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LONDON (Alliance News) - UK stocks ended mixed Monday, with banks the main drag on the FTSE 100 blue-chip index, which gave back some of the gains seen late last week.
The FTSE 100 ended down 0.4% at 5,877.00 points, following a rally late last week in the wake of a rebound in oil prices and expectations of more monetary stimulus from the European Central Bank. The FTSE 250 closed up 0.1% at 16,146.98 and the AIM All-Share up 0.2% at 688.81. In Europe, the CAC 40 in Paris ended down 0.6%, while the DAX 30 in Frankfurt finished down 0.3%.
Banking stocks in London were among the worst hit on Monday, after Sky News reported over the weekend that they will have to set aside more money to cover the cost of the payment protection insurance mis-selling scandal.
Barclays, HSBC Holdings, Lloyds Banking Group, Royal Bank of Scotland Group and Santander UK are likely to reveal a combined bill of at least GBP5.0 billion when they report earnings for 2015, the report said. A new provision of that size would move the total cost of the scandal north of GBP30.0 billion. Banks will report their earnings starting next month.
Following the news, the FTSE 350 Banking Sector index finished down 3.0%, with shares in Lloyds down 5.6%, Barclays down 4.7%, Royal Bank of Scotland Group down 4.1% and HSBC Holdings down 1.3%.
Kingfisher closed among the worst perfoming stocks in the blue-chip index, down 1.7%, after it announced ambitious profit-improvement plans, according to analysts, with Investec arguing that the rewards for shareholders do not look sufficient to fully offset the risks they face.
The DIY retailer, which owns B&Q and Screwfix, announced a five-year plan to deliver a GBP500 million annual profit uplift by the end of the fifth year and a capital return of GBP600 million over the next three years. The group said it will deliver the GBP500 million per annum in extra profit on top of the profit it will generate from normal business. Kingfisher expects its performance pre-transformation to be broadly in line with the macroeconomic backdrop in its respective markets.
The costs of the transformation plan will reduce reported profit, before the benefits of the plan, by GBP50 million in the first year of the plan and by between GBP70 million and GBP100 million in the second year, Kingfisher warned. In total, the five-year plan is expected to cost GBP800 million in capital expenditure, operating costs and exceptional operating costs.
Investec analyst Kate Calvert said the plan from Kingfisher looks "ambitious" and that the costs will lead to pretax profit downgrades for the group in its 2016 and 2017 financial plus another cut in 2019.
Telecoms giant BT Group also ended firmly in the red, with its shares down 3.4%. A group of more than 100 Members of Parliament, spearheaded by former Conservative Party co-chairman Grant Shapps, backed calls for the company's Openreach division to be separated. The group, calling themselves 'The British Infrastructure Group', called on UK telecoms regulatory Ofcom to take "radical action" over the "natural monopoly" of BT Openreach.
Ofcom has tabled the potential separation of Openreach - which is responsible for the installation and upkeep of most of the UK's broadband connections - as part of its ongoing wider review of digital communications. The British Infrastructure Group's report adds to the voices of many of BT's rivals, including Sky, which have clamoured for the division to be separated.
London-listed oil stocks recovered from their early losses as crude prices found some firm ground above the USD30.0 line, despite giving back some of the gains from the rally started late last week, reaching a peak of USD32.78 before the UK market open Monday.
North Sea benchmark Brent crude was quoted at around USD30.72 a barrel at the London close, while US benchmark West Texas Intermediate stood at USD30.56. Royal Dutch Shell 'A' ended up 0.4% and BG Group up 0.1%. However, BP didn't make it to the green, down 0.7%.
In the FTSE 250, Ophir Energy closed up 4.6% after it said it has signed heads of terms with US oil services group Schlumberger to be its upstream partner on the Fortuna floating liquefied natural gas project in Equatorial Guinea.
The oil and gas explorer said Schlumberger, subject to the agreement being definitively agreed and to government approval in Equatorial Guinea, will get a 40% economic interest in the project. Ophir said it expects the final deal, of which no financial details were provided, to be signed in the second quarter of 2016.
Ophir also released a short trading update, with its production for 2015 averaging 13,000 barrels of oil equivalent per day for the year, ahead of guidance after its Bualuang and Sinphuhorm fields in Thailand performed ahead of budget.
Elsewhere on the London Stock Exchange, engineer GKN ended down 2.7% after being downgraded to Neutral from Outperform by Credit Suisse, while mid-cap fellow engineer IMI was also cut to Underperform from Neutral by Credit Suisse, sending its shares down 5.7%.
The US Federal Reserve interest rate decision, due on Wednesday, also kept some investors out of the market on Monday. The Fed is widely expected to keep US interest rates on hold, following the lift-off announced in December, the first US interest rate hike since 2006. The Fed will start its two-day meeting on Tuesday.
The focus is likely to be on the statement released alongside the Fed decision, where analysts expect to find the central bank highlighting downside risks and concerns about the strength of the dollar or the slump in oil prices.
Wall Street was lower at the London close, with the Dow 30 down 0.5%, the S&P 500 down 0.6% and the Nasdaq Composite down 0.3%.
The pound was standing at USD1.4255 at the London close, while the euro was at USD1.0827. Meanwhile, the gold price was at USD1,107.65 an ounce at the close.
In the US economic calendar, US Redbook index is due at 1355 GMT, while the US Housing Price Index is due at 1400 GMT. US Markit Services and Composite Purchasing Manager's Index readings are due at 1445 GMT, whilt US Consumer confidence data are due at 1500 GMT.
In the US corporate calendar Tuesday, iPhone maker Apple and telecom giant AT&T will publish first quarter and fourth-quarter results, respectively, after the US market close.
In the UK corporate calendar, Dixons Carphone, Crest Nicholson and Easyjet issue trading statements, while PZ Cussons publishes half-year results. Card Factory, Carpetright and Marston's, Picton Property Income, Avon Rubber, Stock Spirits Group, and Intermediate Capital Group release trading statement.
By Daniel Ruiz; danielruiz@alliancenews.com
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