LONDON MARKET MIDDAY: BT Group Leads Blue-Chips In Mixed Market

LONDON (Alliance News) - London stock prices were mixed Monday midday, with BT leading blue-chip gainers after it reaffirmed its outlook for the full financial year in its current guise and outlined a new organisational structure following its acquisition of UK mobile-phone network EE.

The FTSE 100 index was down 0.4% at 6,057.98 points, the FTSE 250 was flat at 16,485.81, and the AIM All-Share was up 0.3% at 695.56. In Paris and Frankfurt, the CAC 40 was down 0.5% and the DAX 30 was down 0.4%.

BT Group shares rose 3.1% after the telecommunications and pay-TV company reported a pretax profit rise to GBP862 million for the quarter to end-December, up from GBP694 million a year before, as revenue rose to GBP4.64 billion from GBP4.48 billion.

BT also said that, following its acquisition of EE, it will have a new organisation structure with effect from April. Under the new structure, it will have six lines of business, Consumer, EE, Business and Public Sector, Global Services, Wholesale and Ventures and Openreach.

Fellow pay-TV company Sky was up 1.9%, after Citigroup added the stock to its Europe Focus List.

At the other end of the FTSE 100 index was Prudential, down 2.4%. The life insurer said the chief executive of its M&G Investments fund management arm is to retire from his role and said it has poached the chief investment officer of Aberdeen Asset Management to replace him.

Michael McLintock will retire as the chief executive of M&G and as an executive director of the group this year, though no exact date was given for his departure, after 19 years with the company. He will be replaced by Anne Richards, currently the chief investment officer and head of Aberdeen's European, Middle East and African operations.

Shares in Aberdeen Asset Management were down 0.9%.

HSBC Holdings declined 1.8%. The lender will impose a hiring and pay freeze globally in 2016 as part of its drive to cut as much as USD5 billion in costs by the end of 2017, according to media reports. The actions were outlined in a memorandum received by employees on Friday, the reports said.

In the FTSE 250, Allied Minds was up 4.3% after the science and technology development group said it now owns a 73% stake in Federated Wireless after a recent fundraising round in which Federated Wireless raised USD22 million. The fundraising values Federated Wireless as USD82 million, increased from USD10 million, and Allied Minds' stake in the company is now valued at USD60 million, up from USD9 million.

Home Retail Group was up 3.9% after the Financial Times reported that J Sainsbury is facing pressure to increase its bid in order to secure an agreement to buy the FTSE 250-listed owner of Argos and Homebase.

According to the newspaper, people close to the matter said Sainsbury's met with Schroders and Toscafund, the two biggest shareholders in Home Retail, last week, with the pair indicating Sainsbury's would have to pay at least 160 pence per share, or preferably close to 165p, to get their support.

A 160p per share deal would value Home Retail at around GBP1.3 billion. The stock traded at 142.00p on Monday. Sainsbury's shares were up 0.2%. Sainbury's has until 1700 GMT Tuesday to make an offer or walk away.

Premier Oil's share price had more than doubled to 39.69 pence by midday, as the stock resumed trading after the terms of its deal to acquire the UK North Sea assets of Germany energy group E.ON were changed, meaning the deal is no longer classified as a reverse takeover.

Premier Oil struck a deal in January to buy E.ON's assets for USD120.0 million net, plus completion adjustments. At the time, the value of the completion adjustments was sufficient for the deal to be classed as a reverse takeover. The pair have now agreed to reduce the completion adjustment to USD15.0 million, meaning the aggregate consideration payable by Premier Oil is USD135.0 million. As a result, the deal is no longer classed as a reverse takeover and Premier's shares could be restored to trading.

Premier Oil also was upgraded by Nomura to Buy from Neutral.

US stocks were expected to retreat slightly after their Friday rally, with the Dow 30 called down 0.2%, and the S&P 500 and the Nasdaq 100 both pointed down 0.3%.

Alphabet, the new corporate umbrella for Google and all of its diverse businesses, is expected to report its first set of results under that name after the US market close on Monday, providing investors with a fourth-quarter update. Barbie doll maker Mattel also is expected to publish a fourth-quarter update after the US market close.

Asian markets ended mixed. The Nikkei 225 index in Tokyo closed up 2.0%, while the Shanghai Composite ended down 1.8% and the Hang Seng in Hong Kong down 0.5%.

Chinese manufacturers signalled deterioration in operating conditions at the start of 2016 but the pace of contraction slowed slightly from December, the results of the Caixin survey showed. The Caixin Purchasing Managers' Index rose to 48.4 in January from 48.2 in December but marked the eleventh successive month of contraction.

Official data released by the Chinese government showed that the manufacturing sector underwent a faster contraction than seen at the end of 2015. The official manufacturing PMI, released by the National Bureau of Statistics, fell to 49.4 in January from 49.7 in December. The official Chinese non-manufacturing PMI dropped to 53.5 from 54.4 in December, staying in positive territory about 50.

The pound spiked higher, but gave back some of its gains shortly afterwards, after data showed that UK manufacturing growth quickened unexpectedly at the start of the year to the strongest level in three months.

Data from Markit Economics showed that the Markit/Chartered Institute of Procurement & Supply Purchasing Managers' Index for manufacturing rose to 52.9 in January from 52.1 in December. Economists had expected the index to fall to 51.8.

"Though the PMI survey has generally signalled growth of production and new orders through much of the past three years, January also saw respondents cite increased competition, challenging exchange rates and a more difficult marketplace as factors making it increasingly difficult to win new contracts and protect margins hard won in recent months," said David Noble, Chief Executive Officer at the Chartered Institute of Procurement & Supply.

At the same time, data from the Bank of England showed that UK mortgage approvals rose unexpectedly to 70,837 in December from 70,424 in November. This was the highest since August 2015. Economists had forecast approvals to fall to 69,600 in December.

Sterling rose to USD1.4318 following the set of data, but was quoted at USD1.4286 at midday.

There also were manufacturing PMI readings from the eurozone and European countries. The euro area manufacturing sector growth slowed as estimated in January with rates of expansion in output, new orders and new export business all easing at the start of the year, final survey data from Markit showed Monday.

The final manufacturing PMI fell to 52.3 in January from 53.2 in December. The reading matched flash estimate, having remained above the 50.0 mark for 31 consecutive months.

Germany's manufacturing sector expansion was the slowest since last October. The Markit/BME manufacturing PMI fell to 52.3 from 53.2 in December. The flash score was 52.1. Meanwhile, the French manufacturing sector stagnated at the start of the year as the final PMI dropped to a five-month low of 50 as estimated in January. It was down from 51.4 in December.

The euro was standing at USD1.0863 at midday.

Still ahead in the economic calendar, US personal consumption expenditure data are due at 1330 GMT, before ISM manufacturing PMI and construction spending, both at 1500 GMT. European Central Bank President Mario Draghi will speak to the European Parliament at 1600 GMT.

By Daniel Ruiz; danielruiz@alliancenews.com

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