13th Aug 2015 09:42
LONDON (Alliance News) - UK and European major indices are higher Thursday mid-morning, as risk appetite increases among investors after the Chinese central bank said it expects no further depreciation in the yuan, following a third devaluation on the currency in as many days.
The FTSE 100 is up 0.7% at 6,614.23, the FTSE 250 is up 0.8% at 17,582.00 and the AIM-All Share is up 0.2% at 750.14.
European major indices are outperforming London, with the CAC 40 in Paris up 1.8% and the DAX 30 in Frankfurt up 1.5%.
The People's Bank of China unexpectedly adjusted its daily reference exchange rate by a further 1.1% on Thursday, setting it at 6.4010 to the US dollar. On Tuesday, the bank had cut the rate by 1.9%, followed by a 1.6% drop on Wednesday.
People?s Bank of China Assistant Governor Zhang Xiaohui told a briefing on Thursday that there is no basis for depreciation to persist and the Chinese central bank is capable of keeping the currency at an equilibrium level, Bloomberg reported.
The dollar currently trades at CNY6.3889, having touched a four-year high of CNY6.4374 on Wednesday.
"Intervention yesterday and this morning's press conference, with the assurance that the [Chinese] central bank sees no reason for further depreciation and expects a stable currency, have been enough to trigger a small equity market bounce," says Societe Generale analyst Kit Juckes.
Spreadex analyst Connor Campbell believes the more measured reaction by the markets is also likely because the drop on the yuan was only by 1.1%, less than previous devaluations.
In the European economic calendar, German inflation slowed as estimated to a 5-month low in July due to lower energy prices, final data from Destatis showed Thursday. Consumer price inflation fell to 0.2% from 0.3% in June. This was the lowest rate since February, when prices gained 0.1%. Month-on-month, consumer prices advanced 0.2%, reversing a 0.1% drop in June. Both annual and monthly figures matched flash data published on July 30.
Meanwhile, French consumer prices inflation slowed unexpectedly in July after remaining steady in the previous month, figures from the statistical office Insee showed Thursday. The consumer price index rose 0.2% year-over-year in July, slightly slower than the 0.3% increase in the previous month. Economists had expected prices to remain steady at 0.3% It was the fourth successive monthly rise.
The European Central Bank is expected to release the minutes of last month?s monetary policy meeting at 1230 BST.
Oanda analyst Craig Erlam says that while the ECB is not currently considering a change to its monetary policy, the minutes can offer insight into the pace and longevity of its quantitative easing program when taking into consideration current conditions.
On the London Stock Exchange, Coca-Cola HBC is the best blue-chip performer, up 10%, after the soft drinks bottling company reported a rise in profit in the first half of its financial year as it benefited from growth in volumes and margins, although its revenue was hit by adverse foreign exchange rates.
It reported a pretax profit in the six months ended July 3 of EUR164.7 million, up from the EUR129.2 million profit it made in the same period the year before, although revenue did slip to EUR3.15 billion from EUR3.18 billion.
Shore Capital upgraded Coca-Cola HBC to Hold from Sell, as the broker believes the company reported a "robust" and "surprisingly strong" set of results.
Tourism and travel operator TUI Group is the second biggest gainer in the FTSE 100, up 6.2%. It posted higher revenue for the third quarter of its financial year and for the first nine months, despite its quarter being clouded by the terrorist attack in Tunisia.
TUI said its earnings before interest, taxation and amortisation rose to EUR130 million from EUR92 million in the third quarter to the end of June and its loss for the first nine months of the year narrowed to EUR239 million from EUR242 million. It said it is currently confident of delivering underlying earnings growth of 12.5% to 15.0% for its current financial year, with trading in the summer months so far proving solid.
Trading in the opposite direction is G4S, down 3.3%, after being downgraded by Goldman Sachs to Sell from Neutral, and by Exane BNP to Neutral from Outperform.
Other blue-chips as Rio Tinto, Diageo, BT Group and Pearson, are also trading lower after going ex-dividend, meaning new buyers no longer qualify for the latest dividend payout.
In the FTSE 250, Ashmore Group leads the mid-cap gainers, up 4.6%, after Citigroup upgraded the emerging markets asset manager to Buy from Neutral.
Michael Page International is up 3.7%. The recruitment company said will pay a special dividend of 16.0 pence per share, having not paid a special dividend a year earlier, in addition to a 5.3% rise in its interim dividend payout to 3.6 pence from 3.42 pence
Its pretax profit rose to GBP40.4 million, up from GBP35.6 million, on the back of higher revenue and gross profit in the first half which defied the currency challenges the group faces. Total revenue rose to GBP530.4 million from GBP512.2 million and its gross profit, or net fee income, rose to GBP280.9 million from GBP263.7 million.
Ophir Energy is by far the biggest mid-cap loser, down 4.6%. The oil and gas company said it has increased its full year production guidance and slashed its spending for the rest of the year as the company tries to restructure the company for a USD50 per barrel environment after swinging to a substantial pretax loss in the first half of 2015.
It swung to a large USD123.3 million pretax loss in the first half of 2015 from a USD589.4 million profit as revenue came in at USD86.5 million compared to nil a year earlier.
Still in the economic calendar, in the US, retail sales and initial and continuing jobless claims are expected at 1330 BST. US Business inventories are expected at 1500 BST.
By Daniel Ruiz; [email protected]
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