Last checked at LONDON (Alliance News) - Shares have opened slightly lower in London Tuesday, with the market given plenty to ponder in terms of UK and US interest rates, Chinese currency policy, and Greek debt talks.
Merger activity also was back to the forefront. Just Retirement Group and Partnership Assurance Group said they have agreed to merge in an all-share deal to create a life insurance company worth almost GBP1.7 billion by market capitalisation.
The combination of the two companies is designed to create a stronger competitor in the defined benefit de-risking and UK retirement income markets. Known as specialist annuity providers, both Just Retirement and Partnership saw their business models rocked when new pension rules in the UK removed the effective requirement on individuals to buy annuity products that guarantee income in retirement.
Just Retirement shares are up 2.6% in early trade, the top gainer in the FTSE 250, while Partnership Assurance shares are up 9.6%.
Meanwhile, Google Inc will be replaced by Alphabet Inc as a publicly traded company, as the search engine forms a new conglomerate called Alphabet Inc to hold its diverse activities.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.6% at 6,698.37
FTSE 250: down 0.2% at 17,721.51
AIM ALL-SHARE: flat at 753.73
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Hang Seng: down 0.3% at 24,460.09
Nikkei 225: closed down 0.4% at 20,720.75
DJIA: closed up 1.4% at 17,615.17
S&P 500: closed up 1.3% at 2,104.18
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GBP: flat at USD1.5580
EUR: flat at USD1.1016
GOLD: down at USD1,101.10 per ounce
OIL (Brent): down at USD50.04 a barrel
(changes since end of previous GMT day)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
(all times in BST)
09:00 Italy Consumer Price Index
10:00 Germany ZEW Survey
10:00 EU ZEW Survey
11:00 US NFIB Business Optimism Index
13:15 Canada Housing Starts
13:30 US Unit Labor Costs and Nonfarm Productivity preliminary
13:55 US Redbook index
15:00 US Wholesale Inventories
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The Greek government has agreed to the outlines of a bailout package put forward by its creditors, according to Greek media reports and government sources. The proposal, which still requires some details to be clarified, would lay out the terms for the country's third bailout in five years, expected to be worth EUR86 billion. The Greek government has not yet made an official announcement about the talks, which reportedly concluded early Tuesday. Although the deal was endorsed by international creditors on Saturday, the Greek government must agree to abide by the deal's terms before it can come into force. A German official, speaking to the ARD public broadcaster, said the chances seemed good for final agreement on the package.
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In an unexpected move seen as step to counter the domestic economic slowdown, the People's Bank of China lowered the value of the yuan. This led to the yuan sliding 1.3% to 6.2920 yuan per dollar in Shanghai. In a statement released on Tuesday, the bank set the value of yuan at 6.2298 a dollar, 1.9% lower than Monday's official fixing rate. The bank termed it as an one-time adjustment as it strives to keep the yuan stable at a reasonable level. The devaluation is seen as step towards making the exchange rate of the yuan more market determined.
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Bank of England policymaker David Miles has said there was a "reasonable" argument in favour of the central bank hiking interest rates at its meeting last week in order to avoid tightening faster in the future, Bloomberg reported. Miles, speaking in an interview with Bloomberg, said he "thought there was a case for beginning the journey now" as he said he came close to voting in favour of a rate hike at his final meeting as a member of the Bank's Monetary Policy Committee last week. "It was a perfectly reasonable case," Miles said. Ultimately, only Ian McCafferty voted in favour of hiking rates.
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Federal Reserve Bank of Atlanta President Dennis Lockhart said the US central bank is close to raising short-term interest rates, potentially sooner than September, as he said the economy is "approaching an acceptable normal", The Wall Street Journal reported. Lockhart, during a speech at the Atlanta Press Club, said the "point of liftoff is close". He added that "September remains a live possibility" for a first rate rise in the US for nine years. Lockhart's comments came after Stanley Fischer, the Federal Reserve's vice-chairman, said the US labour market is now nearly back to full health, but that inflation remains weak, adding the data needs to drive any decisions the Fed must make. Though not offering any prediction for a rate rise, Fischer said "the concern about the situation is, not to move before we see inflation as well as employment returning to more normal levels."
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Like-for-like retail sales in the UK jumped 1.2% on year in July, the British Retail Consortium said. That topped expectations for an increase of 1.0%, although it slowed from the 1.8% spike in June. Overall retail sales advanced an annual 2.2% in June, the BRC said, after rising 2.9% in the previous month.
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Japan reactivated a nuclear reactor for the first time in nearly two years despite lingering public fears of atomic power following the country's worst accident at the Fukushima Daiichi plant in 2011. Kyushu Electric Power Co said it brought reactor 1 at the Sendai Nuclear Power Plant back online at 10:30am local time, about 50 kilometres from the active Sakurajima volcano on the southern island of Kyushu. The company said it would start generating and delivering electricity on Friday, and enter commercial operation at the plant in early September, a year after regulators approved the resumption of its two reactors. It is expected to restart the other unit in October.
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The M2 money stock in Japan advanced 4.1% on year in July, the Bank of Japan said - coming in at 911.4 trillion yen. That beat forecasts for an increase of 3.9%, which would have been unchanged from the June reading following an upward revision from 3.8%.
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US President Barack Obama said partisan political considerations were keeping lawmakers from supporting a deal agreed between Iran and world powers, but expressed hope that once implemented, opinions of the deal will change. "Unfortunately, a large portion of the Republican Party, if not a near unanimous portion of Republican representatives, are going to be opposed to anything that I do," Obama said in an interview with NPR News. Obama has been trying to sell the deal to lawmakers, who are expected to vote next month to approve or disapprove the deal.
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Local authorities declared a state of emergency in the wake of violence that erupted in Ferguson, Missouri on the anniversary of the shooting death of unarmed African-American teenager Michael Brown by a white police officer. Meanwhile, some 50 protesters were arrested after scaling a barricade outside the county courthouse during a peaceful protest, the St Louis Post-Dispatch newspaper reported. There were two shootings Sunday night following a march to mark Brown's death, St Louis County Police Chief Jon Belmar said Monday.
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BROKER RATING CHANGES
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CITIGROUP REMOVES ARM HOLDINGS FROM 'CITI FOCUS LIST EUROPE' - 'BUY'
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Cantor Puts UK Mail Group At Hold From Under Review, Cuts Price Target To 450p From 590p
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TRADERS: MORGAN STANLEY CUTS KAZ MINERALS TO 'UNDERWEIGHT' ('EQUAL-WEIGHT')
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JPMORGAN RESUMES KIER GROUP WITH 'OVERWEIGHT' - TARGET 1638 PENCE
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TRADERS: MORGAN STANLEY RAISES BBA AVIATION TO 'EQUAL-WEIGHT' ('UNDERWEIGHT')
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COMPANIES - FTSE 250
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Just Retirement Group and Partnership Assurance Group said they have agreed to merge in an all-share deal, and intend to raise GBP150 million together. The deal values Partnership Assurance at about GBP668.5 million, equivalent to 166 pence per share. The stock closed at 154.25 on Monday. Investors will receive 0.834 new Just Retirement shares for each Partnership Assurance share they already own. Just Retirement shareholders will own about 60% of the combined group, without taking into consideration the planned equity raising, with Partnership Assurance shareholders holding the remainder.
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Ladbrokes said it made a loss in the first half of 2015, having made a profit in the first half of 2014, as its revenue slipped and it slashed its interim dividend. The bookmaker set to merge with Coral Group reported a pretax loss of GBP51.4 million in the six months ended June 30, after it made a profit of GBP27.7 million in the same period of the prior year. Revenue declined slightly to GBP588.8 million from GBP589.3 million. Ladbrokes will pay an interim dividend of 1.0p, a quarter of the 4.3p it paid the year before.
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Card Factory reported growth in sales in the first half of its financial year, driven by a rise in like-for-like sales and new store rollouts, and said it is confident for the full year. The card and gifts retailer said that total sales in the six months ended July 31 rose 8%, although this was slower than the 8.9% growth it reported in the same period the prior year. Like-for-like store sales increased 2.7%, against a 2.6% comparative. Card Factory also confirmed it will return surplus capital to shareholders, for which it will provide details when it releases its interim results on September 22.
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Outsourcer Serco Group said it swung to a pretax loss in the first half of 2015, in line with its expectations, but reiterated that overall trading in the half was better than had been anticipated. The company, which booked a significant pretax loss for 2014 due to writedowns it booked on a large number of onerous contracts, said its pretax loss for the six months to the end of June was GBP76.2 million, versus a GBP10.9 million profit a year earlier, as it booked GBP117.4 million in exceptional costs. Serco said revenue in the half was down to GBP1.79 billion from GBP2.03 billion a year earlier, in line with the guidance the group gave in its first-half trading update, and it maintained its expectations for trading profit for the year to come at around GBP90 million, with risks now to the upside. Serco scrapped its interim dividend, having paid out 3.10 pence per share a year earlier.
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SIG said its pretax profit was higher in the first half of 2015 than a year earlier thanks to lower exceptional costs which offset a decline in revenue, and the group hiked its interim dividend on the better profit. The building products company said its pretax profit for the half to the end of June was GBP26.8 million, sharply higher than the GBP11.8 million it posted a year earlier, as exceptional costs in the half fell to GBP12.3 million from GBP31.2 million a year earlier. SIG said it will increase its interim dividend to 1.69 pence per share, up 19% from 1.42p a year earlier.
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Specialty chemicals company Synthomer said its pretax profit rose in the first half thanks to margin improvements in its North American business and a good operating performance in Asia which offset continued sluggishness in Europe and a hit the group is taking from the weak euro. The company said its pretax profit for the half was GBP36.8 million, up from GBP29.9 million a year earlier, despite its total sales falling to GBP468.7 million from GBP510.1 million, held back by euro weakness as volumes rose by 6.8%. The group said it will increase its interim dividend to 3.2 pence per share, up from 3.0 pence.
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Construction and support services company Carillion said its The Hospital Co joint venture has been named preferred bidder for the GBP430 million Midland Metropolitan Hospital public-private partnership project. The company said the joint venture has been selected as the preferred bidder on the project, which will involve the construction of a 670-bed hospital in west Birmingham. Carillion expects to invest around GBP16 million in equity in the project, which will be built by the company at a capital cost of GBP297 million. It also will provide facilities management and life-cycle maintenance services for the hospital, which is expected to generate for it around GBP140 million in revenue over the course of the 30-year concession.
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Oil services company John Wood Group said it has been awarded a USD28 million contract by Mexican state-owned oil company PEMEX. Under the deal, Wood Group Kenny and Wood Group Mustang will provide deepwater and complex shallow water concept and basic engineering services, along with 'owner engineer services', meaning advisory services.
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COMPANIES - LONDON MAIN MARKET AND AIM
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PPHE Hotel Group said that trading in the first half of 2015 was ahead of its expectations and that it now expects its performance in the second half to beat previous guidance. The hotel company said it now expects to report revenue for the six months ended June 30 of EUR140 million, which is 12% ahead of the EUR125 million it made in the same period in 2014. It said this will in turn result in a higher margin and profit than the prior year.
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Regional newspaper publisher Johnston Press expressed confidence in its strategy and transformation projects, saying that whilst its second quarter was hit by a slowdown in general trading, July has shown some improvement. In July the company had warned it currently expects its full-year profit to fall below market forecasts, hit by challenging trading in its first half. On Tuesday, Johnston reiterated that this means it enters its second half from a lower revenue base than planned. For the 26 weeks to July 4, the company posted a pretax profit of GBP2.2 million, swung from a pretax loss of GBP6.3 million a year before, despite revenue reducing to GBP128.9 million from GBP135.8 million, mostly as a result of greater exceptional costs in the previous year.
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Hargreaves Services said its pretax profit and revenue both dropped heavily in the financial year to the end of May as the group completed its restructuring, but said it would hike its dividend by 18% in line with its new payout policy. Hargreaves, which supplies solid fuel and bulk material logistics services, said its pretax profit from its continuing operations in the year to the end of May was GBP24.9 million, down slightly over half from the GBP52.1 million it made a year earlier. The group increased its full-year dividend by 18% to 30.0 pence per share, based on its move to a higher dividend payout ratio and its strong cash generation.
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GAME Digital said it achieved "robust trading" in the second half of its financial year and said that is expects to deliver adjusted earnings before interest, tax, depreciation and amortisation in line with market consensus for the full year. The video game and console retailer said it made a good uplift in gross margin and a positive Ebitda contribution in line with expectations in the half year ended July 25, ahead of the breakeven Ebitda reported in the second half of the prior year.
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Market research and data analysis company YouGov said its trading for its recently ended financial year was in line with its expectations. The company said that, building on its first half performance, it maintained double-digit revenue growth "well ahead" of the overall market research sector in the year to the end of July, with its US business "continuing to perform particularly well".
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COMPANIES - INTERNATIONAL
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Google Inc will form a conglomerate called Alphabet Inc to hold the internet giant's increasingly diversified business units and investments far beyond its search engine brand, the company said. Chief Executive Larry Page said in a blog post that Alphabet would be a "collection of companies" in which Google is the largest. "This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main Internet products contained in Alphabet instead," he wrote. Google Inc will be replaced by Alphabet Inc as the publicly traded company.
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Kraft Heinz, the merged business of packaged foods maker Kraft Foods and ketchup maker HJ Heinz, on Monday reported lower sales at both divisions, hurt by factors ranging from lower beverage sales and pricing pressures to a stronger dollar and weak European demand. However, Kraft managed to reap a quarterly profit, driven by cost saving measures, but Heinz slipped to a loss, hurt by unfavourable currency and increased spending in North America. "The company is focused on the difficult and challenging process of integrating our two businesses," said Kraft Heinz CEO Bernardo Hees in a statement.
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Tuesday's Scheduled AGMs/EGMs
Triad Group
Telecom Plus
Optibiotix Health
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By Tom Waite; thomaslwaite@alliancenews.com; @thomaslwaite
Copyright 2015 Alliance News Limited. All Rights Reserved.
IN BRIEF: Triad celebrates return to profit, busy recruitment process
Triad Group PLC - Godalming, England-based technology consultancy - Company revisits Executive Chair John Rigg's statement from December which cited Rigg as very confident and enthusiastic about the state and prospects of the company. Rigg says: "I am delighted to confirm that both these statements are proving to be more than amply justified." He says that the company has won major and long-term pieces of new business since its December statement. Rigg says: "We returned to profit in November and, apart from the Christmas/New Year holiday period, have been on a strongly rising trajectory ever since. Cash flow, as normal, is following closely behind the profit trend. We have been nominated for more national awards. Our recruitment process is operating at full steam ahead with great success." Further, he adds that costs of setting up the new projects will be absorbed in the fourth quarter, noting that it will enable the company "to get off to a flying start" in the new financial year beginning in April.
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