11th Mar 2015 17:17
LONDON (Alliance News) - UK shares ended mixed Wednesday, with some blue-chip stocks in the FTSE 100 index benefiting from late bargain hunting after Tuesday losses, but with weaker-that-expected UK industrial production data and some out-of-favour mining and oil stocks limiting gains.
The FTSE 100 was lower most of the day before a flurry of late buying pushed it higher, closing up 0.3% at 6,721.51, while the FTSE 250 ended up 0.2% at 16,948.85 The AIM All-Share closed flat at 711.59.
"Bargain hunters appear to be out in force, as once again corrections in equity markets are being viewed as buying opportunities," said IG Markets analyst Alastair McCaig.
Mining and oil stocks were among the biggest fallers in the FTSE 100, with Antofagasta down 1.7%, Fresnillo down 1.1%, Glencore down 0.6%. Meanwhile, Weir Group, down 0.9%, BG Group, down 1.3%, and BP, down 0.5%, and Tullow Oil, down 1.0%, also were among the worst performers in the blue-chip index.
The FTSE 100 traded slightly higher at the open Wednesday, but lost all of its early gains after data from the Office for National Statistics revealed that UK industrial and manufacturing output declined unexpectedly in January. Industrial output slid 0.1% month-on-month, following a 0.2% drop in December. Economists had forecast a 0.2% rise for January. On a yearly basis, industrial output increased 1.3% in January.
Similarly, UK manufacturing output declined 0.5%, confounding expectations for a 0.2% rise. In December, output had increased 0.1%.
The pound declined against the dollar to below USD1.5000, hitting USD1.4950 just after the UK equities close, its lowest level since mid-January.
The euro also fell against the dollar, to USD1.0567, its weakest since early 2003, after European Central Bank President Mario Draghi said that the stimulus measures adopted by the bank since January - including its EUR1.1 trillion quantitative easing programme - will stabilise inflation in line with the ECB's mandated target and that the measures are working their way into the real economy.
"We can deploy - and we are deploying - monetary policy in a way that can - and will - stabilise inflation in line with our objective," Draghi said his speech at the ECB Watchers Conference in Frankfurt.
The ECB and the eurozone national central banks began asset purchases under the QE programme on Monday. The decision to buy euro-area government bonds had met strong opposition from German policymakers, who felt the deflation threat in Eurozone was not severe enough to warrant stimulus.
"This time last week we said that the euro sell off may take a break; however, we were well and truly wrong," said Kathleen Brooks, UK EMEA research director at Forex.com. "Since last week’s ECB meeting the EUR has fallen 600 pips, and is making fresh multi-year lows on Wednesday. If we keep up this pace then we could reach parity by the end of this week…"
European indices outperformed London, with the French CAC 40 ending up 2.4% and the German DAX 30 up 2.7%. At London close, US stocks were broadly higher, with the DJIA up 0.2%, the S&P 500 up 0.1% and the Nasdaq Composite flat.
In London, Prudential was among the biggest gainers in the FTSE 100, closing up 1.4% at 1,634.00 pence. Prudential shares had lost 3.1% on Tuesday after the insurer confirmed that Chief Executive Tidjane Thiam will leave to become the new CEO of Swiss bank Credit Suisse. On Wednesday, SocGen raised Prudential's price target to 1,951p from 1,530p, reiterating its Buy rating.
In the FTSE 250, Domino Printing Sciences' shares jumped 31% to 941.00p, easily the best mid-cap performer. The inket and laser printer maker said it has reached a deal to be acquired by Japanese electronics company Brother Industries for GBP1.03 billion. The offer is at 915 pence in cash per Domino share, which it said is a premium of 27% to its closing price of 721.0 pence Tuesday.
"It will be interesting to see whether the main competitors in coding and marking – Danaher or Dover – decide to counter the offer, but this is clearly being driven by the need to compete in the new (for Domino) field of digital printing, which is not its core business," said Investec analyst Michael Blogg.
Blogg expects a positive read across in the rest of the sector in light of the acquisition, saying Xaar, e2v Technologies and Oxford Instruments, amongst others, all could be highlighted as potential bid targets. Xaar closed up 3.0%, e2v added 0.6%, while Oxford Instruments lost 0.2%.
Cairn Energy, down 15% at 155.00p, and N Brown, down 17% at 338.90p, were the worst performers in the FTSE 250.
Cairn Energy said late Tuesday it is disputing a draft assessment order from the Indian Income Tax Department calling for it to pay USD1.6 billion plus interest and any penalties for the fiscal year 2006-7 in an effort to "protect its legal position and shareholder interests". The bill is about the same as Cairn Energy's entire market capitalisation.
Jefferies Wednesday downgraded the oil company to Hold from Buy, lowering its price target to 172p from 220p, saying it is awaiting further clarity on the tax claim situation in India.
N Brown warned that pretax profit from continuing operations will be below its guidance and current market expectations of GBP88 million in the recently-ended financial year, after it further reduced prices in the fiscal fourth quarter to clear stock and compete in the fashion sector. N+1 Singer reduced its price target on the home shopping business to 370 pence and estimated a pretax profit miss of around 2% for 2015. Investec moved its rating to Hold from Buy, placing its price target under review.
In the corporate calendar Thursday, Wm Morrisons Supermarkets, Serco Group, SOCO International, Cineworld Group, LSL Property Services, SIG and TT Electronics release full-year results. Computacenter, Fenner, Home Retail Group and ASOS issue trading statements.
In the economic calendar, the Bank of England quarterly bulletin is due at 0001 GMT. The German consumer price index is at 0700 GMT, while the French consumer price index is at 0745 GMT and the UK trade balance is at 0930 GMT. Eurozone industrial production is at 1000 GMT. In the US, import and export price indices, retail sales, and initial jobless claims are at 1230 GMT.
At 1245 GMT, Bank of England Governor Mark Carney gives a speech in Sheffield at the Advanced Manufacturing Research Centre.
By Daniel Ruiz; [email protected]
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