27th Mar 2014 10:54
LONDON (Alliance News) - UK stock indices are lower Thursday but range-bound as investors keep one eye on developments in Ukraine, while the pound has jumped to a six-day high against the dollar after stronger-than-expected UK retail sales data.
Following US President Barack Obama's speech last night that warned of further potential sanctions on Russia, the International Monetary Fund has Thursday offered Ukraine between USD14 billion and USD18 billion in loans over two years to help the country avoid financial collapse after months of unrest that culminated in Russia's annexation of the Crimean Peninsula.
By mid-morning Thursday the FTSE 100 is down 0.4% at 6,579.35, the FTSE 250 is down 0.2% at 16,215.10, and the AIM All-Share is down 0.4% at 847.28.
"In a market clearly lacking in conviction for where to go next, we again turn to the situation in Russia to provide a catalyst for market direction, as we seem to have done repeatedly over the past few weeks," said CMC Markets senior sales trader Nick Dale-Lace.
Retail sales in the UK grew by 1.7% in February, faster than the 0.5% growth expected by economists and reversing the 2.0% decline recorded in January, suggesting the impact of the winter flooding may not have been as bad as expected.
On an annual basis, sales grew by 3.7%, faster than the 2.5% expected. Excluding fuel, sales grew at an even faster rate of 1.8% in the month of February, strongly beating expectations of 0.3% growth.
The impressive data sent the pound almost 0.5% higher against the dollar to a six-day high of 1.6640. The pound has eased from the peak but continues to trade at USD1.6620. Against the euro, the pound is also higher, currently trading at EUR1.2085.
Some disappointing data from the European Central Bank showed private loads in the region continuing to shrink, by 2.2% year-on-year in February, after falling by 2.3% in January. That marks the 20th consecutive month of falling loans in the eurozone.
Within UK equities, Babcock International leads the blue chip index lower after announcing a huge rights issue to pay for the acquisition of Avincis, a provided of aerial emergency services. Babcock plans to raise GBP1.1 billion in a 5-for-13 rights issue at 790 pence - a 42% discount to Wednesday's closing price. The support services group will then spend GBP920 million on Avincis and also take on Avincis's debt of GBP705 million.
Babcock shares are down 4.8% on the news at 1,315 pence. The rights issue implies an ex-rights share price of 1,206p, due to dilution.
Tullow Oil shares also are heavy fallers on the blue chip index, down 3.6%, after saying that drilling in Kenya "encountered poorly developed oil bearing reservoir sands" in an operational update.
The banks are underperforming after the US Federal Reserve Wednesday rejected the capital plans put forward by a number of them. The US units of Royal Bank of Scotland and HSBC will not be permitted to implement their plans for increased capital distributions and are now required to resubmit their plans. RBS shares are down 1.3%, while HSBC is down 0.5%.
The utility companies are mixed following the proposal from the regulator Ofgem that the Competition and Markets Authority investigate the "Big Six" energy supplier to "once and for all clear the air" and ensure there are "no further barriers to effective competition".
Both Centrica and SSE, which earlier in the week announced a price freeze, have issued statements in support of an investigation. Centrica shares are up 0.6%, while SSE is down 1.5%.
On the way up, Rolls-Royce shares are 0.4% higher on the news that All Nippon Airways has selected the British engineer to provide engines worth USD1.1 billion for its Boeing Dreamliner aircraft.
Still to come Thursday, the third and final revision of fourth-quarter US GDP is due at 1230 GMT. After having been revised up to 1.6% at the last reading, economists expect the data to remain stable.
At the same time, US initial jobless claims and core personal consumption expenditure data is due, and Federal Reserve Bank of Cleveland President Sandra Pianalto is also speaking.
By Jon Darby; [email protected]; @jondarby100
Copyright © 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Tullow OilBabcockCentricaSSERBS.LRolls-Royce