BT Share News (BT.A)

LONDON (Alliance News) - UK shares closed broadly higher Thursday, reacting positively to a ceasefire agreement in the Ukraine and a report from the Bank of England that signalled an earlier rate hike than investors had anticipated.

The FTSE 100 closed up 0.2% at 6,828.11 points, the FTSE 250 ended up 1.1% at 16,809.42, and the AIM All-Share finished up 0.2% at 698.05.

The market received a mid-morning boost from news of the Ukraine accord. A ceasefire agreement for Ukraine was reached at peace talks in Belarus and will take effect at midnight on Saturday, Russian President Vladimir Putin said after talks with German Chancellor Angela Merkel.

Soon thereafter, the Bank of England said it expects UK inflation to breach its 2% target in three years and economic growth to gain momentum. Although inflation is set to turn negative in the near term, the central bank expressed its readiness to take whatever action is needed to ensure that inflation returns to the 2% target in a timely fashion. Any interest rate hikes would still be gradual and limited, it said.

In its quarterly Inflation Report, the BoE said it expects the robust pace of UK growth seen in 2014 to be sustained in the near term. Gross domestic product is estimated to rise by 2.9% in 2015 and 2016. For 2017, the bank estimated 2.7% expansion. The bank left its 2015 GDP outlook unchanged from the previous forecast, but upgraded the outlook for 2016 from 2.6%.

In the letter, released with the Inflation Report, BoE Governor Mark Carney said the UK is not experiencing "deflation". A temporary period of falling prices driven by large adjustments in a few components of the CPI is a fundamentally distinct phenomenon from deflation, he said.

"Given the nature of the shocks affecting inflation, the [Monetary Policy Committee] judges it appropriate to set policy so that it is likely that inflation will return to the 2% target within two years," Carney said.

Following Carney's comments, the pound rose to USD1.5385 at the UK equities close, a level it hadn't seen since January 2.

European stocks outperformed London, benefiting even more from the Ukraine news, with the French CAC 40 closing up 1.0% and the German DAX 30 up 1.6%.

Further good news on Ukraine came from the International Monetary Fund, which said it has agreed on a EUR15.5 billion bail-out to support the country to implement a new economic reform programme.

London stocks had initially opened cautiously higher, after negotiations between the eurogroup finance ministers and Greece over the country's debt remained at a stalemate. Eurozone finance ministers ended their talks without any major breakthrough on the future course of action on Greek debt funding. "We had an intense discussion and constructive, covering a lot of ground, also making progress, but not enough progress at this point to come to joint conclusions," Eurogroup President Jeroen Dijsselbloem said at the press conference in Brussels late Wednesday.

In the US at the London close, Wall Street was trading broadly higher, despite some disappointing US economic data, with the DJIA up 0.2%, the Nasdaq Composite up 0.7%, and the S&P 500 up 0.5%.

US jobless claims climbed to 304,000, an increase of 25,000 from the previous week's revised level of 279,000. Economists had expected jobless claims to rise to 288,000 from the 278,000 originally reported for the previous week.

Meanwhile, US Commerce Department released a report showing that US retail sales fell by more than anticipated in the month of January. The report said retail sales fell by 0.8% in January after slumping by 0.9% in December. Economists had expected sales to drop by 0.5%.

In the FTSE 100, Shire shares rose 1.3% after the Irish pharmaceutical company reiterated confidence in its target of USD10 billion in annual product sales by 2020. Shire posted a rise in pretax profit for 2014 boosted by the break-fee from its collapsed takeover by US drugmaker AbbVie Inc and posted earnings per share in line with guidance.

Shire proposed a total dividend of 22.92 cents, up from 19.93 cents in the previous year.

Rio Tinto was among the biggest blue-chip gainers, up 3.2%, after the Anglo-Australian miner reported a fall in underlying earnings in 2014, but said it will hike its dividend 12% to 215 US cents per share, up from 192 cents per share last year. The dividend comprises its 96 cents interim dividend and a 119 cents final dividend.

The group also said it will launch a USD2 billion share buyback programme, comprising a USD400 million off-market share buy-back tender and a USD1.6 billion on-market buyback of shares.

"Last year, we made a clear commitment to materially increase cash returns to our shareholders. We have delivered this today through a 12% increase in our full year dividend and a proposed USD2.0 billion share buy-back. These represent a total cash return to shareholders, in respect of 2014, of almost USD6.0 billion," said Rio Tinto Chief Executive Sam Walsh.

BT Group, down 1.8% at 451.561p, said it placed 222.0 million shares at a price of 455 pence each to raise GBP1.0 billion, which it will use to part fund its acquisition of mobile provider EE Ltd.

Lancashire Holdings ended as one of the biggest gainers in the FTSE 250, up 3.8%. The insurance and reisurance provider said it is in a "very good place for 2015", as it posted a rise in pretax profit for 2014. The company proposed a further special dividend of 50 cents, takings total special dividends for the year to USD1.70, compared to 65 cents in 2013. It also maintained its final dividend of 10 cents, taking its total standard dividends for the year to 15 cents.

In the AIM All-Share, Mariana Resources shares rocketed up 83%, after the company reported positive results from the initial drilling programme at the Hot Maden Prospect in Turkey. The group said the assay results from the drilling showed the stronger mineralisation from the Hole 4 discovery at the site continued into the new drilling targets.

In the economic calendar Friday, German fourth-quarter GDP is due at 0700 GMT, while eurozone fourth-quarter GDP is at 1000 GMT. The UK Leading Index is at 1000 GMT.

In the UK corporate calendar, Rolls-Royce, Anglo-American and Riverstone Energy will provide full-year results. Severn Trent and S&U will release trading statements.

By Daniel Ruiz; danielruiz@alliancenews.com

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