7th Sep 2015 16:04
LONDON (Alliance News) - UK stocks ended higher Monday on a light day of news and trading volume amid the US Labor Day holiday, while commodities company Glencore closed among the best performing FTSE 100 stocks after it took action to cut debt and bolster its financial strength.
The FTSE 100 closed up 0.5% at 6,074.52, the FTSE 250 ended up 0.2% at 16,842.52 and the AIM All-Share closed down 0.1% at 732.57.
In Europe the CAC 40 in Paris ended up 0.6% and the DAX 30 in Frankfurt closed up 0.7%.
Miner and commodities trading company Glencore received a positive response from the stock market, as it took substantial steps to improve its financial position, including suspending dividends and planning to raise capital, while it also said production has been paused at the copper mines Katanga in Democratic Republic of Congo and Mopani in Zambia.
The company has been hit hard by the downturn in commodities markets and by its exposure to the oil and gas industry, which has suffered amid the falling oil price. Last week, credit ratings agency Standard & Poor's revised its outlook on the company's credit rating to Negative from Stable, primarily due to its USD30.0 billion debt pile.
As a result of these continued concerns and the ongoing issues facing commodities markets, the group said it will take measures worth up to USD10.2 billion to preserve its capital and reduce debt.
Most notably, Glencore said it will suspend its 2015 final dividend, saving it USD1.6 billion, and said it would save another USD800.0 million by suspending its interim dividend for 2016. It is raising USD2.5 billion in a proposed equity issuance to help cut debt and bolster financial strength.
The group added it will take another USD7.7 billion worth of actions between now and the end of 2016 in order to cut costs across the business. Glencore said it will suspend its 2015 final dividend, saving it USD1.6 billion and will save another USD800.0 million by suspending its interim dividend for 2016.
VSA Capital, a London-based investment bank, said Glencore's plans to improve its financial position are positive, though the broker said it remains cautious on the company.
"Financial leverage has been a key concern for investors and it is positive that Glencore is addressing the issue as its shares have fallen 60% since the start of May 2015," said VSA. "However, we remain cautious given the upcoming dilution" from the share issuance plan.
Glencore is the worst year-to-date performer in the FTSE 100 with its shares down 56%, and the second worst performer in the FTSE 350, eclipsed only by platinum producer Lonmin which has experienced an 86% decline in its share price. On Monday, Glencore's shares closed up 7.0%.
Other mining stocks also traded higher following a bounce in copper prices which had recently traded at six-year lows. Chile-based copper miner Antofagasta climbed 7.5% as the best performer in the FTSE 100, while Kazakhstan-based copper miner KAZ Minerals ended up 7.6% to close as the best midcap performer. The FTSE 350 Mining sector index closed up 2.1%.
Standard Chartered ended as the worst performer in the FTSE 100, down 1.7%, following continued concerns that the emerging markets bank faces further heavy fines and possible criminal prosecutions over alleged breaches of US sanctions against Iran after a Sunday Times report. The stock fell to its lowest level in six-and-a-half years having been hit by recent plunges in the Chinese stock market, weaker sentiment to emerging markets and the drop in commodity prices.
Associated British Foods closed down 0.8% after it said its expectations remain unchanged for a decline in adjusted operating profit in its current financial year, as its struggling sugar business continues to offset stronger performances from its other businesses.
The group, which owns discount fashion retailer Primark and British Sugar, said that a rise in operating profit at constant currency in grocery, agriculture, ingredients and retail will be offset by a decline in the sugar business, which along with changes in foreign exchange rates will lead to an overall fall in adjusted operating profit for the full year.
Intu Properties edged 0.4% lower after the retail property investor said Chief Operating Officer Mike Butterworth will retire at the end of the year. Intu said the process of determining how to replace Butterworth has started and further details will be announced in due course.
In the FTSE 250, Redefine International closed down 2.3%. The real estate investors said it has reached a conditional deal to acquire the AUK Portfolio from Aegon UK Property Fund for GBP437.2 million.
It said it will acquire the portfolio through its Redefine AUK subsidiary. The portfolio includes 19 properties in the UK, mostly in London and the South East, valued at a total of GBP439.9 million, with six single-let and the rest multi-let. In addition, Redefine said it has struck a GBP52.5 million deal to acquire Banbury Cross Retail Park in Oxfordshire.
In the economic calendar, before the London market opens Japanese GDP and trade balances is at 0050 BST, and Chinese trade balances is at 0300 BST. Later in the morning, German and French trade balances are at 0700 BST and 0745 BST before eurozone GDP at 1000 BST. US labor market conditions index is at 1500 BST and consumer credit is at 2000 BST.
In the UK corporate calendar, hotel and coffee shop chain operator Whitbread issues a trading statement, while asset manager Ashmore Group reports full-year results. Housebuilder Redrow also reports full-year results, and fellow housebuilder Berkeley Group Holdings, which is due to join the FTSE 100, issues an interim management statement. There are also full-year results from animal genetics company Genus, property investment company A&J Mucklow Group, and personal care and household goods company McBride.
By Neil Thakrar; [email protected]; @NeilThakrar1
Copyright 2015 Alliance News Limited. All Rights Reserved.
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