LONDON MARKET CLOSE: Commodity Stocks Push Shares Up On Weak Dollar

LONDON (Alliance News) - London shares ended higher Thursday, with commodity stocks leading gainers as metals and crude prices rose after the dollar continued to retreat on weak US economic data and expectations of slower monetary-policy tightening the Federal Reserve.

Also looking decidedly dovish, the Bank of England's Monetary Policy Committee voted unanimously for the first time in seven months to keep UK interest rates unchanged, as Ian McCafferty abandoned his lonely call for a hike. The central bank signalled that record low UK interest rates are unlikely to rise in the foreseeable future.

The FTSE 100 ended up 1.1% at 5,898.76 points, the FTSE 250 up 0.6% at 16,086.73, and the AIM All-Share up 0.4% at 693.23. In Europe, the CAC 40 in Paris closed flat, while the DAX 30 in Frankfurt slipped 0.4%.

Miners ended at the very top of the FTSE 100, with Anglo American up 20%, Glencore up 6.9%, Antofagasta up 15%, BHP BIlliton up 7.1%, Rio Tinto up 6.2% and Fresnillo up 8.6%.

Spot gold continued to rally, quoted at USD1,154.10 an ounce at the London close, having touched a high of USD1,156.60 earlier in the session.

Royal Dutch Shell 'A' shares ended up 5.8%, with 'B' shares up 5.9%. BP rose 5.5% and BG Group 3.3%. Mid-caps Tullow Oil and Amec Foster Wheeler gained 11% and 8.4%, respectively.

North Sea benchmark Brent oil was quoted at USD34.62 a barrel at the London equities close, having touched a high of USD35.77 a barrel earlier in the day. US benchmark West Texas Intermediate was at USD32.12, having reached a high of USD33.56 a barrel.

Shell reported reported Thursday a dramatic fall in earnings during 2015, but the results did meet expectations. The oil and gas major said current cost of supply (CSS) earnings excluding items more than halved year-on-year in 2015 to USD10.67 billion from USD22.56 billion, which is at the top end of Shell's guidance provided last month.

CSS earnings including items fell 80% during the year to USD3.84 billion from USD19.04 billion a year earlier, whilst income attributable to shareholders dropped at an even steeper rate to USD1.93 billion from USD14.87 billion, representing an 87% decline.

The dollar came under pressure from a combination of weak US economic data and growing opinion that the Federal Reserve will raise US interest rates at a slower pace this year than once expected.

New York Fed President William Dudley said in an interview on Wednesday that the weakening outlook for the global economy and the strength of the dollar could have "significant consequences" for the health of the world's largest economy.

On Thursday, the US Labor Department said in a report that first-time claims for US unemployment benefits rose by more than expected in the week ended January 29. It said initial jobless claims climbed to 285,000 from the previous week's 277,000. Economist had expected jobless claims to rise to 280,000.

Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, fell to 2.25 million in the week ended January 22, while economists expected it to drop to 2.24 million.

The US jobless data came before the release of the key nonfarm payrolls data and unemployment rate, due at 1330 GMT on Friday.

Stocks in New York were mostly lower at the London close, with the Dow Industrials flat and the S&P 500 and Nasdaq Composite both down 0.2%. US media company News Corp is expected to release its second-quarter results after the US market close.

The pound gyrated heavily after the BoE's announcement. It was quoted at USD1.4586 at the London close, having touched a high of USD1.4668 and a low of USD1.4530.

The MPC voted 9-0 to hold interest rates at 0.50%, while policymakers also unanimously voted to maintain the stock of assets from quantitative easing at GBP375 billion.

In its Inflation Report, the BoE said UK gross domestic product growth is projected to be 0.5% in the first quarter of 2016, while it downgraded its growth outlook for the full year to 2.2% from 2.5% and the projection for 2017 to 2.4% from 2.7%.

"The MPC judges the risks to the central projection to be skewed a little to the downside in the near term, reflecting the possibility of greater persistence of low inflation," the BoE said.

UK inflation is projected to increase further in the coming months but a little less quickly than anticipated in November, largely reflecting recent falls in oil prices. Inflation is expected to remain below 1% throughout this year. The BoE estimated inflation to reach its 2% target only in the first quarter of 2018.

Berenberg senior UK economist Kallum Pickering highlighted that the MPC cautioned on risk from financial market volatility, slowing global growth, and the still-to-be-scheduled referendum on whether the UK should remain in the European Union.

"For the first time, the committee added the EU referendum uncertainty to its list of concerns, stating the recent falls in sterling could be a reflection of this risk as well as a result of markets pushing back expectations of a rate hike," Pickering said.

Meanwhile, the euro rose after the European Central Bank President Mario Draghi said in Frankfurt that the ECB will not "surrender" to low inflation, even though it is caused by global forces. The single-currency was quoted at USD1.1195 at the European equities close, having touched a high of USD1.1239 earlier in the session.

Among individual London stocks, AstraZeneca ended near the bottom of the FTSE 100, down 4.4%.

The pharmaceutical giant emphasised the strength of its pipeline as it faces a challenging year with the patent for its biggest seller, anti-cholesterol statin Crestor, set to expire in May, leading it to guide for a decline in earnings and revenue in 2016.

Nevertheless, AstraZeneca reported higher pretax profit, mostly as a result of cutting costs to help offset the expected hit from generic competitors to Crestor.

On a constant currency basis AstraZeneca expects to see its core earnings per share and total revenue both show a low to mid single-digit percentage decline in 2016, including dilutive effects arising from its acquisitions of Acerta Pharma and ZS Pharma during 2015.

Coca-Cola HBC ended down 5.6%, the worst blue-chip performer. Barclays downgraded the soft drinks bottling company to Underweight from Equal Weight, saying it believes the risk that the Nigerian naira will be devalued has not been priced into the shares of international companies such as Coca-Cola HBC with exposure to the west African country.

Barclays analysts said the naira peg to the dollar has meant the currency has only fallen by 20% since the beginning of 2014 compared to the average fall of 34% across major petroleum extraction currencies. However, with 90% of Nigeria's foreign income coming from oil, the decline in oil prices to just over USD30 a barrel means a devaluation is "arguably a question of when rather than if", the bank said.

In the FTSE 250, roadside assistance company AA closed up 6.8%. AA said its full-year results are expected to meet market expectations as it continues to strengthen its position as the UK's pre-eminent motoring organisation. The group said its marketing activities have continued to successfully slow the decline in personal member numbers, which is being exacerbated by the recent increase in insurance premium tax.

In the UK corporate calendar Friday, Shell merger partner BG Group releases its fourth-quarter and full-year results, while Shaftesbury provides a trading statement.

Also in the economic calendar, Japan's leading economic index is due at 0500 GMT. Germany's factory orders are due at 0700 GMT.

By Daniel Ruiz; danielruiz@alliancenews.com

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