LONDON (Alliance News) - The FTSE 100 closed higher Thursday on the busiest day of the earnings season so far, after Federal Reserve Chair Janet Yellen's latest comments pushed up stocks on Wall Street, dragging Europe with it.
London's blue-chip index has spent most of the day in the red, with concerns about the increasingly tense situation in Ukraine weighing on European markets, but it moved higher after Yellen gave testimony before the Senate Banking Committee.
While the tone of Yellen's testimony was little changed from her remarks before the House Financial Services Committee earlier this month, she acknowledged the economic impact of the severe winter weather in the US. Yellen said it was too soon to know how much the weather has played a role in this winter's economic lull but said the Fed will consider the issue at its March meeting.
"Since my appearance before the House committee, a number of data releases have pointed to softer spending than many analysts had expected. Part of that softness may reflect adverse weather conditions, but at this point it is difficult to discern how much," Yellen said.
Ironically, Yellen's speech was originally scheduled for February 13 but had to be postponed due to the bad weather.
The early jitters in Europe came after Moscow admitted it is protecting deposed Ukrainian president Viktor Yanukovych in Russia, and as Ukraine's Crimean peninsula, a region that leans toward Moscow, descended into turmoil.
US Defence Secretary Chuck Hagel warned Russia that it must act carefully during "a very delicate time" in Ukraine, as the Kremlin began military drills near its western neighbour and flew extra fighter jets to patrol the region.
Ukraine's interim President and parliamentary speaker Oleksandr Turchynov warned Russia to keep its armed forces on the peninsula inside their bases, after pro-Russian self defence forces seized regional government buildings in the Crimea and raised the Russian flag atop them. Thousands of Russian troops are stationed in the Crimean port city of Sevastopol, which houses the Russian Black Sea fleet.
Ukraine's parliament elected former opposition leader Arseniy Yatsenyuk as the country's prime minister. The close ally of former prime minister Yulia Tymoshenko, was backed by 371 of 417 participating deputies.
Still, the FTSE 100 closed up 0.2% at 6,810.27, the FTSE 250 closed up 0.3% at 16,523.02, while the AIM All-share, although off its daily low, closed down 0.1% at 886.3.
In Europe, the CAC 40 and the DAX 30 ended the day lower, but well clear of their lows for the day, while the DJIA, S&P 500, and NASDAQ Composite were all up between 0.2% and 0.3% when the London markets closed.
It was the biggest day of the UK full-year earnings season so far, and clear winners and losers emerged.
Almost inevitably, Royal Bank of Scotland was the biggest decliner on the FTSE 100, closing down 7.7%, after it reported its sixth consecutive pretax loss and its largest loss since the financial crisis in 2008.
RBS reported a GBP8.24 billion pretax loss for 2013, widened from GBP5.28 billion in 2012, after incurring a further GBP3.84 billion in provisions, including for product miss-selling and regulator fines, and GBP4.82 billion in impairments and other losses.
The result means that its net losses over the past six years are now over GBP46 billion, almost exactly the amount it was bailed out for in 2008.
It also unveiled a new restructuring programme that will further scale down its investment bank and narrow the bailed-out bank's focus to the UK. Chief Executive Ross McEwan warned of more job cuts.
RSA Insurance Group was the index's third biggest faller, closing down 2.9%. Former RBS boss Stephen Hester, who took the helm of the struggling insurer in early February, unveiled a GBP775 million underwritten rights issue as part of a wider "strategic action plan" that also includes a target to raise GBP300 million from business disposals in 2014, with potential for further such disposals in the coming years.
RSA swung to a GBP244 million pretax loss in 2013, from a GBP448 million pretax profit in 2012, as it was hit by a surge of weather-related claims because of severe flooding in parts of southern and south-west England, bad weather across Europe, and losses from the accounting scandal at its Irish business.
Media buying company WPP was another big loser, closing down 6.3%, despite declaring a 20% increase in its dividend for 2013 and a similar rise in pretax profit for the year. However, it warned that sterling's strength had an increasing impact during the second half of the year and is set to weigh on its results in 2014.
Numis Securities estimates that WPP's organic growth will be 4% in 2014, with a further 2% added from acquisitions. However, there is likely to be a 5% negative impact from foreign exchange, leaving just 1% reported growth, it forecast.
Capita, closing up 6.7%, and Whitbread, closing up 4%, were the two biggest gainers in the FTSE 100.
Outsourcing company Capita hiked its dividend 13% as earnings excluding acquisitions and disposals rose, cashflow increased and it reported higher revenues, order book and bid pipeline.
Meanwhile, Costa coffee shop and Premier Inn hotels owner Whitbread reported strong sales growth in recent weeks thanks to a strong Christmas trading period and "favourable" weather in January, with its restaurant business benefiting from the absence of snow. It said it is now "on track to deliver full-year results towards the top end of the range of current expectations."
Miner Kazakhmys, closing up 39%, was the biggest gainer in the FTSE 250. It swung to a loss in 2013 as revenues fell 7.5%, but market expectations had been for even worse. Chief Executive Oleg Novachuk said he is considering a broader restructuring programme, which Liberum Capital thinks would be a "significant benefit" to the business and could lead to a doubling of operating margins.
In the forex market, the euro was hit in early trading after Spanish GDP fell short of expectations, recording a fall of 0.2% year-on-year in the fourth-quarter of 2013. Economists had forecast a fall of 0.1%. The euro fell to a multi-day low against the pound, and its lowest level since February 13 against the dollar.
However, the currency slowly regained its losses and, at the close of the UK equity market, trades at USD1.3715, while sterling trades at EUR1.2159.
In the data calendar Friday, the European focus will be on eurozone consumer price inflation figures scheduled for 1000 GMT Friday.
UK Nationwide house price information is released at 0700 GMT, at the same time as German retail sales. French consumer spending and producer price data are scheduled at 0745 GMT. The Italian CPI reading is released at 1000 GMT.
In the afternoon, the second preliminary reading of US gross domestic product is released at 1330 GMT. US personal consumption figures are released at the same time, ahead of the Reuters/Michigan consumer sentiment index at 1455 GMT. US pending home sales numbers for January are released at 1500 GMT.
Bank of England governor Mark Carney delivers a speech at 1530 GMT.
In another busy day in the corporate calendar, blue-chips Mondi, Old Mutual, William Hill and Pearson are joined by FTSE 250-constituents Interserve, Berendsen, Laird, Intu Properties, Rentokil, Rightmove, Synthomer and UBM, amongst others, in releasing full-year results. Stagecoach Group releases an interim management statement.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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10 Sep 2015 09:19
