16.08.13 Friday Morning

European equities have mixed opening morning

European equities have opened mixed this morning, following one of the sharpest sessions of selling seen for weeks. Concerns over the market’s belief that interest rates are set to rise in line with a sell-off in the bond market has spooked equity investors into demanding a greater risk premium. Claimant count figures from the States yesterday strengthened the notion that the Fed will begin to taper its asset purchases in September.

And what if they do?

The market will likely hate it to begin with, withdrawing cash quickly from bond-like stocks that have delivered excess returns. Risk assets in general will probably get a hammering initially, spiking volatility. But this effect could be limited. So long as inflation remains stable and 10yr paper unattractive, the equity market could return to normal.

And since the Fed is only likely to taper at the helm of a strengthening economy, consumer spending and credit could support fundamentals and drive prices further after any initial shock. But all of that, sadly, could be wishful thinking. The market might love cheap, guaranteed money more than a healthy economy.

Top Risers

Fresnillo:
With gold rallying on safe haven demand, a number of mining stocks are amongst the best performers within the FTSE 100 including Randgold Resources, Antofagasta, Anglo American & Glencore Xstrata. Gold is currently trading 3.25% higher than yesterday’s low. Additionally UBS have given the share a “buy” rating.

Persimmon:
During trading in yesterday’s session, housing shares broadly plummeted after economists warned that the Help-to-Buy scheme could stoke a new property boom as more buyers start chasing sales with opportunistic landlords fuelling the recent market rebound. Persimmon fell some 7.3% and today’s gains reflect a recovery from heavy losses. Travis Perkins & Bovis Homes also up between 1-5%

Glencore Xstrata:
DJ Chinalco Mining is considering a bid for Glencore’s Las Bambas copper mine possibly worth somewhere in the region of $5B. Additionally, JP Morgan have confirmed a solid first half output with copper production up 20%, Coal production +22% & gold production +14%. Trading today at 304.35.

African Barrick Gold:
African Barrick Gold trading higher after the Tanzanian government allocated more than 50 hectares of land to hundreds of artisanal miners around the country's largest gold mine by output in an effort to resolve longstanding conflicts over mining areas. The move aims to end the wildcat mining that has long troubled gold-mining companies operating in Africa's third-largest gold producer. Illegal mining activities and mine invasions have long troubled Africa Barrick Gold PLC's North Mara Gold Mine in northern Tanzania, where more than a dozen illegal miners have been killed in clashes at the site in the past two years.

Surgical Innovations Group:
Surgical Innovations Group PLC, a designer and manufacturer of creative solutions for minimally invasive surgery, had a strong first six months with revenue up 28% and pre-tax profit more than tripled, and it continues to trade in line with market expectations for the full year. Revenue for the six months ended June 30 was £3.88M (2012: £3.02M)

Top Fallers

Royal Bank of Scotland:
Investec Securities downgrades Royal Bank of Scotland (RBS.LN) to sell from hold, saying RBS' valuation appears full ahead of actual recovery. Maintains 340p target price.

Aviva:
BNP Paribas lowers Aviva (AV) to neutral from outperform but raises target to 403p from 379p. Says it has strongly outperformed peers since the new management addressed costs and internal leverage, leading to solid performance of the share price. Adds further outperformance vs. the sector may prove challenging unless earnings estimates rise by more than expected. Expects management is ahead of its target to reduce operational costs by £400M and largely remove restructuring costs.

Anite:
Anite tops the list of FTSE 250 fallers, following the company's 1Q trading update. Numis Securities says 1Q performance was weak, particularly in Handset Testing which, it says, accounts for around 75% of group profit. Numis notes Anite's full-year expectations are unchanged, however, cautions risk is on the downside owing to the greater 2H weighting.

African Minerals:
Barclays initiates coverage of African Minerals at underweight at 220p. Analysts at Barclays claim that the future for iron ore producers is very bleak with worrying times ahead. African Minerals faces too much uncertainty around its recent unexpected management change.