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LONDON (Alliance News) - Shares have opened lower in London Thursday, after Wall Street and Asia markets took little heart from the US Federal Reserve's decision to remain "patient" on higher interest rates, amid further weakness in world oil prices.
Royal Dutch Shell A and B shares lead FTSE 100 decliners, each down about 3.8%, after the oil major and largest-cap UK listed stock reported a rise in current-cost-of-supply earnings for the fourth quarter and all of 2014, despite revenue and production taking slight hits throughout the year.
Here is what you need to know at the UK market open:
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MARKETS
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FTSE 100: down 0.9% at 6,767.34
FTSE 250: down 0.5% at 16,341.06
AIM ALL-SHARE: down 0.1% at 689.53
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Hang Seng: closed down 1.1% at 24,595.85
Nikkei 225: closed down 1.1% at 17,606.22
DJIA: closed down 1.1% at 17,191.37
S&P 500: closed down 1.4% at 2,002.16
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GBP-USD: flat at USD1.5132
EUR-USD: down at USD1.1270
GOLD: down at USD1,280.03 per ounce
OIL (Brent): down at USD48.37 a barrel
(changes since end of previous GMT day)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
(all times in GMT)
08:55 Germany Unemployment Rate
09:00 EU M3 Money Supply and Private Loans
09:00 Italy Wage Inflation
10:00 EU Consumer Confidence; Business Climate and Sentiment
10:00 Italy Consumer and Business Confidence
11:00 UK CBI Distributive Trades Survey
13:00 Germany Consumer Price Index
13:30 US Jobless Claims
15:00 US Pending Home Sales
15:30 US EIA Natural Gas Storage
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The US Federal Reserve sees the US economy growing "at a solid pace" but remains "patient" on monetary policy, leaving its unprecedented near-zero interest rate unchanged after this week's meeting. The central bank said there was no sign of higher inflation even after six years of unprecedented lax monetary policy. The statement explicitly added "international developments" to the "wide range" of factors and data being taken into account for evaluating interest rate policy, amid continuing turmoil in the eurozone, China's slowing economy and lingering geopolitical risks in Ukraine and the Middle East.
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US crude oil plunged to end below the USD45-a-barrel mark on Wednesday, after an official weekly oil report from the Energy Information Administration showed crude oil stockpiles in the US to have surged more than expected last week, with inventories at an 80-year high. Earlier on Wednesday, a weekly report from the US Energy Information Administration showed US crude oil inventories to have jumped 8.9 million barrels in the week ended January 23, while analysts expected an increase of 3.5 million barrels.
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Prime Minister Alexis Tsipras vowed a radical overhaul of austerity reforms but said Greece will not initiate any "catastrophic clashes" during debt negotiations with international creditors. Addressing his government's first cabinet meeting, Tsipras made it clear that he would move forward with anti-austerity promises, setting Greece on a collision course with its European partners. "We are coming in to radically change the way that policies and administration are conducted in this country," he told ministers. "We do not want an extreme, catastrophic clash...We do not want to go to mutually assured destruction, but we won't continue being subservient." In a first sign that Athens was not willing to stick to creditor commitments to liberalize its energy market, the government said it was freezing plans to privatize the public power utility PPC. The government said it had cancelled the privatization of national train operating company Trainose and the sale of a 67% stake in the Piraeus port - Greece's largest - for which China's Cosco Group and four other companies had been shortlisted.
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Bank of England Governor Mark Carney called for the creation of true fiscal union as part of monetary union in the euro area. In a speech in Dublin, honouring former Canadian Finance Minister Jim Flaherty, Carney praised the monetary boldness of the European Central Bank. The actions were timely and welcome. But it does not end with the monetary policy boldness, he said. The ECB alone cannot eliminate the risks of a prolonged stagnation. Carney noted that these exist primarily because the current construction of the euro area is unfinished. "Europe needs a comprehensive, coherent plan to anchor expectations, build confidence and escape its debt trap," Carney said.
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In the UK, Carney said inflation is likely to fall further over the coming months and turn slightly negative for a period, he said. But it should pick up again in twelve months or so as the direct effects of a lower energy price drop out of the inflation rate.
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U.K house prices grew at a faster pace as expected in January, survey figures from the Nationwide Building Society showed. The house price index rose a seasonally adjusted 0.3% month-over-month in January after the 0.2% increase in December. This was in line with the consensus estimate and marked the fourth consecutive month of increase.
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Retail sales in Japan added just 0.2% on year in December, the Ministry of Economy, Trade and Industry said, worth JPY13.524 trillion. That missed forecasts for an increase of 0.9% and was down from the 0.5% gain in November.
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Two Israeli soldiers and a Spanish UN peacekeeper were killed in the deadliest exchange of fire between Israel and Lebanon's Hezbollah militia since a 2006 war. The fighting comes 10 days after an alleged Israeli airstrike targeted members of Hezbollah on the Syrian-controlled side of the Golan Heights.
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BROKER RATING CHANGES
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TRADERS: HSBC CUTS SEVERN TRENT TO 'UNDERWEIGHT' ('NEUTRAL')
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CREDIT SUISSE CUTS SEVERN TRENT TO 'UNDERPERFORM' ('NEUTRAL')
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CREDIT SUISSE RAISES UNITED UTILITIES TO 'NEUTRAL' ('UP') - TARGET 880 (730)P
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BARCLAYS RAISES EASYJET TO 'OVERWEIGHT' ('EW') - TARGET 2150 (1850) PENCE
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TRADERS: NOMURA CUTS ANTOFAGASTA TO 'REDUCE' ('NEUTRAL')
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TRADERS: HSBC CUTS ITV TO 'NEUTRAL' ('OVERWEIGHT')
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TRADERS: PANMURE INITIATES IMPERIAL TOBACCO WITH 'BUY'
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TRADERS: PANMURE INITIATES BRITISH AMERICAN TOBACCO WITH 'BUY'
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COMPANIES - FTSE 100
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Royal Dutch Shell said its current-cost-of-supply earnings rose in the fourth quarter and all of 2014, despite revenue and production taking slight hits throughout the year. For the year ended December 31, the oil major reported revenue of USD421.10 billion, down from USD451.23 billion in 2013, mainly caused by a slight dip in production and low global crude prices. For the full year, Shell reported cost of current-cost-of-supply earnings of USD19.04 billion, up from USD16.74 billion reported in 2013. For the fourth quarter, CSS earnings totalled USD4.16 billion, down from USD5.26 billion in the third quarter, but up 93% from a year earlier.
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Diageo said sales and volume improved in its second quarter, but were down for the first half as a whole, hit by slower demand in markets such as the US and China, which remained a drag on profit. The world's largest spirits producer and a major producer of beer and wine reported a pretax profit of GBP1.64 billion for the six months to end-December, lower than the GBP2.13 billion profit it reported last year. Diageo said organic net sales were down 0.1% in the recent half year, compared to 2% growth in the first half of the year before. Net sales came in at GBP5.90 billion, compared with GBP5.93 billion the year before, while volume was down 1.9%. The group declared a 9% increase in its interim dividend to 21.5 pence per share.
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The London Stock Exchange Group is planning to put Russell Investments up for sale next month and hopes to raise around USD1.4 billion from the deal, Reuters reported. Citing two sources, Reuters said the exchange operator has hired Barclays to sell the business, which it acquired as part of the USD2.7 billion acquisition of Frank Russell Company last year, a deal done to allow LSE to get its hands on the company's large index business.
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Royal Mail said it has started looking for a new chairman because Donald Brydon has told its board he will step down later this year after six years in the role. In a statement, the postal operator said Brydon will continue to chair the board until at least its annual general meeting in the summer.
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National Grid said it has started a share buyback programme as part of its management of the dilution that resulted from the take-up of its scrip dividend. The grid operator didn't say how many shares it will buy back, but said the programme will run between January 29 and March 4 at the latest.
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3i Group said its diluted net asset value per share rose 5% in the third quarter of its financial year, cash proceeds from realisations were bigger than the new investments it made, and it said it was remaining cautious on new investments because pricing remains full, particularly in Europe. The private equity investor reported a diluted net asset value per share of 375 pence as of December 31, before the payment of its interim dividend of 6.0 pence a share.
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Virgin Media has launched an attempt to halt the Premier League's auction of live football broadcast rights by asking UK media and communications regulator Ofcom to use emergency powers to protect consumers, The Daily Telegraph reported. Virgin has complained the way the auction is set up will mean football fans are likely to face higher bills for watching live matches, the Telegraph said. The move casts a degree of uncertainty over the auction, which is expected to see BT Group and Sky face off to win the live broadcast rights. Discovery Communications Inc, the owner of Eurosport, also is expected to take part in the auction.
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COMPANIES - FTSE 250
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Euromoney Institutional Investor said revenue fell 4% in its first quarter, hampered by pressures on the investment banking sector and weak commodity prices, offsetting an improving performance in the asset management sector. At constant currency, revenue was down 5%, and the company said that whilst currency movements did not "materially" hit its first quarter results, the strength of the US dollar against sterling is expected to have a more "significant" hit to its second quarter.
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Mecca bingo operator Rank Group said revenue and profit rose in the first half of the year, driven by casino acquisitions by its Grosvenor Casinos business, while profit improved at its Mecca business thanks to cost savings and the reduction in bingo duty. The company, which operates the Mecca bingo chain as well as Grosvenor Casinos, posted a pretax profit before exceptional items of GBP34.9 million, up from GBP28.3 million the year before, as revenue rose 3% to GBP361.7 million, up from GBP352.4 million. The group declared a 19% increase in its interim dividend to 1.60 pence per share.
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Mitchells & Butlers said it saw a good performance over the festive trading period, though it warned its margins remain under pressure owing to the integration of the Orchid business and pricing pressures. The FTSE 250-listed pubs company said sales in the 17 weeks to January 27 have increased by 9.1% year on year, with like-for-like sales rising 1.7%. The company said its trading performance over the festive period, the two weeks over Christmas and New Year, was strong, with like-for-like annual sales growth of 4.8%. Like-for-like sales on Christmas Day rose 7.1%, it added.
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Lonmin, the world's third largest platinum producer, said total refined platinum production for the first quarter of its financial year was impacted by the smelter shutdowns and was down 28.8% to 139,823 ounces when compared against the prior year period. Total platinum group metals produced in the three months to December 31 were 265,128 ounces, a decrease of 31.1% on the prior year period. Platinum sales for the quarter at 146,890 ounces were up 9.0%, or 12,086 ounces on the prior year period. Platinum Group Metal sales were up 11.7% to 274,425 ounces.
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Redefine International said it has acquired a portfolio of 56 German retail properties valued at EUR156.8 million in a 50/50 joint venture with its biggest shareholder, Redefine Properties Ltd. The FTSE 250 income focused UK real estate investment trust said the portfolio has been acquired together with existing debt of EUR100 million, which the joint venture intends to refinance immediately.
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COMPANIES - INTERNATIONAL
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Deutsche Bank reported fourth-quarter income before taxes of EUR253 million, compared to a loss of EUR1.77 billion the prior year, driven by higher revenues, lower provision for credit losses as well as lower noninterest expenses. This reflects the solid revenue development in the Core Bank as well as lower litigation costs, the company said.
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Social media giant Facebook reported stronger-than-expected fourth-quarter earnings , which showed the company's net income for 2014 nearly doubling on the year before on growth in advertising revenue, especially from the booming mobile sector. The company reported earnings of USD2.9 billion for 2014, as compared to USD1.5 billion in 2013. Facebook earned USD701 million in the fourth quarter, up from USD523 million in 2013. An average 880 million people used Facebook daily in December, the company said, an increase of 18% over the same period in 2013. More and more of them are accessing the service via mobile devices, which showed a 34% increase in daily views.
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Amazon Web Services, an Amazon.com subsidiary, announced Amazon WorkMail, a secure, managed business email and calendaring service in the cloud. According to the company, Amazon WorkMail enables users to send and receive email, manage contacts, share calendars, and book resources using the same email applications they use today (Microsoft Outlook, their Web browser, or their native iOS and Android email applications) without buying and managing hardware or licensing expensive and complex email server software.
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South Korean conglomerate Samsung Electronics reported a profit for the fourth quarter that declined 27% from last year, despite an uptick in memory demand, reflecting lower operating margins and soft sales growth of smartphones amid intensifying competition. Sales and operating profit for the quarter came in just above Samsung's guidance released earlier in the month. Suwon, South Korea-based Samsung has now reported its fifth consecutive quarter of decline after posting its the lowest quarterly operating profit since the second quarter of 2011 amid the continued slowdown in its core smartphone business as the company grapples with increased competition.
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Fast-food giant McDonald's said Don Thompson will retire as president and chief executive officer and as a member of the board of directors after nearly 25 years working for the company, effective March 1. The company said its board has elected Steve Easterbrook to replace Thompson as president and CEO. Easterbrook was also elected to the McDonald's board, filling the vacancy created by Thompson. Easterbrook, a McDonald's veteran, is currently senior executive vice president and chief brand officer of the company.
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Qualcomm reported a five percent increase in first-quarter profit, driven by demand for chips used in mobile phones and other devices, with results topping Wall Street estimates. Qualcomm detailed some strong earnings outlook for the second quarter, but slashed its overall expectations for the full year, citing mainly heightened competition in China, sales to a key customer, and revised expectations related to OEM mix.
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Nokia posted fourth-quarter 2014 profit attributable to equityholders of the parent of EUR443 million, versus a loss of EUR26 million last year. Net sales from continuing operations reached EUR3.8 billion in the quarter, up 9% from the prior-year figure of EUR3.48 billion.
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Thursday's Scheduled AGMs/EGMs
Edinburgh Worldwide Investment Trust
Euromoney Institutional Investor
easyHotel
ITE Group
JPMorgan Indian Investment Trust
Lonmin
Mitchells & Butlers
Redefine International
Avon Rubber
Premier African Minerals
Boxhill Technologies
Baobab Resources
MXC Capital
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By Tom Waite; thomaslwaite@alliancenews.com; @thomaslwaite
Copyright 2015 Alliance News Limited. All Rights Reserved.
