Sector movers: Insurers and telecoms lead gains

Insurers led the way higher on Tuesday, boosted by positive coverage from some of the largest brokers, including Barclays and Macquarie.

RSA Insurance was the standout gainer on Tuesday as Barclays upgraded the stock to ‘overweight’ from ‘equalweight’ and lifted the price target to 545p from 457p.

Barclays said RSA’s full-year 2015 underlying results were “very strong”, beating company collected underlying earnings per share EPS consensus by 20%.

Most impressive was the speed at which the loss ratio has started to improve, the bank said.

It noted RSA’s plans to close the gap to the best in class players in each of its core markets, UK, Scandinavia and Canada by 2018.

“While we acknowledge that it is rare for a mid of the pack insurer to become a ‘best in class’ insurer, we do believe RSA has set out a realistic plan to get there,” it said.

Direct Line was also benefitting from a broker upgrade, as Macquarie upped its stance on the insurer to ‘neutral’ from ‘underperform’.

“The current valuation now indicates a c.6% yield p.a. over the next three years, on our forecasts. Without special dividends this yield remains at more than 4% across the period, which we believe provides investors with ample income returns in this market and limits downside risks.”

Miners on the other hand got thumped as the latest manufacturing sector data out of China printed below forecasts and strategists sounded a cautious note.

As of 17:47 BST the July 2016 copper contract on COMEX was retreating by 2.10% to $221.90 per pound, alongside a fall of 1.91% in the front month Brent crude futures contract.

The China Caixin manufacturing PMI fell to 49.4 in April from 49.7 in March, missing economists’ expectations for a reading of 49.9. A reading below 50 indicates contraction.

In parallel, analysts at JP Morgan sounded a cautious note on global equity markets, telling clients for the first time since 2007 to go underweight that asset class and explaining that the better part of the impact on stocks from central banks´ shift towards a less aggressive policy stance was already past.

By sectors, JP Morgan recommended clients 'overweight' defensives versus cyclicals, including overweights in Telecoms, Utilities and Real Estate.

As regards Telecoms, JP Morgan highlighted how Telecoms CPI was about to move above market CPI for the first time in years.

The sector´s P/E multiple relative to that of cyclicals was also unassuming, with bond yields unlikely to go anywhere soon and the "relative performance" of cyclicals to defensives remained "extremely well correlated to the direction of bond yields".

Increased caution on the part of investors had its reflection in a 20.8 metric tonne jump in the amount of holdings in the world´s largest gold exchange-traded fund, the SPDR Gold Shares - the largest one day rise since 2011 according to Bloomberg data.

Top performing sectors so far today
Insurance (non-life) 2,444.87 +1.59%
Fixed Line Telecommunications 5,101.35 +1.08%
Software & Computer Services 1,654.79 +1.05%
Food Producers & Processors 8,440.75 +0.92%
Personal Goods 26,814.68 +0.72%

Bottom performing sectors so far today
Mining 9,667.59 -6.83%
Industrial Metals & Mining 1,334.50 -4.58%
Oil Equipment, Services & Distribution 13,375.76 -3.93%
Banks 3,194.71 -2.53%
Industrial Engineering 7,755.74 -2.27%