24th Feb 2015 10:34
LONDON (Alliance News) - London stocks trade lower as investors await the decision by Greece's creditors on the country's economic reform proposals and US Federal Reserve Chair Janet Yellen's semi-annual Congressional testimony on monetary policy.
Greece has submitted its list of reform proposals, the European Commission said Tuesday, adding that the measures are a "valid starting point" to consider a four-month extension to the European portion of the country's bailout.
"List of reform measures of Greek government received on time," commission spokesman Margaritis Schinas wrote on Twitter. Athens had been given until the end of Monday to submit the list, but had announced hours before the deadline that it would not be met.
However, Greek Finance Minister Yanis Varoufakis sent the document "last night, close to midnight," a commission source said on condition of anonymity.
The list of proposed reforms will now be assessed by Greece's creditors - the commission, the European Central Bank and the International Monetary Fund - before eurozone finance ministers decide on the next steps.
The FTSE 100 trades slightly lower at 6,909.40, while the FTSE 250 is down 0.3% at 17,118.29, and the AIM All-Share is flat at 713.10.
In Europe, the CAC 40 and the DAX 30 are both down 0.2%.
Markets also will be waiting for Fed Chair Yellen's testimony on monetary policy starting at 1500 GMT, which could give a clue to when a rise in US interest rates may take place.
"She is likely to be fairly clear about the economic outlook - she thinks economic conditions are improving- but more vague on the short-term implications for monetary policy," says Rhys Herbert, senior economist at Lloyds Bank.
"The latter will partly reflect the likelihood that the FOMC is divided over how much attention it should be giving to the current low inflation numbers and wants to keep its options open for now. So we do not expect her to either clearly rule in or out a mid-year interest rate hike." Herbert adds.
While investors await the two macro developments, individual stock news have taken centre stage.
Defence and aerospace components maker Meggitt is the worst performer in the FTSE 100, trading down 3.5%. The company reported lower profits for 2014, hit by a range of factors including adverse exchange rates, disposals, research and development spending and higher sales of less-profitable products, but it said it had returned to organic revenue growth in the second half of the year and its order book has increased.
Housebuilder Persimmon is the second biggest blue-chip faller, down 4.0%, despite joining peer Bovis Homes in reporting a big rise in profit for 2014, driven by higher home sales at higher average prices, and said 2015 has got off to a solid start.
Like Bovis, which reported on Monday, Persimmon expects a slight slowdown in the market around May's UK General Election, but said the improving UK economy and increased mortgage lender support would drive the market for 2015 as a whole. However, analyst believe that the company's valuation more than takes into account the positivity.
BHP Billiton is the best performing stock in the FTSE 100, up 3.8%. It said its first half profit nearly halved year-on-year, despite growth in production, owing to the impact of volatile commodity markets. The company slashed capital and exploration expenditure, and declared a 5% increase in interim dividend. Still, the slide in profits was not as bad as some investors expected, says Mike van Dulken, head of research at Accendo Markets.
"Good news also comes from further cost cutting being highlighted to allow the group withstand difficult market conditions (low oil price hurting petroleum arm) and help retain profitability/margins," van Dulken says.
Mondi, up 2.2% is another strong blue-chip performer. The South Africa-based paper and packaging company reported higher profits for 2014, driven largely by cost-cutting and other measures aimed at boosting margins, and said it is confident of "making further progress" in 2015 thanks to the investments it has been making in the business.
FTSE 100 engineering group GKN trades down 2.5% after it reported a lower pretax profit for 2014, hit by a lower valuation of its foreign exchange contracts in its accounts, although profit rose excluding this thanks largely to a lack of restructuring charges that weighed on its 2013 results.
In the FTSE 250, Just Retirement Group shares have soared 18%. The specialist annuity products provider said it is well placed to compete and has new products to roll out when new rules governing savings and pensions come into force in April, even as it reported a fall in operating profit in the first six months of its financial year. The stock was also supported by comments from Chief Executive Rodney Cook, who told reporters that the company would participate in industry consolidation if it improves value.
Genus, is the another strong mid-cap performer, up 6.1%. The animal genetics company said it is on course to perform ahead of its original expectations for 2015, although it expects to see slow growth in its second half, as it posted a rise in pretax profit for its first half.
Still ahead in the economic calendar is European Central Bank President Mario Draghi's speech at 1400 GMT, before US Markit Services and Composite PMI at 1445 GMT. US consumer confidence is at 1500 GMT, alongside Yellen's testimony.
Wall Street is indicated for a flat to lower opening. The DJIA and the Nasdaq 100 are both pointed flat while the S&P 500 is indicated slightly lower.
By Neil Thakrar; [email protected]; @NeilThakrar1
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BHP Billiton PLCBovis HomesGenusMGGT.LPersimmonGKN PLCMondiJRG.L