17th Apr 2014 15:59
LONDON (Alliance News) - The FTSE 100 closed higher Thursday, ensuring that it ended the shortened Easter week comfortably in the black, as some better-than-expected US data and some strong earnings reports from major US banks boosted sentiment.
UK stocks traded in tight ranges early, but moved sharply higher after US banks Morgan Stanley and Goldman Sachs Group Inc beat expectations with their respective first-quarter earnings.
Morgan Stanley posted first-quarter net income from continuing operations of USD1.45 billion, or USD72 cents per share, compared with USD936 million, or USD0.49 per share, a year ago. Excluding debt value adjustment, its earnings came in at USD1.4 billion, or 68 cents per share, up from USD1.2 billion, or 60 cents a share, a year ago, and beating estimates of 60 cents.
Goldman Sachs said its first-quarter earnings decreased to USD1.95 billion, or USD4.02 per share, from USD2.19 billion, or USD4.29 a share, in the previous year. Analysts' expectations, which usually exclude special items, were for USD3.45 a share for the quarter.
US earnings are under the microscope at the moment as concerns over the high valuations of certain stocks have been weighing heavily on stock markets around the world in recent sessions.
Stocks were further lifted Thursday by a strong US jobless claims report. The US Labor Department revealed that initial jobless claims inched up to 304,000 in the week ended April 12, from the upwardly revised figure of 302,000 in the previous week. However, this exceeded the 315,000 that had been expected by economists.
The FTSE 100 closed up 0.6% at 6,625.25, meaning it ended the week 1% higher than it opened it, the FTSE 250 closed up 1% at 15,907.91, and up 0.1% for the week, and the AIM All-Share closed up 0.6% at 829.20, but down 0.7% for the week.
In Europe, the CAC 40 in Paris and DAX 30 in Frankfurt closed up 0.6% and 1% for the day, respectively.
After a modestly lower open, US stocks were trading mixed. At the close of the European equity markets, the DJIA is down 0.1%, the NASDAQ Composite is up 0.1%, and the S&P 500 is up 0.2%.
At the individual UK stock level, Babcock International Group closed down 12% as more than 140 million new shares related to its March 27 rights issue were admitted to the market.
Diageo, closing down 3.5%, was the next biggest loser. The spirits and alcoholic beverage company reported another dip in sales in the third quarter, as it was hit by a hefty slowdown in Asia and other emerging markets. It said that organic net sales were down 1.3% in the third quarter ended March 31, while volume fell by 1% overall. It also said current exchange rates would wipe around GBP330 million off of its operating profit for the year ending June 30.
Synergy Health was a big faller in the FTSE 250, ending the day down 0.6%. The company, which provides a range of outsourced health services such as medical device sterilisation, infection control, laboratory services and hospital linen, said exchange rate movements and the postponement of surgical procedures due to bad winter weather in Europe and the US meant its revenue was lower than expected in the last quarter.
At the other end of the spectrum, blue-chip RSA Insurance Group closed up 2.3%. Shares in the insurer jumped after it said it has sold its operations in the Baltics and Poland for GBP300 million in cash.
The company's chief executive, former Royal Bank of Scotland boss Stephen Hester, had set out plans to raise GBP300 million from disposals in late February, and less than two months later he has sold the Baltic and Polish operations for exactly that amount in cash. The disposal is expected to add around GBP200 million to RSA’s tangible net assets, improving its capital strength.
The insurer was forced to launch a GBP773.0 million rights issue as part of a package of measures to shore up its balance sheet after it found a GBP200 million capital hole in its Irish business late last year. The measures included the scrapping of its dividend, a cover policy underwritten by Berkshire Hathaway, and plans to raise GBP300 million from business disposals in 2014.
Hester said the insurer will continue to evaluate further disposals of businesses it considers non-core, and expects to sell some this year.
Life insurers St. James's Place, Resolution, and Aviva closed up 3%, 2.7%, and 2%, respectively, after Berenberg revised its stance on each of the companies. The bank increased its St James's Place's target price to 860.00 pence, from 715.00p, and raised Aviva's to 450.00p from 415.00p. It upgraded Resolution to Hold from Sell, but fractionally lowered its target price to 310.00p, from 320.00p.
FTSE 250-constituent Thomas Cook Group was another big winner, ending the day up 4.3%. Shares in the company jumped after it said Standard & Poor's Rating Services had lifted its outlook on the company to Positive, from Stable, following a detailed financial review of the group's progress in implementing its turnaround plan.
S&P expects that the tour operator's credit metrics will continue to strengthen as cost-saving initiatives as part of its turnaround strategy lead to earnings before interest, taxes, depreciation, and amortisation growth and debt reduction. The positive outlook reflects the likelihood of an upgrade within the next year, provided the positive operating trends continue to enhance the group's profitability and credit measures, the ratings agency said. At the moment, S&P's rating of the Group remains unchanged at "B".
In the forex market, the pound hit a multi-year high against the dollar in early trading. Sterling hit a high of USD1.6842, a level last seen in mid-November 2009. At the close of the UK equity market, the pound trades at USD1.6808, EUR1.2145, JPY171.817, and CHF1.4809.
"Over the past five years, April has been the worst month during the year for the US dollar, and this year has proven no different," said Christopher Vecchio, currency analyst at DailyFX. However, "hope (for the currency) may have been born again recently, after a series of improved consumption and inflation reports this week".
In a quiet few days due to the Easter weekend, Italian industrial orders, sales, and wage inflation data are released at 0900 GMT on Friday. On Monday, the Chicago Fed national activity index is released at 1230 GMT, ahead of the US Conference Board's leading indicator data at 1400 GMT.
On Tuesday, the US redbook index is scheduled at 1255 GMT, with housing price data soon after at 1300 GMT. US existing home sales information and the Richmond Fed manufacturing index is published at 1400 GMT, at the same time as the preliminary reading of eurozone consumer confidence.
In the corporate calendar, FTSE 250-listed Polymetal International releases production results Tuesday.
By James Kemp; [email protected]; @jamespkemp
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