BON.L Share News (BON)

LONDON (Alliance News) - London-listed stocks were trading higher midday Wednesday, with the market awaiting the US Federal Reserve's interest rate decision after the close, with attention in the meantime diverted by improving UK labour market.

The Office for National Statistics said the UK unemployment rate declined in three months to October and the employment rate hit a record high.

The ILO jobless rate came in at 5.2% in August to October period, which was below 5.3% seen in three months to September. It has not been lower since three months to January 2006, the ONS said. Economists had forecast the rate to remain unchanged at 5.3%.

Meanwhile, the employment rate rose to 73.9%, the highest since comparable records began in 1971.

However, support for the pound was limited as UK earnings including bonuses increased by 2.4% in the three months to October from the same period of last year, slightly slower than a 2.5% rise forecast by economists. Excluding bonuses, earnings advanced 2%.

Additionally, the number of people claiming unemployment related benefits increased by 3,900 in November from the prior month. It was expected to increase marginally by 800 from October.

At midday the pound traded at USD1.5018.

Having finally snapped its run of losses on Tuesday, the FTSE 100 continued its positive momentum Wednesday morning, up 0.7% at 6,062.43 points. The FTSE 250 index was up 0.3% at 17,053.49 points, and the AIM All-Share up 0.3% at 721.42.

In Europe, the French CAC 40 was up 0.7% and the German DAX 30 up 0.6%. The moves followed data from Eurostat which showed eurozone consumer prices increased more than estimated in November.

Inflation rose to 0.2% year-on-year in November, coming ahead of the 0.1% initial estimate and higher than the 0.1% growth seen in October. However, headline inflation has been below the European Central Bank's target of 'below, but close to 2%' since early 2013.

Wall Street is called higher ahead of the Fed decision at 1900 GMT, and Fed Chair Janet Yellen's press conference at 1930 GMT. Futures pointed the DJIA, S&P 500 and the Nasdaq 100 all up 0.6%.

The Fed will later conclude its two-day policy meeting, which analysts widely expect to bring the first US interest rate hike in almost 10 years. The last time the Fed increased rates was in June 2006.

With a rate hike almost a foregone conclusion for many market participants, the focus will be on the Fed's policy statement and Yellen's press conference. Analysts expect the Fed chief to emphasise a slow path for rate increases, after a modest quarter point hike in the federal funds rate, and say that subsequent rate hikes next year will be data dependent.

David Kohl, chief currency strategist at Swiss private bank Julius Baer said that despite elevated expectations of a rate hike, investors remain nervous as the tightening comes against a weak inflationary background.

"The rate hike will come at a time of no inflation. Although solid labour market data are a clear signal in favour of a rate hike, overall US economic data continues to disappoint, and the industrial part of the US economy seems to signal some weakness," Kohl said.

"Against this backdrop we expect the Fed to undertake one hike and be done. In this respect the updated of the Federal Open Market Committee participants' assessments of appropriate monetary policy will be the second-most important information released today. A benign path towards higher rates is the support financial market look for," he added, referring to the Fed's so-called 'dot plot' of projections.

On the London Stock Exchange, Pearson was the best performer in the FTSE 100, up 4.5% after the education publisher was upgraded to Outperform from Neutral by Exane BNP Paribas. The upgrade came after the shares had declined amid reports the Pearson had backed down from planned increases to the selling price of its e-books in the face of a rebellion by academic institutions.

Dixons Carphone traded up 2.7% after it said its pretax profit rose in the first half thanks to higher revenue and solid like-for-like sales growth.

The electricals and mobile phone retailer said its pro-forma headline pretax profit for the 26 weeks to the end of October was GBP121.0 million, up 23% year-on-year from the GBP98.0 million it made a year earlier. The headline result strips out costs from the merger. The company will pay an interim dividend of 3.25 pence per share, up 30% year-on-year.

Dixons Carphone also said it has appointed Ian Livingston, the former chief executive of telecoms giant BT Group, as its deputy chairman with immediate effect.

Rolls-Royce Holdings was up 1.9%, also one of the best blue-chip performers. The engineer said it will ditch its divisional structure in the new year and move to a model of five market-facing businesses, part of the wider restructuring programme the group is enacting.

The jet engine and power systems manufacturer, which has been hit by a slew of profit warnings caused by pressures on all of its business units, said from January 1, it will end its current divisional structure, by which it operates under the Aerospace and Land & Sea units.

Instead, it will operate as five market-facing units, covering Civil Aerospace, Defence Aerospace, Marine, Nuclear and Power Systems. The presidents of those five units will then report directly to Warren East, Rolls-Royce's chief executive.

Fashion retailer SuperGroup led the gainers in the FTSE 250, up 9.4%. The company, which owns the Superdry clothing range, said its pretax profit dipped in the first half due to the group booking exceptional costs which offset robust revenue growth.

SuperGroup said its pretax profit for the 26 weeks to October 24 was GBP11.5 million, down from GBP17.2 million, as it booked costs on the restructuring of its business in North America. Stripping out the exceptionals, the company said its pretax profit for the half rose to GBP19.3 million from GBP12.5 million.

SuperGroup has proposed paying a 6.2 pence interim dividend, having not paid an interim nor final dividend in the previous financial year.

Fellow fashion retailer Bonmarche Holdings traded down 29% after it said it expects to report a fall in pretax profit for its current financial year and said its chief executive is off to lead fashion chain Karen Millen.

Bonmarche said trading conditions have been "very challenging" in December, particularly since the Black Friday sales on November 27.

"The board's view is that these trading conditions are likely to continue for the remainder of the winter season, and it has therefore revised its profit expectations for the current financial year," Bonmarche said. Beth Butterwick is leaving after four years as the chief executive of Bonmarche to join rival Karen Millen.

In the AIM All-Share index, Thor Mining traded up 17% after it struck a deal with an Australian company which may lead to the sale of its Spring Hill and Dundas gold projects for up to AUD3.5 million. Thor has signed an option agreement to sell its wholly owned subsidiary, TM Gold, which owns the two gold projects in Australia to PC Gold.

PC Gold will pay a AUD150,000 deposit within the next 21 days to obtain a 30-day option to acquire the subsidiary from Thor. PC Gold will pay an initial AUD2.0 million, including that deposit, to acquire the initial 60% stake in the subsidiary, but "100% management control". To acquire the other 40% stake in the subsidiary, PC Gold will have to pay another AUD1.5 million within a 12 month window.

Aside from the Fed's interest rate decision and press conference, still ahead in the economic calendar for Wednesday, US housing starts and building permits are both at 1330 GMT, industrial production and capacity utilisation are at 1415 GMT, flash Markit manufacturing Purchasing Managers' Index survey results are at 1445 GMT and Energy Information Administration's crude oil stocks are at 1530 GMT.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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