LONDON (Alliance News) - RSA Insurance is leading the FTSE 100 lower Monday after the struggling insurer confirmed it is considering a number of measures to bolster its balance sheet, while HSBC Holdings is also down after its results missed market forecasts.
RSA, which is widely expected to cancel its dividend as it struggles with the aftermath of the discovery of a GBP200 million hole in its balance sheet last year, said it is considering a number of options to raise new funds, including a rights issue.
New Chief Executive Stephen Hester is expected by some analysts and commentators to scale back the company's operations, particularly outside the UK, when the company publishes its business review alongside its 2013 results on Thursday.
HSBC, meanwhile, reported a 9.3% rise in its 2013 pretax profit, but its shares fell as the figure missed analysts' expectations, held back by issues in the UK including higher-than-anticipated costs relating to mis-selling scandals and an increase in the country's bank levy.
HSBC made a USD22.57 billion pretax profit for 2013, compared with USD20.65 billion the prior year, but revenue fell to USD64.65 billion from the USD68.33 billion reported in 2012. Analysts had been forecasting USD24.68 billion in pretax profit on revenues of USD66.42 billion for 2013.
The bank's reduction in operating expenses also failed to live up to analysts' expectations, declining by 10% to USD38.56 billion. Analysts had anticipated a fall of closer to 12%.
The bank also outlined a new way of remunerating its staff in response to a new cap on bonuses initiated by Brussels. The new plan, if approved later this year by the bank's shareholders, would see minimum level of salaries for certain staff going up and the maximum coming down.
Vodafone shares have jumped after the 6-for-11 consolidation of its share capital used to pay shareholders some of the proceeds from the sale of its stake in Verizon Wireless became effective and trading in the new shares began.
Vodafone's rise, coupled with HSBC's slump, means that the telecommunications company is now the largest company in the blue-chip index by market capitalization.
In the FTSE 250, Dixons and Carphone Warehouse Group have confirmed they are in merger talks. The firms said talks are at a preliminary stage, and no decisions regarding the structure of a potential merger have been made. The retailers are of similar size, with a market capitalisation of about GBP1.8 billion.
In economic news, sentiment among UK's service sector firms improved to an all-time high in the three months to February as the sector recorded growth for a third successive quarter, according to data from the Confederation of British Industry.
The latest CBI Service Sector Survey showed that confidence among service providers in the consumer sector as well as the professional services sector increased at the fastest pace since records started around 15 years ago, with the upbeat mood reflecting a further marked pick up in business volumes, which advanced to the largest extent since 2005, resulting in the first ever rise in profitability since 2007.
German business confidence strengthened unexpectedly in February to the highest level since July 2011 despite a drop in expectations. The business confidence index climbed to 111.3 from 110.6 in January, said the Ifo institute. The reading was expected to remain stable at 110.6. The current conditions index improved to 114.4 in February from 112.4 a month ago.
The Federal Reserve has done more than enough to help the economy and should continue to reduce the size of its massive bond-buying plan, according to Richard Fisher, president of the Dallas Federal Reserve, reiterating his view that monetary stimulus has been used as a crutch in lieu of wise fiscal and regulatory policies from Congress.
"It is my firm belief that the fault in our economy lies not in monetary policy but in a reckless and feckless federal government that simply cannot get its fiscal and regulatory policy geared so as to encourage business to take the copious amount of money we at the Fed have created and put it to work creating jobs and growing our economy," Fisher said. The Fed has reduced its bond-buying by USD10 billion per month at its past two meetings, but Fisher has been a vocal advocate of more drastic tapering.
Finance ministers from the world's top 20 economies meeting in Sydney over the weekend agreed to measures they said could add 2% to global growth over the next five years. The bloc also urged a common reporting standard to allow the automatic exchange of tax information between jurisdictions, part of an effort to ensure that corporations pay more tax where they earn revenues.
"Profits should be taxed where economic activities deriving the profits are performed and where value is created," the formal statement said.
Bank of England Governor Mark Carney rejected claims by bankers that the new capital requirements proposed by G20 leaders were too strict and could lead to an explosion in shadow banking.
"We can't have a system where some of those institutions that are pushing back on this are still reliant ultimately on the state and getting a massive subsidy from the taxpayer," Carney told the Sydney Morning Herald.
European Central Bank President Mario Draghi said after the G20 meeting he is ready to act if the outlook for prices deteriorates, although he sees no fear of deflation in the euro area. The ECB will have the full set of information needed to decide whether to act or not by its next rate-setting meeting on March 6. The bank will also release its inflation estimates for 2016 for the first time in March.
In political news, the crisis in the Ukraine continues; the country's authorities have issued an arrest warrant for deposed president Viktor Yanukovych, who was believed to be in hiding on the Crimean peninsula. Yanukovych, along with several other officials, are wanted by police for the "mass murder" of civilians, said Arsen Avakov, who was appointed interior minister on Saturday.
Meanwhile, Ukraine's acting finance minister said that the cash-strapped country needs 35 billion dollars in aid for the next two years. The finance ministry, the central bank and interim President Oleksandr Turchynov will ask the US, Poland and other international partners for loans within the two weeks, minister Yuriy Kolobov said in a statement.
Egyptian Prime Minister Hazem Beblawy has announced the resignation of his military-backed government in a surprise measure. Local media had been predicting a limited cabinet reshuffle to allow army chief and Defence Minister Abdel-Fattah al-Sissi to resign and run for president in an election scheduled for mid-April under a constitution approved in a referendum last month. Al-Sissi will have to resign from the military in order to contest the election.
The deaths of four children in Thailand have sparked calls for an end to the country's political deadlock. The children died in attacks on anti-government protest sites over the weekend. The protesters and the government have blamed each other for harbouring "hidden forces" to carry out the violent acts.
The Italian Senate was due to hold a vote of confidence on the newly installed government led by Matteo Renzi, giving the youthful prime minister the chance to flesh out his ambitious reform agenda. Renzi's government was sworn in on Saturday, a week after he engineered a palace coup to unseat party colleague Enrico Letta from the premiership.
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FTSE 100: Down 0.2% at 6,824.08
FTSE 250: Down 0.1% at 16,450.80
AIM ALL-SHARE: Up 0.8% at 888.4
GBP-USD: 1.6647
EUR-USD: 1.3732
GOLD: USD1,332.70 an ounce
OIL (Brent): USD109.63 a barrel
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KEY UK CORPORATE NEWS:
FTSE 100: Rolls Royce Holdings has been awarded a USD90.1 million production contract for engines to power the MV-22 Osprey vertical take-off aircraft for the US Marine Corps. Distribution and outsourcing company Bunzl reported strong growth in profits and revenues in 2013, driven mainly by further acquisitions as it announced two new deals in Germany and Czech Republic. Primark owner Associated British Foods said much-lower profit from its sugar business in the first-half of the year will be offset by 13% sales growth from its clothing retailer Primark and good performances from its grocery and ingredients divisions. Billionaire John Malone's Discovery Communications is in discussions with British Sky Broadcasting Group to make a joint bid for Channel 5 to gain a foothold in UK free-to-air broadcasting, the Financial Times reported. Bids for Channel 5 are due Thursday. Old Mutual said its majority-owned South African banking subsidiary, Nedbank Group, has reported a 16% rise in annual headline earnings, driven by higher revenues and a slower increase in impairments than in net interest income.
FTSE 250: Hiscox has proposed paying a special dividend to shareholders for 2013 as it reported a 12% rise in pretax profits for its last financial year. Theme park and attractions operator Merlin Entertainments has entered a strategic partnership with US animation studio DreamWorks Animation to create a "Shrek and friends" based attraction. Bovis Homes became the latest UK housebuilder to report an increase in profit for 2013, boosted by improved housing market conditions and an increase in the number of mortgages products available, including high loan to value packages. Bovis raised its dividend 50% to 13.5 pence, from 9.0 pence a year earlier. Essar Energy's independent directors pledged to protect the company's minority shareholders as they said the 70 pence a share buyout bid made by the company's majority shareholders undervalues the business.
AIM: Nyota Minerals is a big gainer after it said it has developed a renewed strategy to focus on exploration following the sale of a majority stake in its Tulu Kapi project in Ethiopia during December. Shares in SacOil jumped in early trading before being suspended at the request of the company pending an announcement. Omega Diagnostics shares have also risen after the firm said it has been granted a USD600,000 grant from Burnet Institute Melbourne and global health initiative UNITAID to build an assembly facility in India for its Visitect CD4 test. DekelOil shares are up after the palm oil project operator said it has raised GBP700,000 by placing 46.7 million shares at 1.5 pence each, most of which went to Africa-focused fund Nubuke, part of its strategy of introducing institutional investors to its share register. Shares in Clean Air Power are also trading higher after the firm said it has received an order for 50 Genesis-EDGE, Dual-Fuel trucks from Sainsbury's. At the other end of the market, Paragon Resources' shares have dropped after its Meso Diamonds unit finalised the terms and conditions of the Mining Lease Agreement for the mining of the Lemphane Kimberlite Pipe in Lesotho. Shares in Karelian Diamond Resources have fallen after it reported a wider pretax loss during its first-half as operating expenses jumped during the company's development phase. Wildhorse Energy is also down, reversing gains at the open, after it signed a binding heads of agreement to sell its underground coal gasification assets to Linc Energy Ltd for AUD4.04 million.
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AFTERNOON WATCHLIST: US Chicago Fed National Activity Index, US Markit Services PMI Preliminary, US Dallas Fed Manufacturing Business Index
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Tuesday's Key UK Corporate Events
BATM Advanced Communications Preliminary Results
St. James Place Full Year Results
CRH Full Year Results
GKN Full Year Results
Croda International Preliminary Results
Ashmore Group Interim results
Dechra Pharmaceuticals Half Year Results
Ladbrokes Full Year Results
Provident Financial Full Year Results
Wilmington Group Interim results
Genus Interim results
Persimmon Full Year Results
Capital & Counties Properties Full Year Results
Seadrill Partners Q4 Results
Netcall Half Year Results
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Tuesday's Key Economic Events
07:00 Germany Gross Domestic Product
07:45 France Business Climate
09:00 Germany IFO
09:30 UK BBA Mortgage Approvals
10:00 EU European Commission Releases Economic Growth Forecasts
10:00 UK Inflation Report Hearings
11:00 UK CBI Distributive Trades Survey
13:55 US Redbook index
14:00 US Housing Price Index
14:00 US S&P/Case-Shiller Home Price Indices
15:00 US Consumer Confidence
15:00 US Richmond Fed Manufacturing Index
15:10 US Fed's Tarullo speech
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By Alice Attwood; aliceattwood@alliancenews.com; @AliceAtAlliance
Copyright © 2014 Alliance News Limited. All Rights Reserved.
24 Sep 2014 11:14
