Arbuthnot Share News (ARBB)

LONDON (Alliance News) - The FTSE 100 closed slightly higher on Friday in a "nervy end" to the week, with US Federal Reserve Chair Janet Yellen set to deliver a speech that will be closely watched for clues about whether the central bank intends to increase interest rates next month.

The FTSE 100 closed up 0.1%, or 5.14 points, at 6,270.79. Losses seen on the first day of the week were more than offset from Tuesday onwards, thanks in part to easing concerns about the potential for a vote for the UK to leave the EU in a referendum scheduled for June 23, and the blue-chip index closed the week up 1.9%.

The FTSE 250 closed up 0.2%, or 39.43 points, at 17,232.26, ending the week up 1.8%. The AIM All-Share rose 0.2%, or 1.46 point, to end at 735.84. The CAC 40 index in Paris and the DAX 30 in Frankfurt both closed up 0.1%.

In the US, the Dow Jones Industrial Average was up 0.2%, the S&P 500 up 0.3%, and the Nasdaq Composite up 0.5%, all at the London equities close.

"We have seen a predictably nervy end to the week today, as the prospect of a long weekend for both US and UK coupled with a speech from Janet Yellen ensured traders reduced exposure to potential volatility," Joshua Mahony, market analyst at IG, said.

The US dollar strengthened in mid-European trading after data showed that the US economy expanded faster than the initial estimate in the first quarter, supporting expectations of a Federal Reserve interest rate increase in June.

Data from the Commerce Department showed that the US economic growth was stronger than previously estimated in the first quarter, although the pace of growth still reflects a significant slowdown.

The report said the pace of growth in gross domestic product was upwardly revised to 0.8% from the initial estimate of 0.5%. The revised GDP growth in the first quarter compares to the 1.4% jump seen in the fourth quarter and the 0.9% increase expected by economists.

"Still to come is a speech from Janet Yellen, with the dollar especially interesting in if the Fed chair has anything hawkish to saw about next month's central bank meeting," Connor Campbell, financial analyst at Spreadex, said.

At the London equities close, the pound was at USD1.4629, down from USD1.4680 the same stage on Thursday. The euro traded at USD1.1130, down from USD1.1181 at the equities close Thursday. Yellen is due to speak at Harvard University at 1815 BST.

"The US dollar continues to dominate the FX space, with the dollar index heading back towards Wednesday's two month high in response to the 2% jump in rate hike expectations today," IG's Mahony said.

Gold was quoted at USD1,212.68 an ounce at the London equities close, down from USD1,222.30 the same stage on Thursday. Brent oil was quoted at USD49.36 a barrel at the London equities close, down from USD49.81 a barrel on Thursday.

In the FTSE 100, 3i Group, the private equity firm led by Chief Executive Simon Borrows, rose by 1.7% to 552.0 pence after Societe Generale reiterated a Buy rating and increased its price target on the stock to 700p from 650p. Michael Sanderson, an equity analyst at the French bank, said the move was prompted by 3i's strong results for the year ended March 31.

The private equity firm reported earlier in May a total return of GBP824 million in the year ended March 31, up from GBP659 million a year earlier. Its net asset value per share rose to 463p from 396p over the course of that financial year, and 3i increased its total dividend to 22.0p from 20.0p.

SocGen's Sanderson said 3i is "well positioned" to generate both realised and unrealised growth in its net asset value - the difference between its assets and liabilities - in the next two years. He said the full-year results demonstrated "healthy" earnings growth, particularly at non-food discount retailer Action. The valuations applied to 3i's investments are "still conservative" in Sanderson's view, with "scope for fresh realisations" in the near term.

Shire, the Irish drugsmaker, closed down 1.4% at 4,289.43p. It shareholders overwhelmingly approved its USD32.0 billion takeover of US-based Baxalta at a meeting on Friday, with 94% of votes in favour of the deal expected to complete June 3.

Analysts at Liberum said shares in Shire are "just too cheap" even though the investment bank doesn't like the deal for Baxalta. Liberum reiterated a Buy rating and 4,700p price target on Shire.

Shares in Shire should rise as the market grows more comfortable with the risks of the Baxalta takeover, Liberum said.

In the FTSE 250, Softcat, a provider of IT infrastructure to corporate and public sector organisations in the UK, rose 5.2% to 346.50p, as Berenberg initiative coverage on the stock with a Buy rating and a 425p price target.

"Despite a strong performance in the shares since its initial public offering in November 2015, we believe Softcat still has scope to grow its customer base and take market share. With strong cash conversion we forecast the business to grow its net cash position substantially, giving capacity for major shareholder returns," analysts at the German bank said in a note.

Similarly, Synthomer rose by 4.8% to 360.59p after analysts at Barclays reiterated an Overweight rating and increased their price target on the stock to 390p from 360p, in a broader note on European chemicals companies.

"Dismissing Synthomer purely on valuation grounds risks missing one of the most interesting self-help stories in the sector, in our view. The company has a clear M&A agenda and has been executing well," analysts at Barclays said. "Funding costs for Synthomer are at lows, making almost any deal within its scope earnings accretive, on our estimates."

The Barclays analysts said they're keeping "a watchful eye" on pricing in Asia nitrile, which they said is the "biggest source of operational downside risk".

PayPoint was another stock to end higher, rising by 5.9% to 960p after analysts at Barclays reiterated an Equal Weight rating and increased their price target on the stock to 890p from 850p, mainly due to the company's move to return cash to shareholders.

PayPoint had a tough time in the financial year ended March 31, according to Barclays, as it "struggled" to exit its mobile and online businesses, its joint partner increased costs, warmer weather hit volumes, and its retailers "pushed back" on price increases.

"Over the coming years, a cap on prepaid energy tariffs could weigh on transaction volume and the move to smart meters will likely reduce cash payment in general. However, the focus appears to have shifted to capital discipline, and a GBP125 million cash return should provide some support to the shares," Barclays analysts said.

Phoenix Group Holdings, the manager of life and pension funds closed to new customers, closed up 3.7% at 880.85p, after agreeing to buy French insurer AXA Group's UK pensions and investments business and its protection business, in a move intended to generate additional cash to help increase dividend payments in 2016 to 56.0 pence from 53.4p in 2015.

Phoenix will pay GBP375 million in cash for the Embassy pensions and investments business together with protection company SunLife, with the deal to bring GBP12.3 billion of assets under management and over 910,000 policies to the London-listed company.

Phoenix is financing the acquisition by raising about GBP193.9 million in a placing, later in the day confirming that 22.5 million shares were sold at 860.00 pence per share. According to presentation slides on Phoenix's website, debt funding from a consortium of banks will total about GBP185 million. The money will be repaid from cash flow within six months from completion.

"We will invest heavily to ensure a smooth transition of the two businesses from AXA to Phoenix and we are committed to delivering the highest level of service to both direct and IFA customers, as we do for our existing customers," Clive Bannister, chief executive officer of Phoenix, said.

On AIM, Secure Trust Bank said it will look to leave London's market for smaller companies in favour of a place on the Main Market for more established companies, as Arbuthnot Banking Group loosens its hold on the challenger bank.

Arbuthnot, also listed on AIM, later said it sold 6.0 million Secure Trust shares at 2,500 pence each. The pricing of the placing was as guided, and the sale generated GBP150 million for Arbuthnot, which sold slightly more than the 5.8 million shares initially intended.

Institutional investors bought the shares at an 11% discount to Secure Trust's closing price on Thursday. Arbuthnot's stake will fall from a 52% majority to a minority position of just under 19%. Arbuthnot also owns the Arbuthnot Latham private bank.

"The growth of Secure Trust in the last four and half years has been substantial, and the company believes that now is the appropriate time to reduce its holding in Secure Trust to a non-controlling position, in order to broaden the range of strategic options available to Secure Trust," Arbuthnot said in a statement.

Shares in Secure Trust closed down 6.3% at 2,623.88p Friday. Arbuthnot shares closed up 3.6% at 1,541.68p.

In the economic calendar, Monday brings retail trade data from Japan at 0050 BST, a speech by the US Fed's James Bullard at 0120 BST, GDP data from France at 0630 BST, Germany's Import Price Index at 0700 BST, and French consumer spending data at 0745 BST.

Industrial Confidence, business climate, economic sentiment indicator, services sentiment and consumer confidence measures for the EU are due at 1000 BST. Germany's consumer price index data follow at 1300 BST.

In the UK corporate calendar, no events are scheduled for Monday, given the bank holiday in the UK. Get ready for a fourth-quarter pre-close update from IG Group Holdings, the FTSE 250 financial trading provider to retail investors, on Tuesday. IG's full-year results follow on July 19.

Full-year results are due from Kainos Group, Renold, and HarbourVest Global Private Equity.

By Samuel Agini; samagini@alliancenews.com; @samuelagini

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