LONDON (Alliance News) - Shares have opened firmly in London on Tuesday, following Monday's steep losses, as investors digest a full menu of UK company updates and M&A activity, ahead of UK GDP figures due at 0930 BST.
Chinese share prices have stabilized Tuesday, after more promised action by Chinese authorities. The Shanghai Composite is down just 1.7%, while the Hang Seng in Hong Kong is trading higher.
Oil prices are sliding again. Brent oil has hit a new four-month low of USD52.70 per barrel.
Royal Mail is the biggest blue-chip loser, down 2.6%, after UK regulator Ofcom provisionally accused the postal operator of breaching competition law by discriminating against competitors in its wholesale pricing.
Meanwhile, RSA Insurance is up 11% after Zurich Insurance said it is considering a takeover bid.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.5% at 6,539.84
FTSE 250: up 0.5% at 17,360.42
AIM ALL-SHARE: flat at 747.48
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Hang Seng: up 0.9% at 24,581.17
Nikkei 225: closed down 0.1% at 20,328.89
DJIA: closed down 0.7% at 17,440.59
S&P 500: closed down 0.6% at 2,067.64
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GBP: down at USD1.5545
EUR: down at USD1.1060
GOLD: up at USD1,096.62 per ounce
OIL (Brent): down at USD52.79 a barrel
(changes since end of previous GMT day)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
(all times in BST)
09:00 Italy Consumer and Business Confidence
09:30 UK Gross Domestic Product preliminary
09:30 UK Index of Services
13:55 US Redbook index
14:00 US S&P/Case-Shiller Home Price indices
14:45 US Markit Services and Composite PMI Preliminary
15:00 US Richmond Fed Manufacturing Index
15:00 US Consumer Confidence
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The Chinese central bank is to inject CNY50 billion into money markets in the country through seven-day reverse bond repurchase agreements on Tuesday, Reuters reports, citing traders. The injection is the largest made by the People's Bank of China through open market operations since July 7.
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US-backed Kurdish forces in northern Syria captured a key town from Islamic State militants Monday but accused Turkey of shelling Kurdish villages in the area, potentially complicating the international campaign against the extremist group. At least four fighters and several civilians were wounded in three waves of alleged Turkish shelling in an area controlled by the Kurdish People's Protection Units and the Free Syrian Army. Turkish troops started airstrikes Friday targeting Islamic State in Syria but appear to have shifted focus to attacking bases of the outlawed Kurdistan Workers' Party in northern Iraq.
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US President Barack Obama is expected to deliver a message to the entire African continent during a speech at the African Union in Ethiopia on Tuesday, the last day of his four-day state visit to the region. Obama will also hold bilateral talks with AU Commission chair Nkosazana Dlamini-Zuma in the capital, Addis Ababa. He is then scheduled to meet with civil society representatives, a day after harshly criticizing the lack of human rights in Ethiopia where political opposition, civil society and media freedom are limited.
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BROKER RATING CHANGES
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DAVY RAISES LADBROKES TO 'NEUTRAL' ('UNDERPERFORM')
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COMPANIES - FTSE 100
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BP said it swung to a loss in the first half of 2015 after revenue fell and it booked expected charges related to its long-awaited settlement over the 2010 Deepwater Horizon oil spill. The oil and gas giant reported a replacement cost loss of USD4.16 billion in the first half of 2015, swinging from a USD6.65 billion profit a year earlier, caused by a fall in revenue and the recently announced agreements in principle to settle US federal, state and the vast majority of local government claims arising from the accident in the Gulf of Mexico. The company booked a pretax charge of USD9.80 billion related to the settlement, slightly below the USD10.0 billion expected by analysts. The total cumulative pre-tax charge for the accident is now USD54.6 billion. BP said it will pay a quarterly dividend of 10.0 cents per share for the second quarter of 2015.
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Diageo said it has agreed a deal with Dutch brewer Heineken and the Ohlthaver & List to restructure their mutual operations in South Africa and Namibia. Under the deal, Diageo will sell its 42% stake in the DHN Drinks business and transfer its associated shareholder loan to Heineken. It will also sell its 25% equity stake in the Sedibeng brewery in South Africa to Namibia Breweries, which is owned by Ohlthaver & List, and transfer the associated shareholder loan to Heineken. In addition, it will sell its 15% stake equity stake in Namibia Breweries to Heineken. Under the restructuring, Diageo also will acquire the remaining shares it does not already own in Brandhouse Beverages Pty Ltd, its beer and spirits marketing joint venture in South Africa, and will make the business a wholly-owned subsidiary. Diageo will receive ZAR2.5 billion in cash for the restructuring, or around GBP128 million, and expects to complete the deals by the end of the year.
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UK media and communications regulator Ofcom said it has issued a statement of objections to postal service operator Royal Mail, with a provisional view that the company breached competition law by discriminating in its wholesale pricing against postal operators that competed with it on delivery. Ofcom said the provisional findings, part of the investigation launched following a complaint by Whistl Ltd, a former competitor of Royal Mail, found that Royal Mail's changes to prices, terms and conditions for the provision of access services included "unlawful price discrimination". In response Tuesday morning, Royal Mail said it was "disappointed" by the regulator's announcement and added it takes its compliance obligations "very seriously".
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Anglo-South African paper and packaging manufacturer Mondi said it expects a rise in first-half underlying operating profit and said it will recognise a one-off charge in the period. The company said its underlying operating profit for the first half of 2015 will be higher than the EUR377 million it posted a year earlier. Mondi added it has booked a EUR36 million charge in the half, primarily related to the closure of a small kraft paper mill in Finland, the shuttering of a consumer packaging plant in Spain and further restructuring in its US bags business.
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Hikma Pharmaceuticals said it has agreed a USD2.65 billion deal to acquire Roxane Laboratories Inc and Boehringer Ingelheim Roxane Inc from Boehringer Ingelheim, the German pharmaceutical company. The Roxane businesses are a US specialty generics operation. Hikma will issue 40 million shares to Boehringer at 2,350 pence per share, along with a USD1.18 billion cash payment. Hikma shares closed Monday at 2,080.00p. Hikma said the deal will significantly expand its US portfolio, including oncology, repiratory, extended release and controlled substances products.
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Engineer GKN said its pretax profit declined in the first half of the year, hit by continued weakness in some of its key markets, and said it has agreed a EUR706 million deal to acquire Fokker Technologies Group of the Netherlands. GKN said its pretax profit for the six months to the end of June was down to GBP212 million from GBP224 million a year earlier, despite an increase in sales for the group to GBP3.62 billion from GBP3.57 billion.
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Fashion retailer Next said its full-price brand sales rose in the first half of its financial year and said it has upgraded its full-year pretax profit expectations after its sales came in ahead of guidance. Next said its total sales in the 26 weeks to July 25 were up 3.5%, with 0.8% growth in retail sales and 7.5% growth in directory sales in the period. The sales were marginally ahead of the guidance of 0% to 3% growth that Next issued in March. As a result of the beat to its sales growth guidance, Next said it has upgraded its pretax profit forecast for the year to GBP810 million to GBP825 million, up 1.9% on its previous forecast.
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ITV maintained its outlook for 2015, continuing to expect "another strong performance with revenue growth across the business", as it posted a rise in pretax profit for its first half. The broadcaster posted a pretax profit of GBP327 million for the half year to end-June, up from GBP250 million a year before, as revenue rose to GBP1.36 billion from GBP1.23 billion. Revenue growth was boosted by a strong performance from its ITV Studios business, and 6% revenue growth in its Broadcast & Online segment. ITV will pay an interim dividend of 1.9 pence, up from 1.4 pence a year before.
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Zurich Insurance said it is evaluating a potential bid for RSA Insurance Group. In a short statement, the Swiss insurer confirmed it is evaluating a potential offer for RSA. It added that the announcement does not represent a firm offer to buy RSA and said there is no assurance that any offer will be made.
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The Royal Bank of Scotland Group is close to agreeing a deal to sell its Indian private banking arm to local firm Sanctum Wealth Management, Reuters reports. RBS is understood to have signed a non-framework agreement and is now in talks to sell the business to Sanctum Wealth, Reuters said, citing an emailed statement from an RBS spokeswoman. Reuters also said RBS has ended it plans to sell its cash management and trade finance business in the United Arab Emirates to Abu Dhabi Commercial Bank, citing sources familiar with the matter.
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HSBC Holdings could be forced out of the FTSE 100 if it decides to move back to Hong Kong from London on completing the review of the best location for its headquarters, Sky News reported.
The report said the issue is that the banking group's shares are listed in Hong Kong, widely seen as the most likely destination in the event of a move, as well as London. Citing sources, Sky News said that HSBC has been discussing the matter with its advisers. "The issue is understood to have arisen because under FTSE Group rules, companies which are listed on an overseas stock market in the same country as they are domiciled are not eligible for inclusion in its equity indices," the Sky News report said.
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COMPANIES - FTSE 250
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Melrose Industries said it has sold its Elster business to US industrial conglomerate Honeywell International Inc for GBP3.3 billion in cash.Melrose said that in addition to the cash consideration, Honeywell will assume the majority of the pension schemes on Melrose's books. Melrose said it is planning to use the consideration for the Elster businesses to return more than GBP2 billion to its shareholders and for general corporate purposes, including paying down its debt obligations.
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Drax Group said it swung to a pretax profit in the first half of 2015, leading to a higher interim dividend in line with its policy, but the electricity generator reiterated that it will be hit by changes to the UK climate change levy in the second half of the year. The FTSE 250-listed power plant operator reported a pretax profit of GBP53.0 million in the first half of 2015, swinging from a GBP10.8 million loss a year earlier, as revenue for the period rose to GBP1.24 billion from GBP1.05 billion.
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COMPANIES - INTERNATIONAL
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French tire maker Michelin said its first-half net income grew to EUR707 million from EUR624 million last year. Revenue rose 8.5% to EUR10.497 billion from EUR9.673 billion last year. The revenue growth was helped by an over-market 2.4% increase in volumes, led by the expected speed-up in quarter-on-quarter growth, the performance of the MICHELIN brand and the rebound in the other brand. A 10.2% favourable currency effect also benefited results.
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Norwegian energy firm Statoil reported that its IFRS net income for the second quarter declined to NOK10.1 billion, from NOK12.0 billion in the same period in 2014. The reduction was primarily a consequence of lower oil prices in the second quarter of 2015 compared to the same period last year. Realised average liquids prices in the quarter were down 28% measured in kronor compared to the second quarter last year. Despite divestments, Statoil delivered production of 1,873 mboe per day in the second quarter, up 4% compared to the same period in 2014.
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US consumer goods giant Procter & Gamble Co is expected to name company veteran David Taylor as chief executive officer on Thursday, the Wall Street Journal reported Monday, citing a person familiar with the matter. He will succeed AG Lafley, who is expected to continue as chairman to help with the leadership transition. Lafley, who has served two terms as P&G's CEO, may announce his retirement this week after a board meeting.
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German stock exchange operator Deutsche Börse reported that its second-quarter net income attributable to shareholders rose to EUR175.1 million from last year's EUR159.3 millionin the prior year.Net revenue was up 19% to EUR583.1 million from the prior year's EUR491.2 million. The increase was mainly driven by higher equity and interest rate volatility and the continued positive developments in securities custody and settlement as well as in its market data business.
The group also plans a restructuring that will result in one-off costs of about EUR60 million in 2015.
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Chinese internet-search giant Baidu reported an increase in profit for the second quarter, as revenues jumped a near 40%, with both earnings and revenues trumping Street estimates. However, Baidu shares plunged over 8% in after-hours trade on Nasdaq, after its outlook for the third quarter was short of current Street expectations. For the third quarter, Beijing-based Baidu expects revenue of CNY18.170 billion to CNY18.580 billion. Analysts had been expecting revenue of CNY18.79 billion for the quarter.
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Tuesday's Scheduled AGMs/EGMs
Vodafone Group
Strat Aero
Byotrol
Plastics Capital
Randall & Quilter Investment Holdings
Amiad Water Systems
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By Tom Waite; thomaslwaite@alliancenews.com; @thomaslwaite
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