19th May 2016 07:31
LONDON (Alliance News) - Shares in London were lower after the open Thursday, with miners and oil stocks dragging on the FTSE 100 as a strong dollar hit commodities prices after the minutes from the Federal Reserve released on Wednesday suggested that a US rate hike in June is a firm possibility.
The FTSE 100 was down 1.3%, or 73.24 points, at 6,092.56. The FTSE 250 was down 0.8% at 16,741.35 and the AIM All-Share was flat at 724.97.
Miners were leading the blue-chip decliners, with the FTSE 350 Mining sector index down 4.3%. Anglo American was down 5.0%, BHP Billiton down 4.4% and Rio Tinto down 3.8%.
Gold miners were also affected as the precious metal price declined, with Fresnillo and Randgold Resources dropping 4.5% and 4.0%.
Gold was standing at USD1,253.54 an ounce soon after the open Thursday, compared to USD1,272.11 an ounce at the close Wednesday.
Oil producers were also hit by lower crude prices, with Royal Dutch Shell 'A' shares down 3.7% and BP down 1.5%.
Brent oil was quoted at USD48.03 a barrel Thursday after the open, against USD49.54 a barrel at the equities close on Wednesday. The North Sea benchmark hit a new 2016 high on Wednesday at USD49.81.
The Fed minutes from the April 26-27 meeting showed "most" participants in the Federal Open Market Committee "judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the committee's 2% objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June."
Lloyds Bank economist Rhys Herbert commented: "The minutes of the April FOMC meeting proved to be more hawkish than markets expected. The probability markets place on a June Fed policy rate rise moved up sharply afterwards to 32% from only 4% late last week".
"A few" Fed members considered it "appropriate" to raise interest rates already last month, according to the notes. The rising labour force participation rate has increased while the pool of available workers is shrinking, the minutes noted. Several Fed members, who come from around the US, reported in the meeting that businesses in their regions "had seen a pickup in wages, shortages of workers in selected occupations, or pressures to retain or train workers for hard-to-fill jobs."
The dollar rose against other currencies after the minutes release, with the pound at USD1.4582 Thursday after the open, compared to USD1.4620 at the London equities close on Wednesday.
Wall Street ended mostly unchanged Wednesday, with the Dow 30 and the S&P 500 closing flat and the Nasdaq Composite up 0.5%.
Elsewhere in London, Royal Mail was down 1.9%. The FTSE 100 postal and logistics operator reported a sharp fall in annual pretax profit as it pursues its business transformation plan, but it pushed up its dividend as it said it had delivered a resilient performance within a challenging market.
Royal Mail said pretax profit for the 52 weeks to March 27 was GBP267.0 million, down from GBP400.0 million the year earlier, due to the costs related to its ongoing restructuring. Stripping out those costs and in constant currencies, operating profit grew to GBP742.0 million in the financial year from GBP740.0 million the year before.
Royal Mail declared a total dividend for the year of 22.1 pence, up 5.2% from 21.0p the year before.
National Grid was down 2.4% even though it said its pretax profit rose by 16% in its recently completed financial year. The gas and electric utility firm posted results that beat market expectations and confirmed its dividend has increased in line with its policy.
The group said its pretax profit rose to GBP3.03 billion in the financial year ended in March from the GBP2.62 billion reported a year earlier, whilst pretax profit before exceptional items rose by 9.0% to GBP3.14 billion from GBP2.87 billion.
Meanwhile, insurers Admiral Group and RSA Insurance were the best blue-chip performers, up 2.0% and 1.7%, respectively, after upgrades from JPMorgan. The broker lifted Admiral to Neutral from Underweight, while it increase its recommendation on RSA to Overweight from Neutral, according to traders.
Also among the few gainers, 3i Group was up 1.3%. The private equity investor said it delivered a higher total return and net asset value per share for the year to the end of March as it continued its momentum in realising value from its assets.
3i said its total return for the year to the end of March was GBP824.0 million, up from GBP659.0 million a year earlier, while its net asset value per share was 463.0 pence at the end of the financial year, compared to 396.0p at the same point a year earlier. 3i said it will pay a final dividend of 16.0p for the year, taking the total payout to 22.0p, up 10% from 20.0p a year earlier.
In Europe, the CAC 40 in Paris was down 0.6% and the DAX 30 in Frankfurt was down 1.0%.
In Asia on Thursday, the Japanese Nikkei 225 index ended flat. In China, the Shanghai Composite is rose 0.2%, while the Hang Seng index in Hong Kong is down 0.7%.
Following the Fed minutes on Wednesday, the European Central Bank releases Thursday at 1230 BST the accounts of its monetary policy meeting held on April 21.
April UK retail sales data, due at 0930 BST, are likely to grab market attention Thursday morning. Expectations are for retail sales to rise 0.5% month-on-month, following a 1.3% decline in March. On a yearly basis, retail sales are expected to grow 2.5%, slower than the 2.7% rise seen in March.
Also in the economic calendar, eurozone construction output is due at 1000 BST. In the US, the Chicago Fed national activity index is due at 1330 BST, as well as initial and continuing jobless claims and the Philadelphia Fed manufacturing survey. The US CB leading indicator is due at 1500 BST, while EIA Natural Gas Storage change is at 1530 BST.
By Daniel Ruiz; [email protected]
Copyright 2016 Alliance News Limited. All Rights Reserved.
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