LONDON MARKET MID-MORNING: EasyJet Up As BoE Keeps UK Rates Unchanged

LONDON (Alliance News) - UK stocks are lower Wednesday mid-morning, with easyJet leading the FTSE 100 after it beat guidance on revenue per seat and said its full-year pretax profit will rise, while the Bank of England voted unanimously to keep UK interest rates on hold in July.

The FTSE 100 is down 0.8% at 6,713.89, the FTSE 250 is down 0.2% at 17,715.08 and the AIM All-Share is down 0.1% at 757.57.

In Europe, the CAC 40 and the DAX 30 are both down 0.3%.

The Bank of England's Monetary Policy Committee member voted 9-0 to leave UK interest rates at 0.5% on hold and maintain asset purchases at GBP375 billion in its latest meeting held in July.

Some analysts were predicting a non-unanimous vote to keep rates at record lows, but others were correct in assuming no MPC members would vote for a rate hike in July, because the meeting was held amid global economic uncertainty related to Greece and a sharp correction in Chinese equities.

The release of the minutes comes after Bank of England Governor Mark Carney on Tuesday repeated his view that the picture on interest rate policy in the UK will become clearer towards the end of the year.

Speaking at an event held by think-tank The Policy Exchange, Carney said the UK economy is still facing challenges from the economic weakness in the eurozone, the strength of sterling, and further UK government austerity measures.

The remarks echo those Carney gave during a speech at Lincoln Cathedral last week, when he hinted that the central bank will start to consider changing its UK interest rate policy at end of 2015, but said that any increases would be slow and suggested that interest rates would rise to no more than 2.25% in the medium term.

Following the BoE's minutes, the pound rose Wednesday to USD1.5684, but dropped shortly afterwards to USD1.5612. The greenback started a rally against the sterling after the pound reached a high of USD1.7191 in July 2014 to touch USD1.4564 in April 2015. However, the pound has recovered some ground since then.

On the London Stock Exchange, easyJet is the best blue-chip performer, up 4.5%. The budget carrier on Wednesday said it beat its guidance for revenue per seat in the third quarter, even as its total revenue fell for the period, and said it expects its pretax profit for the full-year to grow on the back of its strong second half performance.

The better-than-expected figure was driven by good trading in the UK and on beach routes in Europe in May and June. These bright spots partly offset the impact of French air traffic controls strikes in April.

Analysts kept positive stances on easyJet, cheering the update as they called it "strong", "reassuring" and "encouraging". The airline said it expects to grow pretax profit to a range of GBP620 million to GBP660 million in financial year 2015 to September 30 from GBP581 million in financial year 2014.

"Our forecast is in the middle of this [annual pretax profit forecast] range at GBP640.1 million, and we are leaving it unchanged at present," says Numis analyst Wyn Ellis. "With all the concerns that the market has had about excess capacity in the market and the likely impact on yields, we believe that these results will be well received," writes the analyst.

London-listed travel operators TUI Group and British Airways and Iberia-owner International Consolidated Airlines Group are both up 1.1%.

Sage Group is up 2.4%. The business software company reiterated Wednesday its expectations for its current financial year, continuing to expect at least 6% organic revenue growth for the full year, as it saw organic revenue up 6.6% in its first nine months. It said in the third quarter to end-June it saw organic revenue growth of 7.5%. Sage said growth was flattered by a relatively weak comparative third quarter in the previous year.

Miners are giving back Tuesday's gains, with BHP Billiton down 3.6%, Fresnillo down 3.2%, Rio Tinto down 3.0%, Randgold Resources down 2.8%, Anglo American is down 2.7% and Glencore is down 2.6%.

However, BHP Billiton reported late Tuesday a 6% increase in iron ore production for the fourth quarter, while production of metallurgical coal grew 13%. Meanwhile, fellow miner Fresnillo Wednesday said its gold and silver production both significantly rose in the first half of 2015, leading to the company increasing its full year production guidance for its gold segment.

ARM Holdings is down 3.1% despite saying it expects to meet market expectations for dollar revenue in 2015 and posting a rise in pretax profit for its first half, as concerns over the slow-down of the smart phone market prevail. The chip designer reported a pretax profit of GBP198.1 million for the half year to end-June, up from GBP146.0 million a year before, as revenue rose 22% to GBP456.0 million from GBP373.7 million. In dollar terms revenue rose 15% to USD705.2 million from USD614.8 million.

Liberum reiterated its Sell rating for ARM as the broker calls the result provided by the chip designer "a touch soft". Liberum says that whilst ARM is maintaining its full-year dollar revenue outlook, the recent strength of sterling is likely to lead to around 3% to 5% earnings per share downgrades.

In the economic calendar, in the US, the housing price index is due at 1400 BST, US Markit purchasing manager's Composite and Services indices are due at 1445 BST, and US existing home sales are due at 1500 BST. EIA Crude Oil stocks are due at 1530 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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