Sector movers: General Industrials, Construction pace gains
Cyclicals were to be found among both the best and worst performing sectors on Monday, with broker commentary the main driver against the backdrop of a generally 'up' market as the key gauges on services activity in the States, compiled by ISM and IHS Markit, pointed towards solid growth ahead for the sector.
Pacing gains were General Industrials, boosted by Goldman Sachs's decision to reiterate a 'buy' recommendation on shares of DS Smith and Smurfit Kappa.
In particular, the broker cited how its top paper packaging names appeared to be 'inexpensive' even as shares of companies exposed to pulp prices - that were near all-time highs - were trading at or close to peak multiples.
Included in Goldman's target prices for Billerud, DS Smith, Mondi, Smurfit and SCA was a premium to reflect the potential for any of them to become to turn into an acquisition target.
Helping to propel construction stocks higher, analysts at Cannacord Genuity reiterated their 'buy' stance on US-exposed CRH.
"CRH substantially lagged the wider market and sector in 2017, with the share price down by c.10%. We believe the shares continue to look interesting with some positive drivers expected in 2018 and assuming that higher US interest rates do not de-rail the US construction cycle," the Canadian broker told clients.
On a related note, analysts at BoA-Merrill Lynch wrote that, while home prices in the States have risen by 45% since the first quarter of 2012, the current overvaluation (relative to household incomes or rents) is still "well below" levels seen during the bubble period and do not imply a correction is imminent.
Going the other way, and against a backdrop of concerns around growing trade frictions, following the White House's push on steel and aluminium tariffs, were Aerospace and Defence names.
Dragging on the entire space, Ultra Electronics was knocked lower after announcing the US DoJ had put the kybosh on its ERAPSCO JV with Sparton, after raising competition concerns that led Ultra and Sparton to call off their proposed tie-up.
That came amid news that US-based chip designer Qualcomm had filed a request for America's CFIUS to look into its potential acquisition by Singapore-based Broadcom and a thinly-veiled threat from the US president against European carmakers, with Trump complaining about the significant trade deficits the country was running in its trade with other countries, including Canada and Mexico.
In the background, strategists at JP Morgan sounded a positive note on European and Japanese equities, but stuck to an 'underweight' stance for UK stocks.
Top performing sectors so far today
General Industrials +2.47%
Construction & Materials +2.14%
Mobile Telecommunications +1.74%
Software & Computer Services +1.69%
Real Estate Investment & Services +1.51%
Bottom performing sectors so far today
Industrial Metals & Mining -0.80%
Forestry & Paper -0.26%
Aerospace and Defence -0.17%
Banks -0.07%
Tobacco -0.01%