Caledonia Share News (CLDN)

LONDON (Alliance News) - UK shares ended mixed Wednesday, as investors remained cautious ahead of the release at 1900 BST of the minutes of the US Federal Reserve's most recent monetary policy meeting.

It was a busy day in the UK corporate front. Shares in banks Barclays and Royal Bank of Scotland rose despite being fined by regulators in the US and the UK for alleged manipulation of currency markets, while shares in fashion retailer Burberry Group slumped after it lowered profit guidance for its current financial year, partly due to movements in foreign exchange rates.

The FTSE 100 managed to close above the 7,000 mark, up 0.2% at 7,007.26, while the FTSE 250 ended down 0.2% at 18,135.53. The AIM All-Share ended flat at 762.63.

European indices also ended mixed, with the CAC 40 in Paris up 0.3% and the DAX 30 in Frankfurt flat.

Six major banks - Barclays, Royal Bank of Scotland, UBS, Citigroup's Citicorp, JPMorgan Chase & Co and Bank of America - were fined USD5.7 billion on Wednesday, as authorities in the US and the UK took action after an investigation into alleged manipulation of currency markets.

Barclays will pay USD2.4 billion in total, including about USD441 million to the UK's Financial Conduct Authority, USD400 million to the US Commodities Futures Trading Commission and USD485 million to the New York State Department of Financial Service. Meanwhile, Royal Bank of Scotland Group was fined USD669 million by US regulators.

Barclays and RBS shares surged after the news came out, with Barclays closing up 1.4% and RBS up 0.6%. "It seems investors feared the worst and that cumulative USD6 billion slap on the wrists is seen as a light touch," said IG Markets analyst Joshua Mahony.

Also in the banking sector, Bank of Georgia Holdings was the best performer in the FTSE 250, up 6.5%, after reporting higher first-quarter pretax profit, as higher revenue in its banking and healthcare operations more than offset lower contributions from insurance and real estate.

The holding company said it made a GEL73.2 million pretax profit in the three months ended March 31, compared with GEL63.9 million in the corresponding period of the prior year, even as impairment charges for loans to customers jumped to GEL38.9 million from GEL9.1 million.

Outside banks, Burberry Group's shares took a hit after it lowered its retail and wholesale profit guidance for its current financial year due to movements in foreign exchange rates and also cautioned that it is seeing "increased uncertainty" in some markets.

The stock ended down 5.2% as the worst performer in the FTSE 100.

The fashion retailer said that if exchange rates remain where they are, it expects retail and wholesale profit in the current financial year to be around GBP10 million higher than at the prevalent exchange rates in its last year. That is GBP40 million lower than the guidance it gave in its trading update in April. It left all its other guidance unchanged, including the expectation that licensing revenue will fall 40% at constant exchange rates due to the expiry of Japanese licences.

Burberry also said it expects its adjusted pretax profit at constant exchange rates to be more weighted to the second half in the current year.

On the flip side, Vodafone Group led blue-chip gainers, up 5.4%, as merger and acquisition speculation supported telecommunication stocks.

"Considering the expectations of further M&A activity in the telecommunications sector, it is hard to believe that Liberty Global’s chairman John Malone wasn’t conscious of the reaction his ‘Vodafone would be a great fit’ comments would make," said IG Markets analyst Alastair McCaig.

Vodafone took back Tuesday's losses which came after it had reported revenue and earnings ahead of expectations, but investors had focused on a 19% fall in adjusted operating profits excluding exceptional costs and a more cautious outlook than expected.

When the European market closed Wednesday, Wall Street was largely flat, with the DJIA, S&P 500 and Nasdaq Composite indices all down 0.1%, ahead of the release of the minutes of the most recent US Federal Open Market Committee meeting.

"Since removing its forward guidance earlier this year, the Fed has offered very little insight into when that first rate hike will come and that is making investors quite anxious, particularly around these kinds of releases," said Oanda senior market analyst Craig Erlam.

"Comments from one of the more doveish members, Charles Evans, today suggests to me that a rate hike this year remains more likely. He argued the case for hanging on until the start of 2016 but if he is among the more doveish, that would suggest the consensus is still a 2015 hike," wrote Erlam.

Forex.com analyst Fawad Razaqzada said that if the FOMC conveys a doveish message, then the US currency could be hit hard, while a hawkish message could send it sharply higher.

Earlier Wednesday, the minutes of the most recent Monetary Policy Committee meeting, held earlier this month, showed Bank of England policymakers unanimously voted to maintain their monetary policy stance. The MPC voted 9-0 to hold the key UK interest rate at a record low of 0.50% and asset purchase programme at GBP375 billion.

For two members, the immediate policy decision remained finely balanced between voting to hold or raise the bank rate.

The pound pushed higher against the dollar following the release of the minutes and traded at USD1.5543 at the London equities market close.

Investors also focused Wednesday on Greece's financial issues after the government's parliamentary speaker said the struggling nation will not be able to make a payment to the International Monetary Fund on June 5 if there is no deal with its creditors by then, Reuters reported.

"Now is the moment that negotiations are coming to a head. Now is the moment of truth, on June 5," Nikos Filis told ANT1 television. "If there is no deal by then that will address the current funding problem, they won't get any money."

In the economic calendar Thursday, China HSBC manufacturing Purchasing Managers Index is due at 0245 BST, while France Markit manufacturing PMI is at 0800 BST. Germany Markit manufacturing PMI is due at 0830 BST, while Eurozone Markit manufacturing PMI is at 0900 BST. UK retail sales are set for 0930 BST. In the US, initial jobless claims are due at 1330 BST, while the Philadelphia Fed manufacturing survey is at 1500 BST.

In the corporate calendar, United Utilities Group, National Grid, Royal Mail Group, Caledonia Investments, Qinetiq Group and Lombard Risk Management release full-year results. Meanwhile, Shaftesbury and Daily Mail and General Trust publish half-year results. Bwin.Party Digital Entertainment and Inchcape issue first-quarter interim management statements, while Henry Boot and Rank Group provide trading updates.

By Daniel Ruiz; danielruiz@alliancenews.com

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