LONDON MARKET MIDDAY: Ex-Dividends Offset Crude Rally Ahead Of ECB

LONDON (Alliance News) - Shares prices in London were lower Thursday midday, with stocks going ex-dividend counterbalancing the benefit of a higher oil price, as investors awaited the ECB monetary policy decision and press conference at 1245 BST and 1330 BST, respectively.

Connor Campbell, an analyst at Spreadex, said "nothing is really expected" from the European Central Bank at this meeting, following the significant easing package announced on March 10. However, Campbell said this creates "a somewhat complicated situation" for President Mario Draghi.

In March, the central bank cut by five basis points both its main refinancing rate, to 0.0%, and the marginal lending facility rate, to 0.25%, while it further cut by 10bp the already-negative deposit rate to -0.4%. In addition, the ECB expanded by EUR20 billion to EUR80 billion the monthly purchases it makes under the asset purchase programme, the mechanism used for quantitative easing.

Campbell said Draghi will likely come under pressure to outline what more measures - potentially extreme measures such as 'helicopter money' - the central bank could still implement in the future. Helicopter money refers to a 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.

"Whilst the ECB president won't want to alarm his critics by wholeheartedly backing the more esoteric tools in his belt, at the same time investors will want to hear that the central bank still has a substantial contingency plan if the current measures fail to take hold in the intended way," said Spreadex's Campbell.

The FTSE 100 was down 0.6%, or 35.87 points, at 6,374.39 by midday. The blue-chip index had opened at a 2016 high of 6,427.32 points, its highest level since early December, but declined shortly afterwards.

The blue-chip index was being dragged down by stocks going ex-dividend, meaning new buyers no longer qualify for the latest dividend payment. Defence contractor BAE Systems was down 3.7%, outsourcer Capita down 3.6%, and medical devices company Smith & Nephew down 2.6%.

Sky was the worst performer in the FTSE 100, however, down 4.9%. The pay-television provider said Thursday that operating profit rose 12% in the first nine months of its financial year, as revenue growth was driven by strong customer additions during the third quarter. However analysts failed to be impressed.

Liberum said: "Our main concern is with Sky's long term profitability. It will never reach the heights to justify the valuation as there will be continuing pressures from programming cost inflation." Barclays raised concerns on the upcoming German football television rights auction, noting that: "Sky Deutschland cannot get exclusivity, which is a negative development."

Meanwhile, Haitong Research took issue with Sky's lack of visibility on its numbers: "Sky should report full financials or none at all, because only selective disclosure is likely to mislead investors."

Oil-related stocks were benefiting from a rise in crude prices after the US Energy Information Administration said Wednesday that US crude oil inventories rose by less than expected.

Brent crude reached its highest level since November at USD46.10 a barrel in early trade Thursday. The North Sea benchmark was quoted at USD45.92 at midday in London, higher compared to USD44.39 at the London equities close on Wednesday.

BP was up 1.3% and Royal Dutch Shell 'A' shares up 0.5%. In the FTSE 250, Cairn Energy was up 3.6%, Ophir Energy up 3.2% and Amec Foster Wheeler up 2.9%.

The FTSE 250 itself was down 0.4% at 16,951.50 and the AIM All-Share was flat at 733.54.

Elsewhere in the mid-cap index, Acacia Mining was the best performer, up 5.4%. The miner said its profit rose in the first quarter of 2016 after the company countered lower gold prices by increasing production and improving its margin through cost reductions. Acacia said revenue in the first quarter of 2016 amounted to USD221.0 million, whilst earnings before interest, tax, depreciation and amortisation totalled USD66.0 million. That revenue was 3% higher than the previous quarter thanks to a rise in gold sales.

Shares in diversified engineer Smiths Group were up 4.2% after it struck a USD710.0 million deal to acquire the US's Morpho Detection from French engineering group Safran. Morpho is a California-based detection and security technology company, Smiths said, and will be merged into the UK-listed company's existing Smiths Detection business.

Aerospace and defence components manufacturer Senior added 3.7%. The group said it anticipates better aerospace sales in the second half but said its Flexonics arm continues to face a challenging market, hit by difficult conditions in truck and off-highway markets and the industrial sector.

Oil & gas company Petrofac was down 2.9% after being downgraded to Hold from Buy by Jefferies.

A report from the Office for National Statistics showed UK retail sales volume slid 1.3% in March after February's 0.5% fall, whilst economists expected a 0.1% drop. On a yearly basis, retail sales growth eased unexpectedly to 2.7% in March from 3.6% in prior month. Sales were expected to expand 4.4% on an annual basis.

Excluding auto fuel, retail sales volume declined 1.6%, following a 0.3% drop in February. Economists had forecast a marginal 0.3% decrease. Year-on-year, retail sales excluding auto fuel rose 2.7%, slower than economist expectations of 4.4% growth, versus the previous 3.8% rise.

The pound slid to USD1.4297 following the report but recovered shortly afterwards, quoted at USD1.4372 at midday. Sterling stood at USD1.4381 at the London equities close on Wednesday.

In Paris, the CAC 40 was down 0.6% and the DAX 30 in Frankfurt was down 0.5%.

Still in the economic calendar Thursday, initial and continuing US jobless claims are due at 1330 BST, as well as the Philadelphia Federal Reserve manufacturing survey. Later is the US housing price index at 1400 BST and a preliminary reading of eurozone consumer confidence at 1500 BST.

Stocks in New York were called for a mixed open, with the Dow 30 index seen flat, as was the S&P 500, while the Nasdaq 100 was pointed down 0.1%.

In the US corporate calendar, car maker General Motors and financial firm Blackstone release first-quarter results before the US open, while Google parent company Alphabet, technology giant Microsoft, financial services company Visa and coffeehouse chain Starbucks release the same after the US close.

In Asia, the Nikkei 225 index in Tokyo ended up 2.7% Thursday, while the Shanghai Composite fell 0.7%. The Hang Seng index in Hong Kong finished up 1.8%.

By Daniel Ruiz; danielruiz@alliancenews.com

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