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LONDON (Alliance News) - The FTSE 100 closed slightly lower on Wednesday, even though major UK banking stocks rose, as the mining sector dragged on the blue-chip index.
The FTSE 100 ended down 1.97 points, at 6,165.8, and the FTSE 250 rose 0.2%, or 36.16 points, to 16,881.24. The AIM All-Share dropped by 0.1%, or 0.95 point, to end at 725.13. In Paris, the CAC 40 closed up 0.3% and the DAX in Frankfurt rose 0.6%.
US shares were higher at the London close, with the Dow Jones Industrial Average and the S&P 500 both up 0.2% and the Nasdaq Composite up 0.6%.
In the FTSE 100, Royal Bank of Scotland Group, up 2.4%, Barclays PLC, up 3.4%, and Lloyds, up 2.0%, were among the biggest risers, with the potential for the US Federal Reserve to increase interest rates as soon as June, which would boost the banking sector's margins, driving banks higher.
"Worries that a US rate hike in June could bring down inflated asset prices turned to optimism about the implications of higher interest rates for bank earnings," Jasper Lawler, market analyst at CMC Markets, said.
The minutes of the most recent US Federal Reserve meeting are set to be released after the London market close, at 1900 BST, and could provide some insight into whether the central bank plans to increase interest rates at its June meeting. The Federal Open Market Committee left its benchmark US interest rate unchanged in a range of 0.25% to 0.50% in April.
In the UK, an Ipsos Mori poll showed that the chances of a vote to leave the European Union in a referendum scheduled for June 23 have fallen, driving sterling higher.
At the London equities close, the pound was at USD1.4620, up from USD1.4478 the same stage on Tuesday. The euro traded at USD1.1279, down from USD1.1337 at the equities close Tuesday.
"If the UK does remain in the EU, the clearer near-term outlook for the economy could prove a better environment for businesses and individuals to take out loans," Lawler said.
Miners were among the heaviest fallers in the FTSE 100. Anglo American, down 3.7%, Antofagasta, down 3.1%, Glencore, down 3.0%, BHP Billiton, down 2.2%, and Rio Tinto, down 2.0%, dragged on the index.
Brent oil was quoted at USD49.54 a barrel at the London equities close, up from USD49.29 a barrel Tuesday. Gold was quoted at USD1,272.11 an ounce at the London equities close, down from USD1,280.36 the same stage on Tuesday.
Ashtead Group closed up 3.7% to end at 961.5p. Shares in the equipment rental company rose after analysts at Exane BNP increased their rating on the stock to Outperform from Neutral and moved their price target to 1,050p from 900p.
ARM Holdings, up 2.0%, said it acquired UK-based imaging technology products company Apical for USD350.0 million in cash. According to the chip designer, Apical is a leader in imaging and embedded computer vision technology. Its technology is used in more than 1.5 billion smartphones and about 300 million other consumer electronic devices, digital cameras and tablets.
Analysts at investment bank Liberum were unconvinced, claiming that ARM paid a "very high price" for Apical. Liberum's Eoin Lambe noted that many other companies are developing products in the area Apical works, and believes ARM is unlikely to build the same dominant position here as it has in smartphone apps processors.
"Computer vision is a very hot space at present, and ARM appears to have paid a high price to get into the market," Lambe said in a note.
Burberry, the luxury fashion company led by Chief Executive Christopher Bailey, fell by 2.3%. Its pretax profit fell to GBP415.6 million in the year ended March 31, from GBP444.6 million a year earlier.
A 5.0% increase in Burberry's total dividend for the year, to 37p per share, was accompanied by news of a GBP150.0 million share buyback.
Bailey, who made his name as a designer and also holds the role of chief creative officer, warned that Burberry expects the "challenging environment" for the luxury fashion sector to continue in the near term. He set out a goal of making at least GBP100 million of annualised cost savings by the 2019 financial year.
"The company previously had no trouble selling its expensive goods to affluent Chinese, but a crackdown on bribery and expensive gift giving in the Asian country has hit the luxury goods sector hard," Garry White of Charles Stanley said.
In the FTSE 250, Booker Group, the food wholesaler, rose by 6.1%, after analysts at Goldman Sachs increased their rating on the stock to Buy from Neutral. Challenger bank Shawbrook Group advanced by 5.7% to 279.5p, with analysts at Credit Suisse reiterating an Outperform rating and trimming their price target on the stock to 380p from 400p.
Marshalls, a paving company, down 6.6%, was the heaviest mid-cap faller, after reporting that revenue growth in the first four months of 2016 slowed amid project delays and some short-term uncertainty taking a toll on the market.
Although Marshalls said it is confident of achieving its expectations for 2016, the company warned that some customer projects have been delayed in response to short term uncertainty in the wider economy. The UK's referendum on whether to remain a member of the European Union or leave is just weeks away.
The company's UK revenue for the four months ended April 30 rose to GBP120 million from GBP119 million the corresponding period a year earlier. "This increase is against strong comparatives for 2015 and reflects a slight softening in commercial sales over the last two months," Marshalls said.
In the economic calendar Thursday, expect foreign investment in Japanese stocks and bonds at 0050 BST, as well as machinery orders data, followed by the MNI Business Sentiment Indicator for China at 0245 BST. UK retail sales data is due at 0930, followed by EU construction output data at 1000 BST and ECB Monetary Policy Meeting Accounts at 1230 BST.
At 1330 BST, expect US Chicago Fed National Activity Index, jobless clams data and the Philadelphia Fed Manufacturing Survey. At 1530, the US CB Leading Indicator and EIA Natural Gas Storage change are due.
Highlighting the UK corporate calender Thursday are full-year results from 3i Group, National Grid, and Royal Mail Group.
Thursday will also see full-year results from Booker Group, Bloomsbury Publishing, Dairy Crest Group, Investec, Mothercare, Electrocomponents, Shanks Group, Young & Co Brewery, and Caledonia Investments.
First-half results are due from Euromoney Institutional Investor, Thomas Cook Group, Grainger, UDG Healthcare, Vectura Group, On the Beach, Mitchells & Butlers, Britvic, and Brewin Dolphin Holdings.
Trading statements are to be published by Merlin Entertainments, Hargreaves Lansdown, Chesnara, North Midland Construction, LMS Capital, Ricardo, and Exova Group.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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