HSBC Holdings Share News (HSBA)

LONDON (Alliance News) - UK shares ended higher, boosted by miners and oil stocks amid higher commodity prices, shrugging off political concerns that sent the pound deeply into the red after Prime Minister David Cameron set a date for the UK's in-out European Union referendum, with London Mayor Boris Johnson saying he will support the campaign to leave the block.

The FTSE 100 index closed up 1.5%, or 87.5 points, at 6,037.73, with HSBC Holdings among the biggest fallers after the bank's 2015 numbers fell short of analyst forecasts.

The FTSE 250 ended up 0.8%, or 130.74 points, at 16,288.80 and the AIM All-Share up 0.4%, or 2.9 points, at 686.67. In Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt closed up 1.8% and 2.0%, respectively.

"Equity investors have basically ignored the increased Brexit risks, as well as disappointing earnings from HSBC and weaker-than-expected Eurozone PMI data," said FOREX.com analyst Fawad Razaqzada.

Razaqzada said the reason behind the rally in stocks is the rise in oil prices and expectations that central banks will keep rates at record low or negative levels for the foreseeable future.

The price of Brent crude has managed to remain above the USD30 line after recovering some ground following its multi-year lows of nearly USD27 in mid-January.

The recent agreement between Saudi Arabia, among other OPEC members, and Russia for a freeze in oil production has supported the resilience in oil prices, even though US Energy Information Administration crude stockpiles data showed a sharp increase in US crude oil inventories Thursday.

North Sea benchmark Brent oil was quoted at USD34.18 at the London equities close Monday, having stood at USD33.07 at the close on Friday.

Oil-related stocks ended among the best performers in London, with blue-chips BP up 2.4% and Royal Dutch Shell 'A' and 'B' shares up 3.5% and 1.8% respectively. In the FTSE 250, Cairn Energy ended up 3.9% and Tullow Oil up 2.2%.

But it was miners that ended at the very top of the FTSE 100, monopolizing the top four in the blue-chip index, with Anglo American up 11%, Glencore up 9.6%, BHP Billiton up 6.6%, and Rio Tinto up 5.9%.

Mike van Dulken, head of research at Accendo Markets, said mining stocks benefited from a rise in the price of copper, nickel and iron ore.

"All are following the recent global equity rally, benefiting from bets that oversupply will begin to reduce as well as a return of risk-on appetite," said van Dulken.

BHP Billiton is expected to release its first-half 2016 results on Tuesday at 0530 GMT.

The price of gold slowed down in its 2016 rally, with the metal quoted at USD1,209.90 an ounce at the close, having stood at USD1,230.61 at the close on Friday. The gold price still remains up by 14% in 2016.

The pound was hit by political worries after Prime Minister David Cameron confirmed a date for the so-called 'Brexit' referendum, with several Conservative MPs, including London Mayor Boris Johnson, positioning themselves in favour of the leaving campaign.

After the market close Friday, EU President Donald Tusk confirmed the EU's 28 leaders have granted their "unanimous support" to a reform deal with Britain. David Cameron said the UK will have a "special status" in the EU following the agreement struck with his EU counterparts.

Following a meeting with his ministers on Saturday, Cameron announced the referendum on the country's membership in the EU will be held on June 23.

The prime minister has given free rein to ministers in his Conservative party to back his bid to stay in a reformed EU or support a 'Brexit' from the bloc.

Ratings agency Moody's warned that "the economic costs of a decision to leave the EU would outweigh the economic benefits."

"We consider it positive that the referendum will take place as soon as June, as a lengthy period of uncertainty on the part of firms and investors would damage the UK's economic growth prospects," said Kathrin Muehlbronner, a senior vice president at Moody's.

"That said, the outcome of the referendum remains wide open," Muehlbronner said. "In our view, a decision to leave the EU would be credit negative for the UK economy."

IG analyst Chris Beauchamp said the broker's "Brexit binary" points firmly for the outcome of the referendum to be the UK staying in the EU, indicating a 67% chance.

The pound touched a low of USD1.4136, a level it hasn't seen since March 2009. However, sterling recovered some ground and was quoted at USD1.4142 at the London equities close, against USD1.4325 at the close on Friday.

Meanwhile the euro retreated following weak flash Purchasing Manager's Index manufacturing, service and composite readings from the eurozone and Germany.

Eurozone's flash composite PMI dropped to 52.7 in February from 53.6 in January. It was forecast to fall more slightly to 53.5 in February. A reading above 50 indicates expansion in the sector.

The eurozone's services PMI came in at a 13-month low of 53 versus 53.6 a month ago, with economists expecting the indicator to remain unchanged at 53.6. The PMI for manufacturing slid to 51 from 52.3 in January. The expected score was 52.

Meanwhile, Germany's private sector growth slowed to a seven-month low in February primarily due to weaker manufacturing expansion. The flash composite output index fell to 53.8 in February from 54.5 in January. The services Purchasing Managers' Index edged up to 55.1 from 55 in January. It was expected to remain unchanged at 55.

The single currency was quoted at USD1.1024 at the close, having stood at USD1.1121 at the close on Friday.

Markit also revealed weaker-than-expected data from the US manufacturing sector, as the flash manufacturing PMI reading came in at 51.0 in February, below the 52.4 from January. Economists expected at score of 52.0.

However, stocks in New York were shrugging off the data at the London close, with the Dow Jones Industrial Average up 1.2%, the S&P 500 up 1.2% and the Nasdaq Composite up 1.3%.

Still in the US corporate calendar, telecommunications equipment provider Motorola Solutions releases its fourth-quarter results after the US market close.

On the London Stock Exchange, shares in HSBC ended down 4.9%. The lender reported a 1.0% increase in annual pretax profit, missing analyst expectations after a loss-making fourth quarter, as the bank grappled with slowing Chinese economic growth, declining commodity and oil prices, and historically low interest rates.

HSBC lifted its dividend for the year to USD0.51 per share from USD0.50, as pretax profit rose to USD18.87 billion in 2015, from USD18.68 billion in 2014. Coming one week after HSBC decided to remain in the UK, rather than move to its historic home of Hong Kong, the results missed analyst expectations of a USD21.78 billion pretax profit, according to consensus estimates compiled by the bank.

Chairman Douglas Flint said the group had a "broadly satisfactory" financial performance in 2015, which he said was marked by "seismic shifts" in global economic conditions, and cautioned that China's slower economic growth will "undoubtedly" play its part in a "bumpier" financial environment. Nevertheless, Flint expects China to be the driver of global growth, as the Asian giant's economy transitions to services from manufacturing.

HSBC made a fourth-quarter pretax loss of USD858.0 million, compared with a USD1.73 billion pretax profit in the corresponding three months of 2014.

In the FTSE 250, shares in Home Retail Group closed up 12% at 172.48 pence, making them the best mid-cap performer. The gains were made after Frankfurt-listed Steinhoff International Holding said after the market close on Friday that it has put forward a proposal to Home Retail for a possible all-cash offer which would be for 175.0p per Home Retail share.

This offer is considerably higher than the deal currently on the table from J Sainsbury earlier this month, which implied a price of around 161.3p per Home Retail share. The offer made by Sainsbury earlier this month was thought to be towards the lower end of the range that Home Retail would be willing to sell at, according to reports prior to the deal being unveiled - making the higher offer by Steinhoff even more significant.

Home Retail Group, in its own statement Friday, confirmed it has received the proposal from Steinhoff, which will have until March 18 to make a firm offer or walk away from the deal. After the market close Home Retail Group said it has requested a extension to the deadline by which Sainsbury's must make a firm offer or walk away to the same date.

Sainsbury's ended as one of the worst performers in London's blue-chip index, down 2.3%.

Veterinary drugs company Dechra Pharmaceuticals closed up 11% after it said its pretax profit rose in the first half of its financial year on stronger revenue, with good growth in its existing portfolio and encouraging signs from its pipeline.

The FTSE 250 company said its pretax profit for the six months to the end of December was GBP14.2 million, up from GBP12.6 million a year earlier, as revenue increased to GBP110.7 million from GBP100.9 million.

Dechra said it saw good growth in its European franchise, led by its Genera business, though this was offset by the weak euro, which wiped out the vast majority of revenue growth in the region. In North America, revenue rose significantly, up 59% thanks to the investments made by the group in expanding in the region in recent years.

In the UK corporate calendar Tuesday, Persimmon, InterContinental Hotels Group, Provident Financial, GKN and Meggitt release full-year results. Dotdigital and Genus publish half-year results, while Morgan Advanced Materials, Morgan Sindall, Unite Group, Croda release full-year results. Ladbrokes, Drax Group, John Wood Group and Vitec Group publish full-year results.

In the economic calendar, Germany GDP is due at 0700 GMT, while Germany's IFO business climate data are due at 0900 GMT. In the US, the Redbook index is due at 1355 GMT, while US consumer confidence and the Richmond Federal Reserve manufacturing index are due at 1500 GMT.

By Daniel Ruiz; danielruiz@alliancenews.com

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