LONDON (Alliance News) - Equities in London traded higher midday Thursday, with miners leading the way on a read-across from Brent oil hitting USD50 a barrel for the first time this year.
The dollar had been weakening, lending support to dollar-denominated oil, but the pound suffered Thursday morning in London due to some weak UK economic data.
The second estimate of first quarter UK Gross Domestic Product came in below the initial estimate, according to data from the Office for National Statistics. On a yearly basis, GDP climbed 2.0% in the first three months of 2016, below the 2.1% previously estimated.
Quarter-on-quarter GDP grew 0.4%, unrevised from the estimate published on April 27. The sequential growth was slower than the 0.6% expansion posted in the fourth quarter of 2015.
"The recovery appears to have slowed at the start of 2016 and growth remains very unbalanced, although there appears to be more at play than just Brexit uncertainties," said Scott Bowman, UK economist at Capital Economics.
"While Brexit uncertainty probably played a part in the slowdown – business investment fell by 0.5% on the quarter – there appears to be other temporary factors at play, including financial market volatility at the start of the year," Bowman added.
Another report by the ONS showed UK business investment decreased 0.5% quarter-on-quarter in the first quarter, coming below expectations of a 0.1% rise. However, the preliminary figure was an improvement on the 2.0% contraction seen in the fourth quarter of 2015.
"Overall, as these other temporary factors holding back growth fade and if the UK votes to remain in the EU – as heavily implied by bookmakers’ odds and increasingly by polls – then growth should bounce back in the second half of the year. Even if a Brexit occurs, we don't think the damage to the economy would be as severe as some – including the Treasury this week – have suggested," Bowman said.
The pound slumped against the dollar following the data release, going from USD1.4717 to a low of USD1.4676. By midday in London, sterling had bounced back to USD1.4707.
The FTSE 100 spent much of the morning fluctuating between gains and losses, and traded up 0.3%, or 15.4 points, to 6,278.25 at midday. The blue-chip index was benefiting from rises in energy companies and miners, as Brent oil breached the USD50 barrier for the first time since November 2015.
The North Sea benchmark reached a high of USD50.22 a barrel, having traded at USD49.17 at the London equities close on Wednesday.
"Oil breaking USD50 per barrel from the first time in 2016 and a slight backtracking of the US dollar has helped a rally across commodities and a positive read-across to UK mining shares," said Jasper Lawler, market analyst at CMC Markets.
Leading the gainers in the blue-chip index were BHP Billiton, up 4.8%, Antofagasta, up 4.8% and Glencore, up 4.4%. The FTSE 350 Mining sector index traded up 3.5%, the best performing sector.
The FTSE 250 was reading flat at 17,238.58 points and the AIM All-Share also was flat at 733.63. In Europe, the CAC 40 in Paris was up 0.4% and the DAX 30 in Frankfurt was up 0.5%.
Futures ahead of the New York open pointed the DJIA and Nasdaq 100 both up 0.2% and the S&P 500 up 0.1%.
In UK corporate news, United Utilities Group was down 1.1% after it said profit fell in line with its expectations in its recent financial year, as the company accelerated its investment plans.
The water and sewage services provider said its operating profit for the year to the end of March was GBP567.9 million, down 13% from GBP653.3 million. Underlying operating profit was GBP604.1 million, down from GBP664.3 million and in line with the company's expectations. Revenue rose 0.6% to GBP1.73 billion from GBP1.72 billion the year before.
United Utilities will pay a total dividend for the year of 38.45 pence, compared to 37.70p a year earlier.
Ibstock was the worst performer in the FTSE 250, down 9.9%. The bricks manufacturer said it has seen good trading momentum in the first four months of 2016, but its UK clay business made a slower start to the year than expected.
Ibstock said UK brick sales to the new residential sector grew, but the UK clay business was hit by destocking in the builders' merchant supply chain, itself driven by softness in the repair, maintenance and improvement market. This has improved, Ibstock said, but a shift in its sales mix in the first four months will mean overall average pricing will take a hit.
Electra Private Equity was another poor mid-cap performer, down 4.2%. The private equity investor said Edward Bramson, the activist investor who fought his way onto the board of the company last year, has been appointed interim chief executive.
Electra said Bramson will take on the interim CEO role on an unpaid basis and it has started the search for a chief financial officer. The moves come after Electra said it had decided to create an executive function in order to boost its corporate governance structure and provide ongoing support to its board.
Electra also said it has terminated its Management & Investment Guideline agreement and limited partnership agreement, under which management of its operations and investments is outsourced to house private equity firm Electra Partners.
On the other side of the index, Pets at Home Group reported growth in profit in its recently-ended financial year as revenue grew in both the merchandise and services divisions, and it said trading is in line with expectations in the first quarter of the new year.
The retailer for pets and veterinary services operator said its pretax profit in the year ended March 31 grew to GBP92.1 million from GBP87.0 million the year before, as revenue rose to GBP793.1 million from GBP729.1 million.
Pets at Home will pay a total dividend for the year of 7.5 pence, a 39% increase on the prior year. Shares in the company traded up 3.5%.
Hostelworld Group shares sank 27%, the biggest faller in the FTSE All-Share, after it said trading in the second quarter of 2016 has been below its expectations following "recent geopolitical events" in Europe.
The hostel-focused online booking platform said Asia Pacific continued to be its fastest-growing destination in the quarter, driven by increased demand and Hostelworld's increased supply in the region. However, bookings into higher-priced European destinations have been weaker reflecting "recent geopolitical events", Hostelworld said, without elaborating.
In addition, planned changes to its supporting brands' product offering and focus on improving the quality of its revenue streams have resulted in a material reduction in bookings from those channels, Hostelworld said, meaning overall group bookings in the second quarter are marginally down compared with last year.
Still ahead in the economic calendar, US initial and continuing jobless claims are at 1330 BST, as are durable goods data. US pending home sales are due at 1500 BST, while EIA natural gas storage data are at 1530 BST.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
Copyright 2016 Alliance News Limited. All Rights Reserved.
1 Jul 2016 06:27
