Barclays Share News (BARC)

LONDON (Alliance News) - UK shares were rallying midday Friday following the economic stimulus measures announced by the European Central Bank on Thursday, but financial services provider Old Mutual was missing the gains of its London-listed peers after confirming plans to split up its business.

The Anglo-South African group said there is "limited rationale" for its four main divisions to be part of the same group, confirming that it intends to separate them by the end of 2018 in a move to cut debt, costs and complexity.

Bruce Hemphill, a former executive at African lender Standard Bank Group, said the review he began when he succeeded Julian Roberts as Old Mutual's chief executive in November 2015 showed that there is "very little commonality" between the businesses.

The group's four divisions include holdings in two publicly listed entities: a 66% stake in New York-listed OM Asset Management and a 54% stake in Johannesburg-listed lender Nedbank. The separation "may involve equity market activity" for Old Mutual's UK-focused wealth management arm and its emerging markets business based in South Africa.

Shares in Old Mutual were down 2.2%.

Faring slightly worse was Marks & Spencer Group was also among a handful of stocks down in the FTSE 100, down 2.9%, after the food and clothing retailer was downgraded to Underperform from Neutral by Merrill Lynch.

The FTSE 100 index was up 1.6%, or 84.85 points, at 6,121.55. The gains in blue-chip index were being led by financial stocks such as banks and insurers, benefiting the most the easing measures announced by ECB President Mario Draghi.

Aviva was up 5.5%, St James's Place up 4.8%, RSA Insurance up 4.3%. Meanwhile, shares in Standard Chartered were up 4.6%, Royal Bank of Scotland Group up 4.0% and Barclays up 3.5%.

Market expectations for ECB stimuli were high, but Draghi and the ECB over-delivered with a cut to all three of its interest rates and an expansion to its asset purchase programme.

The main refinancing rate, which the bank uses to boost liquidity, was cut by five basis points to a record low 0.0%. The already-negative deposit rate was cut by 10 basis points to -0.40%, while the ECB made a surprise five basis point cut to its marginal lending facility rate to 0.25%. The new rates will take effect on March 16, the bank said.

Furthermore, the bank expanded the monthly purchases it makes under the asset purchase programme by EUR20 billion to EUR80 billion starting in April. The ECB also decided to include investment grade euro-denominated bonds issued by non-bank corporations in the euro area in the list of assets that are eligible for regular purchases.

"The financial sectors across Europe have felt the benefits of yesterday's ECB announcement, rising in anticipation of both the added bonus of EUR20 billion more being pumped into the markets and the direct stimulus of corporate debt now being included in the basket of debt that the current ECB [quantitative easing] scheme can use," said IG analyst Alastair McCaig.

When responding to questions from reporters, Draghi said that while rates are likely to remain at low levels for an extended period of time, he does not anticipate the need for further rate cuts. This also was supportive of bank shares, as negative interest rates hurt their earnings.

Draghi's comment saw the euro more than make up the losses it suffered in the immediate aftermath of the central bank's easing decision. The single currency was quoted at USD1.1086 at midday Friday, lower than the USD1.1161 at the equities close Thursday.

The FTSE 250 was up 1.1% at 16,564.88, while the AIM All-Share was up 0.6% at 701.60. In Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were up 2.6% and 2.8%, respectively.

Marshalls was the best mid-cap performer, up 6.1%, after the block paving manufacturer said investments in product development helped its pretax profit surge in 2015. The group said that enabled the payment of a special dividend, as it outlined plans to make bolt-on acquisitions for its water maintenance and street furniture divisions.

The supplementary dividend of 2.00 pence per share came on top of a final dividend of 4.75 pence per share, which means its full-year dividend is 7.00 pence per share, up from 6.00 pence in 2014.

Safestore Holdings was another mid-cap gainer, up 3.5%, after the self-storage provider agreed a deal to acquire smaller peer Space Maker for up to GBP44.4 million. Safestore will pay GBP43.0 million initially in cash, with a further GBP1.4 million in deferred consideration to be payable in the three years following completion, dependent on certain performance targets being hit.

Annuities providers Just Retirement Group and Partnership Assurance Group were in the green after saying they remain confident of achieving at least GBP40.0 million of cost savings through the GBP1.60 billion merger of the life insurers. The pair said they expect their merger to complete in April, with the aim of creating JRP Group, as they separately reported earnings. Their shares were up 3.7% and 3.6%, respectively.

Just Retirement said it swung to a first-half pretax profit of GBP26.1 million in the six months ended December 31, from a GBP9.2 million pretax loss in the corresponding period of 2014. Partnership swung to a full-year pretax loss of GBP16.5 million in 2015, from a GBP24.1 million pretax profit in 2014, saying it was hit by one-off costs, particularly the new Solvency II rules for insurers across the EU, and lower sales volumes.

Among the FTSE 250 losers was Acacia Mining, down 3.8%, after the miner was cut to Neutral from Buy by UBS. Restaurant Group was down 2.2% after Deutsche Bank downgraded the Chiquito and Garfunkel's owner to Hold from Buy.

Shares in Computacenter lost 2.9%. The IT infrastructure services provider saw its 2015 pretax profit boosted by a one-off gain and lower restructuring costs in 2015, but warned its profit for the first half of 2016 will fall behind that seen in 2015 as its its UK business faces a "more challenging year."

Stocks in New York were expected to track the gains seen in Europe, with the DJIA pointed up 1.0%, the S&P 500 seen up 1.1% and the Nasdaq 100 called up 1.3%.

In the US economic calendar, the import and export price index is at 1230 GMT, the preliminary reading of the Reuters/Michigan Consumer Sentiment Index at 1400 GMT, and Baker Hughes' US oil rig count at 1700 GMT.

Released earlier in the day were data from the Office for National Statistics revealing that the UK visible trade deficit narrowed in January due to a decrease in imports. The overall trade deficit including goods and services fell to GBP3.5 billion from GBP3.7 billion in December.

Another report from the ONS said construction output in the UK decreased 0.2% month-on-month in January from December, as expected by economists. On a yearly basis, construction output fell 0.8% in January but slower than an expected 1.7% decline.

Meanwhile, results of a quarterly survey from the Bank of England showed Britons' inflation expectations for 2017 fell to the lowest level in more than 16 years in February. Inflation is forecast to be 1.8% in the coming year compared with 2% predicted in November. This was the lowest inflation expectations since November 1999. In five years' time, inflation is forecast to rise to 2.9%, unchanged since November.

By Daniel Ruiz; danielruiz@alliancenews.com

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