25th Feb 2016 16:58
LONDON (Alliance News) - London's blue-chip index posted an impressive gain Thursday, supported by well-received earnings and dividend hikes by Lloyds Banking and RSA Insurance, while lower oil prices kept US stocks from joining the European stock rally.
The FTSE 100 closed up 2.5%, or 145.63 points, at 6,012.81. The FTSE 250 ended up 1.8%, or 281.57 points, at 16,399.07, and the AIM All-Share rose 0.3%, or 1.75 points, to 688.98.
European stocks were similarly positive, with the CAC 40 in Paris up 2.2% and the DAX 30 in Frankfurt up 1.8%.
Wall Street failed to take part. The Dow Industrials was up just 0.2% at the London stock market close. The S&P 500 index was up 0.1%, but the Nasdaq Composite was down 0.1%.
"It is interesting to see such divergence between the two regions, especially the chasm in trading sentiment currently separating the FTSE and the Dow. Both have a tendency to be weighed down by their respective commodity sectors, the latter seeing an especially volatile session last night thanks to the choppy movements in the oil price," said Conner Campbell, financial analyst at Spreadex.
At the London close Brent oil was priced at USD33.75 a barrel, having earlier traded as high as USD34.60. However, Brent was still higher than the price seen at the London equities close on Wednesday, which was USD32.91 a barrel. The US benchmark WTI was at USD31.30 a barrel, down from an intraday high of USD32.25.
The gold price remained strong, quoted at USD1,237.46 an ounce at the London close but lower than the USD1,248.40 seen Wednesday.
US stock prices ignored positive economic data before the New York open. A report from the Commerce Department showed US durable goods orders jumped by 4.9% after slumping by a revised 4.6% in December. Economists had expected durable goods orders to climb by just 2.0% compared to the 5.0% drop that had been reported for the previous month.
Excluding orders for transportation equipment, durable goods orders climbed by 1.8% in January after falling by 0.7% in December.
The dollar rose against other major currencies following the data. At the close of London equity trade the pound was quoted at USD1.3940, similar to the USD1.3944 seen at the same time on Wednesday.
The euro was quoted at USD1.1029, also similar to the USD1.1034 on Wednesday.
"It appears that the US index is sorely missing the earnings-focused gains the FTSE has seen today, with the incredible, dividend driven, performances of Lloyds and RSA Insurance helping overcome any potential negative sentiment following a rough Asian session," Spreadex's Campbell said.
Lloyds Bank lifted its annual dividend and said it will return surplus capital through a special payment to shareholders, even as the lender's profit took a dent from what it hopes will be a final charge for the payment protection insurance mis-selling scandal.
With high hopes for dividend growth ahead of the results, Lloyds duly delivered. The bank lifted its ordinary dividend for 2015 to 2.25p from 0.75p the prior year, equating to a GBP1.60 billion payment. The special dividend of 0.5 pence will add another GBP356.4 million to shareholders' pockets.
Pretax profit fell by 6.7% to GBP1.64 billion in 2015. On the other hand, underlying profit, which excludes asset sales and the cost of PPI provisions, rose by 4.6% to GBP8.11 billion. The bank cut its bonus pool to GBP353.7 million from GBP369.5 million the prior year, as "conduct-related provisions...impacted negatively on profitability and shareholder returns".
The stock closed as the biggest riser in the FTSE 100, up 13%, recouping a large chunk of the losses since the beginning of 2016. The stock is now down only 4.2% year-to-date.
The performance by Lloyds read across to other UK banks, with Royal Bank of Scotland, which reports its own 2015 results on Friday, up 5.1%, and Barclays, which reports earnings next Tuesday, up 5.0%.
The FTSE 350 Banks index ended as the best performing sector index, up 6.1%. Earlier in the month, the index hit its lowest level since April 2009, as financial stocks were hit by fears surrounding negative interest rates in Europe and Japan, weak emerging markets, and generally poor sentiment about the health of the global economy.
RSA Insurance was the other stand-out performer in the FTSE 100 Thursday, closing up 9.8%, as the group delivered a 43% rise in operating profit for 2015 and hiked its dividend significantly after reinstating payouts in the wake of a significant restructuring of the business.
Operating profit before tax rose to GBP523.0 million in 2015, the insurer said, up from GBP365.0 million at actual exchange rates and from GBP334.0 million at constant currency. The operating profit was significantly ahead of analyst consensus estimates provided by the company, which had forecast GBP481.0 million.
Thanks to the robust results, RSA pushed its its final dividend payout up to 7.0 pence per share from only 2.0p a year earlier, meaning its full-year dividend rose to 10.5 pence. The previous year, the 2.0p final dividend had been the only payout.
The group's profit was helped by a strong performance in the underwriting business. Underwriting profit increased to GBP220.0 million, compared to only GBP41.0 million a year earlier, with strong underlying results from operations in Scandinavia, Canada and the UK, including a record performance in Canada.
Despite also lifting its dividend, Capita ended as the biggest faller in the FTSE 100, down 5.1%. The outsourcer said it is looking for organic revenue growth of at least 4.0% in 2016, as the the company's annual pretax profit was hit by impairment charges.
Pretax profit fell to GBP112.1 million in 2015, from GBP292.4 million in 2014. Capita lifted its dividend for the year as a whole to 31.7 pence from 29.2p. On an underlying basis, which is stated before the cost of business exits and other items, pretax profit rose to GBP585.5 million from GBP535.7 million.
In addition, Capita revealed that Chairman Martin Bolland wants to step down by the end of the calendar year. The appointment of a successor before then would allow him to step down earlier. External headhunters have been appointed to find a successor to Bolland, who has been chairman since January 2010 and a board director since 2008.
In London's mid-cap FTSE 250 index, shares in Serco Group soared 15%, boosted by the absence of more bad news in the group's full-year results.
The outsourcer said its pretax loss narrowed significantly in 2015 as the costs of its restructuring eased, but reiterated its guidance for revenue and underlying profit to fall again in 2016.
Serco, which has suffered significant writedowns on the value of its contract book in recent years, said its pretax loss narrowed significantly in the year to GBP69.4 million from GBP990.5 million as the severity of the one-off charges it had to book eased substantially.
Revenue fell to GBP3.18 billion from GBP3.60 billion as the group closed out onerous contracts, but Serco said its pipeline of bid opportunities increased by around GBP1.5 billion against the end of 2014 to GBP6.5 billion. Operating costs also fell, broadly in line with the decline in revenue.
Liberum analyst Joe Brent said the results from Serco were "reassuringly dull", while Shore Capital's Robin Speakman said the numbers "appear to show an operating performance better than the worst fears of the market and management guidance".
National Express Group was also a top mid-cap performer, up 8.9%, after it posted a big rise in pretax profit in 2015 thanks to a lack of one-off costs and said trading had been positive across the business, with revenue and margins all improving.
The rail and bus services provider said its pretax profit rose to GBP124.4 million in the year to the end of December, an 87% rise on the GBP66.5 million it posted the year earlier, when it was hit by one-off costs.
National Express will pay a final dividend of 7.645 pence per share, up from 6.95p, taking its total dividend to 11.33p, a 10% rise on the 10.30p it paid out a year earlier.
Revenue rose 2.8% to GBP1.92 billion from GBP1.87 billion, driven by good trading in National Express's bus and coach operations in the UK and US, along with the start of new rail contracts in Germany and a bus deal in Bahrain.
On Friday, the highlights in the economic calendar are the second reading of US GDP and US goods trade balances both at 1330 GMT, while personal consumption expenditure at 1500 GMT.
Earlier in the day, there is French GDP at 0745 GMT, business and economic climate surveys for the eurozone at 1000 GMT, and German inflation at 1300 GMT.
In the rest of the US calendar, there is the Reuters/Michigan Consumer Sentiment Index at 1500 GMT.
In the UK corporate calendar, the focus will be on full-year results from RBS, British Airways-owner International Consolidated Airlines Group, education publisher Pearson, and shopping centre owner Intu Properties.
There are also full-year results from bookmaker William Hill, property portal Rightmove, closed-ended investment firm Riverstone Energy, textile services company Berendsen, engineering company IMI, and Kennedy Wilson Europe Real Estate.
By Neil Thakrar; [email protected]; @NeilThakrar1
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