LONDON MARKET MIDDAY: Dovish Bank Of England Votes 9-0 To Hold Rates

LONDON (Alliance News) - London shares were higher Thursday midday, with miners and oil-related stocks leading gainers as metals and crude prices benefited from a weaker dollar.

The Bank of England's Monetary Policy Committee surprised the market by voting unanimously to keep UK interest rates on hold at 0.5%. The MPC voted had been expected to stay at 8-1.

The pound retreated against the dollar following the decision, quoted at USD1.4597, having stood at USD1.4647 just prior and USD1.4580 at the London equities close Wednesday.

The FTSE 100 index was up 1.4% at 5,918.14 points, the FTSE 250 up 0.7% at 16,098.79 and the AIM All-Share up 0.4% at 693.28. In Paris, the CAC 40 was up 0.4%, while in Frankfurt, the DAX 30 was up 0.6%.

North Sea benchmark Brent oil was quoted at USD35.17 a barrel at midday, retaining its gains on Wednesday and having touched a high of USD35.69 a barrel overnight. US benchmark West Texas Intermediate was at USD32.52, having reached a high of USD32.93 a barrel overnight.

"Crude prices surged yesterday amid a considerable dollar selloff with commodity miners benefiting handsomely too," said Accendo Markets analyst Michael Van Dulken. "This comes after dollar resilience reversed to three-month lows on poor US data and increased expectations the US Fed will adopt a less hawkish narrative".

New York Fed President William Dudley said in an interview the weakening outlook for the global economy and additional strength of the US dollar could have "significant consequences" for the health of the world's largest economy.

A report from the Institute for Supply Management released Wednesday showed that growth in the US service sector slowed in January. The ISM non-manufacturing index dropped to 53.5 in January from 55.8 in December, while economists expected the index to come in at 55.5.

Royal Dutch Shell 'A' shares were up 6.5%, while 'B' shares were up 6.4%. BG Group was up 4.2% and BP up 3.6%. Mid-caps Tullow Oil and Amec Foster Wheeler were up 9.6% and 5.0%, respectively.

Shell reported reported a dramatic fall in earnings during 2015, but the results did meet expectations. The oil and gas major said current cost of supply (CSS) earnings excluding items more than halved year-on-year in 2015 to USD10.67 billion from USD22.56 billion, which is at the top end of Shell's guidance provided last month.

CSS earnings including items fell 80% during the year to USD3.84 billion from USD19.04 billion a year earlier, whilst income attributable to shareholders dropped at an even steeper rate to USD1.93 billion from USD14.87 billion, representing an 87% decline.

But it was miners that were at the very top of the FTSE 100, with Anglo American up 12%, BHP BIlliton up 8.2%, Antofagasta up 7.6%, Rio Tinto up 7.6% and Glencore up 7.2%. Spot gold continued to rally, quoted at USD1,146.00 an ounce, compared to USD1,138.90 at the London equities close on Wednesday.

Catering and support services business Compass Group was another big blue-chip gainer, up 4.0%. Compass said its outlook for 2016 remains positive after reporting a rise in revenue during the first quarter of the financial year. The company said organic revenue grew 5.9% year-on-year in its financial first quarter ended December 31, with like-for-like revenue also increasing thanks to modest pricing and some volume improvement.

At the other end of the index, Coca Cola HBC was down 4.6%, after being downgraded to Underweight from Equal Weight by Barclays.

Giant drugmaker AstraZeneca was down 4.0% after it forecast a fall in revenue and its closely watched earnings per share for 2016, including dilutive effects from recent acquisitions, as it reported a rise in pretax profit for 2015.

The group said pretax profit rose to USD3.07 billion in 2015 from USD1.25 billion a year before, despite seeing revenue fall to USD24.71 billion from USD26.55 billion, with the improved profit mostly the result of lower cost of sales and of selling, general and administrative costs. AstraZeneca reported core earnings per share for the year of USD4.26, flat on the previous year at actual exchange rates, although up 7% at constant currency.

The company is guiding for a low to mid single-digit percentage decline in total revenue at constant currency in 2016, and a low to mid single-digit percentage decline in core earnings per share, also at constant currency. This guidance assumes loss of exclusivity in the US on its biggest seller, anti-cholesterol statin Crestor, from May.

Liberum kept a Buy recommendation on AstraZeneca, as the broker highlighted that the company retained its dividend at the "magic" USD2.80, even though it said the 2016 guidance provided by the group was "slightly light" at the sales level.

AstraZeneca declared a second interim dividend of USD1.90 per share, taking its total dividend for the year to USD2.80, maintained from the previous year.

"Given the 4% yield and pipeline newsflow this year, we remain bullish on AstraZeneca share price performance this year," said Liberum analyst Naresh Chouhan.

Medical devices maker Smith & Nephew was down 0.1%. The group reported a fall in pretax profit for 2015 on higher costs, but saw earnings per share come in ahead of both 2014 and market expectations.

Its pretax profit was of USD559 million for 2015, down from USD714 million a year before, as a rise in revenue to USD4.63 billion from USD4.62 billion was offset by higher selling, general and administrative costs. The company said it has taken an accounting charge of USD203 million in relation to settlements for legal claims related to metal-on-metal hip replacements.

In the FTSE 250, roadside assistance company AA was up 3.6%. AA said its full-year results are expected to meet market expectations as it continues to strengthen its position as the UK's pre-eminent motoring organisation. The group said its marketing activities have continued to successfully slow the decline in personal member numbers, which is being exacerbated by the recent increase in insurance premium tax.

Still ahead in the economic calendar Thursday, US continuing and initial jobless claims are at 1330 GMT, as are unit labour cost data and nonfarm productivity. US factory orders are at 1500 GMT.

"Jobless claims are forecast to remain basically unchanged at 278,000, whilst factory orders...are expected to see a dramatic drop to a 12-month low of -2.5%," said Spreadex analyst Connor Campbell.

Stocks in New York are called for a higher open, with the Dow Industrials and the S&P 500 seen up 0.3% and the Nasdaq 100 pointed up 0.4%.

US media giant News Corp is expected to release its second-quarter results after the US market close.

By Daniel Ruiz; danielruiz@alliancenews.com

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