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LONDON (Alliance News) - London shares ended up Friday, boosted by a recovery in commodity and financial based stocks, at the end of a week that has seen volatility in indices across the world amid fears of a global economic slowdown and the possibility of another banking crisis.
The FTSE 100 index ended up 3.1% at 5707.60 points, but down 2.5% for the week as a whole. The FTSE 250 was up 1.7% at 15,431.31 and the AIM All-Share was up 0.1% at 664.82. European indices also rallied, with the CAC 40 in Paris and the DAX 30 in Frankfurt both up 2.5%.
Rolls-Royce Holdings shares soared after Chief Executive Warren East put to rest market fears of a sixth profit warning in two years, reiterating guidance for 2016.
"Given five warnings in the last two years, some may have feared worse," Liberum's Jack O'Brien and Ben Bourne said in a note.
That sent shares in the blue-chip jet engine and power turbine maker up 13%, though still nearly halved since the first of the five profit warnings in February 2014.
"Our outlook for 2016 is unchanged. Despite steady market conditions for most of our businesses it will be a challenging year as we start to transition products and sustain investment in Civil Aerospace and tackle weak offshore markets in Marine," East said.
However, Rolls-Royce cut its dividend for the first time in 24 years after reporting a drop in profit and free cash flow. The full-year dividend was slashed to 16.37 pence from 23.10p, slightly ahead of the 16.20p expected by analysts. East said the dividend paid for the first half of the new year will be halved, as underlying free cash flow fell to GBP179 million from GBP447 million. He hopes for the dividend to be "rebuilt" to an "appropriate level" over time.
Underlying pretax profit fell by 12% to GBP1.43 billion in 2015, coming in ahead of the GBP1.3 billion expected by analysts, as underlying revenue fell by 3.7% to GBP13.35 billion.
Financial stocks took back some of the losses they saw Thursday, with the FTSE 350 Banks sector index ending up 5.4%. However, the index is still down 21% since the start of 2016, something that Erin Davis, senior equity analyst at MorningStar, sees as a buying opportunity.
"Many European bank stocks remain at multiyear lows, and we see an opportunity for investors to increase stakes in the highest-quality names at attractive discounts to our fair value estimates," said David. "We think the recent sell-off is overdone."
The recovery in banking stocks Friday was also supported by the news that Deutsche Bank will buy back about USD5.4 billion of bonds in euros and dollars as the lender tries to ease concerns about its finances among investors. Shares in Deutsche have been on a roller-roaster this week, provoking sharp gyrations in banking stocks across Europe. Deutsche shares ended Friday up 8.8% in Frankfurt, somewhat flat compared to the level they started the week on Monday.
Standard Chartered ended up 8.2%, benefiting from an upgrade to Buy from Hold by Investec. The broker's analyst Ian Gordon said Standard Chartered now trades at less than half of Investec's forecasts for tangible net asset value between 2015-2017.
Barclays closed up 4.1%. Singapore-based DBS Group Holdings and Oversea-Chinese Banking Corp have made non-binding bids for the Barclays Asian private wealth business, Bloomberg reported on Friday, citing people familiar with the matter.
The FTSE 100-listed lender has been looking for buyers of its Singapore-based wealth unit since last year, the report said. Spokesmen for DBS, OCBC and Barclays declined to comment, the news agency added.
Meanwhile, Lloyds Banking Group, Royal Bank of Scotland Group and HSBC Holdings ended up 2.8%, 4.3% and 4.8%, respectively.
Miners recovered some recent losses, with Anglo American up 4.5%, Glencore up 13%, BHP Billiton up 6.5% and Antofagasta up 11%.
The FTSE 350 Mining sector index was the best performing sector index, ending up 8.8%. However, the index is still trading around lows it hasn't seen since 2005.
The gold price added gains to its 2016 rally, with the metal quoted at USD1,234.70 an ounce at the London equities close. This week alone it has risen by 5.5%, while it is up by 17% year to date, as investors tried to find a "safe heaven" whilst stocks headed south.
Oil companies also ended in the green as Brent managed to halt its most-recent fall, which started earlier this month, holding above USD32 a barrel. The North Sea benchmark was at USD32.87 a barrel after the London close, having stood at USD30.09 at the close Thursday.
BP was up 4.7%, Royal Dutch Shell 'A' up 2.9% and BG Group up 3.8%.
Elsewhere on the London Stock Exchange, Pendragon ended up 3.6%. Berenberg said it remains confident on the vehicle retailer, keeping a Buy stance on the company, even tough the stock has dropped heavily since the start of 2016.
The broker said car retailers are often viewed as cyclical plays on the economy. Therefore, as a result of the current backdrop in equity markets, shares in Pendragon have declined by 23% so far in 2016, having touched lows they hadn't seen in more than a year.
Henderson Group ended down 4.2% after brokers expressed negative views on the Anglo-Australian asset manager following the release of its 2015 results on Thursday, with Societe Generale, UBS and Numis slashing earnings per share forecasts. Friday's losses added to the 7% loss that followed the results.
The group said it will "review" its short-term plans if the turbulent market conditions seen in the opening weeks of 2016 continue. Hendersons's outlook was closely watched by investors, amid a stock market rout that has seen nearly 28% wiped from the group's share price so far this year.
US stocks were up at the London close, ahead of a long weekend, as the New York market will be closed Monday due to the President's Day. The Dow Jones Industrials was up 1.1%, the S&P 500 up 1.0% and the Nasdaq Composite up 0.6%.
A report from the US Commerce Department showed that US retail sales rose by slightly more than anticipated in January, partly reflecting an increase in auto sales.
The report said retail sales climbed by 0.2% in January compared to economist estimates for a 0.1% uptick. The modest increase in retail sales was partly due to growth in sales by motor vehicle and parts dealers, which climbed by 0.6% in January after rising by 0.5% in December.
Excluding auto sales, retail sales inched up by 0.1% in January, matching the revised increase in December. Economists had expected ex-auto sales to come in flat.
However, consumer sentiment in the US unexpectedly deteriorated in February, a report from the University of Michigan showed. The preliminary reading on the consumer sentiment index for February came in at 90.7 compared to the final January reading of 92.0. The decrease came as a surprise to economists, who had expected the consumer sentiment index to inch up to a reading of 92.5.
Following the mixed set of data, the pound stood at USD1.4455, broadly flat compared to the USD1.4444 at the close on Thursday. The euro was at USD1.1218 at the close, compared to USD1.1354 at the close Thursday.
The single-currency dropped against the greenback after a report from Eurostat showed that eurozone industrial production dropped unexpectedly in December.
Industrial output fell 1.0% on a monthly basis in December, faster than the revised 0.5% drop seen in November. Economists had forecast a 0.3% rise. All components of production except durable consumer goods logged contraction. Durable consumer goods output rose 1.4%.
However, another report from Eurostat said the euro area economic growth rate remained stable in the fourth quarter. Gross domestic product climbed 0.3% quarter-on-quarter, the same rate of growth as seen in the previous period. On a yearly basis, economic growth slowed marginally to 1.5% from the 1.6% reading of the third quarter. Both quarterly and annual growth rates matched economists' expectations.
In the UK corporate calendar Monday Hammerson, Reckitt Benckiser and Fidessa Group release full-year results, City of London Investment Group publishes half-year results, while Georgia Healthcare Group and Acacia Mining release full-year results.
In the economic calendar, exports and imports data from China are due at 0200 GMT, while Japan's industrial production data are at 0430 GMT. Eurozone's trade balance data are due at 1000 GMT, while the European Central Bank president Mario Draghi speaks at the European Parliament at 1400 GMT.
The Shanghai market is reopening on Monday, having remained closed for a week due to the Lunar New Year celebrations.
By Daniel Ruiz; danielruiz@alliancenews.com
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