27th Jan 2016 08:33
LONDON (Alliance News) - London shares opened flat to lower Wednesday, with early moves driven by UK company news as investors await the US Federal Reserve decision after the London close, the first since the rate hike announced in December.
The FTSE 100 index was down 0.6% at 5,877.84 points, the FTSE 250 was down 0.1% at 16,167.84 and the AIM All-Share down 0.1% at 683.32. In Europe, the CAC 40 in Paris was down 0.3% and the DAX 30 in Frankfurt was down 0.5%.
The Royal Bank of Scotland Group was among the worst blue-chip performers, down 4.6%, after it outlined a series of additional provisions and impairments it will book in the fourth quarter which will impact its 2015 results by just over GBP4 billion, related to its pension obligations, US residential mortgage-backed securities, payment protection insurance, and on its private banking arm.
As of the end of December, RBS expects it will show a CET1 ratio of around 15.0% as a result of the charges and provisions, compared to 16.2% at the end of September.
Antofagasta was down 5.0% after the Chilean miner said its copper and gold production accelerated in the fourth quarter but said full-year 2015 production still was lower than the year before.
The group said its copper production for the fourth quarter to the end of December hit 169,900 tonnes, up 8.2% from the third quarter, thanks to higher production from its Los Pelambres and Centinela concentrates projects, plus the contribution from the Antucoya and Zaldivar mines.
For all of 2015, however, copper production dipped to 630,300 tonnes, down 11% year-on-year due to lower overall production from Los Pelambres and Centinela.
Shares in fellow miner Rio Tinto were down 2.0%. The company said that it has reached a binding agreement to sell its Mount Pleasant thermal coal assets to MACH Energy Australia for USD224 million plus royalties. With the recently announced binding agreement for the sale of Rio Tinto's interest in the neighbouring Bengalla coal joint venture, this amounts to USD830 million of agreed sales.
Mount Pleasant is a large-scale, thermal coal asset in the Hunter Valley of New South Wales with total marketable reserves of 474 million tonnes.
Aberdeen Asset Management was the best performer in the FTSE 100, up 5.2%, despite saying it continued to suffer net outflows in the quarter to the end of December, driven by continued volatility in emerging markets, and said it will cut further costs as it looks to cope in a tough investment environment.
The emerging markets fund manager, which has suffered in recent months from its exposure to a slowing Chinese economy, said it recorded net outflows of GBP9.1 billion for the quarter to the end of December, compared to the GBP12.7 billion it posted in the quarter to the end of September.
Overall, the group's assets under management at the end of September totalled GBP290.6 billion, compared to GBP283.7 billion at the end of September. The assets under management was pushed higher by the recently-completed acquisitions of Arden and Advance.
Business software company Sage Group was up 3.9% after it said its organic revenue grew in the first quarter of its financial year, with good growth in its recurring revenue stream. On a like-for-like and constant currency basis, organic revenue grew 6.6% in the quarter to the end of December.
The growth was driven by recurring revenue, where organic growth hit 10% in the quarter, helped by a 36% growth in software subscription revenue. This offset a 5.3% decline in organic revenue from software and software-related services business, an expected fall as Sage transitions its focus to subscription relationship rather than one-off sales.
Cineworld Group was at the top of the FTSE 250, up 3.2% after Nomura upgraded the cinema operator to Buy from Neutral.
The Paragon Group of Companies was up 2.5% after the buy-to-let lender and consumer debt purchases said its financial performance met its expectations in the quarter to the end of December and said it remains confident on the outlook for the buy-to-let market in the UK, despite regulatory changes.
The group said its underlying operating profit, which strips out fair value items and acquisition-related costs, rose 14% in the quarter year-on-year. Its pretax profit was GBP33.9 million for the quarter, up from GBP30.2 million.
In the AIM All-Share index, Sirius Minerals was down 19% after it said it has pushed back the definitive feasibility study for its major potash project in York. The company said it originally aimed to publish the material findings of the definitive feasibility study in January, but has now pushed this back to March.
Volatility continued in Asian stocks on Wednesday, with the Japanese Nikkei 225 index closing up 2.7%. In China, the Shanghai Composite ended down 0.5%, while the Hang Seng index in Hong Kong finished up 1.0%.
Analysts expect the Fed to make no changes to its monetary policy amid a mixture of economic concerns that include declining oil prices, a strong dollar, negative US inflation, and volatility in global equity markets.
Following the 'lift-off' announced in December, the first US interest rate hike since 2006, analysts believe the tightening path of the Fed is more likely to take another step forward in March, rather than on Wednesday. However, the combination of macroeconomic and market worries could put some doubt among the US rate-setters and push that next step back even further.
Standard Life analyst Jeremy Lawson believes that low inflation alone may not prevent another US rate hike in March, but "combined with further data disappointments and financial volatility, the risk of delay is rising".
The focus will be on the Federal Open Market Committee policy statement, released at 1900 GMT alongside the rate decision, as there is no press conference by Fed Chair Janet Yellen or inflation forecast revisions scheduled.
Societe Generale analyst Kit Juckes commented: "The statement is bound to reflect the softer economic data, tighter financial conditions, global environment and the 2% gain in the dollar's trade-weighted index since the last meeting. However, the assessment of the inflation and labour market outlook probably hasn't changed, and our US economics team haven't thrown in the towel on the idea of a March rate hike, even if the market has".
Also in the economic calendar for Wednesday, UK mortgage approvals data are due at 0930 GMT. In the US, MBA mortgage applications are at 1200 GMT, new home sales are at 1500 GMT and the Energy Information Administration crude oil stock change is at 1530 GMT.
By Daniel Ruiz; [email protected]
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