LONDON MARKET CLOSE: Stocks End Up As Fed and BoJ Decisions Loom

LONDON (Alliance News) - UK shares ended higher Wednesday, with focus on the US Federal Reserve interest rate decision due later today, while investors will have to keep on their toes for the same by the Bank of Japan in the early hours of Thursday.

The FTSE 100 ended up 0.6%, or 35.39 points, at 6,319.91. The FTSE 250 ended up 0.8%, or 138.22 points, at 17,083.71, and the AIM-All Share fell 0.14 points to 729.08.

The Fed monetary policy decision is scheduled for 1900 BST. Economists overwhelmingly expect the central bank to leave its Federal Funds rate target unchanged, but a calmer global macroeconomic backdrop could mean the Fed hints at a rate rise at its next meeting in June.

FOREX.com analyst Fawad Razaqzada also expects the Fed not to announce changes to its monetary policy. However, Razaqzada said investors will scan the statement searching for clues on whether the Fed will hike rates in its next meeting.

"The dollar and other financial markets could...move sharply depending on the language the Federal Open Market Committee uses in the policy statement to describe the health of the world's largest economy, inflation outlook and the likely path of future interest rate changes," Razaqzada said. "This will have indirect impact on some commodities which are priced in the US dollar, such as gold and silver."

Brent oil touched a high of USD47.02 a barrel Wednesday, a level it hasn't seen since mid-November. The North Sea benchmark was adding to its Tuesday gains, when crude prices increased after the American Petroleum Institute reported a draw of nearly 1.1 million barrels in US oil inventories last week.

However, oil prices then retreated Wednesday after the US Energy Information Administration reported a 2 million-barrel climb in crude-oil supplies for the week ended April 22.

Brent was standing at USD46.12 a barrel at the London equities close, higher than the USD45.60 at the same time Tuesday. Meanwhile, gold was quoted at USD1,247.60 an ounce at the close, compared to the USD1,241.76 an ounce on Tuesday.

Stocks in New York were lower at the London equities close, with the Dow 30 down 0.1% and the S&P 500 down 0.2%.

The Nasdaq Composite was down 0.8%, hit by technology giant Apple's drop in profit in the second-quarter, hurt largely by a double-digit revenue decline that reflected weak iPhone sales. Apple reported its results Tuesday after the Wall Street close. Apple shares were down 5.6% at the London close.

In addition to the Fed this week is a Bank of Japan policy decision set for Thursday at 0400 BST. The Japanese central bank will conclude its two-day policy meeting, with analysts widely expecting it to announce a slew of measures to help weaken the yen.

"Given past policy behaviour, we therefore expect the BoJ's chairman Kuroda to be ready to surprise the markets again this year," said Maitland analyst Cebuan Bliss. "'Helicopter money', a consumption subsidy rather of fiscal policy nature, could become a frantic option, as Prime Minister Abe's reform policies have disappointed so far."

Helicopter money refers to a radical form of monetary policy that involves printing large sums of money and distributing it to the public in order to stimulate the economy, like a helicopter scattering euro notes to a crowd.

The UK economy grew at a slower pace, as expected, in the first quarter, preliminary estimates from the Office for National Statistics showed. Gross domestic product grew 0.4%, from a quarter ago, when it expanded 0.6%. This was in line with expectations.

Output increased in the dominant services sector by 0.6%. The other three main industrial groupings within the economy decreased, with production falling by 0.4%, construction output by 0.9% and agriculture by 0.1%.

On a yearly basis, UK GDP grew 2.1% in the first quarter, slightly faster than the expected growth of 2.0%.

Another report from the ONS showed the UK index of services rose 2.5% in February from last year, with the largest contribution coming from distribution, hotels and restaurants and business services and finance. Month-on-month, services output edged up 0.1%, the same pace of growth as in January.

The pound gyrated heavily before and after the economic data, with sterling reaching an intraday high of USD1.4621 prior and then declining to a low of USD1.4550 shortly afterwards. The pound stood at USD1.4544 at the London close compared to USD1.4590 at the close Tuesday.

The euro was quoted at USD1.1308 at the close, slightly lower than USD1.1310 on Tuesday.

In Paris, the CAC 40 index ended up 0.6%, and the DAX 30 in Frankfurt rose 0.4%.

On the London Stock Exchange, Worldpay Group ended up 4.3%, benefiting from an upgrade by UBS to Buy from Neutral. The Swiss bank said Worldpay's exposure to online transactions and significant investment in new value-added services will enable the company to outgrow its peers.

GlaxoSmithKline ended up 2.0% after the drugmaker pleased investors as it clarified its 2016 earnings guidance after an "encouraging" start to the year, implying higher earnings growth than previously indicated, as it continued to see benefits from its three part deal with Novartis AG in 2014.

GlaxoSmithKline's first quarter results beat expectations, helped by strong growth from its vaccines and consumer healthcare businesses, bolstered by the acquisitions it made from Novartis, which offset a small decline to its pharmaceuticals segment following the sale of its oncology business to the Swiss pharmaceutical firm.

Barclays ended up 0.5%, after an intense day for the stock following the lender's first-quarter earnings. The bank said the results showed a core business in rude health even as the bank saw a 25% drop in pretax profit. The stock opened higher, reaching 182.00 pence, its highest level since early-February. However, the shares declined since, closing at 174.80p.

Pretax profit fell to GBP793 million in the three months ended March 31, Barclays said, down from GBP1.06 billion the corresponding quarter a year earlier, with income net of insurance claims down 11% to GBP5.04 billion and credit impairment charges up 15% to GBP443 million. The results were ahead of analyst expectations, reflecting a strong performance in the bank's core business and resilience in its investment banking business.

Emerging-market-focused peer Standard Chartered fell 1.1%, among the worst blue-chip performers, having been downgraded to Sell from Hold by Deutsche Bank. The stock gave back only part of the gains it made Tuesday, when it added 9.8%, reaching its highest level in 2016, after its first-quarter loan impairment charges and capital strength proved better than the market had expected.

In the FTSE 250, Amec Foster Wheeler rose 3.7%, ending among the best performers. The oilfield services company said it has appointed Jonathan Lewis, who has held several senior roles at US giant Halliburton, as its new chief executive, as the company reported a drop in revenue in the first quarter of 2016.

Revenue in the quarter amounted to GBP1.30 billion, 1.5% lower than the GBP1.32 billion booked a year earlier. Revenue was also down 3.1% on a like-for-like basis compared to the previous year. The company's order book stood at GBP6.40 billion at the end of March, compared to GBP6.60 billion at the end of 2015, representing a 3.0% fall.

Societe Generale held a Buy recommendation on the company as the French bank believes this was "a 'normal' but relatively resilient performance in the current environment".

At the other end of the index, McCarthy & Stone dropped 6.1% after funds managed by Anchorage Capital, TPG Special Situations Partners, Goldman Sachs European Special Situations Group and Strategic Value Partners sold 85.0 million shares in the retirement housebuilder, increased from the 75.0 million they had initially planned to sell.

The gross proceeds from the sale to the selling investors were around GBP200.0 million. Following the sale, Anchorage holds a 7.6% stake, TPG a 3.9% stake, Goldman Sachs a 3.9% stake and Strategic Value Partners a 4.2% stake.

In the UK corporate calendar Thursday, Lloyds Banking Group, Taylor Wimpey, WPP, Schroders, Aggreko, Howden Joinery Group, Tullow Oil, Weir Group, Kaz Minerals, Berendsen, NCC Group and Synthomer issue trading statements. Air Partner, Oxford Biomedica, Harvey Nash Group, Camelia, GameAccount Network, U and I Group and Petropavlovsk release full-year results. Avocet Mining publishes a first-quarter production statement.

In the economic calendar, Japan's housing starts data are due at 0600 BST. The UK's nationwide housing prices are due at 0700 BST, while the eurozone's consumer confidence data are at 1000 BST. Germany's consumer price index is due at 1300 BST.

In the US, initial and continuing jobless claims and gross domestic product data are both due at 1330 BST, while the Energy Information Association natural gas storage data are due at 1530 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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