Other surveys showed that in the Eurozone it was still falling, dealing a blow to any lingering hopes that the bloc might emerge from recession in the current quarter.

Equity prices duly fell across the board, led by the mining sector, which has seen the gains made in its mini-rally of recent days given back. The market as a whole is going to finish the day down about 2.5%. Food producers, food retailers and utilities fared best, but most of the stocks in those sectors are still down.

Tate & Lyle and United Utilities are among just a handful of risers, while Halfords chose a bad day to unveil a dividend cut and warn on the outlook – it has lost about 15% of its value today. All this despite the Office of National Statistics confirming its initial estimate of 0.3% GDP growth in the first quarter, and adding that corporate profits in the period were 5% up on the year-ago period – the first such increase in six quarters.

Closing bell is compiled by Douglas McNeill, Investment Director of Charles Stanley.

However in the US, markets saw volatile trade, moving on the back of the comments from Fed Chairman Bernanke and the release of FOMC minutes. In his prepared statement, the Chairman warned of the dangers of a premature tightening of policy but in his Q&A session he said that “If we see continued improvement and we have confidence that that is going to be sustained, then in the next few meetings, we could take a step down in our pace of purchases”- although he added that any move to adjust asset purchases would depend on the economic data, and the Fed could increase purchases again if the outlook got worse. The minutes of the last Fed meeting were considered to be less dovish than had been anticipated.

As a result, stocks ended the day lower; the S&P closed down 0.83% at 1655.35.

Overnight, Asian stocks are having a negative session, weighed by the US close and not helped by the latest Purchasing Manager’s Index data out of China, which indicated that factory activity shrank for the first time in seven months in May. The Nikkei closed down 7.32% at 14483.98; the Hang Seng is currently down 2.53%, with the Shanghai Composite currently down 0.67%.

On the macro front, focus will be on Manufacturing and Service PMIs across the eurozone, together with the UK’s first quarter GDP data; with focus in the US on the usual employment data and New Home Sales.

NEWS HEADLINES

Investec has said that full-year adjusted operating profit increased by 21% to £433.2m; adding that its FY Tier I ratio was 11.0%

SABMiller has reported that full-year earnings before tax was $6.42b versus analysts’ estimates for a profit of around $6.46b; the full-year earnings margin was up 18.6%

Halfords has reported that full-year profits and non-recurring items fell 22% to £72m versus £92.2m last year, in-line with expectations

Daily Mail & General Trust has reported that first half revenue was £915m versus analysts’ estimates for sales of around £917.3m; pre-tax profit was £137m versus estimates of around £125.8m

United Utilities has reported that full year revenue was £1.64b, in-line with estimates; full-year underlying pre-tax profit was £354m versus estimates of around £351m

Next week’s reporting highlights include:

Marks & Spencer – is the clothing business responding to treatment?

United Utilities – staying ahead of regulatory targets?

Vodafone – what price a Verizon deal?

Tuesday

Full-year results from Burberry, the luxury goods retailer. The company last updated the market on 17th April, when it stated that full-year profit before tax would be at the upper end of analysts’ expectations. The share price rose 2% on the statement and has since advanced a further 9%. Market expectations are for dividend growth of 11% this year, predicated on healthy sales growth, a higher operating margin and flat interest charge. Attention next week will focus on outlook comments and any update on corporate strategy; the share price level suggests investors are confident that global demand for luxury goods will remain relatively buoyant over the medium term.

Full-year results from Marks & Spencer, the UK’s largest general retailer. The company last updated the market on 11th April, when it reported general merchandise sales down by 4% and food sales up by 4% in the fourth quarter. The share price rose 4% on the statement and has advanced by a further 5% since. Market expectations are for dividend growth of 3% this year, predicated on modest sales growth, a broadly flat operating margin and slightly higher interest charge. Attention next week will focus on outlook comments and financial guidance for 2013/14; the share price level suggests investors expect trading conditions to remain challenging but for profitability to be resilient in the current year.

Vodafone publishes its results for the year to 31st March. The company last updated the market on 7th February, when it revealed deterioration in Europe, strong trading in the US and confirmed guidance for the full year. The share price hardly moved (+0.9%). Since then it has risen by 15% on hopes of a disposal of its Verizon Wireless (VW) stake. Market expectations for the current year are for dividend growth of 4%, against a background of sales growth of 2%, a 12.6% margin and a £1.8bn interest charge. With the results, management will announce how it will use the recently announced £2.1bn dividend from VW (special dividend, share buyback, debt reduction). There will also be a focus on whether Q4 may be the last quarter of falling revenues in Europe. The share price level suggests that investors see a better-than-even chance that Vodafone will, in the next year or so, sell the VW holding at a satisfactory price (say, $130bn).

Wednesday

FirstGroup, transport operator in the UK and North America, reports FY13 results. Net debt remains high at some £2bn and the recently announced disposal of eight London bus depots for £80m may not be enough to save the annual dividend, which could be cut by 50%. The share price may have taken this on board and of more significance will be the recovery prospects, largely for UK Bus but also other activities such as US Student Bus. The UK Bus profit margin has fallen to 8% which is well below the peer group and it still faces headwinds such as higher costs and stimulating passenger revenue at a time of declining subsidies. Also, the outlook for UK Rail is uncertain after the controversy over the rebid for the West Coast line led to a temporary extension of some of its franchises.

Full-year results from SSE, an integrated electricity and gas company operating mainly in the UK and Ireland through a mix of market-based and regulated businesses. The company last updated the market in March, when it reiterated guidance for a 4%-5% rise in adjusted pre-tax profit with positive contributions from all three divisions: Retail, Wholesale and Networks. The share price barely moved on the statement, but has continued to trend upwards since. Market expectations are for dividend growth of 5% this year, predicted on a more normal retail supply margin of 5%, modest growth in earnings per share, and a commitment to dividend growth of 2% above RPI inflation in 2013. Attention next week will focus on delivery of the heavy capital investment programme (plus impact on credit metrics) and the outlook for thermal generation following a decision to mothball capacity in 2014; the share price level suggests that investors are optimistic that SSE remains well positioned despite the tough operating environment.

Thursday

Full-year results from Electrocomponents, the world’s leading distributor of electronics and maintenance products. In the first half, sales growth was flat, gross margin declined by 1.2%, operating costs rose by 3% and pre-tax profit declined by 30% to £41.5m. Profits are weighted to the second half even more than usual this year, reflecting action to improve gross margin and find efficiencies (cost savings of £3m-£4m expected). Investors will be focusing on the top-line outlook after underlying Q4 sales showed 1% growth. The Group has growth opportunities but the shares need some reassurance that economic activity is beginning to improve in its operating regions.

Full-year results from Halfords, the UK’s leading retailer of Car Maintenance, Car Enhancement and Cycling products. The company last updated the market on 10th April, when it pre-released sales data and guided for full-year profit before tax to be in the range of £68m to £72m. The share price was broadly unchanged on the statement, but has advanced by 18% since. Market expectations are for a flat dividend this year, predicated on minimal sales growth, a lower operating margin and flat interest charge. Attention next week will focus on dividend policy and financial guidance for the current year; the share price level suggests investors consider there to be a risk that the dividend will be cut.

Full-year results from Pennon, owner of regulated water company South West Water and waste business Viridor. The company last updated the market in February, when it confirmed a strong performance from South West Water, but played down hopes for a recovery at Viridor, which issued a profit warning in late 2012 due to weak recyclate prices. The share price fell 3% on the statement, but has recovered since. Market expectations are for dividend growth of 7% this year, predicted on lower earnings and a commitment to real dividend growth of 4% a year above RPI inflation to 2015. Attention next week will focus on the outlook for Viridor, write-downs to the carrying values of some of its assets, and progress on the longer-term pipeline of Energy from Waste projects that are expected to deliver significant growth from 2015 onwards. The share price level suggests that investors are confident that South West Water remains well positioned to outperform its regulatory contract for 2010-15, but are more cautious on prospects for Viridor in the coming year.

Full-year results from SABMiller, the world’s largest emerging markets brewer. The company last updated the market on 18th April, when the pre-close trading update reported lager volumes up 3% and revenue up by 7% in the full year. The share price rose 1% on the statement and has advanced by a further 5% since. Market expectations are for dividend growth of 13% this year, predicated on healthy sales growth, a slightly higher operating margin and increased interest charge. Attention next week will focus on outlook comments and financial guidance for the current year; the share price level suggests investors are confident that demand for beer in emerging markets will remain relatively buoyant over the medium term.

Full-year results from United Utilities, a regulated water company operating in North West England. The company last updated the market in March, when it reiterated guidance for an increase in revenue slightly below the allowed regulatory price rise (due to lower commercial volumes) and underlying operating profit slightly ahead of last year (despite higher costs). The share price rose 2% on the statement and has continued to move upwards since, helped by read-across from a bid approach for peer Severn Trent. Market expectations are for dividend growth of 7% this year, based on a commitment to growth of 2% above RPI inflation to 2015. Attention next week will focus on operational performance (including customer service, which continues to catch up with the industry average) and preparations for the next regulatory price review; the share price level implies that investors are confident that the firm is on course to outperform its regulatory contract for 2010-15.

Friday

Next Friday brings a third-quarter update from Smiths Group, the diversified engineering company. The company last updated the market in March, when it delivered encouraging sales growth and improved margins at most divisions as the benefits of self-help initiatives and increased investment (R&D, acquisitions and expansion in emerging markets) start to take hold. The share price edged downwards on the statement and has remained slightly lower since, partly reflecting the more cautious tone on second-half performance. Market expectations are for dividend growth of 5% this year, predicted on modest sales growth, strong cash generation and target dividend cover of 2.5x. Attention next week will focus on delivery of revised cost savings at Detection, a flagged slowdown in demand at John Crane, the impact of a US medical device tax and uncertainty around US defence spending; the share price level suggests that investors remain somewhat cautious about the firm’s exposure to government-funded end markets, which still account for 35% of sales.

This report was compiled by Charles Stanley’s dedicated Private Client Research Team comprising:

Jeremy Batstone-Carr (Head of Private Client Research)

Nic Clarke (Banks, Insurance, Other financials)

Tony Shepard (Travel, Support Services, Oil)

Tom Gidley-Kitchin (Construction, Household Goods, T&T, Mining)

Sam Hart (Retail, Leisure, Media Beverages)

Tina Cook (A&D, Utilities, REITs and Tobacco)

Rae Ellingham (Pharma, Food Producers, Industrials)

Diamonds: The main news this week in diamond-land has undoubtedly been the acquisition of the “Harry legacy” for $26.7m. Swatch, the new owners of Harry Winston, announced themselves with the purchase of the 101.7ct pear-shaped Type IIa, flawless, D colour stone and set a record for the highest price paid for a colourless diamond at the same time. The sale was part of an auction by Christies that raised around $102m whilst in the same week, Sotheby’s magnificent jewels sale totalled nearly $80m, showing that the market for good quality jewellery remains buoyant. Diamond prices have been well supported this week, as polished prices recover some of their recent weakness.

Precious metals: South Africa has again grabbed the headlines for all the wrong reasons this week. Concerns over further labour unrest has caused the Rand to depreciate and CDS’s to rise. A modicum of relief was seen today as Amplats avoided the disruption seen at Marikana, but most believe that the upcoming wage negotiations will be impacted by further unrest. This is likely to provide a short term boost to palladium and platinum prices short term, although any positive impact on gold pricing is likely to be minimal. Despite outperforming gold by 22% and 13.5% in 2013, our positive stance towards palladium and platinum, predicated on increasing global demand and declining supply, remains in place, although no one should ever be ashamed of banking a profit! 

Base metals: A much quieter week for the base metals, with minimal movements for all except nickel. Our long-time caution over the metal remains in place, even after the near 2.5% decline in the week to below $15,000 a tonne, that many believe is the marginal cost of production for many global producers. As noted last week, stocks continue to rise, so without a significant pick-up in demand any recovery is likely to be subdued at best. The recovery in copper prices has been welcomed, although sadly a move back towards $7,000/t is increasingly likely short term.

Specialities: Arguably one of the more interesting announcements this week has been the approval of two bills by the Natural Resources Committee in the U.S. The bills aim to speed up the approval and subsequent production of minerals deemed to be of strategic and critical importance, such as rare earths. Rare Earth projects are notoriously slow in coming into production, as MolyCorp will testify, so any assistance in developing a new industry should be welcomed. In pricing terms, not much has happened this week, but considering recent weakness, maybe that should be seen as a positive.   

This report has been compiled by Kieron Hodgson, Commodities Analyst at Charles Stanley Securities. For further information, please contact Kieron on 020 7149 6939 or email: Kieron.hodgson@csysecurities.com