13th May 2015 09:29
LONDON (Alliance News) - London shares are higher Wednesday mid-morning, with investors awaiting the Bank of England's inflation report, due at 1030 BST, while Mondi is the best blue-chip performer after reporting a much higher quarterly operating profit.
The FTSE 100 trades up 0.7% at 6,982.00, reapproaching the 7,000 mark, while recovering some of its post-election gains after they were almost wiped out on Tuesday. Meanwhile, the FTSE 250 is up 0.8% at 17,834.94, and the AIM All-Share index is up 0.3% at 758.98.
European stocks also are higher, with the CAC 40 in Paris up 1.2%, and the DAX 30 in Frankfurt up 0.7%.
Mondi is leading the FTSE 100 gainers, up 10%, after reporting a 29% increase in operating profit excluding exceptional items in the first quarter of 2015, driven by higher volumes and lower input costs across most of Europe, strong contributions from capital projects and acquisitions, and higher selling prices in Russia and South Africa.
The paper company said its underlying operating profit in the three months to end-March, which excludes what it terms as special items, was EUR236 million, up from EUR183 million a year earlier, and up 9% from EUR216 million in the fourth quarter of 2014.
Meanwhile, Barratt Developments is up 3.9%. The housebuilder said it remains on track to report a significant improvement in its results in the year to end-June, as it expects housing completions to be ahead of previous guidance and as it reported an 18% increase in total forward sales by May 10.
The company said it now expects housing completions for the year to June 30 to be about 16,100, up from 14,838 in its last financial year, and it said forward sales including joint ventures stood at GBP2.59 billion as of May 10, up from GBP2.20 billion on May 11, 2014.
SABMiller shares are up 2.2%. The brewer reported flat pretax profit in its recently ended financial year, as its revenue fell very slightly, it was hit by currency exchange rate changes, and it booked costs associated with joint ventures and acquisitions. The company, whose brands include Grolsch, Peroni, Coors Light beers and Bulmers cider, reported a pretax profit for the year ended March 31 of USD4.8 million, flat on the year before, on revenue of USD22.1 million, down slightly from USD22.3 million.
TUI Group is up 1.8% after saying its operating loss narrowed in the first half of its financial year, as revenue rose and its hotels and resorts and cruises businesses delivered a significant increase in profitability, and it retained its profit guidance for the year as a whole. The travel company reported a loss before interest, tax and amortisation of EUR292.0 million for the six months to end-March, compared with EUR341.4 million a year earlier, when profits on asset sales and a refinancing benefit are excluded
Compass Group is the biggest faller, down 3.4%, even though it reported a rise in profit in the first half of its financial year, boosted by strong sales in North America and emerging markets. The catering and outsourcing company reported a 4.9% rise in pretax profit for the six months to March 31 to GBP621 million, while its organic revenue grew 5.7% to GBP8.9 billion. Its operating margin increased by 10 basis points to 7.5%.
Panmure Gordon analyst Anna Barnfather is not positive on Compass. "We retain our Hold given the lack of positive catalysts, concerns over sustainability of retention rates and slowdown in margin progression/cost inflation."
Severn Trent, up 1.3%, said it is selling its water purification business to joint venture partner Industrie De Nora in a deal that values the whole unit at USD99 million and Severn Trent's share at USD81.2 million. The water utility said its share will be settled by a cash payment of USD20.1 million, or GBP12.6 million, and the rest through the settlement of net intercompany debt. It expects the sale to complete at the end of June.
The pound rose after UK unemployment declined to the lowest since 2008 during the first quarter of 2015 and average earnings increased by more than expected, data from the Office for National Statistics showed.
The ILO jobless rate came in at 5.5% during January to March period compared to 5.7% in October to December quarter. The rate came in line with expectations. There were 1.83 million unemployed people in the first quarter, which was down by 35,000 from October to December, the smallest quarterly fall since June to August 2013. The claimant count rate remained unchanged at 2.3%, while it was expected to fall to 2.2%.
In the first quarter, UK average earnings including bonus increased 1.9%, faster than the expected increase of 1.7%. Excluding bonus, pay for employees climbed 2.2%.
The sterling rose to levels it hasn't seen since mid-December at USD1.5738.
"As we await the UK Quarterly Inflation Report, there are growing signs that we will see a balanced and less hawkish tone from the BoE, which should parlay into additional gains for the FTSE," says Brenda Kelly, head analyst at London Capital Group.
Oanda analyst Craig Erlam adds: "Market interest rate hike expectations appear to have been widely pushed back to next year now, but with the economic recovery clearly on a strong footing and rising oil prices likely to provide a lift to the inflation outlook, I wonder if [Governor Mark] Carney may put later this year back on the table. It will also be interesting to hear the banks view on the election outcome and what impact this will have."
The eurozone reported Q1 GDP growth of 0.4% quarter-on-quarter, slightly below expectations of a 0.5% rise, and 1.0% growth year-on-year against economists forecasts of a 1.1% rise.
US futures point to a higher opening, with the DJIA and the S&P 500 pointed up 0.4%, and the Nasdaq 100 seen up 0.5%.
"This afternoon will see the US release the latest retail sales figures [due at 1330 BST] which are expected to reflect a contraction in the monthly levels, further underlying the general cooling of economic data that has been coming out of America, and partially explaining why currency markets have generically pushed the date for interest rate rises out to September," says IG analyst Alistair McCaig.
Also in the economic calendar Wednesday, in the US, EIA crude oil stocks are at 1530 BST.
By Daniel Ruiz; [email protected]
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Related Shares:
Barratt DevelopmentsCompass GroupSevern TrentMondiSAB.L