15th Dec 2016 08:32
LONDON (Alliance News) - London stock indices were mixed just after the open on Thursday as investors reacted to the US Federal Reserve's interest rate increase on Wednesday, and its projection of three rate hikes in the new year.
The FTSE 100 index was up 0.1%, or 7.91 points, at 6,957.10, having opened modestly lower. The FTSE 250 was down 0.1% at 17,660.43 and the AIM All-Share was flat at 825.32.
The BATS UK 100 was down 0.1% at 11,760.51, the BATS 250 was down 0.2% at 16,065.06 and the BATS Small Companies was down 0.2% at 10,377.12.
European stocks outperformed London. The CAC 40 in Paris was up 0.6% and the DAX 30 in Frankfurt was up 0.5%.
In Asia, the Japanese Nikkei 225 index closed up 0.1%, the Shanghai Composite ended down 0.7% and the Hang Seng in Hong Kong finished down 1.8%.
Wall Street closed lower on Wednesday, after the Fed's decision. The Dow Jones Industrial Average ended down 0.6%, the S&P 500 index down 0.8% and the Nasdaq Composite down 0.5%.
The US central bank met market expectations by raising its target range for the Fed funds rate by 25 basis points to between 0.50% and 0.75%. The Fed said that "realised and expected labour market conditions and inflation" were at levels to justify a hike in the key short-term rate.
However, the Federal Open Market Committee's dot plot of future interest rate expectations surprised the market by indicating three rate increases in the second half of 2017, up from the two indicated in the September dot plot. 15 of the monetary-policy committee's 17 participants expect at least two increases in increments of 0.25 percentage point, according to a summary of the Fed's economic projections. 11 of the 17 anticipate three hikes next year.
The FOMC's economic projections largely ignore potential fiscal stimulus from President-elect Donald Trump in 2017, which the market expects to lift growth if implemented.
The Fed's March policy meeting will be the most important central bank meeting of the first quarter of 2017, said Kathleen Brooks, research director at City Index Direct. She noted that this will be the meeting when the next dot plot is revealed and comes after Trump has been in office for a few months.
"If Trump's desire to have a fiscal stimulus plan on steroids is approved by Congress, then it is hard to see how we won't get a larger upgrade to growth, employment and inflation rates at the Fed, which could lead to more rate hikes next year, potentially earlier than is currently expected," Brooks commented.
The hawkish Fed statement gave a boost to the dollar, but damaged the price of gold. Just after the European equities open on Thursday, the metal traded at USD1,135.98 an ounce, considerably lower than the USD1,163.41 an ounce seen at the close on Wednesday.
Gold miners Fresnillo, down 8.6% and Randgold Resources, down 6.9% were the biggest fallers in the FTSE 100 early Thursday. In the FTSE 250, Acacia Mining was down 5.9%, Hochschild Mining, down 5.4% and Centamin down 4.3%.
The central bank theme will continue on Thursday with the Bank of England's policy decision at midday in London. The BoE is not expected to make any changes to its policy stance and will maintain its neutral policy bias following the resilience seen in the UK economy since the Brexit vote.
Elsewhere in the economic calendar, Markit manufacturing, services and composite purchasing managers' index readings for the eurozone are at 0900 GMT. UK retail sales data are at 0930 GMT.
In the US, initial and continuing jobless claims data are at 1330 GMT, as well as the consumer price index and the Philadelphia Fed manufacturing survey. At 1445 GMT is the Markit manufacturing PMI for the US.
In UK company news, Centrica was the best blue-chip performer in London, up 2.3%. The British Gas owner said it expects 2016 results to exceed the original guidance issued at the end of last year, after a strong energy marketing and trading performance combined with further cost efficiencies.
Centrica said it expects to deliver adjusted earnings per share in 2016 of around 16.5 pence per share, meaning the company is still expecting a decline from the 17.2 pence EPS reported in 2015.
"Our performance in the second half of the year has been strong, and we expect to exceed our 2016 targets. We have made considerable progress in reshaping our portfolio and capabilities to deliver a robust platform for customer-focused growth," said Chief Executive Iain Conn.
GVC Holdings was the best performer in the FTSE 250, up 5.0%, after it said it expects net gaming revenue and earnings will be at the upper end of market expectations for 2016.
Market expectations for GVC's proforma net gaming revenue are between EUR852 million and EUR885 million, and market expectations for proforma adjusted earnings before interest, tax, depreciation and amortisation are between EUR202 million and EUR205.5 million.
The sports betting and gaming group said daily net gaming revenue in the fourth quarter to date is up 12% year-on-year, with sports daily NGR up 19% and gaming/other daily NGR up 8%.
GVC added that the positive momentum across the business combined with strong cash generation gives it confidence to announce a 49% increase in the special dividend to 12.5 pence per share.
Online takeaway delivery company Just Eat said it is buying UK peer hungryhouse Holdings and Canadian online food delivery firm SkipTheDishes.
Just Eat is buying hungryhouse from Delivery Hero Holding GmbH for an initial GBP200 million in cash, with a further GBP40 million payable subject to hungryhouse's performance between signing and completion of the transaction.
Just Eat said the hungryhouse acquisition will significantly benefit its restaurant partners and customers by creating an enlarged customer base and increasing the breadth of choice on offer. It added that the combination of the two business will generate "compelling economic benefits of scale, with high operating leverage driving material synergies". hungryhouse operates solely in the UK.
Just Eat said it is also buying Canadian firm SkipTheDishes for an initial CAD110 million. A further CAD90 million may also be payable, subject to certain financial targets being met.
Just Eat traded up 3.4%.
By Neil Thakrar; [email protected]; @NeilThakrar1
Copyright 2016 Alliance News Limited. All Rights Reserved.
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