20th Apr 2016 16:19
LONDON (Alliance News) - A lower-than-expected build-up in US crude oil inventories sparked a late rally in oil prices, helping the FTSE 100 reverse earlier losses and end Wednesday higher.
The FTSE 100 closed up 0.1%, or 4.91 points, at 6,410.26. A rally in oil prices after the US Energy Information Administration's crude oil stockpiles increased by less-than-expected helped the blue-chip index surge late in the session.
The EIA said its commercial crude oil inventories increased by 2.1 million barrels in the week ending April 15, slightly less than the consensus estimate of a 2.4 million barrel increase.
"Overall, it was not exactly a solid report but good enough to keep the bears at bay, at least for the time being. But I don't think this is a strong enough report to provide meaningful support to oil prices," said Fawad Razaqzada, technical analyst at FOREX.com and City Index.
"That being said however, the ability of oil prices to shrug of negative news lately should not be ignored. This behaviour of price action actually shows that the underlying bullish trend is strong for oil," he added.
At the London equity close, Brent traded at USD44.39 a barrel, higher than the USD43.99 seen at the same time on Tuesday.
The North Sea benchmark had hit an earlier low of of USD42.79 a barrel after oil workers in Kuwait ended a three-day strike in protest of planned government cutbacks. The disruption to Kuwait's oil supply had supported oil prices earlier this week.
Sheikh Talal al-Khaled, the spokesman for the state-run oil sector, said employees were back at work and that the Gulf country would need three days to return to its normal production of 3.0 million barrels per day. The stoppage had halved Kuwait's production of oil, the OPEC nation's main source of income, according to local media.
Elsewhere, the price of gold maintained its recent strength. At the London close, the precious metal traded at USD1,252.92 an ounce, lower than the USD1,254.50 price at the close on Tuesday.
The FTSE 250 closed down 0.2%, or 26.27 points, at 17,017.98, and the AIM All-Share ended down 0.1%, or 0.98 points, points at 733.36.
In Europe, the French CAC 40 ended up 0.6% and the German DAX 30 up 0.7%.
On Wall Street at the London close, the DJIA and S&P 500 were both up 0.2% and the Nasdaq Composite was up 0.4%.
In UK economic news, unemployment increased for the first time in seven months and pay growth slowed unexpectedly in the three months to February.
Data from the Office for National Statistics showed that the number of people out of work increased 21,000 to 1.7 million in the three months to February, the first increase in seven months. Employment climbed at a slower pace of 20,000.
Nonetheless, the jobless rate held steady at a decade low 5.1%, unchanged from the previous three months and matched economists' expectations. The employment rate was 74.1%, the joint highest since comparable records began in 1971.
Average earnings including bonuses increased 1.8%, slower than the 2.1% increase in the previous three months and the expected growth of 2.3%.
The pound initially fell against the dollar to a low of USD1.4343 but quickly overturned its losses. At the London close, sterling traded the dollar at USD1.4381, slightly lower than the USD1.4397 seen at the same time on Tuesday.
The euro traded the dollar at USD1.1327 at the close Wednesday, below the USD1.1378 on Tuesday.
Blue-chip miners helped to lift the FTSE 100, with Anglo American, up 5.1%, Rio Tinto, up 3.9%, and BHP Billiton, up 3.4%, all among the best performers.
IG's Senior Market Analyst Chris Beauchamp said the stocks have enjoyed a surge thanks to a "remarkable shift in positioning in metals futures".
Separately, BHP Billiton trimmed its full-year production guidance for iron ore after being hit by a string of issues, as the company reported a fall in production across all of its major commodities in the first nine months of its financial year.
The miner maintained its guidance for its other major commodities, including petroleum, copper and coal, but said iron-ore production from its operations in Western Australia will be around 10.0 million tonnes lower in 2016 than previously expected.
Upgrading its rating on the stock to Hold from Sell, Investec said defensive strategies BHP Billiton employed have left it well positioned to benefit from the expanded cash flows higher commodity prices enable.
GKN, up 2.4%, said trading in the first quarter met its expectations, though it has taken a hit to its trading margin from a shift in the revenue mix of its aerospace arm.
The engineer, which makes airframe structures and automotive driveline systems, said sales in the three months to the end of March hit GBP2.18 billion, up from GBP1.94 billion a year before. Organic sales grew 1.0% and the group got a 3.0% boost from beneficial currency moves, but the majority of the rise was driven by acquisitions.
GKN said its trading margin in the quarter was weaker year-on-year due to a hit taken in its Aerospace business, which makes airframe and engine structures for planes. The weakness in the margin was driven by lower military sales in the quarter, reflecting a continued decline in sales from mature programmes, mainly the Boeing F/A-18 Super Hornet fighter jet and the UH-60 Black Hawk helicopter.
N Brown Group ended down 13%, making it the worst performer in the FTSE 250. The online and catalogue fashion retailer warned that trading in its new financial year has been subdued, after reporting that pretax profit fell to GBP72.2 million in the year ended February 27, from GBP78.3 million a year earlier.
The profit drop was due to GBP17.2 million in exceptional costs booked in the first half of the year relating to the closure of its clearance stores, reorganisation costs and VAT-related legal and professional fees.
"Looking forward, whilst we face challenging market conditions for the fashion sector overall, and trading since the year end has been subdued, we remain confident in our ability to make further progress this year," N Brown Chief Executive Angela Spindler said.
It was a good day for banking stocks on the whole, with the FTSE 350 banks sector index ending up 1.8%. Virgin Money, the FTSE 250 bank, said it made good progress across its mortgages, credit cards and savings products in the first quarter of 2016. The brief update comes ahead of a more detailed release due on May 4.
Ian Gordon, an Investec analyst with a Buy rating and 425.00 pence price target on the stock, said the update came as no surprise given British Bankers' Association's February mortgage data, which showed approvals at an eight-year high. The stock closed down 0.4% at 341.20p, having traded as high as 353.00p.
Metro Bank, the UK's first new high-street bank in more than a century, could break even in the second half of 2016 and make its first profit the following year, analysts at Jefferies said, after the lender reported that its first-quarter underlying loss narrowed.
Having raised GBP400 million in an initial public offering on the Main Market of the London Stock Exchange in March, Metro Bank said it made a GBP7.9 million loss after tax on an underlying basis excluding listing costs in the three months ended March 31, narrowing from the GBP8.5 million loss the corresponding quarter a year earlier.
Joe Dickerson, analyst at Jefferies with a Buy rating and 3,000.00 pence price target on the stock, said the numbers gave him "conviction" that Metro can be profitable in 2017. The stock closed up 1.2% at 2,031.92p.
According to his estimates, Metro Bank is on course for a GBP16.0 million pretax loss in 2016, which would be a narrowing from GBP56.8 million a year earlier. Dickerson then sees Metro Bank making a GBP23.4 million pretax profit in 2017.
The focus for Tuesday will be on the European Central Bank, which releases its monetary policy decision at 1245 BST, followed by a press conference with President Mario Draghi later at 1330 BST in Frankfurt.
Analysts are not expecting the central bank to announce new easing measures, following the significant package launched in March, but instead it is expected to review its quantitative easing programme and potentially discuss more aggressive monetary policy tools including so-called helicopter money.
In March, the main refinancing rate, which the ECB uses to boost liquidity, was cut by five basis points to a record low 0.0%. The already-negative deposit rate was cut by 10 basis points to -0.40%, and the central bank also made a surprise five-basis-point cut to its marginal lending facility rate to 0.25%.
In addition, the ECB expanded by EUR20 billion to EUR80 billion the monthly purchases it makes under the asset purchase programme, the mechanism used for quantitative easing.
Elsewhere in the economic calendar, UK retail sales are at 0930 BST at the same time as public sector net borrowing. US initial and continuing jobless claims are out at 1330 BST, as is the Philadelphia Federal Reserve manufacturing survey.
Later is US housing price index at 1400 BST and a preliminary reading of eurozone consumer confidence at 1500 BST.
In the UK corporate calendar, there are third-quarter results from broadcaster Sky, drinks giant SABMiller issues a trading statement and miner Anglo American releases first quarter production results.
There are also trading statements from bookmaker Ladbrokes, IT infrastructure services provider Computacenter, pet products and services retailer Pets at Home Group, industrial property investor SEGRO and transport operator Go-Ahead Group. Precious metals miner Acacia Mining releases first quarter results.
By Neil Thakrar; [email protected]; @NeilThakrar1
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Anglo AmericanVirgin Money HoldingsRio TintoBHP Billiton PLCMetro BankBrown GroupGKN PLC