LONDON MARKET CLOSE: Insurers And Miners Lead Gains As Amlin Swallowed

LONDON (Alliance News) - London and other European stock markets closed higher Tuesday, with Wall Street also trading in the green after re-opening from a holiday on Monday, buoyed by a positive close by Chinese equity markets.

Amlin was the star of the London mid-caps Tuesday, adding a third after it said it has agreed to be acquired by Mitsui Sumitomo Insurance in a deal valuing the reinsurer at about GBP3.47 billion, as the wave of mergers and acquisitions continues across the UK insurance industry. The FTSE 350 non-life insurance index ended up 5.1%, with Lancashire Holdings, Beazley and Esure and Hiscox also among the top FTSE 250 gainers.

The FTSE 100 index ended up 1.2% at 6.146.10, the FTSE 250 up 0.9% at 17,000.28, and the AIM All-Share up 0.3% at 734.73. In Europe, the CAC 40 index in Paris closed up 1.1% and the DAX 30 in Frankfurt finished up 1.6%.

Wall Street was trading higher at the London close, wiping out the losses seen on Friday ahead of the long US Labor Day weekend. The Dow Jones Industrial Average was up 1.6%, the S&P 500 up 1.5% and the Nasdaq Composite up 1.9%.

Investors in Europe and the US was relieved after Chinese stocks closed higher Tuesday, with the Hang Seng in Hong Kong ending up 3.3% and the Shanghai Composite up 2.9%. In Japan, the Tokyo's Nikkei 225 index ended down 2.4%.

However, market commentators remained wary. "The artifice of the Chinese markets at the moment, with the government’s sporadic interventions, means it is hard to tell whether or not the worst is truly over," said Spreadex analyst Connor Campbell.

"The behaviour of investors today (and yesterday) suggests they might be starting to believe so; however, there have been similarly robust gains since the initial yuan devaluation that kicked all this off, gains that soon disappeared in the face of the constant reminders of China’s chaotic slowdown," wrote Campbell.

The positive close in Chinese stocks came alongside mixed trade data from the country. The Asian giant posted a trade surplus of USD60.24 billion in August, the National Customs Office said, well above forecasts for a surplus of USD48.0 billion and up from USD43.03 billion in July.

Exports were down 5.5% on year, also bettering expectations for a fall of 6.6% after tumbling 8.3% in the previous month. But imports skidded an annual 13.8% versus expectations for a fall of 7.9% and after dropping 8.1% a month earlier. In yuan-denominated terms, exports fell 6.1% on year and imports plummeted 14.3% for a trade surplus of CNY368.03 billion.

After the release of weak export figures last month, the People's Bank of China devalued its currency on August 11 in an effort to support exports. The devaluation was the biggest one-day reduction in value in two decades.

As the central bank sold dollars to stabilise the yuan exchange rate, country's foreign exchange reserves declined by the most on record in August. Foreign exchange reserves fell by USD93.9 billion to USD3.56 trillion in August, the bank said on Monday. The PBoC also cut its interest rates in August for the fifth time since last November and reduced the reserve ratio to support bank lending.

Concerns still remain about how the economic situation in China could affect the US Federal Reserve's monetary policy decision in the next Federal Open Market Committee scheduled for September 16-17.

Market participants will focus this week on the US JOLTS job openings data, due on Wednesday at 1500 BST, and weekly US initial and continuing jobless claims on Thursday at 1330 BST, as they search for clues on whether the Fed will raise US interest rates this month or later this year.

Following Friday's mixed job report, analysts at Deutsche Bank and Lloyds Bank still believe that the "lift-off" will come in September.

"Despite last week’s employment report showing a weaker-than-expected rise in August payrolls, the upward revisions to headcount gains over the previous two months, alongside a stronger-than-anticipated decline in the unemployment rate to 5.1%, chimed with the Committee's desire to see a continued improvement in the labour market as a prerequisite for a hike," said Lloyds.

Deutsche said: "We expect the Fed to hike this year; the exact timing of lift-off, September vs October vs December, is a very close call but we continue to see September as most likely."

In European economic data released Tuesday, Germany's exports rose 2.4% month-on-month in July, above economists expectations for 1% growth. At the same time, imports advanced 2.2% in July, beating expectations of a 0.7% rise. These were the highest seasonally adjusted monthly figures ever calculated both for exports and for imports, Destatis said.

Eurozone economy grew more than initially estimated in the second quarter as strong exports offset the decline in investment. Gross domestic product advanced 0.4% sequentially after rising 0.5% a quarter ago, Eurostat reported Tuesday. Economists expected a 0.3% rise.

On the London Stock Exchange, mining stocks pushed higher. The FTSE 350 Mining Sector Index ended up 2.6%, led by Glencore, up 3.2%, Anglo American, up 2.8%, and Fresnillo, up 2.3%. In the FTSE 250, Kaz Minerals was up 2.1%.

Elsewhere, United Utilities finished up 2.1% after Societe Generale upgraded the water company to Buy from Hold.

Whitbread led a short list of blue-chip fallers, down 1.6%. Though the hotel and coffee shop operator posted a rise in sales in the first half of its financial year, the numbers were below analysts expectations, who said that the results revealed a modest slowdown in the second quarter.

Whitbread said that total sales in the 24 weeks to August 13 grew 11.8%, or 3.9% on a like-for-like basis on the same period the year before. Of this, Premier Inn's total revenue grew 12.9%, with like-for-like sales up 5.3%, while Costa's total revenue increased 16.7%, as like-for-likes rose 4.6%. In the second quarter, total sales increased 11.1% and rose 3.3% on a like-for-like basis.

Societe Generale predicted a 6.5% rise in like-for-like sales in the first half for Premier Inn, and noted that Costa's like-for-like performance was also below the 5% consensus forecast.

The only other two blue-chips in the red were Next, down 0.9%, and Sports Direct International, down 0.6%.

In the FTSE 250, Amlin was easily the best performer, up 32% at 652.25 pence. Mitsui Sumitomo Insurance, which is owned by Japan's MS&AD Insurance Group Holdings Inc, will pay 670 pence per Amlin share. In addition, Amlin shareholder will be able to receive the insurer's 8.4 pence interim dividend declared last month. The price tag is a 36% premium to Amlin's closing price on Monday and a 2.4 times multiple to the insurer's net tangible book value per share on a fully diluted basis of 275.2 pence at the end of June.

In the corporate calendar Wednesday, Barratt Developments and Hargreaves Lansdown release full-year results.

Sports Direct International issues an interim management statement and holds its annual general meeting. Royal London Asset Management is set to vote against the re-election of Sports Direct founder Mike Ashley as executive deputy chairman at the AGM, the Financial Times reported.

Royal London said it has lost confidence in the company's board and would vote against Ashley's re-election for the first time. Ashley Hamilton Claxton, corporate governance manager at Royal London, one of the City's most prominent institutional investors, said the investment manager is "very concerned about the long list of corporate governance failings that have not been addressed."

Meanwhile, MartinCo, Advanced Medical Solutions Group and Dalata Hotel Group publish half-year results. Monitise and Mattioli Woods will release full-year results

In the economic calendar, the Japan consumer confidence index is due at 0600 BST and UK industrial and manufacturing production data are expected at 0930 BST. In the US, before the JOLTS job openings data, due at 1500 BST, the Redbook index is due at 1355 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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