HSBC Holdings Share News (HSBA)

LONDON (Alliance News) - Shares in London were higher Friday midday, with commodity stocks and banks recovering from losses on Thursday, while Rolls-Royce Holdings led gainers as the company left its outlook for 2016 unchanged, even as it cut its dividend and reported a drop in underlying pretax profit.

The FTSE 100 index was up 1.9% at 5,641.18 points, the FTSE 250 up 0.8% at 15,303.42, and the AIM All-Share up 0.1% at 664.30. European indices were rallying as well, with the CAC 40 in Paris up 1.1% and the DAX 30 in Frankfurt up 1.5%.

Given the five profit warnings over the last two years, some feared the worst for Rolls Royce on Friday, but Liberum analyst Jack O'Brien said the engine maker's results have paused the downgrade cycle for now.

Rolls Royce said underlying pretax profit fell to GBP1.43 billion in 2015, from GBP1.62 billion in 2014, coming in ahead of the GBP1.3 billion expected by analysts, as underlying revenue fell to GBP13.35 billion from GBP13.86 billion.

Rolls cut its dividend for the year as a whole to 16.37 pence from 23.10p, slightly ahead of the 16.20p expected by analysts. Chief Executive Warren East said the payment to shareholders will be halved at the next half year. Underlying free cash flow fell to GBP179 million from GBP447 million.

East said the 2016 outlook for the company is unchanged, with underlying pretax profit expected to be GBP650 million lower than in 2015. However, Liberum analyst Jack O'Brien said the free cashflow guidance is disappointing and is now likely to be at best in line with previous expectations of an outflow between GBP100 million and GBP300 million.

Miners were taking back some recent losses, with Anglo American up 15%, Glencore up 9.1%, BHP Billiton up 6.9% and Antofagasta up 7.6%.

Oil companies were also in the green as Brent managed to halt its most-recent fall, which started earlier this month, holding above USD31 a barrel. The North Sea benchmark was at USD31.52 a barrel Friday midday, having stood at USD30.09 at the London equities close Thursday.

BP was up 4.5%, Royal Dutch Shell 'A' up 3.1% and BG Group up 2.5%.

Financial stocks also were repairing some of their recent losses, with emerging markets bank Standard Chartered benefiting from an upgrade to Buy from Hold by Investec. The stock was up 7.2%, having fallen 5.1% on Thursday.

Barclays was up 4.6%. Singapore-based DBS Group Holdings and Oversea-Chinese Banking Corp have made non-binding bids for the Barclays Asian private wealth business, Bloomberg reported on Friday, citing people familiar with the matter.

The FTSE 100-listed lender has been looking for buyers of its Singapore-based wealth unit since last year, the report said. Spokesmen for DBS, OCBC and Barclays declined to comment, the news agency added.

Meanwhile, Royal Bank of Scotland Group was up 4.3% and HSBC Holdings was up 2.9%.

Stocks in New York were called for a positive open, with the Dow Jones Industrials seen up 0.8% and the S&P 500 and the Nasdaq 100 both pointed up 1.0%.

Despite the gains seen in European indices and the positive call for US stocks, FOREX.com analyst Fawad Razaqzada wasn't convinced the rebound in equities will last long.

"Compared to the recent sharp falls, today's bounce represents a mere drop in the ocean. We are not out of the woods just yet [and] as like the previous occasions this may well prove to be just a short-covering bounce, but it is a welcome relief nonetheless," Razaqzada said.

"The major indices are either bouncing off key technical support levels or exhaustion points after the recent sharp falls. Some bearish traders seem happy to book profit as they don't want to go into the weekend holding a position, knowing full well that there is a good chance for a central bank intervention, or some sort of production agreement among the key oil exporting countries in an effort to boost prices," Razaqzada added.

Still ahead in the economic calendar, US retail sales and import and export price indices are at 1330 GMT, while the Reuters/Michigan Consumer Sentiment Index and business inventories both are at 1500 GMT.

Already released, the euro area economic growth rate remained stable in the fourth quarter, flash estimate from Eurostat showed. Gross domestic product climbed 0.3% quarter-on-quarter, the same rate of growth as seen in the previous period. On a yearly basis, economic growth slowed marginally to 1.5% from the 1.6% reading of the third quarter. Both quarterly and annual growth rates matched economists' expectations.

Meanwhile, another report from Eurostat showed that eurozone industrial production dropped unexpectedly in December. Industrial output fell 1.0% on a monthly basis in December, faster than the revised 0.5% drop seen in November. Economists had forecast a 0.3% rise. All components of production except durable consumer goods logged contraction. Durable consumer goods output rose 1.4%.

Elsewhere on the London Stock Exchange, BT Group was down 0.7% after UBS cut the telecommunications stock to Sell from Hold.

UBS said competition for BT has been underestimated by the market and has weighed on the company's risk/reward profile. Analysts Polo Tang and Michael Hill said that after a benign period, the risk of increasing competition could mean longer-term earnings before interest, taxes, depreciation and amortisation could fall to GBP1.25 billion per annum, a 15% decrease on current earnings.

In the FTSE 250, Berendsen was up 4.0% after Credit Suisse upgraded the textile services company to Outperform From Neutral, while Investec was up 4.7% after the asset manager was upgraded to Buy from Hold by HSBC.

Henderson Group was the worst mid-cap performer, down 4.3% after brokers expressed negative views on the Anglo-Australian asset manager following the release of its 2015 results on Thursday, with Societe Generale, UBS and Numis slashing earnings per share forecasts.

The group said it will "review" its short-term plans if the turbulent market conditions seen in the opening weeks of 2016 continue. Hendersons's outlook was closely watched by investors, amid a stock market rout that has seen nearly 28% wiped from the group's share price so far this year.

"It's fair to say market conditions in first six weeks of 2016 are quite different to when we set the budget for the business overall in November," Chief Executive Andrew Formica told journalists Thursday in a conference call.

Real estate investment trust Tritax Big Box REIT was down 2.7%. The group it said it had "significantly exceeded" its target of GBP100.0 million - not to mention its declared maximum size of GBP150.0 million - in its placing, open offer and offer for subscription of shares.

The company, which invests in 'big box' warehouse property, said a total of 161.3 million shares will be issued at 124 pence per share, after having previously said it would issue 80.6 million shares at the same price. The company additionally said it will conduct a tap issue to meet GBP50.0 million of excess demand on equivalent terms to the placing. As a result, the total size of the issue will be GBP200.0 million. Tritax said this was "significantly lower" than the total overall demand.

SuperGroup was down 1.8%. The fashion retailer and owner of Superdry label said co-founder and Product & Brand Director Julian Dunkerton sold 4.0 million shares in the company at 1,200 pence each via an accelerated bookbuild on Thursday. Following the sale, Dunkerton now holds 22.1 million shares in the company, equivalent to a 27% stake in the company.

By Daniel Ruiz; danielruiz@alliancenews.com

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