5th Mar 2015 10:36
LONDON (Alliance News) - UK shares are trading broadly higher Thursday mid-morning, ahead of European Central Bank and Bank of England rate decisions and ECB press conference, with insurers Aviva and Friends Life as the biggest gainers in the FTSE 100.
The FTSE 100 is trading up 0.1% at 6,925.77, while the FTSE 250 is up 0.5% at 17,2200.24. The AIM All-Share is up 0.2% at 713.28.
European indices are trading in the same direction, with both French CAC 40 and German DAX 30 up 0.3%.
The market also is looking forward to ECB President Mario Draghi outlining details of the central bank's planned government bond-buying programme. Ahead of the announcement, the euro is trading down against the dollar at a rate last seen in September 2003 at USD1.1045.
"The main focus will be on not only the form of assets the ECB intends to buy, but also on the updates to its growth and inflation forecasts, as these could give clues as to the timeframe of any QE program," says Chief market analyst at CMC Markets Michael Hewson.
"It is already likely that we?ll see an upgrade to the growth forecast for 2015, from 1%, but we could see a downgrade to the inflation forecast for 2015, of 0.7%," he writes. "The inflation forecast for 2016 will be interesting though as it is currently 1.3%, and if it is revised upwards then QE could well have a much more limited shelf life than a lot of people currently expect."
Spreadex analyst Connor Campbell says: "Even negative German factory orders couldn?t derail the positive sentiment that has seeped in this morning ahead of the ECB conference. The one worry for the markets will be issues surrounding expectations; the central bank managed to fudge the numbers around the initial announcement, leaking a lower figure than was eventually revealed to ensure the markets were pleasantly surprised."
Germany's factory orders declined at the fastest pace since last August, according to data released by Destatis. Factory orders fell 3.9% in January from the prior month, which was the biggest drop since August, when they declined 4.2%. Economists had forecast a 1% drop in January after rising 4.4% in December.
Meanwhile, Italy's economy stagnated as initially predicted in the fourth quarter, final data from the statistical office Istat showed Thursday. Gross domestic product remained flat on a sequential basis in the fourth quarter, following a 0.1% fall in the third quarter. The sequential rate came in line with the estimate published on February 13.
Separately, the Bank of England?s chief banking supervisor has told British lawmakers that he is holding HSBC Holdings? top executives? ?feet to the fire? to ensure they simplify the group and improve its risk controls after a tax evasion scandal at its Swiss private bank, the Financial Times reports Thursday.
The comment from Andrew Bailey, head of the Prudential Regulation Authority, increases the pressure on the biggest British bank to accelerate plans for shedding businesses it judges too risky to manage in an increasingly strict regulatory climate, the paper says.
China's Premier Li Keqiang on Thursday lowered the growth target for China this year to "approximately 7%." Li's speech outlined a government work report on the country's key economic policies for this year. He said China faces challenges including sluggish investment growth, falling prices on manufactured products and an "inefficient" growth model, coupled with problems of overcapacity and lack of innovation.
In London, Aviva is the best performer in the blue-chip index, up 4.7%. The insurer said its turnaround is ongoing as it reported a fall in net profit for 2014 due to the 2013 sale of its US life and related internal asset management businesses, but operating profit excluding this rose as increases in its life business, general insurance and health helped to offset a fall in fund management operating profit.
In what could be its last annual earnings statement in its current form with the proposed GBP5.6 billion acquisition of life insurance rival Friends Life Group expected to complete in the second quarter of 2015, Aviva said its net profit fell to GBP1.74 billion in 2014, compared with GBP2.15 billion in 2013. Friends Life, meanwhile, said it swung to a net loss.
Aviva Chief Executive Mark Wilson said the integration of Friends Life is a "significant focus". However, Wilson said it is important that Aviva doesn't allow the integration of Friends Life, should the acquisition complete, to come at a cost to other parts of the business.
Friends Life, up 4.5%, swung to a net loss of GBP138 million in 2014, compared with a net profit of GBP235 million in 2013. Pretax profit from continuing operations fell to GBP64 million from GBP415 million. Although revenue increased to GBP11.05 billion from GBP10.05 billion, as higher net earned premiums more than offset a slight fall in investment return, total claims benefits and expenses rose to GBP10.98 billion from GBP9.66 billion.
Friends Life said it intends to increase its dividend to 31.15 pence per share from 21.14 pence per share, subject to completion of the Aviva takeover deal. Meanwhile, Aviva is increasing its dividend for the year to 18.1 pence from 15 pence, as previously reported.
Aggreko is one of the worst performers in the FTSE 100, down 0.5%, as it reported a fall in profit in 2014, mainly due to large hit from the strength of sterling on its translated overseas earnings, while revenue was broadly flat as challenging trading in Asia Pacific offset strong growth in the Americas and a good performance in Europe, Middle East and Africa.
The temporary power company also said 2015 had got off to an encouraging start, although it warned it may face a hit from the recent sharp fall in oil price later in the year and it's currently expecting its key profit measure to be flat compared with 2014.
Betfair Group is the best performer in the FTSE 250, up 14%. The online betting firm revised up its full-year earnings expectations following a strong third quarter, its fourth consecutive quarter of double-digit growth as it continues to attract new customers, and said it expects a strong finish to the year with record levels of political betting in the run up to the UK general election in May.
The group said it is now expecting full-year earnings before interest, taxes, amortisation and depreciation of between GBP113 million and GBP118 million for its financial year to end-April, having said at its half-year results that it was expecting a figure between GBP97 million and GBP103 million.
Still in the economic calendar, the Bank of England releases its interest rate decision at 1200 GMT, while the ECB follows at 1245 GMT, followed by Draghi's press conference at 1330 GMT. In the US, initial jobless claims data is at 1330 GMT, while factory orders are at 1500 GMT.
US futures point to a flat opening in DJIA, S&P 500 and Nasdaq 100.
By Daniel Ruiz; [email protected]
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