10th May 2016 11:04
LONDON (Alliance News) - Stock prices in London were higher Tuesday midday, after sentiment was supported by stable inflation data from China, while outsourcer Capita and budget airline easyJet were among the best FTSE 100 performers after releasing earnings and trading updates.
The FTSE 100 index was up 0.7%, or 44.89 points, at 6,159.70. The FTSE 250 was up 0.5% at 16,764.38 and the AIM All-Share was up 0.2% at 724.77.
"Equity markets are gaining ground this morning thanks to Chinese inflation data (deflation data actually) which surprised to the upside for producer prices while consumer price growth held firm," said Mike van Dulken, head of research at Accendo Markets.
China's consumer price inflation remained stable yet again below the government's full-year target in April and producer prices dropped at a slower pace from last year, providing ample space for policy manoeuvre, National Bureau of Statistics data revealed.
Consumer prices climbed 2.3% on a yearly basis for the third straight month in April, matching economists' expectations, but below the full-year target of 3%. On a monthly basis, consumer prices decreased 0.2%, but that was slower than the 0.4% decline seen in March.
Another report from the NBS showed that producer prices declined by a less-than-expected 3.4% in April from last year. Economists had forecast prices to decrease 3.7%, after easing 4.3% in March. Month-on-month, producer prices advanced 0.7%, which was the second consecutive rise.
"This update has gone some way to offset the market fears that dragged markets lower yesterday after soft Chinese trade data over the weekend revived concerns about the nation's transition/growth/slowdown," Accendo's van Dulken noted.
The Shanghai Composite ended flat, while the Hang Seng index in Hong Kong closed up 0.4%. In Tokyo, the Nikkei 225 index ended up 2.2%.
Also released early Tuesday, like-for-like sales in the UK were down 0.9% on year in April, the British Retail Consortium said in a report, falling short of forecasts for an increase of 0.5%, following the 0.7% decline in March.
Meanwhile, the UK visible trade deficit narrowed slightly in March on higher exports, the Office for National Statistics said. The deficit on trade in goods fell to GBP11.20 billion from GBP11.40 billion in February. The expected level of deficit was GBP11.45 billion.
German industrial production declined at the fastest pace since August 2014, Destatis reported. Industrial production decreased 1.3% on a monthly basis in March, following a revised 0.7% drop in February. This was the second consecutive decline and the biggest since August 2014, when output slid 2.5%. Economists had forecast a 0.2% fall for March.
Still in the economic calendar Tuesday, US JOLTS job openings are due at 1500 BST, followed by American Petroleum Institute weekly crude oil stocks at 2130 BST.
Stocks in New York were called for a positive open, with the Dow 30, S&P 500 and Nasdaq 100 indices all pointed up 0.5%.
In Europe, the CAC 40 index in Paris and the DAX 30 in Frankfurt were up 1.1% and 1.2%, respectively, after the negotiations between the eurogroup and the Greek government over the country's debt progressed on Monday. Eurozone finance ministers expressed hope that a deal allowing the cash-strapped country to tap further bailout aid and ease its debt burden can be reached within the next two weeks.
"This is the first time there is clarity on debt relief, as well as a clear signal that eurozone member states are willing to act on Greek debt," said analysts at UBS.
Athens and its creditors have struggled for months to agree on new reforms and cost-cutting measures that would allow Greece to receive the next tranche of its third, EUR86 billion bailout. However, pension cuts and income tax hikes passed by the Greek parliament late Sunday had helped reinvigorate the negotiations.
On the London Stock Exchange, Capita was the best blue-chip performer, up 5.7%, after it affirmed its organic revenue growth target for 2016 following a solid start to the year. Capita said it has seen increased organic growth in its divisions so far in 2016 and said its bid pipeline provides greater visibility and confidence on the outlook for 2016 as a whole.
The group said it is on track to hit its target for 4.0% organic revenue growth in 2016 and is trading in line with market expectations for the full year. Capita said it has secured GBP458.0 million in major contracts in 2016 so far.
However, analysts UBS analyst Rory McKenzie was less convinced, saying that Capita has made a slower start to the year. The GBP458.0 million contracts figure was lower compared to GBP1.2 billion in contract wins at the same time last year, with GBP1.8 billion for the whole financial year 2015.
UBS's McKenzie highlighted that Capita said in its statement that "some of these contract decisions are taking a little longer than expected to come through". However, the group expects "a flow of bid outcomes over the rest of this year", adding that "the prospect list of opportunities behind our pipeline remains strong".
Shares in easyJet were up 2.2%, albeit after heavy gyrations in early trade, as investors were undecided over the budget airline update. EasyJet said it swung to a loss in the first half of its financial year due to negative movements in foreign exchange rates, while it warned on the effect the recent terrorist attacks in Brussels will have on its third-quarter performance. However, easyJet increased its dividend payout ratio.
The low-cost airline said it suffered a GBP24.0 million pretax loss in the six months ended March 31, having made a GBP7.0 million pretax profit in the first half of the prior year. It warned that foreign exchange movements will hit second-half profit by GBP20.0 million, leading to an estimated GBP55.0 million hit in the full year ending September 30, although it said this was in line with market expectations.
easyJet also said it will increase its annual dividend payout ratio to 50% of post-tax income from 40% previously. easyJet said the increase was driven by its confidence on the future outlook for the business.
Associated British Foods was down 1.3%. The AB Sugar and Primark owner plans to sell its Chinese sugar business for USD1.0 billion, Bloomberg reported, citing a person familiar with the matter. The source said the process was in the very early stages and there is no timetable for completion. A spokesperson for AB Foods declined to comment on the story.
This comes after AB Foods revealed last month that it is buying the remaining 48.65% of Johannesburg-listed sugar producer Illovo Sugar which it doesn't already own for GBP262.0 million.
In the FTSE 250, Bovis Homes Group was up 1.4% after saying it is on track to deliver its planned growth for 2016. The housebuilder said sales prices continue to rise and said the upcoming UK vote on EU membership in June has had "no discernible impact" on the business.
Bovis said UK housing market conditions remain positive, with strong demand from home buyers benefiting from good access to mortgage finance and growth in its sales prices, driven by its "improving mix of homes". Bovis said weekly sales rates have improved in recent weeks and in the year to date, it has achieved 0.65 net private reservations per site, in line with a year earlier.
Shares in N Brown Group were down 0.4%, after Numis downgraded the online shopping and catalogue retailer to Hold from Add, saying concerns over lower forecasts for 2017 outweigh any potential buying opportunity.
"The continued downgrades remind us once again that this is a business which should trade at a discount to the sector (bad debt, weak free cash generation, lower quality brands), particularly in the absence of any margin recovery story," analyst Andrew Wade said.
By Daniel Ruiz; [email protected]
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