Vodafone Share News (VOD)

LONDON (Alliance News) - Stock prices in London were higher Tuesday midday, as investors digested a flood of UK blue-chip reporting, as well as a below-consensus UK inflation reading, while the macro-economic focus now turns to the US, where inflation figures are due at 1330 BST.

The FTSE 100 index was up 0.5%, or 31.55 points, at 6,182.95. The FTSE 250 index was up 0.9% at 16,846.26 points. The AIM All-Share was 0.2% higher at 725.56.

UK inflation slowed unexpectedly in April, and producer prices continued to decline from last year, the Office for National Statistics showed.

Annual consumer inflation eased to 0.3%, while economists had expected it to remain unchanged at 0.5%. Month-on-month, UK consumer prices increased only 0.1% after rising 0.4% in March. Economists had forecast a 0.3% increase. Core inflation, which excludes energy, food, alcoholic beverages and tobacco, slowed to 1.2% from 1.5%.

Ruth Miller, an analyst at Capital Economics, said the inflation figures "may reinforce the market's view that [UK] interest rates will stay on hold until 2019 and further fuel talk of an interest rate cut".

However, Miller doubts inflation will drop any further towards zero in coming months. "Much more likely is that inflation will hover around its current rate and gradually pick up towards 1.0% by the end of the year as the effects of last year's falls in food and energy prices drop out of the annual comparison," the analyst said.

"Our view – if the UK votes to stay in the EU – is still that a rate rise near the turn of the year remains more likely than not, although rates will rise very gradually," Miller noted.

Another report from the ONS showed that factory gate prices decreased 0.7% on a yearly basis in April. This was compared to a 0.9% drop in March and a 0.8% decline forecast by economists. Input prices fell 6.5% year-on-year compared to a 6.1% fall in March. It was slower than the expected decrease of 6.7%. On a monthly basis, input prices gained 0.9%, but slower than March's 2.2% rise.

The pound fell following the inflation report but recovered most of the ground lost shortly afterwards. Sterling fell to USD1.4453 after the data, having stood at USD1.4503 previously. The pound was quoted at USD1.4481 at midday.

In Europe, the CAC 40 stock index in Paris was up 0.2% and the DAX 30 in Frankfurt, which reopened Tuesday after the Whit Monday holiday, also was reading up 0.2%.

The euro area trade surplus rose to a three-month high in March on weak imports, Eurostat reported. The trade surplus rose to a seasonally adjusted EUR22.3 billion from EUR20.6 billion in February. It was forecast to rise to EUR22 billion.

Stocks in New York were called for a higher open, adding to the significant gains from Monday, with the Dow 30 index seen up 0.2%, the S&P 500 pointed up 0.1%, and the Nasdaq 100 called up 0.3%.

In the US economic calendar Tuesday, consumer inflation data will continue to be the focus, due at 1330 BST, alongside building permits and housing starts reports. US industrial production is due at 1415 BST. The American Petroleum Institute weekly crude oil stocks will come much later at 2130 BST.

US headline inflation is expected to climb to 0.3% in April from 0.1% in March month-on-month, while on a yearly basis it is expected to rise to 1.1% from 0.9%, according to FXStreet.com. Consensus expected US core inflation to increase to 0.2% month-on-month in April from 0.1% in March. Conversely, on a yearly basis, core inflation is expected to fall to 2.1% from 2.2%.

In Asia on Tuesday, the Japanese Nikkei 225 index ended up 1.1%. In China, the Shanghai Composite finished down 0.3%, while the Hang Seng index in Hong Kong added 1.2%.

Among individual equities in London, shares in Taylor Wimpey were up 5.0%, making the house builder it one of the best performers in the FTSE 100, after it said the current "positive" state of the UK new-build housing market meant it was able to raise its medium-term financial targets and upgrade its dividend policy.

Taylor Wimpey said the healthy and controlled lending environment was providing good accessibility to mortgages at competitive rates, whilst consumer demand and confidence remain high. The group noted that it was performing well in this environment, pointing to its strong order book in which it is over 70% sold for 2016 private completions as at the end of April 2016. The company said this positions it well for the remainder of the year.

Against this backdrop, Taylor Wimpey said it was raising its medium-term financial targets, which will apply for the period from 2016 to 2018, after having met or exceeded the goals it set out in May 2014. These targets are to generate an average annual return on net operating assets of 30%, an average operating profit margin of 22%, and the GBP1.30 billion in dividends, to be paid in cash to shareholders over the period.

Taylor Wimpey's positive update supported the shares of other blue-chip housebuilders as well, with Berkeley Group Holdings up 2.5%, Barratt Developments up 2.2% and Persimmon up 1.8%.

Inmarsat was up 5.1% at 786.50 pence. Shares in the satellite business are recovering from the heavy losses seen since the group revised down its 2016 revenue guidance earlier in May. On Friday, the stock hit a low of 728.50p, its lowest level since November 2014. In the year to date, the stock remains down 31%.

Equipment rental firm Ashtead Group was up 4.5%, benefiting from an upgrade to Outperform from Neutral by Exane BNP.

DCC was another big gainer, up 4.3%. The Irish sales, marketing, distribution and business support company, which joined the FTSE 100 in December, said it expects to deliver another year of profitable growth ahead as it reported a 47% rise in profit in its last financial year, beating market expectations and prompting a large hike in its annual dividend.

Land Securities Group shares were up 3.1%. The real estate development trust said it has been reducing risk inside the company, with its gearing at the lowest level in "many years", as it reported its pretax profit had almost halved over the year due to a reduction in the valuation surplus.

Land Securities said it sold GBP1.54 billion of buildings in the year to March 31, reducing its adjusted net debt at year-end to GBP3.24 billion, from GBP4.17 billion a year earlier.

In light of this reduction of net debt, along with a "strong year for lettings" which left it with just 500,000 square feet left to let in London, Land Securities said it was lifting its final dividend to 10.55p from 8.15p. As such, its dividend for the year was 35.00p, up from 31.85p a year earlier.

The real estate development trust posted a total business return of 13.4% for the year to March 31, with basic net asset value per share rising to 1,482.00 pence from 1,343.00p a year earlier and adjusted diluted NAV rising to 1,434.00p from 1,293.00p.

Pretax profit, however, fell to GBP1.34 billion from GBP2.42 billion a year earlier, despite a 10% increase in revenue profit to GBP362.1 million, after valuation increases "were unable to match the sharp increases" seen the year earlier. Valuation surplus fell to GBP907.4 million, from GBP2.04 billion a year earlier.

Mobile operator Vodafone, up 2.4%, also hiked its dividend for its most recently ended financial year, and guided for earnings growth in the year ahead, as it said it had returned to organic earnings growth for the first time in eight years.

The company's earnings before interest, tax, depreciation and amortisation rose 2.7%, as its group service revenue rose 1.5%. This included 2.5% organic service revenue growth in its fourth quarter, helped by stabilisation in Europe and growth in Africa, the Middle East and Asia Pacific.

Vodafone proposed a final dividend of 7.77 pence per share, taking its total dividend for the year to 11.45p, up 2.0% from the 11.22p it paid in the previous year.

Vodafone's organic figures are adjusted for merger and acquisition activity, as well as foreign exchange rate movements.

In the FTSE 250, Lookers was the best mid-cap performer, up 7.1%. The motor retail and aftersales service group said it achieved a strong performance in the three months ended March 31 with a particularly good performance in March.

Total gross profit from new cars increased by 23% year-on-year in the motor division, or 5% on a like-for-like basis, while used cars gross profit also rose by 23%, or 7% on a like-for-like basis. The aftersales business, meanwhile, saw gross profit rise by 25%, also 7% on a like-for-like basis.

By Daniel Ruiz; danielruiz@alliancenews.com

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