JKX.L Share News (JKX)

LONDON (Alliance News) - The FTSE 100 closed higher for a fourth consecutive session Thursday, a relative bastion of calm as other markets and asset classes proved volatile in the wake of a US Federal Reserve statement that left markets none the wiser as to when the US central bank will start raising interest rates.

The FTSE 100 ended up 0.3% at 6,962.32, after trading up and down in a tight 50 point range during the day. The FTSE 250 closed up 0.4% at 17,438.15, while the AIM All-Share index closed flat at 715.26.

As expected, the Fed removed the word 'patient' from its guidance, but then went on to give several reasons why it isn't in a hurry to raise rates, including lowering inflation and growth expectations and saying there was still more slack in the US economy despite the drop in unemployment.

"Just because we removed the word patient from the statement doesn't mean we are going to be impatient," Fed Chair Janet Yellen said late Wednesday.

The US central bank said that a hike in its benchmark interest rate "remains unlikely" at its April 29 meeting in Washington, but said nothing about the following meeting in June.

"A tightening in June is still possible - Chair Yellen indicated as much in her press conference - but September seems more likely," said Michael Moran, chief economist at Daiwa Capital Markets.

The initial market reaction to the Fed announcement was a drop in the dollar, a rise in US stock indices and in commodity prices. However, the dollar's fall proved short-lived, and the greenback regained ground against major currency pairs. Asian equity markets, bar Japan, followed Wall Street's lead and moved higher, but the European markets then failed to respond and US equity indices are mostly down on Thursday.

In Paris, the CAC 40 closed up 0.1% after spending most of the afternoon in negative territory, and the DAX 30 in Frankfurt closed down 0.2%. When the European equity markets closed, the DJIA was down 0.6%, the S&P 500 was down 0.5%, while the Nasdaq Composite was up 0.1%.

First-time claims for US unemployment benefits saw a modest increase in the week ended March 14th, according to a report released by the Labor Department on Thursday. The report said initial jobless claims inched up to 291,000, an increase of 1,000 from the previous week's revised level of 290,000. Economists had expected jobless claims to rise to 293,000 from the 289,000 originally reported for the previous week.

"Jobless claims data served to highlight why the Fed is right to be cautious. It also served to highlight the complex web of logic the US markets are operating on at the moment," said Spreadex analyst Connor Campbell. "Weak jobs equals delayed hike equals, in theory, happy markets."

"What hasn’t helped this situation has been the resurgence of the dollar; of late the greenback has shown Superman-like levels of invincibility as it kicked down the doors’ of the pound and the euro and took back yesterday’s losses," he said.

Following the FOMC on Wednesday, the dollar weakened against its major counterparts, with the euro touching USD1.1018 and the pound reaching USD1.5130. But the greenback recovered from its losses Thursday, with the euro trading at the London equity close at USD1.0663 and the pound at USD1.4763.

Brent oil had reached a high of USD56.77 a barrel on Wednesday, but retreated as the dollar strengthened on Thursday and was trading at USD54.51 a barrel when the London equity markets closed. West Texas Intermediate prices also rose Wednesday to USD45.32 a barrel, but dropped again Thursday to USD43.88 a barrel.

In the light of Thursday's recovery, many analysts believe the dollar rally is not over yet. However, Oanda Senior Analyst Craig Erlam thinks it will take longer to get to parity with the euro.

"While people were getting excited about parity, I think we may have to wait for later in the year for that, potentially when the Fed does eventually hike rates," he said.

Despite the dollar's rise, metals prices were holding on to some of the gains made in the wake of the Fed announcement, and this was supporting London-listed mining stocks. Gold was trading at USD1,170.94 an ounce when the equity markets closed, up 0.2% since the start of the day.

Fresnillo, up 5.4%, Randgold Resources, up 3.2%, Antofagasta, up 3.5%, BHP Billiton, up 2.4%, Rio Tinto, up 1.4%, and Glencore, up 1.6%, were amongst the best-performing stocks in the FTSE 100.

Next was the worst-performing stock in the blue-chip index, closing down 3.6%. The fashion chain reported a sixth consecutive year of annual pretax profit growth, as sales increased in its stores and particularly online, but it cut its guidance for the current year as it predicted slower growth in international sales due to the issues in Russia and Ukraine and said some of its product lines this year weren't performing as well as last year.

Next reported a pretax profit of GBP794.8 million for the year to January 31, up from GBP695.2 million a year earlier, as revenue grew to GBP4.00 billion, from GBP3.74 billion, with Directory sales up 12.1% and retail sales up 4.8%.

However, it now expects full-price Next brand sales to grow between 1.5% and 5.5% in the current financial year, down from the growth of 2.5% to 7.5% it had predicted in December. At that time, it said it expected profit to grow in line with sales, but Thursday said it now expects pretax profit in the current year to grow between 0.4% and 6.7% to between GBP785 million and GBP835 million.

Next shares had hit an all-time high on Wednesday in the run up to the results.

FTSE 250-listed Ted Baker had also hit an all-time high on Wednesday, and hit another new high in early trade Thursday after it reported further growth in profit and sales in its last financial year, and said it plans to open more stores in the year ahead. Pretax profit grew 25.3% to GBP48.8 million in the year ended January 31, from GBP38.9 million a year earlier, as revenue grew 20.4% to GBP387.6 million, from GBP321.9 million. It raised its total dividend for the year to 40.3 pence per share from 33.7p.

However, Ted Baker ended amongst the worst performers in the mid-cap index, down 2.5%. Cantor Fitzgerald analyst Freddie George said "the stock, which has risen by over 30% in the last six months, is highly rated and is likely to see some profit taking and a period of consolidation."

In the corporate calendar Friday, JKX Oil & Gas, Dunedin Enterprise Investment Trust and Gamma Communications will release full year results. Berkeley Group Holdings will publish an interim management statement, while Investec will issue a trading statement.

In the economic calendar, the German producer prices index is at 0700 GMT, while eurozone current account is at 0900 GMT. UK Public sector net borrowing is at 0930 GMT.

By Daniel Ruiz; danielruiz@alliancenews.com

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