Markets
Europe
The FTSE-100 finished Friday's session 0.08% higher at 6,270.79, whilst the FTSE AIM All-Share index closed 0.20% better-off at 735.84. In continental Europe, markets ended in the green, as a weaker euro led to gains for export-driven stocks. Germany's DAX rose 0.5% amid a fall in import prices in April. France's CAC 40 advanced 0.3% on positive cues from data on the country's GDP.
Wall Street
Wall Street remained closed due to the Memorial Day holiday.
Asia
Equities are trading higher amid better-than-expected industrial output data from Japan. In addition, the US dollar strengthened against local currencies amid expectations of higher interest rates. The Nikkei 225 rose 1.0%, while the Hang Seng was trading 1.3% higher at 7:00 am.
Oil
Yesterday, Brent oil prices increased 0.9%, while WTI didn't trade due to the Memorial Day holiday. The spread between the two varieties stood at US$0.4 per barrel.
Headlines
French GDP picks up in Q1 2016
As per data published by INSEE, the French statistical office, France's GDP grew 0.6% q-o-q in Q1 2016, faster than the 0.4% rise in the previous quarter. The improvement was mainly due to a 1.0% increase in consumer spending and a 1.6% surge in investment. The country is targeting a GDP growth of 1.5% for 2016.
Company news
AstraZeneca (LON:AZN, 4,022.50p) - Hold
On Friday, AstraZeneca received positive results from the Phase III FALCON trial. The trial compared Faslodex 500mg to Arimidex 1mg for the treatment of locally-advanced or metastatic breast cancer in post-menopausal women who have not undergone hormonal treatment for hormone-receptor-positive breast cancer. The company informed that Faslodex 500mg was superior to Arimidex and met its primary endpoint of extended progression-free survival. A complete data evaluation is underway and the results are expected to be presented at a medical meeting in 2016. Separately, AstraZeneca informed that the US FDA issued a complete response letter (CRL) regarding the new drug application (NDA) for sodium zirconium cyclosilicate (ZS-9). The drug is being developed for the treatment of hyperkalaemia by ZS Pharma, a wholly-owned subsidiary of AstraZeneca. The CRL refers to observations arising from a pre-approval manufacturing inspection. AstraZeneca and ZS Pharma are evaluating the content of the CRL and will work closely with the FDA to determine the appropriate next steps for the NDA.
Our view: The aforementioned updates are mixed for AstraZeneca. The successful trial of Faslodex 500mg offers earlier treatment options to post-menopausal women with HR+ locally advanced or metastatic breast cancer. The drug has more than 10 years of clinical evidence and was recently approved by FDA for use in combination with palbociclib in the treatment of women with hormone-receptor-positive, human-epidermal-growth-factor-receptor 2-negative (HER2-) advanced or metastatic breast cancer (MBC). On the other hand, disapproval of AstraZeneca's new drug (ZS-9) for high potassium levels due to a manufacturing issue is a major setback. AstraZeneca paid US$2.7bn for ZS Pharma to gain access to the drug. Moreover, many of its drugs are in the development phase. AstraZeneca has been facing certain growth-related issues, as some of its key drugs are approaching patent expiry. In view of the mixed outlook surrounding the company, we maintain a Hold rating on the stock.
Bodycote (LON:BOY, 610.50p) - Buy
On Friday, Bodycote released a trading update for the period between 1st January 2016 and 30th April 2016. During the period, revenues declined 4.9% y-o-y to £192.4m and 9.1% down at constant exchange rates. Like-for-like (LFL) revenues were down 2.7%. LFL revenues for the Aerospace, Defence & Energy business were 6.7% lower y-o-y, whereas, LFL revenues for the Automotive & General Industrial business grew 0.5%. Car and light truck revenues increased 3.6%, whereas heavy truck revenues were 14.0% lower. Net cash at the end of period stood at £9.4m compared with £12.3m as on 31st December 2015. The final dividend of 10.3p and special dividend of 10p for 2015 would be paid on 3rd June 2016.
Our view: Bodycote delivered satisfactory performance in the first four months of 2016. The company's performance was impacted by its exit from Brazil and the restructuring actions announced in 2015. The oil & gas and industrial sectors witnessed a fall in revenues owing to weak demand. Car and truck revenues surged, with strong performance across North America, Europe and the emerging markets. Bodycote expects full-year results to be in line with the expectations. Although, some of the company's divisions are currently under pressure, we believe it would bounce back to growing terms owing to its fundamentally strong position. Therefore, we maintain a Buy rating on the stock.
Economic news
US GDP
The US Commerce Department revised GDP growth in Q1 2016 to 0.8% from the earlier estimate of 0.5%. The markets expected a 0.9% growth in the economy.
US University of Michigan sentiment
The US University of Michigan's consumer sentiment index for May increased to 94.7 from 89.0 in April, final data indicated on Friday. The consumer expectations index, which closely forecasts the direction of consumer spending, increased to 84.9 from 77.6, while the current economic conditions index improved to 109.9 from 106.7.
Eurozone consumer confidence
The gauge of Eurozone consumer confidence improved to -7.0 in May, after a reading of -9.3 in April, the European Commission stated yesterday.
Germany CPI
Consumer prices in Germany rose 0.1% y-o-y in May, from 0.1% fall in the previous month, as per the preliminary data published by Destatis yesterday. On m-o-m basis, consumer prices rose 0.3% in May, after a 0.4% decline in April.