.34 on talk that it will propose an off-market buyback of London-traded shares for £25 per share.
Emap added 2.6 percent to 741p after the publisher received an upgrade to “buy” from Goldman Sachs.
Among losers on the session, BSkyB was 1.3 percent lower to 542p on talk that one of its brokers had been informed that its forecasts were too high by 10 percent. BSkyB denied the rumors.
Government bonds markets saw yields up in the US, the UK and the Eurozone, while yields on Japanese government bonds were lower on Tuesday.
In the United States, a strong consumer confidence report sent Treasury bond yields up after three days of declines which had been prompted by the decision of the Federal Reserve to keep interest rates on hold for the time being. The Conference Board put consumer confidence at 104.5 in September, above the expected reading of 103.0. At mid-morning in New York, the two-year Treasury bond was yielding 4.68 percent, a gain of 3.4 basis points, while the ten-year bond was 3.3 basis points higher to yield 4.58 percent.
In the Eurozone, bonds followed the lead of US issues. Meanwhile, a German business sentiment survey was also stronger than expected in September, adding to speculation that the European Central Bank will raise interest rates again before the end of the year. Late in the day, the two-year Schatz had added 4.3 basis points to 3.515 percent and the ten-year Bund was 0.3 basis points higher to 3. 660 percent.
In Japan, government bond yields were lower as the stock market there declined and investors worried that the US could cut interest rates. Five-year yields were 3.5 basis points lower to 1.090 percent, while ten-year yields were at 1.615 percent, a drop of 2 basis points.
The UK equities markets were lower on Friday, hurt by Thursday’s losses in New York and concerns that the US economy is cooling down. The FTSE 100 dropped 1.2 percent on Friday to 5,822.3, a decline of 55 points on the week. Meanwhile, the FTSE 250 was 0.7 percent lower on the session to 9,784 but was off only 1.6 points for the week.
Brewer SABMiller fell 2.6 percent to 998p on data showing that a general decline in the volume of beer sold in the US is hurting its Miller brands more than others. Another factor in the decline was weakness in the South African rand. SABMiller does a substantial part of its business in South Africa.
The mining sector was especially hard hit by sell-offs on Friday as investors worried about how demand for commodities will be affected by the slowdown in the US economy. Xstrata was 2.7 percent lower to £21.13, while Anglo American fell 2.8 percent to £21.34 and BHP Billiton dropped 3.2 percent to 887p.
There were few gainers on the day. On the 250, MFI Furniture was 13.1 percent higher to 99p after it sold its retail division, which had been seeing losses. On the 100, there were just two stocks with gains on the day. Building materials group Hanson added 0.7 percent to 680½p as talk continued that Mexican company Cemex is considering a bid. The other blue-chip gainer was Brambles Industries. The pallet supplier gained 2.5 percent to 468½p.
Yields were lower on US Treasury bonds on Thursday after the Philadelphia Federal Reserve Bank’s economic index fell to -0.4 in September. The index was at 18.5 in August, and had only been predicted to drop to 14.7 this month. The new reading indicates that manufacturing has contracted in the region, likely on the slowing housing market and lower consumer spending. Also contributing to lower yields was data showing more jobless claims last week than had been predicted.
By late morning in New York, two-year Treasury bonds were yielding 4.76 percent, a decline of 4.7 basis points. Meanwhile, ten-year issues had dropped 5.5 basis points to 4.68 percent, leading to an increase in the yield curve inversion.
Late in the day in Europe, Eurozone government bond yields were also lower. The two-year Schatz was 2.3 percent lower to a yield of 3.626 percent, while the ten-year Bund was yielding 3.758 percent, a decline of 2.9 basis points.
Yields were mixed in the UK late in the session, as the two-year gilt added 0.1 basis point to 4.979 percent, but the ten-year gilt fell by 2.7 basis points to a yield of 4.574 percent.
In Japan, the ten-year government bond was 2 basis points higher to 1.705 percent as the equities markets were slightly higher on the session. The price decline came even though there was strong demand for an auction of ¥800 billion in 20-year bonds.
