18th Mar 2016 17:18
LONDON (Alliance News) - Shares in the UK ended mixed Friday, with the two day rally in the FTSE 100 spurred earlier this week by the dovish attitude from central banks running out of steam, but with the blue-chip index ending higher for the week as a whole.
The FTSE 100 ended down 0.2%, or 11.48 points, at 6,189.64 Friday, having moved in a very narrow range between 6,237.02 and 6,186.24. For the week, the blue-chip index ended up 0.8%.
"Investors have also shown greater enthusiasm for equities and other riskier assets in recent days due, in part, to central bank easing," said FOREX.com analyst Fawad Razaqzada.
On Tuesday, the Bank of Japan Governor retained interest rates at -0.1%. The Japanese central bank had introduced negative interest rate in January in order to achieve its 2% inflation at the earliest possible time. It said it would take additional easing measures if needed for achieving the price stability target.
Following the BoJ, on Wednesday, the US Federal Reserve left interest rates unchanged in a range from 0.25% to 0.50% as widely expected, and the projections made by members came in below the market's expectations, as policymakers expect two rate hikes by the end of this year compared to the four predicted back in December.
On Thursday, Norway's central bank slashed its key interest rate by 25 basis points to a new record low of 0.50%, citing the weaker economic outlook, and said the rate may be cut further this year. The bank also said that the policy rate could turn negative if the economy is exposed to new major shocks.
To follow the trend, the Bank of England held interest rates at the record low level of 0.50% on Thursday, marking the seventh anniversary of the key rate at the current level.
Banking stocks took a hit on Thursday following the decisions made by central banks. Even as they encourage banks to lend, negative interest rates squeeze lending margins. Negative rates are becoming more common, adopted already by the European Central Bank and the Swiss National Bank, while in the Nordic region, Sweden and Denmark also have introduced them.
However, banks recovered some of the ground lost on Friday, with the FTSE 350 Banks sector index closing up 1.0%, having dropped the same level on Thursday. Standard Chartered ended up 8.3%, Royal Bank of Scotland up 2.4% and Lloyds Banking Group up 1.0%.
Meanwhile, commodity-related stocks travelled in the exact opposite direction to the banks, surging on Thursday but giving back those gains on Friday. Dollar-denominated commodities such as oil, gold, silver or copper have all benefited from a fall in the dollar after the Fed's outlook on rates.
The pound was quoted at USD1.4489 at the London equities close Friday. Sterling stood at USD1.4493 at the close Thursday, having reached a one-month high of USD1.4503 previously. Meanwhile, the euro was quoted at USD1.1278 at the close, having stood at USD1.1325 on Thursday.
Antofagasta ended down 4.3%, Fresnillo down 1.9% and Rio Tinto down 0.9%. Shares in Antofagasta were also hit by a downgrade from RBC Capital to Underperform from Sector Perform.
Brent crude reached Friday its highest level so far in 2016 at USD42.51 a barrel, quoted at USD41.68 a barrel at the London equities close. Brent was USD41.52 a barrel at the close Thursday.
Meanwhile, the gold price remained resilient in its 2016 rally, albeit slightly lower on Friday. The metal was quoted at 1,253.20 an ounce, compared to the USD1,263.47 at the close Thursday.
Elsewhere, Smiths Group closed up 2.8% after RBC Capital upgraded the engineer to Outperform from Sector Perform.
Meanwhile, Berkeley Group Holdings ended down 2.5% after it voiced concerns about the UK government's housing policies, as it said its high-end property sales in the two months to end-February were in line with the previous year, when the market slowed in the run-up to the country's general election.
The housebuilder, which focuses almost exclusively on more-expensive developments in London and the South East of England, said on the whole trading conditions are positive in the housing market and are stable in London, in spite of "global macro uncertainty, including the impending UK European Referendum". Berkeley added it is continuing to see good underlying demand for its properties.
However, whilst Berkeley said it expects to deliver results for the year to end April at the top end of expectations, it said transaction levels at the upper end of the housing market have been affected by the "significant increase" in transaction taxes over the last 18 months, which it said "will have consequential effects on both social mobility and the supply of new homes".
The FTSE 250 closed up 0.3%, or 52.31 points, or 16,901.32 and the AIM All-Share ended up 0.2%, or 1.40 points, at 706.65.
The race between Steinhoff International Holdings and J Sainsbury to make a bid for Argos-owner Home Retail Group came to a conclusion, as Sainsbury's made a firm offer for Home Retail, after Steinhoff opted to drop out of the running and instead strike a deal with European electrical retail group Darty.
Darty had previously recommended a takeover offer made for the company by Groupe Fnac that was made last November, but said Friday it is withdrawing its recommendation in favour for the new offer made by Steinhoff. Steinhoff has made an offer of 125.0 pence per Darty share, valuing the company at GBP673.0 million.
Darty has favoured Steinhoff's offer as it is an 18.6% premium to the previously recommended implied offer price of 105.4 pence per Darty share from Groupe Fnac. Darty said the board unanimously recommends the offer, and all the directors plan to vote in favour of the Steinhoff deal using their own voting rights - unless Group Fnac "announced a higher and deliverable offer."
Shortly after Steinhoff confirmed it was out of the running, Sainsbury's came back with a firm cash and share offer for Home Retail in line with the indicative offer it had made in February. Including a special dividend largely arising from Home Retail's sale of its Homebase chain to Wesfarmers, the offer represents an indicative value of 173.2 pence per share, valuing Home Retail Group at GBP1.40 billion.
Excluding the special dividend, the offer made by Sainsbury's represents and indicative value of 145.4 pence per Home Retail Group share, valuing the chain at GBP1.20 billion. Importantly, that special dividend will only be paid if Home Retail Group pays it before the Sainsbury's offer becomes unconditional.
Sainsbury's said, following its due diligence on the offer, it believes it can achieve a higher level of earnings before interest, tax, depreciation and amortisation synergies in the third full year after the deal is completed, of "no less than" GBP160.0 million, compared to the previous estimate of only GBP120.0 million.
Shares in Darty ended down 0.6% at 130.00 pence, while Home Retail closed down 9.9% at 163.20p, and Sainsbury's ended down 3.0%.
Meanwhile, Halma ended down 4.2% after Exane BNP cut the mid-cap health, safety and environmental technology group to Neutral from Outperform, while homewares retailer Dunelm Group dropped 3.1% after Merrill Lynch cut its rating to Neutral from Buy, according to traders.
In Europe, the CAC 40 index in Paris and the DAX 30 in Frankfurt ended up 0.4% and 0.6%, respectively.
Shares in New York were higher at the London equities close, with the DJIA and the Nasdaq Composite both up 0.6%, and the S&P 500 up 0.4%
In the corporate calendar Monday, Centamin, Miton Group and Brainjuicer Group, Management Consulting Group, Earthport, JKX Oil and Gas, CVS Group, Netplay, Quadrise Fuel International, Sanne Group, Brady, Smart Metering System release full-year results. Meanwhile, Artulium, FW Thorpe and Yougov publish half-year results.
In the economic calendar, eurozone's current account and consumer confidence are due at 0900 GMT and 1500 GMT. The UK's CBI industrial trends survey is due at 1100 GMT. In the US, the Chicago Fed national activity index is due at 1230 GMT.
By Daniel Ruiz; [email protected]
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