Hikma Pharmaceuticals Share News (HIK)

LONDON (Alliance News) - London saw a steady morning of equities trading Wednesday, as investors held back ahead of the UK budget and the US Federal Reserve's monetary policy decision and press conference in the afternoon and evening.

In the meantime, there was a UK jobs report for investors to chew on. 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 bonus to rise 2.0%.

Lloyds Bank said even though wages came higher than expected, they remain weak overall. "The combination of job gains alongside weak wage growth remains a puzzle for policymakers," it said.

Lloyds said the Bank of England explained that weaker wages could be due to a combination of low headline inflation and compositional effects, reflecting the skew of job growth towards relatively lower-skilled and lower-paid workers.

"Even if the influence of both factors unwind over time, the low rates of pay growth seem likely to persist well into 2016. As such, pay pressures provide little urgency for a tighter policy stance," Lloyds said.

Investec economist Chris Hare somewhat disagrees, saying there is evidence that the weakness in wage growth is unwinding and, in the coming months, will move closer towards its circa 4% pre-recession average rate.

The pound dropped slightly against the dollar following the employment report. At midday, sterling was quoted at USD1.4096, lower than USD1.4159 seen at the London stock market close on Tuesday.

London stocks were unmoved by the jobs data. At midday, the FTSE 100 was up 0.1%, or 6.71 points, to 6,146.68.

The FTSE 250 was up 0.2% at 16,663.99 and the AIM All-Share up 0.1% at 711.50.

The next focus for the London market will be the UK Budget, which is scheduled to get underway at 1230 GMT. Chancellor of the Exchequer George Osborne is set to take aim at public services, with spending cuts set against splashy new spending commitments for roads, railways and housing, plus incentives to increase the amount Britons save.

Osborne is expected to make around GBP4.0 billion in further cuts to public services in the UK, with an already stated intention to trim around 50 pence from every GBP100.00 that Westminster spends by 2020, by which time Osborne has an eye on the UK government turning to a surplus.

"As much as he will be conscious that he can’t afford to waste the budgets left between now and his own self-imposed 2020 deadline to be running a surplus, he will not want to do anything that might jeopardise the looming Brexit vote," said Alastair McCaig, market analyst at IG.

In Europe, the French CAC 40 was down 0.1% and the German DAX 30 was up 0.4%. US futures pointed the DJIA and Nasdaq 100 both flat and the S&P 500 down 0.1%.

Investors also await the statement from the Federal Open Market Committee at 1800 GMT revealing its monetary policy decision and economic projections. Fed Chair Janet Yellen will hold a press conference afterward 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, London Stock Exchange Group and Deutsche Boerse said they have reached an agreement to merge, having disclosed they were holding talks last month.

Xavier Rolet, the chief executive of LSE who will stand down when the deal is completed, said he was "very pleased" to finally announce the proposed merger between the two firms, and said he "100% supports the merger" and believes it is "absolutely the right time" to conduct the deal.

The merger will be carried out through the creation of a new UK holding company which will acquire LSE Group via a scheme of arrangement. LSE Group shareholders will get 0.4421 of a share in the newly-combined company for each LSE share they currently own, meaning they will own 45.6% of the group, with Deutsche Boerse shareholders have 54.4%.

The pair said the combined group will maintain headquarters in London and Frankfurt, and the board will have equal representation from both companies. LSE traded down 0.3%.

Hikma Pharmaceuticals 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 Inc, despite lowering its guidance for the Roxane business last month.

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. Analysts had expected Hikma to report a pretax profit of USD302.2 million on revenue of USD1.44 billion, so it beat expectations for profit and met them for revenue.

The company was down 1.3%, making it one of the worst performers in the FTSE 100. The stock will fall out of the blue-chip index into the FTSE 250 from the start of trade Monday as a result of the latest FTSE index review.

Engineer Smiths Group said its pretax profit grew in the first half thanks to better operating margins, but its underlying results weakened amid continued pressure on its John Crane energy services business.

The diversified engineer, which also will be demoted from the FTSE 100 next week, said pretax profit for the six months to the end of July was GBP168.0 million, up from GBP131.0 million a year earlier. On a headline basis, which strips out exceptional items, pretax profit fell to GBP189.0 million from GBP208.0 million.

John Crane, which provides engineering services to energy clients, saw revenue fall due to challenging oil and gas markets, though its aftermarket services sales remained relatively resilient. Aftermarket revenue fell 7.0%, while first-fit customer sales declined by 15%. The order book for John Crane also weakened, though not by the same rate as the first half sales decline, Smiths said.

Smiths Group traded down 1.6%.

Tullow Oil was the best performer in the FTSE 250, up 4.1%. The oil and gas company said it has encountered "good oil shows" across an interval of over 700 metres in the Cheptuket-1 well in Block12A in northern Kenya. 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.

Moneysupermarket.com Group was down 3.3%. The price comparison site's founder Simon Nixon has completed the sale of his entire remaining stake in the company, according to sole bookrunner Credit Suisse.

Credit Suisse Securities placed 37.8 million shares on behalf of Nixon at 328.00 pence per share, raising a total of GBP124.0 million. The shares sold represent around 6.9% of the company's issued share capital.

Moneysupermarket shares closed at 343.6p on Tuesday and were quoted at 332.20p Wednesday. The intended sale was announced soon after the market close Tuesday.

Cloud-based video technology group Forbidden Technologies said it has signed a deal with US technology giant Microsoft Corp for it Forscene cloud video platform.

Under the deal, Microsoft will be able to sell the Forscene platform through its Azure cloud computing marketplace.

"Not only is this agreement a further validation of the efficacy of our technology, it's an important milestone as we further expand our sales apparatus. Whilst we expect to generate some income directly from this agreement in 2016, we anticipate its financial impact being most acutely seen from 2017," said Aziz Musa, Forbidden's chief executive.

The company was the best performer in the AIM All-Share index, up 27%.

Aside from the UK budget and Fed, still ahead in the economic calendar, the US consumer price index and US industrial production are both due at 1230 GMT, while the Energy Information Administration's crude oil stocks are at 1430 GMT.

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

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