21st Oct 2014 10:05
LONDON (Alliance News) - UK shares have rebounded following a lower open Tuesday, amid reports that the European Central Bank could soon decide to start buying corporate bonds on the secondary markets as part of its drive to bolster lending to businesses, a move the central bank has denied.
The FTSE 100 is up 0.6% at 6,307.27, having been down 0.5% earlier in the session, while the FTSE 250 is up 1.0% at 14,909.74 and the AIM All-Share is up 1.0% to 699.16.
European stocks are also performing well, with the CAC 40 up 0.9% and the DAX up 0.8%.
Citing several sources familiar with the situation, Reuters reported that the ECB is considering buying corporate bonds on the secondary market and may decide on the matter as soon as December with a view to begin buying early next year.
The ECB began buying covered bonds on Monday, part of a private-sector asset-purchase programme that will also see it buy bundled loans known as asset-backed securities later this year.
However, there is concern at the ECB that these measures may have an insufficient impact to help support the economy, Reuters said.
The third-quarter earnings season got well underway in the UK.
Chip maker ARM Holdings is down 2.9%, the worst performing stock in the FTSE 100, after it said it expects to meet market revenue expectations of around USD350 million for its fourth quarter, as growing royalty revenues helped boost pretax profit in its third quarter. The company posted a pretax profit of GBP79.2 million for the quarter to end-September, up from GBP68.3 million a year before, as revenue rose to GBP195.5 million from GBP184.0 million.
Liberum has reiterated its Sell recommendation on ARM Holdings, saying that it remains cautious on the company's royalty growth.
British consumer goods giant Reckitt Benckiser is down 2.0% after it said sales growth slowed in the third quarter, held back by slower hygiene sales in emerging markets and slower sales growth in its health division. It still reiterated its full year targets for both revenue and margin growth and said it now expects to demerge the pharmaceuticals business before the year end.
Engineering group GKN reported higher pretax profit for the third quarter, as higher trading margins in its aerospace and driveline businesses offset a decline in sales that was caused by the strength of sterling and weak agricultural sales. The company reported a pretax profit of GBP139 million for the three months to end-September, up from GBP131 million a year earlier, even though revenue declined to GBP1.79 billion, from GBP1.87 billion, due to the strength of sterling. Its overall trading margin improved to 8.9%, from 8.2%. The company's shares have climbed 2.0%, putting it amongst the top performers in the blue-chip index.
Shire shares have risen 2.3% after it said it is "disappointed" that the takeover offer from AbbVie Inc will not go ahead, but said it has maintained momentum throughout the offer period and it reiterated its target of USD10 billion product sales by 2020. The Irish drugmaker is now owed a break fee of USD1.635 billion from AbbVie, which is due before 1700 BST Tuesday.
The UK's listed supermarket chains continued to lose sales and market share in recent weeks, as the so-called "heavy discounters" and upmarket grocers took a bigger slice of the UK grocery market, according to the latest figures from Kantar Worldpanel.
Tesco's market share in the 12 weeks to October 12 slid to 28.8%, down from 30.1% a year earlier, while its sales fell by 3.6% in the period. However, its market share was unchanged from the previous 12 week period, and its sales decline slowed. J Sainsbury's and Wm Morrison Supermarkets' sales slipped back, down 3.1% and 1.8%, respectively. Sainsbury's shares of the market fell to 16.1% in the 12 weeks period, down from 16.7% last year, while Morrison's slice of the market pared-back to 11%, from 11.2% the prior year.
"We are seeing clear polarisation of the market with both the premium and discount ends of the market gaining share, while the mainstream grocers continue to be squeezed in the middle," said Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel.
"Tesco is yet to see substantial improvement, however it seems it may be turning a corner as sales are down 3.6%, which is the grocer’s best figure posted since June," said McKevitt.
Tesco shares are up 2.5%, while Sainsbury's is up 1.3%, and Morrisons is up 1.0%.
The UK budget deficit increased in September from last year, data published by the Office for National Statistics showed. Public sector net borrowing excluding interventions totalled GBP11.8 billion in September, an increase of GBP1.6 billion from the same period of last year. This increase in net borrowing is predominantly a result of an increase of GBP1.6 billion in central government net borrowing, the ONS said.
"It is still early days and the figures could be significantly revised. But the trends seem clear enough,"says Berenberg's chief UK economist Rob Wood. "The economic recovery is creating plenty of jobs which should help keep a lid on benefit spending, but still weak wage growth along with the Chancellor’s decision to increase the amount people can earn tax free has hurt income tax receipts and means borrowing stubbornly refuses to decline."
The afternoon's economic data will be dominated by the US. The Redbook index forthe week ending October 17 is at 1355 BST and existing home sales change for September is at 1500 BST.
Futures indicate Wall Street for a higher open. Nasdaq is pointed up 0.3%, while the S&P 500 and DJIA is indicated up 0.1%.
By Neil Thakrar; [email protected]
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