LONDON MARKET MIDDAY: Banks And Miners Sour Investor Sentiment

LONDON (Alliance News) - UK stocks traded in the red midday Wednesday, with heavyweight mining and banking stocks creating a drag on the FTSE 100 ahead of the US Federal Reserve's policy decision after the London equity market close.

Royal Bank of Scotland Group was one of the big decliners in the blue-chip index, down 3.3% at 252.50 pence, having touched its lowest level since September 2012 at 246.00p earlier in the day.

The bank said it will make a GBP4.2 billion payment into its main pension scheme, while setting aside billions of pounds to deal with past misconduct and an impairment charge in relation to its private bank. Wednesday's actions are expected to wipe GBP3.6 billion from the group's tangible net asset value.

The latest developments underline the scale of the turnaround job at hand for Chief Executive Ross McEwan, who has been leading the effort to return the bank to health. The financial crisis of 2007-09 still weighs heavily on RBS. The UK government remains its majority shareholder, with a 72.9% stake following Chancellor George Osborne's move to sell a 5.4% holding at a loss last August.

"Osborne's decision to sell a chunk of the government's stake last August, which was derided at the time, now looks like a sound financial decision, but it does mean any further sales are essentially off the table. Coincidentally, with Lloyds down this morning in sympathy, it seems the government will remain a key asset manager when it comes to UK banks," said Chris Beauchamp, senior market analyst at IG.

Lloyds, in which the UK government has a 9.9% holding, traded down 1.9%, while Barclays was down 2.2%.

Antofagasta traded down 3.5% after the miner said its copper and gold production accelerated in the fourth quarter but said full-year 2015 production still was lower than the year before.

Antofagasta said its copper production for the fourth quarter to the end of December hit 169,900 tonnes, up 8.2% from the third quarter, thanks to higher production from its Los Pelambres and Centinela concentrates projects, plus the contribution from the Antucoya and Zaldivar mines.

Anglo American, down 5.3%, was the worst performer in the index after posting a 12% gain on Tuesday. BHP Billiton also was one of the worst performers, down 3.5%.

The blue-chip FTSE 100 index traded down 0.6% at 5,878.05 points. The FTSE 250 was down 0.4% at 16,114.48, while the AIM All-Share traded up slightly higher at 683.99.

In Europe, the CAC 40 was down 0.6% and the DAX 30 down 0.7%.

Futures pointed Wall Street for a lower open, with the Dow Industrials down 0.4%, the S&P 500 down 0.6% and the Nasdaq 100 down 1.0%.

Apple traded down 4.0% in premarket trade after the US tech giant lowered its revenue forecast for the second quarter when it reported earnings after the New York bell on Tuesday.

Apple posted its biggest quarterly earnings ever but warned revenue is set to sink. Apple predicted between USD50 billion and USD53 billion in revenue for the second quarter, a drop from USD58 billion in the same quarter in 2015.

Apple's performance weighed on the Nasdaq before the open and on shares of London-listed chip maker ARM Holdings, down 2.3%. ARM designs microprocessors for iPhones and is heavily reliant upon smartphone sales for growth.

Investors also are looking ahead to the Fed's monetary policy decision at 1900 GMT. Analysts expect the Fed to make no changes to its monetary policy amid a mixture of economic concerns that include declining oil prices, a strong dollar, negative US inflation, and volatility in global equity markets.

Following the 'lift-off' announced in December, the first US interest rate hike since 2006, analysts said the tightening path of the Fed is more likely to take another step forward in March, rather than on Wednesday.

Elsewhere in London, Sage Group was the top performer in the FTSE 100, up 3.4%. The software group said its organic revenue grew in the first quarter of its financial year, with good growth in its recurring revenue stream.

Sage said its organic revenue, on a like-for-like and constant currency basis, grew 6.6% in the quarter to the end of December. The growth was driven by recurring revenue, where organic growth hit 10% in the quarter, helped by a 36% growth in software subscription revenue.

Aberdeen Asset Management traded down 0.5% as the asset manager said it continued to suffer net outflows in the quarter to the end of December, driven by continued volatility in emerging markets, and said it will cut further costs as it looks to cope in a tough investment environment.

Aberdeen, which has suffered in recent months from its exposure to a slowing Chinese economy, said it recorded net outflows of GBP9.1 billion for the quarter to the end of December, compared to the GBP12.7 billion it posted in the quarter to the end of September.

Soft drinks maker, Britvic was one of the best performers in the FTSE 250, up 3.7%. The company said trading for the first quarter to December 20 had been hit by difficult trading conditions, but that revenue was boosted by encouraging Christmas trading.

Britvic reaffirmed its earnings before interest, tax, depreciation and amortisation guidance range of GBP180 million to GBP190 million, after it said it saw good trading in its core markets over the entire Christmas period, with reported revenue for the first quarter 4.8% ahead of last year at GBP311.6 million.

Buy-to-let lender and consumer debt purchaser Paragon Group of Companies, up 3.4%, said its financial performance met its expectations in the quarter to the end of December and said it remains confident on the outlook for the buy-to-let market in the UK, despite regulatory changes.

Aside from the Fed, still ahead in the economic calendar are US new home sales at 1500 GMT and the Energy Information Administration's crude oil stocks at 1530 GMT.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

Copyright 2016 Alliance News Limited. All Rights Reserved.