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LONDON (Alliance News) - UK shares are trading flat to firm Tuesday mid-morning in a busy day of corporate reporting, with Barclays results dragged by new provisions for ongoing investigations, while the UK construction activity showed its sharpest expansion in four months.
The FTSE 100 is up 0.2% at 6,951.99, after having reached a new record intraday high of 6,974.26 on Monday, while the FTSE 250 is flat at 17,256.46. The AIM All-Share is trading up 0.1% at 713.61.
Barclays reported an increase in adjusted pretax profit last year, but the group's earnings on a statutory basis were dragged down by a provisions over alleged foreign exchange manipulation, insurance mis-sold to customers in the UK, and a technical change in the valuation of a portfolio of loans held in its non-core unit.
The FTSE 100 bank beat analyst forecasts by reporting a 12% increase in adjusted pretax profit, which amounted to GBP5.50 billion in 2014. This was supported by a 9% fall in adjusted operating expenses to GBP18.07 billion, supported by job cuts and other savings. Analysts had forecast a GBP5.33 billion adjusted pretax profit, according to Barclays.
An additional GBP750 million provision for the ongoing investigations and litigation relating to the alleged foreign exchange rigging, as well as another GBP200 million charge to cover the costs of the mis-selling of payment protection insurance, meant Barclays fell into a statutory pretax loss of GBP1.47 billion in the fourth quarter, which was also hurt by a GBP935 million charge for an accounting revision of an education, social housing, and local authority portfolio that is mainly made up of "long-dated fixed-rate loans with strong credit quality".
Barclays is the second worst performing stock in the FTSE 100, after Travis Perkins, down 2.7%.
Meanwhile, UK construction activity showed in February its sharpest expansion in four months, as the UK Construction Purchasing Managers' Index data came in better-than-expected at 60.1, above consensus estimates of 59.0, reflecting the same figure of a revised reading for January.
"The construction PMI matches the story from manufacturing yesterday that the UK economy is picking up momentum again, as the oodles of stimulus in the pipeline, from cheaper oil to cheaper money, encourage spending," says Berenberg analyst Robert Wood.
In Europe, indices are trading in the same direction, with the CAC 40 in Paris up 0.4% and the DAX 30 in Frankfurt up 0.4%, supported by a better-than-expected German retail sales data.
Germany's retail sales rose at a faster pace in January from the previous month to the highest level in four-and-a-half years, preliminary figures from Destatis showed Tuesday. Retail sales grew a seasonally adjusted 2.9% month-on-month in January, much faster than December's 0.6% increase. Economists had expected sales to rise at a weaker pace of 0.4%. This was the fourth consecutive monthly increase.
On an annual basis, retail sales climbed for the second straight month in January at faster pace of 5.3%, after a 4.8% growth logged in the prior month. Economists had forecast only a 3.0% growth for the month.
"Whilst the DAX keeps hitting new highs with the prospect of more growth on the horizon once ECB QE finally arrives, there are still lingering doubts surrounding the Union," says Spreadex analyst Connor Campbell. "A Sentix poll places the eventuality of a Eurozone break-up at the highest chance since for two years, whilst there are fresh calls of ?Grexit? from certain sectors in Syriza," writes Campbell.
Chief market analyst at CMC Markets Michael Hewson says: "Greece in particular continues to be a cause for concern with contradictory noises coming out of Athens with respect to the government?s willingness to abide by the agreement that appeared to be sealed last week," writes Hewson. "There still appears to be significant pushback from politicians in Athens about abiding by the terms of the current bailout agreement."
The Mediterranean country on Monday said it will not have any problem meeting its financial obligations in March, after reports indicated that Greece might have difficulty repaying its international creditors in the coming months.
Eurozone's producer prices index slid 3.4% year-on-year in January, below the consensus estimate of a decline of 3.0%, and also below a previous reading of a decline of 2.6% in December. On a month-on-month basis, data slid 0.9%, below a drop of 0.7% expected by economists, but above a previous reading of a decrease of 1.0% in December.
Joining Barclays in reporting earnings Tuesday, miner Glencore joined sector peers in slashing its capital expenditure plans, after it reported lower 2014 profits hit by the fall in the oil price and prices for other commodities. The metals and mining giant said its capital expenditure fell to USD8.57 billion in 2014, from a pro-forma USD1132 billion in 2013, and it now expects total industrial capital expenditure for 2015 to be between USD6.5 billion and USD6.8 billion, down from its previous guidance of USD7.9 billion.
Taylor Wimpey also joined sector peers in reporting strong growth in 2014 profits, driven by higher home completions at higher average selling prices, and it was also positive about its outlook saying the so-called "spring selling season" has got off to a better start than it had expected.
The home builder reported a pretax profit of GBP468.8 million for 2014, up from GBP306.2 million in 2013, as revenue rose to GBP2.69 billion, from GBP2.30 billion. It completed 12,454 homes, a 6.5% increase on 2013, while its average selling price rose 11.5% to GBP213,000, from GBP191,000.
British American Tobacco said its Brazilian unit British American Tobacco Prestação de Serviços has filed a request with the Brazilian securities regulator to register a public tender offer to acquire up to all of the 24.7% of Souza Cruz shares which are not currently owned by BAT and to delist the company. The tobacco company said it is offering BRL26.75 a share in cash, minus any dividend paid by Souza Cruz. That price would be a 30% premium to Souza Curz's volume weighted average closing share price over the three months to February 20.
Glencore shares are down 1.6%, Taylor Wimpey's are up 1.4%, and BAT's are up 1.3%.
The Reserve Bank of Australia has kept its interest rates on hold against market expectations. The monetary policy board maintained the cash rate at 2.25% after lowering it by 25 basis points last month, and some economists had expected the bank to lower rates further this month.
In the US, still in the economic calendar Tuesday, Redbook index is at 1350 GMT, and the ISM New York index is at 1445 GMT.
US futures point to a lower opening, with DJIA, S&P 500 and Nasdaq 100 seen down 0.1%.
By Daniel Ruiz; danielruiz@alliancenews.com
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