9th Oct 2015 11:15
LONDON (Alliance News) - A doveish set of US Federal Reserves minutes released late Thursday was propping up UK equities midday Friday, while Glencore shares led the FTSE 100 gainers after it announced a big cut to its zinc output.
The multi-commodities miner and trading house announced a 500,000 tonne per year reduction of contained zinc metal mine production across its operations in Australia, South America and Kazakhstan, in order to preserve the value of its reserves in the ground "at a time of low zinc and lead prices".
This represents around a third of Glencore's annual zinc production, it said, and will reduce fourth quarter 2015 mine production by around 100,000 tonnes of contained zinc metal. The company will suspend its operations at Lady Loretta in Australia and at Isaycruz in Peru, and will reduce operations at George Fisher and McArthur River in Australia, as well as various mine operations in Kazakhstan.
Glencore shares were trading up 11% at 133.90 pence, well above the stock's all-time low of 66.67p, which it hit at the beginning of last week.
Other miners also were helping to drive the FTSE 100 higher, with Anglo American up 6.6%, and Antofagasta up 4.9%.
The FTSE 100 index traded up 1.0% at 6,440.71 points, the FTSE 250 traded up 0.7% at 17,124.40 and the AIM All-Share index was up 0.4% at 735.25.
In Europe, the French CAC 40 index was up 1.2% and the German DAX 30 was up 1.4%.
US futures indicated a slightly higher start for Wall Street. The DJIA and S&P 500 were both pointed up 0.1% and futures in the Nasdaq 100 were just fractionally higher.
Elsewhere in the FTSE 100 in London, Sports Direct International was the worst performing blue-chip stock, down 3.5%. The sporting goods retailer said on Thursday that it is planning a multi-million investment in the Heatons store portfolio after it revealed on Wednesday that it is buying the Irish clothing retailer for EUR47.5 million.
The company said it will invest substantially in Heatons over the first full year of ownership, confirming that it expects to complete the acquisition of the shares it doesn't already own by April 2016.
Sports Direct already owns 50% of Heatons, and after acquiring the remaining 50% for EUR47.5 million, the business will have an imputed value of EUR95 million.
CMC Markets market analyst Jasper Lawler said the market saw Sports Direct's intended acquisition of Irish department stores Heatons as a "misuse of cash and a step in the wrong direction".
Shares in London Stock Exchange Group traded flat, having been lower earlier in trade, after it said late Thursday that it agreed to sell Frank Russell Co's asset management business, Russell Investments, to TA Associates for USD1.15 billion. Following the sale the London Stock Exchange Group will enter into some licence agreements with Russell Investments, the company said.
Numis analyst Jonathan Goslin said the sale is a positive development for the exchange operator even if the price at which the business was sold was not as high as it could have been, with some earlier press reports valuing the business at up to USD1.80 billion.
In the FTSE 250, oil engineering and service company Petrofac led gainers, up 10% after it said it has terminated its contract with ZPMC, the Chinese company that was constructing the Petrofac JSD 6000 deepwater multi-purpose offshore vessel, over issues with ZPMC's performance in respect of the construction.
The contract was awarded to ZPMC back in 2014, and the vessel was expected to be constructed and installed sometime in early 2017. The move may lead to Petrofac abandoning its plans to construct the new vessel, marking another strategic reversal, but "not an unpopular one", according to Investec analyst Neill Morton.
If Petrofac does abandon the new vessel, it would "bring the company full circle", back to its roots as an onshore, MENA-focused engineering and construction contractor, Morton said.
Vedanta Resources traded up 10% after the multi-commodity company reported a rise in production across most of its commodities in the first half of its financial year and said its net debt is expected to be below the USD8.0 billion mark as of the end of September.
Vedanta said it was focused on optimising its operating expenses and capital expenses in light of current market conditions, and it implemented several initiatives to generate cash savings across its business during the second quarter. This has resulted in improved cost performance and lower net debt, the company said.
In the AIM All-Share index, Renewable Energy Generation shares were up 30% at 48.25 pence. The company said it had received non-binding approaches for its subsidiary which holds all of its assets and operations from a "highly credible" unnamed potential buyer, and said the subsidiary's management plans to spin off some of its assets into a new company if the deal goes through.
The offer made would generate a net cash distribution of around 60.0 pence per share, the company said, which was a 61% premium to the closing price of the company's shares on Thursday.
Adgorithms, was the worst performer in the index, down 60%. The advertising software company warned its earnings for the full year will be materially below expectations, citing disruption in the online advertising market.
Adgorithms said severe disruption in recent weeks which has resulted in a loss of supply for major online advertising exchanges and a drop in demand from major media buyers. This had a "significant effect" on indirect revenue generation, Adgorithms said, and is expected to continue to do so in the near term. Full-year earnings will miss market expectations as a result.
On the economic front, stocks in the UK were give a boost at the open in response to the doveish minutes of the Federal Reserve's September policy meeting, which indicated that chances of a rate hike this year are waning. Most officials decided it would be "prudent" to wait for signs that problems overseas, especially in China, would dissipate.
"Recent information on real US economic activity was generally stronger than expected, but equity prices declined, the foreign exchange value of the dollar appreciated further, and indicators of foreign economic growth were generally weak," the minutes said.
Nevertheless, the Fed said it will consider raising interest rates before year's end, as policy makers "agreed that developments over the inter-meeting period had not materially altered the committee's economic outlook." However, analysts noted that the meeting took place September 16-17, a few weeks before the release of the disappointing September jobs report.
"The [Federal Open Market Committee]'s decision to leave rates on hold in September was followed by soft enough US employment data to push rate hike expectations even further into the future, prompting a sharp rally in equities and commodities, along with emerging and commodity-sensitive currencies," said Societe Generale strategist Kit Juckes.
"The FOMC minutes still show a Fed that almost - but didn't quite - summon up the courage to raise rates. The tone was doveish enough for risk appetite to go on recovering," Juckes added.
Still ahead in the economic calendar, US export and import price indices are expected at 1330 BST, while wholesale inventories are due at 1500 BST. Meanwhile, the International Monetary Fund annual meeting continues in Lima, Peru, lasting until Sunday.
By Neil Thakrar; [email protected]; @NeilThakrar1
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