Hikma Pharmaceuticals Share News (HIK)

LONDON (Alliance News) - UK stocks closed higher Wednesday, reacting largely positively to the range of measures announced by UK Chancellor of the Exchequer George Osborne in his eighth budget report, ahead of the US Federal Reserve's monetary policy decision later in the day.

Shares in retail asset gatherers Hargreaves Lansdown and St James's Place ended up 2.3% and 3.8% respectively after the UK Chancellor set out new measures to encourage young people to save for retirement and home ownership.

"From April 2017, anyone under the age of 40 will be able to open a lifetime individual savings account and save up to GBP4,000 each year," Osborne told lawmakers. "For every GBP4.0 you save, the government will give you GBP1.0."

The total amount that can be saved into all ISAs will be increased to GBP20,000 from GBP15,240 as of April 2017.

Furthermore, Osborne said he will slash supplementary tax paid by UK oil producers, to 10% from the current 20%, and effectively abolish the petroleum revenue tax, to support struggling North Sea oil producers at a time of depressed oil prices.

It was not all good news for London-listed companies, as the Chancellor announced a surprise sugar levy on soft drinks in two years' time.

Osborne identified sugary drinks as a key cause of childhood obesity, which he said costs the UK economy GBP27 billion a year, more than half the entire National Health Service pay bill. As a result, the soft drinks industry will face a sugar levy in two years, which will follow a two-tier tax band.

The sugar tax hurt shares in Scottish soft drinks company AG Barr, down 2.4%, 7Up maker Britvic, down 1.3%, and Vimto producer Nichols, down 6.6%.

The Chancellor also said the economic picture for the UK was still "strong", but revealed the Office for Budget Responsibility's forecasts for the UK economy had been downgraded amid a "cocktail of risks" triggered by slowing growth in China, emerging markets and prolonged market volatility.

The OBR downgraded its forecasts for gross domestic product to 2.0% in 2016 from 2.4% previously, to 2.2% in 2017 from 2.5%, to 2.1% in 2018 from 2.4% previously, and to 2.1% from 2.3% in both 2019 and 2020.

The FTSE 100 rose in the wake of the budget and closed up 0.6%, or 35.52 points, at 6,175.49. The FTSE 250 ended up 0.7%, or 118.04 points, at 16,752.80, while the AIM All-Share ended down 0.1%, or 0.73 points, at 710.26.

In Europe, the CAC 40 in Paris ended down 0.2% and the DAX 30 in Frankfurt closed up 0.5%.

On Wall Street at the London close, the DJIA was flat, the S&P 500 was up 0.1% and the Nasdaq Composite was up 0.3%.

The dollar was boosted by some upbeat inflation numbers. Data from the Labor Department showed that core consumer prices, which exclude volatile products such as food and energy, rose by 2.3% year-on-year in February. Economists expected core prices to match the January reading of 2.2%.

Meanwhile, the headline consumer price index rose 1.0% year-on-year in February, which was slower than the 1.4% rise seen in January but still above expectations for a 0.9% rise. However, on a monthly basis headline CPI fell 0.2%, in-line with forecasts, after coming in flat in January.

At the London stock market close, the pound traded the dollar at USD1.4104, lower than USD1.4159 seen at the close on Tuesday.

The pound also reacted to UK jobs data released earlier this morning. The UK unemployment rate remained unchanged at a 10-year low during November to January period, data from the Office for National Statistics showed.

The jobless rate came in at 5.1% in three months to January, unchanged from the fourth quarter of 2015 and in-line with economists' expectations. The employment rate was 74.1%, the joint highest since comparable records began in 1971.

Average weekly earnings for employees increased by 2.1% including bonuses, and by 2.2% excluding bonuses, compared with a year earlier. Economists had forecast earnings including bonuses to rise 2.0%.

The euro was quoted at USD1.1082 against the dollar at the European equities close, against USD1.1106 at the corresponding time on Tuesday.

The focus now for dollar watchers will be on the US Federal Reserve, which will reveal its monetary policy decision and economic projections at 1800 GMT and hold a press conference at 1830 GMT.

The US central bank is widely expected to make no changes to its target for the Federal Funds rate, but is likely to hint at further rate hikes later in 2016.

In UK corporate news, shares in Hikma Pharmaceuticals saw a turn around, having been among the worst performers in the FTSE 100 earlier in the session, closing as the best, up 5.5%.

The pharmaceuticals company, which will be demoted to the FTSE 250 next week, reported a fall in pretax profit in 2015, but forecast a significant rise in revenue for the year ahead, helped by its recent acquisition of the Roxane Laboratories.

The company reported a pretax profit of USD318 million, down from USD362 million in 2014, as revenue slipped to USD1.44 billion from USD1.49 billion the year before. Hikma proposed a final dividend of 21 cents per share, taking its total dividend to 32 cents for the year, in line with what it paid in 2014.

Deutsche Boerse and London Stock Exchange Group agreed to combine in a GBP21 billion all-share merger that would create the world's largest exchange group by total income, and hope to overcome hurdles such as competition concerns to complete their move.

Together, LSE and Deutsche Boerse want to create a European force rooted in London and Frankfurt to compete with US and Asian rivals, with their operations spanning capital markets, post trade, information services and technology. The pair said Wednesday they have not yet settled on a name for the combined entity.

Obstacles could emerge to completing the merger, with approval needed from regulators, governments and shareholders.

The formal merger agreement, under which Deutsche Boerse shareholders will own just over 54% of the combined group, could spark competing bids from the likes of Intercontinental Exchange Inc, the owner of the New York Stock Exchange, which has already made clear its possible interest in making an offer.

At the close, LSE shares were down 1.2%.

Tullow Oil ended as the best performer in the FTSE 250, up 7.9% after it said it has encountered "good oil shows" across an interval of over 700 metres in the Cheptuket-1 well in Block12A in northern Kenya, but stopped short of announcing the well result as a new discovery.

The well is the first one to test the Kerio Valley Basin and was drilled by the PR Marriott Rig-46 to a final depth of 3,083 metres. The objective of the well, which seems to have been achieved successfully, was to establish a working petroleum system and test a structural closure in the south-western part of the basin.

"This has confirmed the presence of a working petroleum system and post-well analysis is now in progress which will be used to determine the exploration and appraisal programme in the basin going forward," said Edward Vaughan, analyst at VSA Capital.

The company was also helped by a rise in oil prices, with Brent rising back above the USD40 a barrel level. At the London close the commodity was quoted at USD40.16 a barrel, higher than the USD38.53 a barrel seen on Tuesday.

The price of gold edged slightly lower Wednesday, trading at USD1,228.57 an ounce versus USD1,231.40 at the close on Tuesday.

Still ahead in the economic calendar aside from the Fed, Japanese trade balances data at 2350 GMT.

On Thursday, focus will be on the Bank of England which will announce its monetary policy decision at noon alongside its meeting minutes.

There are also eurozone trade balances and inflation data at 1000 GMT, US current account and continuing and initial jobless claims are at 1230 GMT alongside the Philadelphia Fed manufacturing Survey. US JOLTS job openings and Conference Board leading indicator are at 1400 GMT.

In the UK corporate calendar, there are full-year results from FTSE 250-listed fashion retailer Ted Baker, specialist lender OnseSavings Bank and private hospital group Spire Healthcare. There are also interim results from property, residential, construction and services company Kier Group.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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