Legal & General Share News (LGEN)

LONDON (Alliance News) - UK stocks were higher Wednesday midday, rebounding from the heavy losses seen at the start of the week, as investor focus turned to US Federal Reserve Chair Janet Yellen's testimony on Capitol Hill for any insight into the US central bank's monetary policy path in 2016 after its rate hike in December.

The FTSE 100 index was up 1.0% at 5,688.65 points. The leading UK stock index was recovering from the losses seen on Tuesday, when it closed down for a third consecutive session, touching its lowest level since the middle of 2012.

The FTSE 250 was up 1.4% at 15,526.91 and the AIM All-Share up 0.3% at 673.53. European stock also were rallying, with the CAC 40 in Paris up 2.1% and the DAX 30 in Frankfurt up 2.3%.

Shares in Europe shrugged off another negative close from the Japanese Nikkei 225, which ended down 2.3% on Wednesday, adding to the 5.4% loss seen on Tuesday. The Chinese market remains closed for Lunar New Year, though the Hong Kong market will re-open again on Thursday.

Stocks in New York managed to avoid contagion from the losses in Asia and Europe Tuesday. The Dow Jones Industrials ended up 0.1% on Tuesday, while the S&P 500 closed down 0.1% and the Nasdaq Composite down 0.4%.

US futures pointed higher open ahead of the open Wednesday, with the DJIA seen up 0.7%, the S&P 500 up 1.0% and the Nasdaq 100 up 1.4%.

Yellen's testimony to the Committee on Financial Services in the US House of Representatives will start at 1500 GMT, with market participants likely to pay close attention to the Fed chief's remarks on the outlook for interest rates amid the latest downturn in global equity markets.

Adam Cole, head of G10 FX Strategy at RBC Capital Markets, said the most "immediate question" that markets will be looking for clues on is whether a March rate hike is still in play. Cole said futures now point close to a zero probability of a move at the next Federal Open Market Committee meeting on March 16, and only around 25% probability to one hike before year-end.

"Our economists think the odds that Yellen heavily promotes a March move are slim. Even though the chair is likely to highlight good US economic fundamentals...the 'risk' that the global malaise spills over to the US is also likely to get a lot of lip service," said RBC Capital's Cole.

Also still ahead in the economic calendar, the National Institute of Economic and Social Research UK GDP forecast is at 1500 GMT and the US Energy Information Administration's crude oil stocks are at 1530 GMT.

UK industrial production declined at a faster pace in December, data from the Office for National Statistics showed. Industrial production fell 1.1% month-on-month, faster than November's 0.7% drop. Economists had forecast output to fall by 0.1% in December. This was the second consecutive fall in production.

On a yearly basis, industrial output slid 0.4%, partially offsetting a 0.9% increase in November. Output was forecast to climb by 1.0%.

Meanwhile, UK manufacturing output dropped 0.2%, confounding expectations for a 0.1% rise. In November, output had fallen 0.4%. Manufacturing output declined 1.7% annually, coming in below a 1.4% fall forecast by economists, after a 1.2% drop in November.

"With recent December industrial production figures also disappointing across several major euro area countries, today's figures suggest that softening global growth is continuing to weigh on the sector. In the UK's case, this is probably being exacerbated by the pass-through from past sterling strength," said Michael Sawicki, senior economist at Lloyds Bank.

On the London Stock Exchange, insurers and banks were leading the rebound, recovering from the losses seen Tuesday when talk of global economic slowdown and the possibility of another banking crisis weighed on investors confidence.

Prudential, up 6.4%, Legal & General Group, up 4.6%, Old Mutual, up 4.5% and St James's Place, up 3.9%, were among the best blue-chip performers on Wednesday.

UK banking stocks, which fell on Tuesday alongside European counterparts such as Deutsche Bank, also were rebounding, with Barclays up 2.8%, Royal Bank of Scotland up 2.8% and HSBC Holdings up 1.4%.

Swiss financial firm UBS said that, despite a recent market sell-off, it remains neutral on equities in its global tactical positioning.

"Near-term, the likelihood of more market-friendly central bank statements or action boosting risk asset prices is balanced by the fact there has been little improvement in the key economic indicators we're watching, as well as fresh concerns about credit conditions in Europe," UBS said.

At the other end of the FTSE 100, Hikma Pharmaceuticals was the worst performer, down 14%. The pharmaceutical company said it agreed a lower price for its acquisition of Roxane Laboratories and Boehringer Ingelheim Roxane from German pharmaceutical company Boehringer Ingelheim.

This is as a result of new information having been received from Hikma in relation to the financial performance of Roxane in 2015, following the publication of Hikma's prospectus regarding the acquisition in January. However, Hikma said that, following further due diligence, it now expects Roxane's revenue for 2015 to come in lower than it had previously anticipated, which it attributed to higher-than-expected rebates.

It now expects Roxane's revenue for 2015 to only be slightly higher than 2014, and for 2016 to be lower than in 2015. As a result, Hikma now expects the acquisition to be slightly dilutive to its adjusted earnings per share in 2016.

Gold miners Randgold Resources and Fresnillo were down 3.3% and 3.0%, respectively, after the price of the yellow metal dropped for second consecutive session after an impressive rally so far in 2016. Gold was quoted at USD1,183.86 an ounce at midday.

Chip-designer ARM Holdings was down 1.9% despite reporting a rise in pretax profit in 2015, as it saw a strong performance in its fourth quarter with revenue up 19%. ARM reported a pretax profit of GBP414.8 million for 2015, up from GBP316.5 million in 2014, as revenue rose to GBP968.3 million from GBP795.2 million, more than offsetting increases in research and development costs.

However, Liberum said ARM's fourth quarter underlying earnings before interest and taxes missed consensus estimates, and the company's outlook for 2016 was cautious. ARM said that whilst economic uncertainty "may influence consumer and enterprise spending, potentially impacting semiconductor revenues and industry confidence", based on current conditions in the semiconductor market, it expects 2016 dollar revenues "broadly in line" with market expectations.

In the FTSE 250, Domino's Pizza Group was the biggest gainer, up 9.9%, after the pizza delivery company was upgraded to Buy from Neutral by Credit Suisse. Meanwhile, Virgin Money Holdings was up 7.5% after Nomura started coverage on the lender with a Buy rating.

Dunelm Group was up 7.1%. The homewares retailer reported growth in profit in the first half of its financial year, as sales grew and it benefited from six extra days of winter price promotion. Dunelm said it made solid progress in like-for-like store sales, underpinned by a strong performance from curtains and bedding, particularly in its new 'kids' range.

Tullow Oil was the worst mid-cap performer, down 10%. The oil producer reported a narrower pretax loss in 2015 despite reporting a steep drop in revenue due to the fall in oil prices, as the company said it remains focused on reducing costs and getting the TEN development in Ghana producing.

The company reported a USD1.29 billion pretax loss from continuing activities in 2015 compared to a USD2.04 billion loss in 2014. That result came despite a steep drop in revenue to USD1.60 billion from USD2.21 billion, yielding a gross profit of USD591.3 million compared to USD1.09 billion last year - in line with Tullow's guidance last month.

With Tullow already releasing a glimpse into its results last month, attention was on the company's spending in the near term and on the TEN development in Ghana which is expected to begin producing this year.

Tullow stuck to its guidance to have a USD1.10 billion capital expenditure budget in 2016, but said this could fall to USD900.0 million. Importantly, with TEN almost finished, the company believes capital expenditure could be as low as USD300.0 million per year from 2017 onwards.

By Daniel Ruiz; danielruiz@alliancenews.com

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