RDSA.L Share News (RDSA)

LONDON (Alliance News) - UK stocks were higher Friday midday, supported by its commodity-related stocks amid higher oil prices, while Royal Bank of Scotland Group was leading the blue-chip fallers after the state-backed bank reported its eighth consecutive annual net loss.

At midday, the blue-chip FTSE 100 index traded up 1.1%, or 68.10 points, at 6,080.91. The FTSE 250 index was up 0.9% at 16,540.43, and the AIM All-Share was up 0.2% at 690.52.

Analysts described RBS's full-year results as "messy", "disappointing" and a continuation of the "tale of woes". The stock was down 8.2% at 224.50 pence.

The Edinburgh-based bank's net loss narrowed to GBP1.98 billion in 2015 from GBP3.47 billion in 2014. Adjusted operating profit, which strips out restructuring and litigation costs, among other items, fell to GBP4.41 billion from GBP6.06 billion, due to lower income and asset disposals.

Although it boasts a strong capital position, RBS said it now expects capital distributions, either through dividends or share buybacks, to take place later than the first quarter of 2017.

"Every year we hope that the time has come for the bank to turn a corner and every year we return disappointed," said Michael Hewson, chief market analyst at CMC Markets.

Hewson said the continuation of RBS's restructuring is likely to make any prospect of a return to paying dividends much more difficult in the short-term.

"Unless there is some clear evidence that this continued drip feeding of negative news shows signs of abating, it is going to be very difficult to see a rebound in the share price, as shown by today's sharp falls," Hewson added.

International Consolidated Airlines Group also was in the red, down 4.5%, despite it reporting a more than doubling in profit in 2015, as revenue grew despite taking a small hit to sales in the fourth quarter following the terrorist attacks in Paris.

The airline operator - which owns British Airways, Aer Lingus, and Spanish carriers Iberia and Vueling - said its pretax profit in 2015 grew to EUR1.82 billion from EUR828 million in 2014, as revenue rose by 13% to EUR22.86 billion from EUR20.17 billion.

However, miners and oil-related stocks were the main support for gains in the blue-chip index, following a sharp rise in crude prices attributed to reports that oil ministers from Venezuela, Saudi Arabia, Qatar and Russia will meet next month to discuss freezing production.

However, reports of this meeting come after Iran and Saudi Arabia ruled out a deal by major producers to cut oil output earlier this week. Iran's oil minister recently said it was "laughable" to think Iran would agree freeze output following years of sanctions.

Brent oil was quoted at USD35.74 a barrel at midday, having surpassed the USD36 line earlier Friday, higher than the USD33.75 seen at the London close on Thursday. US benchmark West Texas Intermediate was at USD33.45 on Friday versus the USD31.30 a barrel seen on Thursday.

Oil producers were amongst gainers in the London market, with Royal Dutch Shell 'B' shares up 2.9%, Shell 'A' shares up 2.8% and BP up 2.0%. In the FTSE 250, Tullow Oil was the best mid-cap performer, up 6.5%.

London-listed mining stocks also attracted buyers after the People's Bank of China Governor Zhou Xiaochuan said there is more room for monetary policy and multiple instruments to address possible downside risks to the Chinese economy.

Xiaochuan reiterated that there is no room for persistent renminbi depreciation. In the long-run, the exchange rate will reflect economic fundamentals, he noted. Economic growth remains relatively strong, Zhou said ahead of this week's G20 meeting in Shanghai. The central bank said foreign reserves will be maintained around an appropriate and reasonable level.

Anglo American was up 5.2%, Rio Tinto up 4.2%, Glencore up 3.9% and BHP Billiton up 2.8%.

BHP said progress has been made in its negotiations with Brazilian authorities on a settlement for the Samarco tailings mine dam burst. Responding to recent news reports that Brazilian authorities are seeking to substantially increase the value of a compensation settlement regarding the mine disaster, BHP said significant progress has been made in the negotiations and it was "hopeful" an agreement will be reached.

But it was Pearson that was at the top of the FTSE 100, up 5.4%.

Pearson said it swung to a pretax loss of GBP433.0 million in 2015, compared to a GBP255.0 million profit in 2014, primarily due to the one-off costs the group will book for the restructuring programme.

Revenue dipped 2.0% to GBP4.47 billion from GBP4.54 billion, as its Pearson VUE, Connections Education and Wall Street English business in China all performed well, but this was offset by declines in its US Higher Education, UK Qualifications and South African units.

Brokers agreed that the statement provided few surprises following Pearson's pre-close update in January, when the education and publishing group outlined job cuts and plans to simplify its business. Analysts said there was no bad news additional to what was expected.

Most brokers retained negative recommendations on Pearson shares, but Societe Generale kept its Buy recommendation as it believes in the benefits of the group's restructuring programme.

"Our view is still, as per our upgrade [to Buy] note on January, 'New restructuring programme supports a realistic return to growth and current dividend', that the latest restructuring offers a credible growth plan," SocGen analyst Simon Baker said.

Nomura upgraded fashion house Burberry Group to Buy from Neutral, sending its shares up 4.3%. The upgraded comes ahead of the luxury good company detailing the results of its operational review, with Nomura saying a change in approach would be a positive for the business. Driving productivity measures should boost Burberry's valuation, the bank said, as would more discipline on cost and capital allocation.

Intu Properties was up 2.2% after the shopping centres owner returned to like-for-like rental income growth in 2015 following an improved performance in the second half, though its pretax profit dipped due to lower total valuation gains made on its portfolio.

Intu said its like-for-like rental income grew 1.8% in the year to the end of December, compared to a 3.2% decline a year earlier. The group expects this to continue in 2016, guiding to like-for-like rental growth of 2-3%. Pretax profit, however, declined to GBP513.0 million, down from a GBP593.7 million profit a year earlier, as a significant decline in the valuation gain it made on its portfolio offset much lower financing costs for the business.

In the FTSE 250, engineering group IMI was up 2.0%. The group said its pretax profit and revenue fell in 2015, in line with the profit warning the group issued earlier in the year as it contended with tough markets.

IMI expects the tough conditions in its markets to continue in the first half and said margins are likely to decline further before some improvement is seen in the second half of 2016 as the benefits of its restructuring plans flow through. On the expectation of improvements on the horizon, the group said it will hike its final dividend slightly to 24.5 pence from 24.0p, taking its total dividend up to 38.4p from 37.6p.

At the other end of the index, shares in bookmaker William Hill were down 2.2%. The group reported a drop in profit in 2015, as revenue fell slightly following a tough comparative period which included the football World Cup and as it faced additional gambling duties in the UK, but increased its dividend payout ratio and announced a share buyback.

The betting company said pretax profit in 2015 fell to GBP184.7 million from GBP233.9 million in 2014, as revenue decreased by 1% to GBP1.59 billion from GBP1.61 billion. William Hill will pay a total dividend of 12.5 pence for the year, a 2.5% increase on the 12.2p it paid in 2014, and said it has increased the dividend payout ratio to around 50% of adjusted earnings. It will also complete a GBP200 million share buyback over the next year.

European indices were higher, with the CAC 40 in Paris and the DAX 30 in Frankfurt up 1.8% and 1.9%, respectively. European investors were shrugging off data from European Commission showing that eurozone economic sentiment reached an eight-month low in February.

The economic sentiment index fell to 103.8 in February from 105.1 in January. This was the lowest score since June 2015. It was forecast to drop to 104.3.

The positive mood in the markets was expected to spread to the US, with the Dow Jones Industrial Average and the S&P 500 both pointed up 0.7% and the Nasdaq 100 seen up 0.9%.

Later in the afternoon, investors will look for the second reading of US GDP and US goods trade balances, both at due 1330 GMT. Meanwhile US personal consumption expenditure is expected at 1500 GMT, as well as the Reuters/Michigan Consumer Sentiment Index.

By Daniel Ruiz; danielruiz@alliancenews.com

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