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LONDON (Alliance News) - The FTSE 100 ended modestly higher Friday ahead of a holiday weekend, having closed in positive territory every day this week.
Throughout the week, the blue-chip index has been boosted by strong performances in turn by some of its key individual constituents, and Friday was no different.
Royal Bank of Scotland Group closed up 9.5% as the FTSE 100's biggest riser. Shares in the bank rose sharply after it said first-quarter pretax profit doubled, helped by lower operating expenses and a significant reduction in impairment losses, as the part-nationalised bank's creation of an internal "bad bank" aids its gradual recovery.
RBS said first-quarter pretax profit increased to GBP1.64 billion from GBP826.0 million in the corresponding quarter a year earlier, even as total income, excluding own credit adjustments, disposals and a number of other items, decreased to GBP5.05 billion from GBP5.16 billion.
Operating expenses, excluding integration and restructuring costs amongst other items, were reduced to GBP3.19 billion from GBP3.38 billion, with RBS saying it remains on track to meet its target of cutting costs by GBP1.00 billion in 2015. Expenses were cut by reducing staff headcount by 6,300 and from lower bonuses, as well as the scaling back of RBS's investment banking division.
Impairment losses fell to GBP362.0 million from GBP1.03 billion due to "significant improvements" in Ulster Bank's mortgages in arrears and in UK Corporate and International Banking.
In addition, the 81%-state-owned bank followed Lloyds Banking Group in making no further provision for the payment protection insurance mis-selling scandal.
The bank said that good progress has been made towards developing detailed plans to implement its new structure - built around Personal & Business Banking, Commercial & Private Banking, and Corporate & Institutional Banking - which was unveiled in February alongside its 2013 earnings. It added that it will be reporting on this basis from the second quarter of 2014.
"Today's results show that in steady state, RBS will be a bank that does a great job for customers while delivering good returns for our shareholders," Chief Executive Ross McEwan said in a statement. However, "we still have a lot of work to do and plenty of issues from the past to reckon with. Everyone at RBS is focused squarely on doing everything we can to earn the trust of our customers and in the process change the banking sector for the benefit of the UK," he added.
InterContinental Hotels closed up 8.4%, making it the blue-chip index's second biggest gainer.
The company, which owns hotel brands Crowne Plaza and Holiday Inn, said revenue per available room was up 6% in its first quarter, and it declared a USD750 million special dividend after completing two asset disposals during the period, in line with an ongoing strategy to reduce the capital intensity of the business.
Overall, the FTSE 100 closed up 0.2% at 6,822.42, meaning that it closed the week up 2.1%, its biggest weekly gain since February. The FTSE 250 closed up 0.5% at 15,930.92, and up 0.3% for the week, while the AIM All-Share index closed up 0.1% at 825.19, and 0.7% for the week.
In the afternoon, the blue-chip index jumped sharply in the immediate aftermath of some much-better-than US jobs data, before quickly returning to pre-data levels.
Employment in the world's largest economy rose by much more than anticipated in the month of April, according to a report released by the US Labor Department, with the report also showing a much bigger than expected drop in the unemployment rate.
The report said non-farm payroll employment surged by 288,000 jobs in April compared to economist estimates for an increase of about 210,000 jobs. The report also showed upward revisions to the job growth in the two previous months. Revised data showed that employment rose by 203,000 jobs in March and 222,000 jobs in February, reflecting a new upward revision of 36,000.
With the stronger-than-expected job growth, the US unemployment rate dropped to 6.3% in April from 6.7% in March. Economists had expected the unemployment rate to edge down to 6.6%.
?The ice storm is becoming a distant memory, and it?s encouraging that job figures continue to rise after what has been a sluggish first quarter of growth," said Dennis de Jong, managing director at UFXMarkets, making reference to the anaemic 0.1% increase in US annualised first-quarter gross domestic product that was reported on Wednesday.
The dollar also received a boost in the wake of the US jobs data, but fell shortly afterwards, as some soft factory orders data released a little later missed economists' forecasts.
The US Census Bureau said factory orders rose by 1.1% in March following a downwardly revised 1.5% increase in February. Economists had been expecting orders to increase by 1.4% compared to the 1.6% growth originally reported for the previous month.
At the close of the UK equity market, the euro trades at USD1.3863, while the pound trades at USD1.6864.
Earlier in the day, sterling dipped briefly following the latest reading of the UK construction purchasing managers' index. The UK construction sector PMI slowed to 60.8 in April from 62.5 in March, a faster slowdown in growth than the reading of 62.0 that had been expected by economists. Although, with a PMI reading above 50.0 indicating expansion, the sector remains buoyant.
Away from InterContinental Hotels and RBS, AstraZeneca, which was one of the main catalysts for gains by the FTSE 100 earlier in the week, ended Friday down 0.2%. The pharmaceutical company, which has been at the heart of some intense merger and acquisition speculation, opened the day firmly lower after US giant Pfizer Inc submitted an improved takeover offer of GBP50 per share, valuing the British drug maker at GBP64 million.
However, the company's shares managed to take back most of the losses after it rejected the proposal, stating that the increased GBP50 per share bid still "significantly undervalue(s)" the company and that the details of the proposal are "inadequate".
In the FTSE 250, Capital & Counties Properties closed up 3.7%. Shares in the property investment and development company rose after it said it has made a "positive" start to the year after launching its new residential development in Fulham, London.
Rentokil Initial was another big mid-cap riser, ending the day up 2.8%. The pest control to facilities management company said pretax profit in the first quarter 2014 was ahead of the same period in 2013, but said revenue was held back by lower revenues from its Protect and Enhance business, particularity in Benelux, as expected.
It said pretax profit in the first quarter 2014 amounted to GBP19.3 million compared with GBP10.6 million in the first quarter 2013. Restructuring and one-off costs for continuing operations were significantly lower during the period at GBP2.1 million, versus GBP5.1 million a year earlier, contributing to the increase in profit. Revenue fell to GBP412.3 million in the first quarter 2014 compared with GBP644.8 million a year earlier, reflecting the disposal of its Initial Facilities business, which was sold for GBP250 million in March.
There is no UK macro economic data or company reports scheduled to be released on Monday owing to the early May Bank Holiday.
However, HSBC Chinese manufacturing purchasing managers' index information for April is released at 0145 GMT. March's Sentix investor confidence reading for the eurozone is released at 0830 GMT, ahead of euro area producer price inflation data at 0900 GMT.
In the US, Markit services PMI reading for April is published at 1345 GMT, before the ISM non-manufacturing PMI reading at 1400 GMT.
On Tuesday, Spanish, Italian, French and German Markit services PMI figures for April are released at 0713 GMT, 0745 GMT, 0750 GMT, and 0755 GMT, respectively. The wider eurozone's Markit services PMI reading for April is published at 0800 GMT, with the UK's released at 0830 GMT. Eurozone retail sales data are released at 0900 GMT.
In the afternoon, the US Bureau of Economic Analysis releases trade balance data at 1230 GMT.
In Tuesday's UK corporate calendar, FTSE 100-listed Barclays and Glencore Xstrata is joined by FTSE 250-listed Countrywide, Hiscox in releasing trading updates.
Blue-chip Aberdeen Asset Management provides interim results.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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