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Standard Chartered leads FTSE gains but Vodafone drags
Focus remains on currencies, with recently hard-hit Japanese yen and British pound both strengthening.
Standard Chartered led small FTSE 100 gains as analysts at Morgan Stanley recommended investors switch their allegiances from Asia-focused competitor HSBC.
Despite missing their usual cue from Wall Street – where markets were closed on Monday due to a public holiday – European stock markets made small gains. Britain’s FTSE 100 rose by 0.1% to 6,325, while the Eurofirst 300 was up 0.3% to 1,163.
On currency markets, the Japanese yen was under market scrutiny yet again, rising strongly against the dollar, up 0.5% to 93.48, after comments from finance minister Taro Aso that the country did not in fact plan to buy foreign bonds. His comments come after prime minister Shinzo Abe said such a policy could be an option for future monetary easing. The Nikkei 225 stock index subsequently closed down 0.3%.
There was little other market moving news, though investors were awaiting a Spanish government bond auction and the German ZEW survey for clues on the strength of sentiment in the eurozone. Angst has been growing ahead of this weekend’s Italian elections, and after last week's poor GDP figures for the fourth quarter of 2012.
With no major UK economic releases, the pound clawed back some of yesterday’s losses, up 0.2% against the euro and dollar to 1.1601 and $1.5495 respectively. The pound and Japanese yen have been the biggest beneficiaries of the so-called 'currency war', whereby countries take steps to bring down the value of their currencies in order to aid their exporters and boost their economic recovery.
Of London shares, Standard Chartered (STAN.L) rose 2.3% to 1,768p after Morgan Stanley raised its recommendation to ‘overweight’, increasing its price target for the bank by 16%. HSBC (HSBA.L) though, which is ‘fairly valued on lower revenue growth expectations’, Morgan Stanley said, moved in the opposite direction, with shares down 0.6% to 721p.
‘We are switching our preference from HSBC to STAN, due to the improvement in the Asian economic environment (a positive for STAN’s asset quality outlook), as well as valuations reaching par,’ the Morgan Stanley team said.
Aberdeen Asset Management (ADN.L), the fund manager on an acquisition spree, was also making gains, up 1.4% to 430p, as Societe Generale raised its target price for the shares to 420p, maintaining its hold recommendation on the shares.
Vodafone (VOD.L) shares dropped as Bernstein cut their rating to 'underperform' from 'market-perform', reducing their target price to 135p from 170p.
Royal Bank of Scotland (RBS.L) investors appeared little moved by comments from British prime minister David Cameron who urged faster restructuring of the 82% state-owned bank.
‘It was a very badly damaged institution but I think they are doing the right thing but obviously we want them to, where possible, accelerate the adjustments that they are making in terms of making it a strong organisation,’ Cameron reportedly said during a trip to India.
Shares in the bank rose by 0.6% to 341p.
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by Gavin Lumsden on Dec 19, 2014 at 17:24