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LONDON (Alliance News) - Shares in emerging markets bank Standard Chartered were leading FTSE 100 fallers amid a narrowly mixed early market Tuesday.
The stock was down 6.3%. StanChart said it will raise GBP3.3 billion in a rights issue and axe its final dividend for 2015 to strengthen its balance sheet, as its said it swung to a third-quarter loss on a jump in impairment charges.
Among mid-cap stocks, transport operators Stagecoach and Go-Ahead were gaining on a favourable decision regarding a bus franchising proposal related to UK government devolution. The stocks were up 4.8% and 2.0%, respectively.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.1% at 6,357.46
FTSE 250: up 0.1% at 17,187.97
AIM ALL-SHARE: down 0.1% at 738.98
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Hang Seng: closed up 0.9% at 22,568.43
Nikkei 225: market closed for Culture Day holiday
DJIA: closed up 0.9% at 17,828.76
S&P 500: closed up 1.2% at 2,104.05
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GBP: flat at USD1.5434 (USD1.5433)
EUR: flat at USD1.1023 (USD1.1025)
GOLD: up at USD1,136.70 per ounce (USD1,134.90)
OIL (Brent): flat at USD48.72 a barrel (USD48.78)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
(all times in GMT)
Japan Culture Day holiday
09:30 UK PMI Construction
13:55 US Redbook index
14:45 US ISM New York index
15:00 US Factory Orders
15:00 US IBD/TIPP Economic Optimism
19:00 EU ECB President Draghi's Speech
21:00 US Vehicle Sales
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US President Barack Obama signed into law on Monday a two-year, more than USD1 trillion per-year budget deal that averts a government shutdown and also increases the government's debt limit. The budget increases spending by USD80 billion over the course of two years - USD50 billion in 2016 and USD30 billion in 2017 - with the increases split between defence and non-defence spending. An increase in the debt ceiling was also approved and was designed to allow US borrowing through March 2017. Lawmakers had faced a deadline to raise the debt ceiling next week and a budget deadline of December 11.
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The Russian airline whose plane crashed in Egypt over the weekend, killing all 224 aboard, said Monday that the disaster was most likely caused by a mid-air "impact". "The only plausible reason can be a mechanical impact on the plane," the deputy general director of Kogalymavia, a small airline that operates flights under the name Metrojet, told a press conference. "There is no combination of system failures that could cause the plane to be destroyed in the air," Alexander Smirnov said, according to the Interfax news agency. Egyptian state media reported shortly after the crash that the pilot had told air traffic controllers about a malfunction and requested to land. But a senior Egyptian aviation official later denied that report, saying that no such alert was made.
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BROKER RATING CHANGES
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HSBC RAISES SHIRE TO 'BUY' ('HOLD') - TARGET 6200 (5700) PENCE
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TRADERS: MACQUARIE RAISES RELX TO 'NEUTRAL' ('UNDERPERFORM') - TARGET 1200 P.
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BARCLAYS CUTS TULLETT PREBON TO 'UNDERWEIGHT' ('EQUAL WEIGHT'); TARGET 310 (385) PENCE
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BARCLAYS RAISES WILLIAM HILL TO 'OVERWEIGHT' ('EQUAL WEIGHT') - TARGET 415 (385) P.
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TRADERS: LIBERUM CUTS TAYLOR WIMPEY TO 'SELL' ('HOLD')
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TRADERS: LIBERUM CUTS PERSIMMON TO 'SELL' ('HOLD')
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TRADERS: LIBERUM CUTS BARRATT DEVELOPMENTS TO 'SELL' ('HOLD')
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COMPANIES - FTSE 100
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Standard Chartered said it will raise GBP3.3 billion in a rights issue and axe its final dividend for 2015 to strengthen its balance sheet, as the Asia-focused bank reported that it swung to a third-quarter loss on a jump in impairment charges. The two-for-seven rights issue is designed to increase the group's common equity tier one capital ratio, a key measure of financial strength, to 13.1% on June 30 levels from 11.5%. The issue price of the rights issue has been set at 465 pence, a 35% discount to the Monday's closing price of 713.60p. The news came as Chief Executive Bill Winters revealed the outcome of a strategic review that will aim to shift the group's focus more on affluent retail clients and less on asset-intensive corporate and institutional banking businesses.
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Royal Dutch Shell upgraded its cost synergy targets from its proposed acquisition of BG Group by USD1 billion to USD3.5 billion. It said the merger is on track to complete in early 2016.
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Direct Line Insurance Group reiterated guidance for its combined operating ratio, and reported growth in third-quarter premiums despite highly competitive motor and home insurance markets. The insurer guided a combined operating ratio for 2015 in the range of 92% and 94% for ongoing operations. A ratio below 100% indicates an underwriting profit, while a ratio above that level indicates a loss. Direct Line said that gross written premium from ongoing operations was GBP844.5 million in the three months to September 30, compared with GBP819.5 million in the corresponding quarter the prior year. The insurer said it will first consider any return of capital to shareholders alongside its results for 2015, and will partly depend on capital requirements under new insurance rules coming into force across the European Union from January 1, 2016.
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Imperial Tobacco Group reported a rise in profit in its recently-ended financial year, although revenue was blown lower by currency headwinds and difficult trading in the Iraqi and Syrian markets, but Imperial said that while challenges will persist it is well-placed to meet expectations for the new year. The tobacco company said pretax profit in the year ended September 30 grew to GBP1.75 billion from GBP1.52 billion the year before, although revenue fell to GBP25.28 billion from GBP26.46 billion. At constant currency, tobacco net revenue would have grown 4.3%. Imperial Tobacco will pay a total dividend of 141.0 pence, up 10% on the 128.1p paid the year before.
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Associated British Foods reported a drop in pretax profit in its recently-ended financial year as currency headwinds made it difficult to grow revenue and its sugar business was hit by low sugar prices. AB Foods warned that results will also suffer in the new year. The group, which owns discount fashion retailer Primark and British Sugar and which operates an agriculture and consumer goods arm, said pretax profit in the year ended September 12 fell 30% to GBP717 million from GBP1.02 billion the year before, whilst revenue fell 1% to GBP12.80 billion from GBP12.94 billion. AB Foods will pay a total dividend of 35.0 pence per share, which is 3% higher than the prior year.
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National Grid said Steve Holliday will step down as its chief executive in 2016 and will be replaced by John Pettigrew. The group, which manages the UK's power grid, said Holliday will remain the chief executive until the end of the current financial year in March 2016 and will stay with the company until July 2016 to ensure a smooth transition. Pettigrew is currently the executive director of the group's UK operations and has been with the company for 25 years.
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Anglo-South African paper and packaging company Mondi said it is continuing to assess potential ways to boost the efficiency of its operations, including the expansion of facilities in Slovakia and the Czech Republic. The company said one option it is currently considering is expanding the Ruzomberok mill in Slovakia's paper production capacity by installing a 300,000 tonne per year containerboard machine to product a new product. The project will not impact on the existing paper machines at the mill. Also under consideration is expanding the Steti mill in the Czech Republic.
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US pharmaceutical giant Pfizer approached UK peer GlaxoSmithKline about a possible merger but was rebuffed prior to Pfizer then confirming its talks with botox maker Allergan, the Financial Times reported. Three people familiar with the matter told the FT that Pfizer looked seriously at a deal with Glaxo but received a cool reception from the British drugmaker's board. The talks have now ended.
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US-Canadian brewer Molson Coors Brewing has entered into advanced talks to buy SABMiller's majority stake in the MillerCoors joint venture, the Financial Times reported, citing sources close to the talks. The move is seen as a critical deal for securing regulatory approval for Anheuser-Busch InBev's GBP68.0 billion takeover ofSABMiller. AB InBev controls 46% of the US beer market, while MillerCoors controls 27%, meaning any combination of the two would certainly raise competition concerns there. The talks come ahead of the Wednesday deadline for AB InBev to make a formal takeover bid for SABMiller or walk away from the deal.
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COMPANIES - FTSE 250
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Weir Group said its full-year results are set to be broadly in line with market expectations despite further weakness in its key markets in the third quarter. The engineering firm said the challenges in its markets intensified in September and October, with further declines in work from the oil and gas industry amid project deferrals and cancellations continuing due to the low oil price. Overall order input fell 29% in the third quarter to the end of September and was down 8.0% from the second quarter, though the group did achieve some operational progress in its power and industrial division, where margins improved.
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Just Eat increased its revenue guidance for 2015 following order growth that was ahead of management expectations in the third quarter. The online takeaway company said orders in the three months ended September 30 grew 64%, or 48% on a like-for-like basis, as its strategy of ongoing investment in technology and marketing delivered order growth ahead of expectations. As a result, Just Eat increased its revenue expectations for the full year to slightly above GBP240.0 million, up from the GBP230.0 million guidance issued in August.
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Transport operators Stagecoach Group and Go-Ahead Group both welcomed the decision made by the Tyne and Wear Quality Contract Scheme Review Board that the bus franchising proposal tabled by the North East Combined Authority has failed to meet the necessary statutory tests. The transport executive for the authority had proposed that bus services should be franchised in Tyne and Wear through the letting of contracts, with local taxpayers taking on the risk of the local bus network. This would have replaced the current system whereby services are largely commercially-funded by bus operators.
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COMPANIES - INTERNATIONAL
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German luxury car giant BMW said its third-quarter net profit increased to EUR1.579 billion from EUR1.310 billion last year. Revenue climbed 14% to EUR22.345 billion from last year's EUR19.600 billion, benefiting from currency. Worldwide sales of BMW, MINI and Rolls-Royce brand vehicles rose 6.9% in the quarter to 545,062 units from 509,669 units in 2014, setting new records for this period. The company reaffirmed its targets for the full year.
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JPMorgan Chase, Citigroup and Bank of America are among eight large US banks that may have credit grades cut by Standard & Poor's on the prospect that the US government is less likely to provide aid in a crisis. Standard & Poor's Ratings Services said it took rating actions on the eight US global systemically important banks or GSIBs. It placed on CreditWatch with negative implications nonoperating holding company or NOHC ratings, including the senior unsecured and nondeferrable subordinated debt or NDSD ratings, on all eight US GSIBs. The other important banks are Bank of New York Mellon, Morgan Stanley, State Street, Goldman Sachs and Wells Fargo.
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Google plans to launch its drone delivery service in 2017, according to reports. Called Project Wing, the initiative aims to be delivering goods to consumers via drones.
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The emissions scandal that already has cost Volkswagen billions of dollars and damaged its made-in-Germany reputation broadened to include 3-litre engines in Volkswagen, Audi and Porsche light duty diesel vehicles. The US Environmental Protection Agency said it had issued a second notice of violation of the Clean Air Act to the German automaker. The violations alleged by the EPA are in addition to the notice it issued September 18 that accused VW of including emission-test evading software in certain 2-litre engines for model year 2009-15 vehicles.
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Swiss financial services giant UBS reported its third-quarter net profit attributable to shareholders was CHF2.07 billion, compared to last year's profit of CHF762 million. The latest results included a net tax benefit of CHF1.30 billion, mainly related to a net upward revaluation of deferred tax assets, CHF592 million of net charges for provisions for litigation, regulatory and similar matters and CHF298 million francs of net restructuring charges.
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American International Group announced restructuring initiatives that will focus on organizational simplification, operational efficiency, and business rationalization, which are expected to generate pre-tax annualized savings of approximately USD0.4 billion to USD0.5 billion when fully implemented. Further staff reductions are anticipated in 2016.
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Tuesday's Scheduled AGMs/EGMs
Maryn Value Investors
Schroder Japan Growth Fund
Jupiter European Opportunities Trust
Mobile Streams
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By Tom Waite; thomaslwaite@alliancenews.com; @thomaslwaite
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