GOG.L Share News (GOG)

LONDON (Alliance News) - The FTSE 100 closed marginally higher Wednesday, adding to gains posted on Monday and Tuesday, and ensuring that the blue-chip index closed the month of April firmly higher than it opened it.

Meanwhile, it was a volatile day in the forex market following a raft of top-tier macro economic releases from the US and Europe.

The FTSE 100, which spent the day trading in a tight range as investors await the outcome of the latest Federal Open Market Committee meeting after the UK equity market close, was partly lifted by a strong performance by Royal Dutch Shell.

The oil giant, which is the largest company in the FTSE 100 by market capitalisation, closed up 2.9% after it said its earnings almost halved in the first quarter of the year, as it wrote down some of the value of its refineries in Europe and Asia due to declining refining margins and as its production fell.

However, it also said it would pay a higher dividend for the quarter as it returns some of the funds from its asset-sale programme to its shareholders.

Overall, UK stocks closed mixed. The FTSE 100 closed up 0.5% at 6,780.03, meaning it added 2.8% in the month of April. The FTSE 250 closed down 0.5% Wednesday, and down 2.8% for the month, while the AIM All-Share index closed up 0.9% Wednesday, but down 3.3% for the month.

It was a similar story in Europe, where the CAC 40 in Paris closed down 0.2% Wednesday and the DAX 30 closed up 0.2%.

Within the UK FTSE 350 sector indices, the oil and gas producer sector was the best performing sector, closing up 1.7%, as shares in FTSE 100-listed Tullow Oil and FTSE 250-constituent Heritage Oil also rose sharply.

Tullow ended the day up 1.7% after it sold stakes in two assets to AIM-listed Faroe Petroleum for USD75.6 million plus a royalty on developments at one of the assets.

The company, which also said its 2014 production guidance remains unchanged at between 79,000 and 85,000 barrels of oil equivalent a day, said that Faroe is buying 60% of its Ketch asset and 53.1% of the Schooner asset in which Tullow holds 93.1%. Tullow said it will pay USD58.8 million when the deal completes and the rest when cumulative production milestones are hit.

Meanwhile, Heritage Oil jumped 23% after it said it had recommended a GBP924 million takeover offer from Al Mirqab Capital, an investment vehicle controlled by the royal family of Qatar. It said Al Mirqab had offered 320 pence per share in cash for the company, a deal that it is recommending and that is supported by the independent directors on its board. Heritage Oil's shares closed up 22.4% at 312.7947 pence Wednesday.

Away from the oil and gas production companies, Rolls-Royce Holdings was amongst the biggest risers in the blue-chip index. The company's shares rose after it said late on Tuesday that it is in talks with Germany's Siemens AG about a possible sale of its energy gas turbine and compressor business.

Playtech was among the biggest risers in the FTSE 250, closing up 4.5%. Shares in the online gaming software supplier rose after it expressed confidence in its continuing growth prospects for 2014, as it reported a rise in revenue in the quarter to end-March.

The group posted revenue of EUR102.7 million in the quarter, up from EUR87.5 million a year before, driven by strong performances in its Casino, Services and Sport divisions. It said that average daily revenue for the first 29 days of its second quarter are up over 15% compared to the previous year.

At the other end of the spectrum, CSR was the mid-cap index's heaviest faller, ending the day down 10%. The chip maker swung to a pretax loss in the first quarter to March 28, hit by the continued decline of its legacy products.

The company posted a pretax loss of USD4.0 million, versus a profit of USD1.1 million a year before, as revenue declined to USD180.8 million from USD237.9 million in the previous year. The decline in revenue was primarily caused by what the chip maker calls its legacy products, which declined 57%, as the products reached the end of their life cycle.

GlaxoSmithKline, closing down 2%, was a big faller in the FTSE 100. The drugs giant reported a drop in revenue and net profit for the first quarter due to asset sales and a decline in sales of pharmaceuticals in the US, but the company also raised its dividend and reiterated its full-year profit guidance despite making its sales guidance more vague.

British American Tobacco was another heavy loser, falling 2%. The world's second-largest listed tobacco company by revenue after Philip Morris International Inc said that revenue grew slightly at constant exchange rates in the first quarter, but dropped significantly when taking into account currency movements in the quarter.

The group said that group revenue for the three months to end of March, at current exchange rates, declined by 12%, hit by the current strength of sterling against some of BAT's key revenue-generating currencies, notably the Brazilian real, South African rand, Japanese yen and Australian dollar. The group also reiterated that while emerging market volumes are increasing, the trading environment in Western Europe remains challenging.

However, it was Tesco, which ended the day down 3.1%, that was the biggest loser in the blue-chip index Wednesday, after it went ex-dividend, meaning new buyers no longer qualify for the latest dividend payout. Similarly, William Hill closed down 2.7%, Admiral Group closed down 3.1% and Weir Group closed down 1.4% after going ex-dividend.

In the FTSE 250, SIG, which closed down 3.8%, Hunting, which closed down 4%, and Spirax-Sarco Engineering, which closed down 1.3%, also went ex-dividend Wednesday.

In the forex market, the euro jumped against the pound and the dollar in early trading.

The single currency rose sharply, after initially plummeting, in the wake of the release of the latest consumer price inflation data for the eurozone.

The preliminary reading of April's year-on-year CPI for the single currency area accelerated from a four-year low, coming in at 0.7% from 0.5% in March. Although this meant inflation edged up from its 2009 lows, it fell short of the 0.8% that economists had been expecting.

"The ship is starting to sink and time is running out for the European Central Bank to divert a 1990s Japanese-style bout of deflation," said Dennis de Jong, managing director at UFXMarkets.

"Inflation simply isn’t rising quick enough and stimulus is required, be it through the introduction of quantitative easing or negative interest rates. (ECB President) Mario Draghi has said that he is prepared to take emergency measures, but now is the time for action rather than words," de Jong Warns.

UBS economist Gyorgy Kovacs is less concerned. "While headline inflation is still uncomfortably low, the data still don't signal any trend towards deflation," he says. For one, core inflation rebounded to 1.0% year-on-year, "which means that core inflation has not exhibited any clear downtrend since April, 2013."

Later in the day, the dollar dropped significantly against its major rivals following the release of some highly anticipated US data.

The fall came after the preliminary reading of US gross domestic product revealed that the world's largest economy grew less than forecast in the first quarter, driven by the impact of severe winter weather.

The US Commerce Department said gross domestic product inched up by just 0.1% in the first quarter of 2014 compared to the 2.6% increase in GDP in the fourth quarter of 2013. While economists had anticipated a notable slowdown in the pace of GDP growth, they still expected an increase of about 1.2%.

"The biggest shocker for some time, is how I would describe the US GDP miss for the first quarter," said Kathleen Brooks, research director at Forex.com.

A strong ADP employment report released just a few minutes before the disappointing growth data was not enough to lift the dollar. The report showed that private sector employment in the US continued to grow significantly in the month of April. ADP said private sector employment surged up by 220,000 jobs in April following an upwardly revised jump of 209,000 jobs in March.

At the close of the UK equity market, the euro trades at USD1.3868, while the pound trades at EUR1.2170 and USD1.6884.

The much weaker-than-expected US GDP report comes before Federal Open Market Committee interest rate and monetary policy decisions at 1800 GMT.

Expectations are for the FOMC to keep its interest rates unchanged at 0.25% and to taper its monthly asset purchases by another USD10 billion.

However, there is now an "increased risk that the Fed could hold pat on asset purchases for this month," says Brooks. While she believes that this is an unlikely outcome, if the Fed sounds concerned about growth, "and then does not taper asset purchases, the market reaction could be severe," she warns.

In the data calendar Thursday, UK Nationwide housing price figures for March are released at 0600 GMT, ahead of the latest Markit manufacturing purchasing managers' index, consumer credit, and mortgage approvals data at 0830 GMT.

In the US, Federal Reserve Chair Janet Yellen gives a speech at 1230 GMT. Weekly jobless claims data are released at the same time, along side personal consumption and income information. Markit manufacturing PMI is released at 1345 GMT, ahead of the ISM manufacturing PMI at 1400 GMT.

In the corporate calendar, FTSE 100-listed BG Group, British Sky Broadcasting, Smith & Nephew, and Shire are joined by FTSE 250-listed Millennium & Copthorne Hotels and Lancashire Holdings in releasing quarterly results. Blue-chips Lloyds Banking Group, Weir Group, Schroders, and Roll-Royce Holdings, and mid-caps RPS Group, Phoenix Group Holdings, Synthomer, Go-Ahead Group, and Howden Joinery Group provide trading updates.

FTSE 250-constituent N Brown Group publishes full-year results.


By James Kemp; jameskemp@alliancenews.com; @jamespkemp

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