Markets start month on downbeat note as UK PMIs disappoint and Greek concerns continueLeading shares are on the slide again after a mini-revival on Thursday, despite support from the mining sector in the wake of the latest Chinese data.The FTSE 100 is currently down 27.08 points at 6933.55, amid the uncertainty over the UK general election, the continuing discussions between Greece and its creditors to try and solve the country’s financial crisis and a strengthening euro as the receding prospect of US rate rises hits the dollar.Traders are struggling to find much enthusiasm for equities as the last session of the week gets underway. Many markets across Europe are closed to mark Labour Day so this could suppress volumes a little too, but it’s worth noting that the heavyweight mining stocks are at least managing to post some gains. That fractionally better than expected Chinese PMI reading has offered the sector another boost.When we initiated on the UK motor insurers last year in our note “No pain, no gain”, our thesis was that we did not believe the market would turn until the insurers felt sufficient pain to force pricing higher. In our view they are now feeling the pain and pricing is therefore poised to inflect. We believe the UK motor market is the first property and casualty market to reach the trough of the pricing cycle, and the improving dynamics will become clear as the year progresses. Although we believe 2015 earnings could still need to come down, this will prove the catalyst for stronger pricing and the focus will quickly shift to improving 2016 earnings, and the stocks could re-rate - more pain, more gain.We also believe the stocks are defensive, with little Solvency 2 [forthcoming regulatory regime] or interest rate exposure which is likely to be a focus for the wider insurance sector. We are double upgrading esure to overweight with 31% upside to our revised price target of 285p. We are also upgrading Admiral to equal weight, with 2% downside to our price target of 1,523p. Esure is our favoured name within the subsector, as we believe it has been unfairly punished for disappointing since its IPO due to weak growth, but the market inflection could allow it to revisit its IPO aspirations. Continue reading...
 |
| READ THE ORIGINAL POST AT www.theguardian.com |
