Sector movers: UK engineers drop on downgrades, utilities lower as well
Shares in British engineering groups Spectris and Halma dragged the Electronic & Electrical equipment sector lower after analysts at HSBC downgraded their stance on both in the wake-up of the recent run-up in their stock price.
"The sector continued to re-rate through results season with share prices up 13% despite sector earnings upgrades of 5%. Although valuation multiples are at historically high levels we think the sector will maintain positive share price momentum fuelled by FX upgrades," analysts Scott Cagehin, Michael Hagmann and Mayank Bhandari said in a research note sent to clients.
They upped their target price on Halma from 975p to 1,050p but lowered their recommendation from 'buy' to 'hold'. Spectris on the other hand was taken from 'buy' to 'reduce' and their target was slashed from 2,000p to 1,700p.
Electricity and utilities stocks were also knocked lower, at least in part after a top US rate-setter, the president of the Federal Reserve Bank of New York, William Dudley, told broadcaster Fox that markets were getting complacent and that an interest rate increase come September was "possible".
That saw yields on longer-dated Gilts jump, with the yield on the benchmark 10-year Gilt up by five basis points to 0.59% by the close of trading, which in turn weighed on the likes of Drax, SSE, National Grid, Pennon Group, Severn Trent and United Utilities.
Retailers were also caught in the downdraft after ONS reported consumer prices rose by at a quicker-than-expected pace of 0.6% year-on-year in July.
Ahead lay unemployment claims and job vacancies data for July which were due to be released on the next day, the first such set of figures from after the referendum vote.
The latter, in particular, might provide a timely steer on the odds of the British economy moving into a recession, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
"[...] vacancies were 10K lower in the three months to June than in the previous three months. On the basis of past form, three-month-on-three-month declines in vacancies of more than 20K would signal recession," Tombs said in a research note sent to clients.
Top performing sectors so far today
Mining 12,235.84 +1.60%
Oil Equipment, Services & Distribution 15,109.65 +1.19%
Construction & Materials 6,088.33 +0.94%
Industrial Metals & Mining 1,719.59 +0.46%
Automobiles & Parts 7,215.27 +0.13%
Bottom performing sectors so far today
Electronic & Electrical Equipment 5,061.55 -2.18%
Electricity 8,941.94 -1.85%
Gas, Water & Multiutilities 6,644.43 -1.55%
General Retailers 2,648.95 -1.51%
Life Insurance 7,062.29 -1.51%