LONDON MARKET MIDDAY: FTSE 100 Still Up As US Futures Point Lower

LONDON (Alliance News) - The FTSE 100 is still higher Wednesday midday, even as US futures have turned to indicating a lower open, after Greek Prime Minister Alexis Tsipras told his government that creditors haven't accepted the country's proposals to unlock needed aid.

The FTSE 100 dropped following the news, but is still up 0.3% at 6,852.57. Meanwhile, the FTSE 250 is down 0.5% at 17,916.85 and the AIM All-Share is down 0.15 at 769.26.

In Europe, major stock indices declined sharply after Tsipras's comments came out, with the CAC 40 in Paris now down 0.5% and the DAX 30 in Frankfurt down 0.9%.

Greece's creditors are being too unyielding in negotiations on a bailout deal and should accept some of the measures proposed by his government, Tsipras said ahead of a meeting with EU and IMF officials.

Tsipras called the rejections unprecedented and questioned if the creditors - the European Commission, the European Central Bank and the International Monetary Fund - want a deal. He alleged that the creditors' stance hides two possibilities: "Either they don't want an agreement or they are serving specific interests in Greece," according to a Greek official.

Wall Street is pointed to a lower open, with the DJIA pointed down 0.3% and the S&P 500 and the Nasdaq 100 pointed both down 0.2%.

"Following a new record high for the Nasdaq composite and two days of modest gains, US stock markets look like pulling back on the open on Wednesday," says CMC Markets analyst Jasper Lawler. "Greece parliamentary and International Monetary Fund differences over the latest proposals from Athens dampened investor risk appetite that had been lifted by hopes of an imminent deal."

European and US investors attention will be mainly focused in the coming days on Brussels, where EU officials will attend to several meetings replete with challenges straining the bloc. There is an eurogroup meeting scheduled for Wednesday at 2000 BST, while the European Council meeting is starting on Thursday at 1600 BST until Friday afternoon.

But ahead of the eurogroup meeting, Tsipras is conducting yet another round of crisis talks in Brussels with representatives of the country's creditors. A statement issued by Tsipras' office late Tuesday said that he would meet Wednesday morning with European Commission President Jean-Claude Juncker, International Monetary Fund Managing Director Christine Lagarde and European Central Bank President Mario Draghi.

At the European Council summit of EU national leaders, apart from the economic situation in Greece, the deadly migration crisis in the Mediterranean Sea and the diplomatic tensions with Russia will be on the menu too, along with the European identity crisis in Britain. Hopes for a blockbuster free trade deal with the US and dreams of a stronger eurozone union will round off their two days of talks.

US President Barack Obama's push for greater authority to negotiate trade deals moved a step closer to reality Tuesday after the measure cleared a key procedural hurdle in the Senate. The Senate voted 60-37 to limit debate on the Trade Promotion Authority measure and was expected to approve the bill in a separate vote as soon as Wednesday. TPA is considered a key element for completion of trade deals under negotiation with Pacific Rim countries and the EU.

Outside Greece Wednesday, US investors will look to the release of US Gross Domestic Product data for the first quarter, which are due to be published at 1330 BST, at the same time as US personal consumption expenditure data.

"While growth in the first quarter is old news at this stage, if the data shows it was not as bad as thought, it could encourage the Federal Reserve to hike [US interest rates]," says Craig Erlam, senior market analyst at Oanda. "There were numerous headwinds facing the US economy in the first quarter and if it managed a small amount of growth, or even marginal contraction, that would show a strong resilience in the economy. We’re expecting the figure to be revised up to minus 0.2% on an annualized basis."

Meanwhile, Lloyds Bank anticipates a modest upward revision to a flat reading on the quarter overall, just ahead of the consensus, largely reflecting upward revisions to retail sales data that suggest that US consumer spending in the first quarter was stronger than initially estimated.

In London, Wm Morrison is up 3.0% at 185.23 pence, J Sainbury is up 2.8% at 276.7p, and Tesco is up 1.1% at 218.55p. The supermarkets are among the leading risers in the blue-chip index after Belgian food retailer Delhaize Group and Dutch supermarket chain Koninklijke Ahold agreed to combine their businesses in a deal that will create a chain of more than 6,500 stores, sparking thoughts of M&A activity in the UK sector. The deal is expected to close in mid-2016.

Additionally, Societe Generale says it expects Morrisons to continue to underperform the other two in terms of like-for-like sales growth "due in particular to its limited exposure to online and convenience, the two most dynamic segments in the UK grocery market." SocGen analyst Arnaud Joly highlights that Wm Morrison needs to clarify its positioning and strengthen its differentiation, saying he expects more clarification from new Chairman Andrew Higginson and new CEO David Potts in September with the publication of interim results.

SocGen keeps a Sell stance on Morrisons, cutting its price target to 150p from 160p. The broker upgrades Sainsbury's to Buy from Hold, raising its price target to 315p from 260p, saying that the grocer's profile is more resilient than many fear. Meanwhile, SocGen says it remains too much uncertainty over Tesco to justify a re-rating in the short term, and therefore it keeps a Hold stance and a price target of 235p on the stock.

Royal Dutch Shell 'B' and 'A' are both up 2.0%, after Deutsche Bank upgraded the oil giant to Buy from Hold, following a "torrid" start to the year that has seen the company's share price significantly underperform its peers.

"Our reasons for upgrading Shell are clear," Deutsche says. "In our view the Shell dividend is sustainable; the BG [Group] transaction with all its strategic logic will proceed; the restructuring possibilities at Shell assuming its completion are substantial; management intent to reshape Shell 'legacy' is decided; and with the shares now trading at a 6.3% dividend yield, they are at a level from which we see limited relative or, indeed, absolute downside."

BG Group shares also are higher, up 1.8%.

In the AIM All-Share, Ascent Resources is up 44% after saying it has received a provisional Integrated Pollution Prevention and Control Permit from Slovenia's Environmental Authority for the installation of the Gas Gathering and Separation Station at the Petišovci field. Appeals against the permit can be lodged in the next 30 days, Ascent said, but once the permit becomes legally valid, Ascent can start procurement and construction of the station.

88 Energy shares are up 18% after the company said it has secured a USD50 million funding facility from Bank of America. The funding will be provided, based on securing approval from the lender, to back specific projects 88 Energy undertakes.

Meanwhile, shares in Mosman Oil & Gas are down 12% at 2.74p after it raised GBP400,000 via a placing and subscription at a discount. Mosman said it has raised the funding via the issue of 16 million shares at 2.5 pence per share. The funding is to be used to back a potential acquisition by the company, details on which it has yet to disclose, and to finalise planning for the Te Wiriki-1 well at the Murchison permit in New Zealand.

By Daniel Ruiz; danielruiz@alliancenews.com

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