30th Sep 2015 15:57
LONDON (Alliance News) - UK stocks ended higher Wednesday, with J Sainsbury and Glencore leading the charge among blue-chips, bringing a terrible quarter for the FTSE 100 index to a more optimistic close.
The large-cap index closed up 2.5% at 6,061.61, but ended the quarter down 7.0%, having been undermined by growth concerns about China and emerging markets, while expectations of a US Federal Reserve rate hike drawing closer also hurt appetite for stocks. The index was above 7,000 points as recently as June but has dipped below 6,000 points several times since the China-inspired 'Black Monday' on August 24.
The FTSE 250 ended the day up 1.5% at 16,683.02. It lost 4.8% in the quarter, having been above 18,000 points in June.
The AIM All-Share closed Wednesday up 0.7% at 725.26.
Joshua Mahony, market analyst at IG, said that despite the rally, the overall picture remains worrying after the worst quarter in four years.
"Today’s rally is one part of such a recovery, but for now, we remain firmly below the 6,123 level which would bring about hope for a more protracted period of upside for the FTSE," Mahony said.
European equities joined the rally, with the French CAC 40 closing up 2.6% and the German DAX 30 ending up 2.2%. Earlier, Asian equities similarly had posted a strong trading session. The Japanese Nikkei 225 index closed up 2.7%, the Hang Seng rose 1.4% and the Shanghai Composite added 0.5%. Shanghai will now be closed for a week to celebrate Chinese National holiday, while Hong Kong will be closed on Thursday.
On Wall Street at the London close, the Dow Jones Industrial Average was up 1.4%, the S&P 500 was up 1.5% and the Nasdaq Composite was up 1.8%.
US private sector jobs growth surpassed expectations in September, reinforcing hopes that the Federal Reserve is on track to raise interest rates this year. The payroll processor ADP released a report Wednesday showing stronger-than-expected private sector job growth in September, driven by strong jobs growth at large businesses.
The report said private sector employment jumped by 200,000 jobs in September following a downwardly revised increase of 186,000 jobs in August. Economists had expected an increase of about 190,000 jobs, which would have matched the job growth originally reported for the previous month.
However, MNI Indicators said its Chicago business barometer tumbled to 48.7 in September from 54.4 in August, with a reading below 50 indicating a contraction. Economists had been expecting the business barometer to show a much more modest decrease to a reading of 53.6, which would have still indicated growth.
Philip Uglow, chief economist at MNI Indicators, said: "While activity between Q2 and Q3 actually picked up, the scale of the downturn in September following the recent global financial fallout is concerning."
"We await the October data to better judge whether this was a knee jerk reaction and there is a bounce-back, or whether it represents a more fundamental slowdown," he added.
In the UK, data from the Office for National Statistics showed that gross domestic product grew 0.7% from the first quarter, unrevised from the second estimate published on August 28. This was faster than the 0.4% economic expansion seen in the first quarter. However, on a yearly basis, GDP gained 2.4%, revised down from 2.6% estimated previously.
Investec economist Chris Hare noted that GDP continued to be driven by strong domestic demand and despite the "rosier picture" the data paints of the recovery, it is unlikely to encourage the Bank of England to raise interest rates more quickly than expected.
"Our view is still that the [monetary policy committee] will begin its 'gradual and limited' course of rate rises in Q1 next year," Hare said.
On the UK corporate front, Sainsbury's spent the day as one of the top fliers in the FTSE 100 and closed up 12%. The grocer said its full-year underlying pretax profit will be "moderately ahead" of consensus after it achieved growth in sales in the second quarter of its financial year.
Sainsbury's said that total retail sales in the 16 weeks to September 26 grew 0.3% excluding fuel, but fell 1.8% including fuel. Like-for-like retail sales, however, declined for the seventh consecutive quarter, falling 1.1% excluding fuel and 3.3% including fuel. This was an improvement on the first quarter, though, when like-for-like revenue excluding fuel decreased 2.1% and total sales excluding fuel declined 0.6%.
Sainsbury's expectations for a moderately better full-year also propped up the share price of fellow supermarkets. Wm Morrison Supermarkets' shares rose up 6.0% and Tesco's climbed 7.0%.
Glencore shares posted a second day of recovery after its 29% decline on Monday. The multi-commodity miner closed up 8.0% Wednesday, building on its 17% rise on Tuesday, as it moved to defend its financial position following recent concerns about its debt pile which have caused its shares to plunge, exacerbating declines it had faced due to the tough conditions in commodities markets.
Glencore said it has "taken proactive steps to position our company to withstand current commodity market conditions", adding the company "remains operationally and financially robust" and has "positive cash flow, good liquidity and absolutely no solvency issues."
The mining sector also was supported by a bounce in copper prices. Jasper Lawler, market analyst at CMC Markets, said copper prices surged 4%, helping shares in KAZ Minerals, which closed as the best performer in the FTSE 250 up 16%.
Entertainment One was the worst mid-cap performer after the media company said it has agreed to buy 70% of 'Peppa Pig' producer and creator Astley Baker Davies, which it will fund through a significantly discounted rights issue to raise GBP193.6 million.
Entertainment One said it plans to raise the GBP195.3 million by way of a 4 for 9 rights issue of around 131.5 million new shares at a price of 153.0 pence, a 44% discount to its closing price of 272.0p Tuesday. The company ended down 8.8% to 248.00 pence
Astley Baker Davies jointly holds the ownership rights to the 'Peppa Pig' franchise, a big growth driver for Entertainment One. The company said that through this acquisition it will increase its share of the earnings from 'Peppa Pig' to 85% from 50%. Analysts from Numis and N+1 Singer were supportive of the deal, with Numis calling it "strategically sensible".
In the AIM market, Serica Energy shares rose 72% after it said it has defied the market downturn by entering production in the UK North Sea, an area under increasing pressure due to lower oil prices, and said it has a healthy cash balance and no debt with a wide range of assets to push forward with.
The North Sea oil company reported a USD639,000 pretax loss in the first six months of 2015, narrowing from the USD2.6 million loss a year earlier. It generated its maiden revenue of USD2.2 million after starting production in the half. The loss also narrowed due to administrative expenses being reduced to USD1.5 million from USD2.2 million and due to lower share-based payments.
Indian online fashion retailer Koovs reported a pretax loss in its last financial year as it increased marketing and overhead costs in a bid to build the online retailing business, although revenue rose as visits to the website continue to grow.
Koovs said that it made a pretax loss of INR922.6 million in the year ended March 31, 2015, although revenue rose to INR204.1 million. This compares with a INR202.2 million loss in the six months to March 31, 2014 on revenue of INR64.4 million. Profit was hit by higher marketing expenditure in an Indian market which Koovs said is "growing extremely quickly", adding that heavier-than-anticipated marketing investment will continue in order for it to achieve its goals in the competitive environment. The company's shares traded down 33% in London.
In the economic calendar Thursday, there are Japanese Tankan manufacturing outlook index readings at 0050 BST, the Chinese manufacturing and non-manufacturing purchasing managers' index at 0200 BST, and Nomura's manufacturing PMI for Japan and Caxin manufacturing and services PMI for China, both at 0245 BST.
After the London open, UK Halifax house prices are at 0800 BST, before a raft of Markit manufacturing PMI readings from France at 0850 BST, Germany at 0855 BST, the eurozone at 0900 BST, the UK at 0930 BST, and the US at 1445 BST. There is also the Institute for Supply Management manufacturing PMI at 1500 BST, alongside US construction spend.
The UK corporate calendar is thinner on Thursday as the new quarter begins, with food producer Cranswick issuing a second quarter trading statement, exhibitions and conferences organiser ITE Group issuing a trading update and Pantheon International Participations reporting full-year results.
By Neil Thakrar; [email protected]; @NeilThakrar1
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