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Sector movers: Cyclicals get Trump boost, but some economists wary

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Sector movers: Cyclicals get Trump boost, but some economists wary

Wed, 01 March 2017
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Sector movers: Cyclicals get Trump boost, but some economists wary
GKN Quote more

Price: 343.90

Chg: -1.10

Chg %: -0.32%

Date: 11:09

FTSE 100 Quote

Price: 7,275.84 Chg: 3.89 Chg %: 0.05% Date: 11:15

(ShareCast News) - Cyclicals were again at the top of the leaderboard with US-exposed CRH leading the advance one more.
The Dublin-based company's stock finished sharply higher, coming within just a whisker of its 52-week highs - at 2,895.0p - at one point during the session.

Nonetheless, some economists were wary of the recent buoyant sentiment around Trump's fiscal plans. Indeed, over the past few weeks it had been the more defensive areas of the US stockmarket which had performed best, likely as longer-term Treasury yields fell back - and not cyclicals as one might expect.

​"President Trump's first address to Congress laid out a long list of policy objectives, but he provided little explanation of the path to achieving them. Trump has to overcome major hurdles in Congress to achieve his objectives; markets will remain on edge to see the final version of the stimulus plan," said Oren Klachkin at Oxford Economics.

Shares in steel maker Evraz and the main copper miners were also on the up on Wednesday, benefitting from expectations of increased government largesse in the States, better-than-expected economic data in China and some sector-specific news.

China's official manufacturing and service sector purchasing managers' indices both outpaced economists' forecasts for February.

The former rose from 51.3 in January to 51.6, versus projections for a dip to 51.2; although some economists cautioned that activity was likely to slow over the remainder of the year, there wwere analysts who emphasised how it boded well for the near-term outlook.

As regards the copper sector specifically, Chile's state-owned Codelco's chief reportedly said he expected more challenging labour negotiations at its El Teniente copper mine in 2018.

Codelco also forecast the price of the industrial metal would range between $2.60 and $2.70 a pound in 2017, rising to $3.0 a pound over the longer-term.

The Chilean operator also penciled in a market deficit of between 100 to 200kt next year.

One rung below on the leaderboard was GKN, which powered gains in the Automobile sector on the back of target price upgrades of Canaccord Genuity and JP Morgan.

The Canadian broker revised its target on the aerospace and auto components manufacturer from 370.0p to 410.0p, reiterating a 'buy' stance.

Analyst Anthont Plom dubbed GKN's latest set of full-year figures as "impressive".

"The focus has been, and continues to be, on delivering consistent organic growth above end markets, and the outlook for 2017 feels encouraging. Teal's 2017 aerospace forecast is +2% and global automotive production is forecast at +2%; GKN expects to grow above the market in both instances.

"Production of the F-35 (£3.5m shipset), A350 (£3.4m) and A320neo (£1m) are all expected to continue ramping up in 2017, with the other major narrowbody programme, the Boeing 737Max (£0.8m), also entering production in the year."

GKN management also said its other main division, Powder Metallurgy, would grow above market in 2017, likely benefitting from its increased presence in China.

UK industrial engineers also did well as a group, with some 'market chatter' referencing the benefits of a weaker pound for the likes of Rotork.

Top performing sectors so far today
Construction & Materials 6,937.15 +4.26%
Industrial Metals & Mining 2,500.44 +3.70%
Mining 16,652.27 +3.48%
Automobiles & Parts 8,671.89 +3.06%
Industrial Engineering 11,275.98 +2.88%

Bottom performing sectors so far today
Electricity 9,048.35 -0.72%
Gas, Water & Multiutilities 6,164.13 -0.56%
Industrial Transportation 2,996.74 -0.48%
Oil Equipment, Services & Distribution 15,004.60 -0.23%
Alternative Energy 0.00 0.00%