LONDON (Alliance News) - UK stock prices ended mixed Wednesday, as Greece requested a new three-year loan from the eurozone bailout fund, while London banking, energy and property stocks were sent in all directions by the UK Summer Budget.
The FTSE 100 closed up 0.9% at 6,490.70 points, the FTSE 250 down 0.6% at 17,112.86 and the AIM All-Share down 0.8% at 744.19.
In Europe, the CAC 40 in Paris closed up 0.8% and the DAX 30 up 0.7%.
UK investor attention switched from Greece in the morning to UK Chancellor of the Exchequer George Osborne in the afternoon.
For banks, Osborne said the UK bank levy will be gradually reduced over the next six years and then no longer applied to worldwide balance sheets, though an 8% tax charge is to be introduced on bank profits.
Shares in HSBC Holdings, which is reviewing whether to move its global headquarters from London, partly due to the costs of the bank levy, rose immediately following Osborne's announcement but later eroded some of its gains, closing up just 0.5%.
Barclays was the biggest riser amongst banks, up 3.1%, but for a different reason. The bank is looking for a new chief executive to focus the FTSE 100 banking group's efforts on generating returns for shareholders, after the board called time on Antony Jenkins' leadership and appointed Chairman John McFarlane in an executive capacity until a successor is found.
Meanwhile, Royal Bank of Scotland Group closed up 0.5%. The body responsible for managing the taxpayer's stakes in bailed-out banks, UK Financial Investments, said the UK government can raise at least GBP2 billion by selling part of its shareholding in RBS in the current fiscal year. The UK still owns about 80% of RBS after pumping GBP45.5 billion into the bank in the global financial crisis of 2007-09.
Lloyds Banking Group, in which the government holds a smaller stake, closed up 0.6%.
Standard Chartered, a UK-based bank with predominantly overseas operations, fell 2.5%. The bank's shares mostly were affected by the continued equity market rout in China. This also hit other UK stocks exposed to China, such as FTSE 250-listed Fidelity China Special Situations, which was amongst the worst performers, down 10%.
Concerns about China had led to panic selling in metals markets on Tuesday, but FTSE 100 miners bounced back from their recent declines. Glencore, which hit an all-time low on Tuesday, rose 2.7% on Wednesday, while Anglo American shares rebounded 1.6%.
Drax Group closed down 28%, the biggest FTSE 250 loser, after Osborne said he will remove the exemption that generators of renewable electricity have had from the climate change levy. Currently, tax is not paid on renewable electricity supplied to businesses and the public sector under renewable source contracts, regardless of whether it is generated in the UK or abroad. Drax is transforming itself into a predominantly biomass-fuelled generator, replacing coal, which would have benefited from being exempt from the climate change levy.
More positively for the UK oil and gas industry, Osborne said his GBP1.3 billion of support for the industry before 2020 will go ahead as planned, as announced in March, and that a new investment allowance will be introduced alongside the reduction in the supplementary tax charge on oil and gas companies from 30% to 20%, which came into effect on January 1, 2015.
These changes are expected to increase oil production by around 15% by 2019 and drive GBP4 billion of new investment over the next five years, the government claims. That announcement saw the shares of companies operating on the UK Continental Shelf within the North Sea rise on Wednesday afternoon.
BG Group shares rose 1.9%, and BP gained 0.9%, while Royal Dutch Shell 'A' and 'B' shares closed up 2.8% and 2.9%, respectively.
Shares in UK housebuilders and buy-to-let lenders dropped after Osborne said the government will restrict the relief on finance costs offered to residential landlords to the basic rate of income tax. The restriction will be phased-in over the course of four years, starting in April 2017.
Barratt Developments, Taylor Wimpey and Persimmon saw their shares drop to sit among the worst performers in the blue-chip index. Barratt fell 2.1%, Taylor Wimpey 5.0%, and Persimmon also 5.0%. In the FTSE 250, Berkeley Group Holdings dropped 7.0%, Crest Nicholson Holdings 6.5% and Bellway 6.7%,
The chancellor also said that the UK government will run a surplus in 2019-20. Estimated to fall to 2.2% 2016-17, then to 1.2% the year after that. The budget deficit is expected to move into a surplus in 2019-20, with a positive balance of 0.4%.
Outside the UK, Greece requested a new aid package from the eurozone, the bloc's bailout fund, the European Stability Mechanism, said Wednesday, as the clock ticked down on preventing the heavily indebted country from going bankrupt.
"We demand an agreement with our neighbours but one which...will demonstrate to us that there is light at the end of the tunnel," Prime Minister Alexis Tsipras told the European Parliament in the French city of Strasbourg.
Athens is now seeking a bailout loan "with an availability period for three years", according to a copy of the Greek request seen by dpa. "The loan will be used to meet Greece's debt obligations and to ensure stability of the financial system," the letter said. It does not mention how much money is being sought.
In his speech at the EU Parliament, Tsipras blamed the Eurozone for the ongoing financial crisis that the country is facing. The Greek prime minister said Greece had been turned into an "austerity laboratory" but "the experiment was not a success: poverty has soared, and so has public debt."
Investors now will focus on the US and the release of the minutes from the June Federal Open Market Committee meeting, due at 1900 BST.
"The last statement erred on the dovish side with no inferences that September will see the first rate hike," said CMC Markets analyst Jasper Lawler. "There is a possibility that the minutes will counteract that dovishness with more specific talk about whether the Federal Reserve will reinvest expiring bonds in its balance sheet, or reference to the pickup in inflation."
"More likely though, given the weakness in economic data leading up to the last meeting, there may be discussions of the impact of international developments, ie Greece and China, and the stronger dollar on the US economy," the analyst said.
Wall Street was lower when the European equity markets closed, with the DJIA down 1.0%, the S&P 500 down 1.1% and the Nasdaq Composite down 1.2%. However, shortly thereafter, the New York Stock Exchange said it "has temporarily suspended trading in all symbols," in an action taken shortly before noon NY time, or 1700 BST, following a morning of technical problems on the world's largest stock market.
In the economic calendar Thursday, China's consumer price index is due at 0230 BST. German current account is due at 0700 BST, while the Bank of England's interest rate decision is due at 1200 BST. In the US, jobless claims are at 1330 BST.
In the corporate calendar, Associated British Foods, Barratt Developments, Dunelm Group, Hays and Premier Oil issue trading updates. Supergroup publishes full-year results, while Centamin releases second-quarter production results. Meanwhile, Mirada and NCC Group provide full-year results.
By Daniel Ruiz; danielruiz@alliancenews.com
Copyright 2015 Alliance News Limited. All Rights Reserved.
12 May 2016 07:36
