Johnson Matthey Share News (JMAT)

LONDON (Alliance News) - Shares in London closed higher Thursday, with platinum and chemicals company Johnson Matthey the best performing blue chip, as investors reacted to minutes from the US Federal Reserve and European Central Bank.

The minutes of the policy-setting Federal Open Market Committee's October meeting, which were released after the UK equity market close on Wednesday, revealed that most members expect economic conditions to justify a US interest rate hike next month.

Some members of the FOMC believed that the economy was strong enough already last month to end the near-zero benchmark interest rate in place since December 2008, while a minority faction still "judged it unlikely" that conditions during the December meeting would warrant an initial tightening of the Fed's unprecedented slack monetary policy, the minutes showed.

However, "most participants anticipated that - based on their assessment of the current economic situation and their outlook for economic activity, the labour market and inflation - these conditions could well be met by the time of the next meeting," the Fed minutes said.

"All’n all, there seemed to be a substantial majority inclined to hike in December even before the upbeat employment report for October that may have eased the fears of one or more doves in the committee," said Phillip Marey, senior US strategist at Rabobank, referring to the much-better-than-expected non-farms job report released at the beginning of November.

"Clearly the removal of the uncertainty around the US rate hike is seen as being far more preferable to investors than keeping them at record lows for a little longer," said Craig Erlam, senior market analyst at Oanda. "In reality, the economy is performing more than well enough to cope with a small rate increase from the current record low levels, and it's good to see that the market is moving on from the hysteria surrounding it."

The FTSE 100 index ended the day up 0.8% at 6,329.93 points, meaning that it has now closed higher for four consecutive sessions, while the FTSE 250 closed up 0.3% at 17,144.72 and the AIM All-Share index closed up 0.2% at 730.61.

In Europe, the CAC 40 in Paris rose 0.2%, while the DAX 30 in Frankfurt performed even better, adding 1.1%.

Still, stocks ended the day well shy of their intra-day highs after the minutes from the European Central Bank's October meeting revealed that policy makers considered, but decided against, boosting the monetary stimulus in October as it was suggested that a deflationary risk remained relevant despite the ongoing slow recovery in the euro area.

"The view was put forward that a case could be made for considering reinforcing the ECB's accommodative monetary policy stance already at the current meeting and, in any case, to act sooner rather than later," the minutes of the October 22 Governing Council meeting held in Malta said. The minutes, which the ECB calls "the accounts", also reiterated that policymakers are set to review the stimulus measures at the December 3 policy session.

The bank is widely expected to raise the size of its monthly asset purchases to EUR80 billion from EUR60 billion and also extend the EUR1.1 trillion programme beyond its September 2016 minimum time period. A reduction of the already-negative deposit rate also is possible, the minutes suggested, saying that such a move would push the bank further into uncharted territory.

In data released from the UK Thursday, the Office for National Statistics showed that retail sales fell by more than expected in October. Retail sales decreased 0.6% month-on-month in October, reversing a 1.7% rise in September, having been forecast to fall by a slightly more modest 0.5%, according to FXStreet.com. On a yearly basis, growth in retail sales slowed to 3.8% in October, down from 6.2% in September and below the expected expansion of 4.2%.

"Retailers may be busy planning for Black Friday, but these figures suggest that shoppers are preparing too. Whereas there was a sudden fall in sales in the days running up to the event last year, that dip started more than a month in advance this time around," said Keith Richardson, head of retail at Lloyds Bank Commercial Banking.

"Now, the run in to Christmas becomes really serious. Falling prices and rising wages mean there's still reason to be cheerful, but these figures suggest that today's new generation of extra-savvy shoppers still know how to get a bargain," Richardson added.

US economic data, meanwhile, revealed that manufacturing conditions in the Philadelphia region have seen a slight improvement in the month of November.

The Federal Reserve Bank of Philadelphia said its index for current activity rose to a positive 1.9 in November from a negative 4.5 in October. The positive reading indicated growth in regional manufacturing activity after two months of contraction. The index had been expected to rise to a negative 1.0, according to FXStreet.com.

On Wall Street, at the UK equity market close, the NASDAQ Composite index was up 0.1%, while the S&P 500 was down 0.1% and the Dow Industrials almost perfectly flat.

In the forex market, at the UK stock-market close Thursday and following the data and central bank minutes, the pound traded higher at USD1.5326, having stood at USD1.5199 at the same time on Wednesday, while the euro traded at USD1.0751, firmly above the USD1.0632 seen at the equities close on Wednesday.

FTSE 100-listed Johnson Matthey ended the day up 8.8% after it said it would return funds to shareholders via a special dividend, following the sale of assets in the first half, and as its pretax profit and revenue both increased substantially, despite mixed conditions for its divisions.

The group said it will pay an interim dividend of 19.5p per share, flat year-on-year, but said it also will pay a special dividend for the half of 150.0p, following the disposal of businesses during the half. The total distribution to shareholders from the special payout will be GBP305.0 million.

The platinum and chemicals company, which makes emission control systems, catalysts and fine chemicals, also said its pretax profit for the six months to the end of September rose to GBP330.2 million, up from GBP207.8 million a year earlier, as revenue rose to GBP5.78 billion from GBP4.80 billion. Stripping out the profit made on assets disposals, however, Johnson Matthey's underlying profit fell 4.0% to GBP208.3 million, hit by tough conditions in a few of its businesses.

CRH, closing up 5.5%, was another big blue-chip riser. The Irish building materials company said it continues to expect its 2015 earnings to be well ahead of the previous year as it continued to deliver good sales growth in the first nine months.

The group said total sales grew 16% year-on-year in the nine months to the end of September, though growth did slow to 14% in the third quarter. Europe sales growth for the third quarter was only 1.0%, amid mixed trading in the region, albeit with conditions stable overall. Sales growth continues to be driven by its Americas operation, CRH said, where third-quarter sales rose 23%, a slowdown from the 32% growth in the first half.

FTSE 100-listed postal operator Royal Mail ended up 4.8% as investors welcomed the group's accelerated cost-saving plans. Royal Mail said it managed to deliver a resilient performance against a tough and competitive postal market, though its full-year outcome will be heavily dependent on how it performs during the key Christmas trading period.

The company said its pretax profit for the half year to September 27 fell to GBP116.0 million from GBP167.0 million in the half to September 28, 2014, mainly due to more costs being booked from its restructuring plan in the UK and reflecting a higher number of voluntary redundancies. Nearly 3,000 net employees left the company in the first half.

Royal Mail said it will pay an interim dividend of 7.0 pence per share, up from 6.7p a year before.

Vodafone, closing down 0.6%, was one of just a handful of blue-chip losers. The mobile phone company said it is planning to raise GBP500.0 million in new debt through the issue of new equity-linked bonds and the purchase of cash-settled call options to hedge the company's equity exposure resulting from the bond issue. Vodafone said that, as the conversion rights on the bonds will be cash-settled, the issue and conversion of the bonds will not result in the issue of any new Vodafone shares, meaning no dilution for shareholders.

On top of this, Vodafone shares went ex-dividend Thursday, meaning new buyers no longer qualify for the latest dividend payout.

In the FTSE 250, defence services company QinetiQ Group ended the day as the index's biggest winner, closing up 10%, after it said it managed to deliver a solid set of interim results against a difficult market backdrop, as both profit and revenue increased but its order intake slumped.

QinetiQ said its pretax profit for the half to the end of September was GBP48.3 million, up from GBP44.4 million a year before, as revenue rose to GBP370.9 million from GBP365.6 million.

Amid an environment of tighter defence and security budgets, however, order intake in the half was down to GBP228.4 million from GBP320.5 million, though QinetiQ said this came against a tough prior-year comparison. The group said about two-thirds of the order intake decline was attributable to the timing of multi-year contract awards, and noted it secured a GBP153.0 million five-year contract renewal from the UK's Ministry of Defence post the end of the half.

Poundland Group was the biggest loser in the mid-cap index. The company revealed that current trading for the company looks volatile, while analysts were concerned that the condition of the recently-acquired 99p Stores business is worse than expected.

In the 26 weeks to September 27, Poundland's pretax profit was GBP5.3 million, down from GBP9.3 million a year earlier, mostly due to exceptional distribution and administrative expenses it incurred in the half, as well as a very tough comparative period. Total revenue rose to GBP561.1 million, up from GBP528.2 million, with underlying sales rising 5.6% in constant currencies, but like-for-like sales were down 2.8%, compared to a 4.7% rise a year earlier.

Poundland ended the day down 15% at 235.46 pence, having earlier fallen to a low of 215.82p, which represents its lowest price since its initial public offering in March 2014.

In the commodities market, at the UK equity market close, Brent oil was quoted at USD44.25 a barrel, having stood at USD43.73 a barrel at the same time Wednesday. Gold stood at USD1,083.64 an ounce, sharply higher than the USD1,068.43 an ounce seen at the UK stock market closing bell on Wednesday.

"The short-term technical explanation for gold’s bounce is profit-taking after traders front-ran what was expected to a fairly hawkish set of [Fed] minutes," said Jasper Lawler, market analyst at CMC Markets. "If the rally in gold takes hold, it could become a flight to safety," he added.

Still to come Thursday, Federal Reserve Bank of Atlanta President Dennis Lockhart and Federal Reserve Vice-President Stanley Fischer are scheduled to speak at 1730 GMT and 2145 GMT, respectively.

In the data calendar Friday, the Bank of Japan's monthly economic survey is released ahead of the UK equity market open at 0500 GMT, with German producer price inflation data for October due shortly after at 0700 GMT. Later on, the preliminary reading of eurozone consumer confidence for November is expected at 1500 GMT and the Federal Reserve Bank of Kansas City's manufacturing activity figure is released at 1600 GMT.

Investors also keep an eye on speeches by European Central Bank President Mario Draghi at 0830 GMT, Deutsche Bundesbank President Jens Weidmann at 1015 GMT and Federal Reserve Bank of St. Louis James Bullard at 1400 GMT.

In a quiet day in the UK corporate calendar Friday, FTSE 250-listed instruments and controls company Spectris is scheduled to release a trading update. Fuller, Smith & Turner, the west London brewer, and Alpha Real Trust are expected to publish half-year results.

By James Kemp; jameskemp@alliancenews.com; @jamespkemp

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