20th Jan 2016 08:21
LONDON (Alliance News) - The FTSE 100 share index dropped 2.0% at the open Wednesday, as weak commodities markets remained the centre of attention with Shell and BG Group detailing the impact of falling oil prices on their 2015 results.
Shell A and B shares were down more than 3.5% early Wednesday, while merger partner BG's shares were down 2.1%. Miner BHP Billiton, which provided a production update overnight, was leading blue-chip losers, down 5.6%.
Meanwhile, the World Economic Forum in Davos gets underway in Davos, Switzerland Wednesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 2.0% at 5,759.34
FTSE 250: down 1.4% at 15,888.35
AIM ALL-SHARE: down 0.7% at 688.49
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Hang Seng: closed down 3.8% at 18,886.30
Nikkei 225: closed down 3.7% at 16,416.19
DJIA: closed up 0.2% at 16,016.02
S&P 500: closed up 0.1% at 1,881.33
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GBP: flat at USD1.4161 (USD1.4157)
EUR: up at USD1.0943 (USD1.0897)
GOLD: up at USD1,094.00 per ounce (USD1,085.04)
OIL (Brent): down at USD28.21 a barrel (USD29.46)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
(all times in GMT)
World Economic Forum - Davos, Switzerland
09:30 UK ILO Unemployment Rate, Claimant Count and Average Earnings
10:00 Switzerland ZEW Survey
12:00 US MBA Mortgage Applications
13:30 US Building Permits and Housing Starts
13:30 US Consumer Price Index
13:30 Canada Manufacturing Shipments and Wholesale Sales
13:55 US Redbook
15:00 Bank of Canada Interest Rate Decision and Monetary Policy Report
16:15 Bank of Canada Press Conference
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Germany's producer prices dropped at a slower pace at the end of the year, Destatis reported. Producer prices fell 2.3% year-on-year in December, slower than the 2.5% decrease seen in November. But it was slightly faster than the expected rise of 2.2%. Producer prices have been falling since August 2013.
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Foreign direct investment into China decreased 5.8% year-on-year in December, data from the Ministry of Commerce showed. China attracted USD12.23 billion in December, the ministry said. Non-financial outbound direct investment increased 6.1% annually to USD13.89 billion.
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The outlook for global economic growth in the coming year among top executives has fallen when compared with their views a year earlier, according to a report by PricewaterhouseCoopers published ahead of the World Economic Forum in Davos, Switzerland. Only 27% of the chief executives that were polled around the world by the auditing and consulting company believed that global economic growth would improve in the next 12 months. One year ago, 37% had expressed optimism about growth.
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US President Barack Obama and Australian Prime Minister Malcolm Turnbull touted the expected economic benefits for their countries and the broader Pacific region of a 12-nation trade deal amid domestic opposition to the agreement. Turnbull, in his first visit as premier to the White House, tied the Trans Pacific Partnership trade deal to global security and the promotion of international rules.
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Pakistan's prime minister met Iranian President Hassan Rowhani on Tuesday in Tehran in an effort to ease tensions between regional rivals Saudi Arabia and Iran. Premier Nawaz Sharif had been in Riyadh on Monday to meet with Saudi King Salman. The visit came as Chinese President Xi Jinping met Saudi King Salman in Riyadh, on the first day of a five-day Middle East tour that will also take him to Egypt and Iran.
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The extremist militia Islamic State confirmed the death of one of its executioners, a Kuwaiti-born British national nicknamed Jihadi John by Western media. He was killed in a US drone strike November 12 in the Islamic State stronghold of al-Raqqa, Syria, the group said in its English-language propaganda magazine Dabiq. The Pentagon on November 13 had said it had a "great deal of confidence" that Mohammed Emwazi, who became infamous from beheading videos in which he spoke with a London accent, was "evaporated" in a strike against a car.
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BROKER RATING CHANGES
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BERENBERG RAISES ULTRA ELECTRONICS TO 'BUY' ('HOLD') - TARGET 2100 (1900) PENCE
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BERENBERG CUTS QINETIQ TO 'SELL' ('HOLD') - TARGET 210 (230) PENCE
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CREDIT SUISSE INITIATES SYNTHOMER WITH 'UNDERPERFORM' - TARGET 260 PENCE
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JPMORGAN CUTS JARDINE LLOYD THOMPSON TO 'NEUTRAL' ('OVERWEIGHT') - TARGET 925 (1150) PENCE
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COMPANIES - FTSE 100
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Royal Dutch Shell said its earnings plummeted in 2015 as a result of lower oil prices, but the oil and gas major sought to alleviate concerns over the future of its dividend. Shell said full-year current cost of supply earnings excluding items is expected to be in the region of USD10.40 billion to USD10.70 billion, little more than half the USD19.04 billion in 2014, whilst income attributable to shareholders will be around USD1.60 billion to USD2.00 billion, also a fraction of the USD14.87 billion a year ago. Shell said its 2015 dividend will be USD1.88 per share, and said its dividend in 2016 will be at least that amount. The 2015 dividend is flat from 2014.
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BG Group said earnings dropped in 2015 as expected, but said those results are in line or ahead of expectations. The oil and gas company, which is a week away from a landmark shareholder vote on the company's proposed merger with Royal Dutch Shell, said it expects to report total results earnings of "at least" USD2.30 billion in 2015, nearly halving from USD4.03 billion in 2014. Production in 2015 averaged 704,000 barrels of oil equivalent per day, ahead of BG's guidance of 680,000 to 700,000 barrels a day.
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BHP Billiton said further productivity improvements have supported a "robust" period of production in the first half of the financial year as it reiterated its full-year production guidance across its commodities except for iron ore. The multi-commodity giant said petroleum, copper and coal all remain on track to deliver production results in the financial year due to end in June that will meet expectations, however, it warned iron ore will be lower than previously expected. Full-year iron ore production guidance was lowered to 237.0 million tonnes from 247.0 million.
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Anglo American said it has struck an agreement with Batchfire Resources to sell its interest in the Callide thermal coal mine in Queensland in Australia. No financial details were revealed on the agreement, but Australia-based Batchfire will acquire Anglo's shares in the holding company for the Callide mine. The Callide site includes an open-pit thermal coal mine and associated processing infrastructure.
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Barclays is to sell its credit card operations in Spain and Portugal, Reuters reported, with Spanish bank Banco Santander and US private equity group Apollo among the potential buyers. Four sources familiar with the matter told Reuters that Barclays was nearing a sale of the credit card businesses in the countries, which would follow on from the sale of Spanish and Portuguese corporate and retail banking arms.
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COMPANIES - FTSE 250
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WH Smith reported growth in revenue in the 20 weeks to January 16 and said it now expects full-year profit to be ahead of plan following a successful Christmas trading period in the high street division. The books and stationery retailer said total group revenue in the period grew 4% year-on-year as a 12% rise in travel revenue offset a 1% decline in high street revenue. On a like-for-like basis, group sales increased 2% with travel sales up 5% while high street sales remained flat.
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JD Wetherspoon reported growth in sales in the second quarter of its financial year, but warned that profit for the full-year will be at the lower end of analyst expectations. The pub company said total sales in the 12 weeks to January 17 grew 6.3% year-on-year, as like-for-like sales rose 3.3%. In the 25 weeks to the same date, total sales increased 6.1% and like-for-likes were up 2.8%. Wetherspoons said it expects its operating margin for the half-year ending January 24 to be around 6.3%, which is 1.1% lower than the same period last year, which it said reflects increases in starting rates for hourly paid staff.
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Plastics company RPC Group said it secured a 97% take-up for its rights issue to fund the acquisition of Global Closure Systems. RPC struck a deal to acquire France-based GCS, a plastic closures and dispensing systems specialist, in December for EUR650.0 million and said it would raise GBP232.6 million through a rights issue to help fund the purchase.
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Technical products and services company Diploma said revenue rose year-on-year in its first quarter, despite a hit from currency translation, with margins tracking with its expectations. Diploma said revenue for the quarter to the end of December was up 6.0% and would have increased 11% in constant currencies, with the main boost coming from contributions from acquisitions the group has made.
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Metals miner Polymetal International said it has entered the first phase of its joint venture with Polyus Gold at the Nezhdaninskoye gold project in Yakutia in Russia. The pair entered into a joint venture in December the develop the deposit. Polymetal will acquire a 50% stake in the JSC South-Verkhoyansk Mining Co business, which holds the rights to the deposit. Under the first stage of the joint venture, Polymetal has acquired a 15.3% stake for a USD18.0 million investment, which will be used to fund the activities of the joint venture.
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COMPANIES - LONDON MAIN MARKET AND AIM
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ISG late Tuesday reiterated its rejection of the offer received from Cathexis UK Holdings, and said the level of acceptances remains low whilst its share price has continued to trade above the offer price since the unsolicited offer was lodged. ISG confirmed its rejection of the offer from Cathexis after reviewing documents, stating the board has unanimously rejected the offer as "significantly undervaluing the company". Cathexis already holds a 29.5% stake in ISG and has been a shareholder since 2012. The tabled offer is for 143.0 pence per ISG share, valuing ISG at GBP70.8 million.
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COMPANIES - INTERNATIONAL
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Zurich Insurance Group said that based on preliminary estimates it expects aggregate losses of approximately USD275 million within its 2015 results related to storms Desmond, Eva and Frank in the UK and Ireland. These storm events brought heavy rainfall and caused severe flooding in parts of North England, Scotland and Ireland. These estimates are net of reinsurance and before tax and will be recorded in the group's annual results, which are due to be released on February 11.
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Netflix announced that in the fourth quarter it added a record 5.59 million members as its big shows such as Narcos and Marvel's Jessica Jones helped to grow membership to 74.76 million. The fourth-quarter additions compare to a forecast of 5.15 million and to prior year net additions of 4.33 million. For first quarter, the company is forecasting 6.10 million net additions compared to 4.88 million, prior year. Netflix said it stayed profitable in fourth-quarter despite foreign exchange headwinds, and delivered operating income of USD60 million and net income of USD43 million.
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Amazon Prime Air is the next big project being worked on by the online retailer. In an interview with Yahoo News, a top executive shared further details about its drone delivery system. Paul Misener, Amazon's vice president for global public policy, says Prime Air will deliver packages to customers within 30 minutes of them ordering it online at Amazon.com. It will be able to deliver parcels that weigh up to five pounds.
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Wednesday's Scheduled AGMs/EGMs
Majedie Investments
Lowland Investment Co
Diploma
Superglass Holdings
Standard Life European Private Equity Trust
Castle Street Investments (re acquisition of Selection Services Investments)
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By Tom Waite; [email protected]; @thomaslwaite
Copyright 2016 Alliance News Limited. All Rights Reserved.
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