LONDON MARKET MIDDAY: Oil Price Rebound Helps Stocks Make Gains

LONDON (Alliance News) - A quiet start to the week in London has seen stocks drift higher midday Monday, as oil prices pared earlier losses.

The FTSE 100 index, which often follows movements in the crude price due to a heavy weighting of oil companies, was up 0.6%, or 34.57 points, to 6,180.62. The mid-cap FTSE 250 was up 0.3% to 16,886.89 and the AIM All-Share was up 0.2% to 712.69.

In Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both up 0.9%.

In New York, futures pointed Wall Street to a higher open. The DJIA was indicated up 0.1%, while the S&P 500 and Nasdaq 100 were both pointed up 0.2%.

Oil prices were making a cautious recovery from lows they set early Monday. The commodity was initially hit by news on Friday that Saudi Arabia will freeze crude production only if Iran and others do so as well. Bloomberg reported that the kingdom's deputy crown prince, Mohammed bin Salman, signalled in an interview that, if any country raises output, Saudi Arabia will follow suit.

Oil producers are scheduled to meet in Doha in Qatar this month to complete an accord capping output. Iran is expected to the attend the talks but has ruled out limiting oil supply as it aims to regain market share after sanctions were lifted in January.

Norbert Ruecker, head of commodity research, Julius Baer said the prospects of an orchestrated supply cut in the Doha meeting are dim.

"With the market still awash with oil and with the chances of a supply cut fading, the oil rally seemingly has run its course. We maintain our neutral view and still believe that oil prices experience a short-term bounce but no sustained recovery," said Reucker.

At midday, Brent oil was at USD38.63 a barrel versus its earlier low of USD38.10. It is now above the USD38.59 price seen at the London stock market close on Friday. West Texas Intermediate was at USD36.66 a barrel, off its earlier low of USD36.16.

In UK stock news, Mondi was the worst performer in the FTSE 100, down 2.4%. The Anglo-South African paper and packaging company said Russian authorities have started an investigation into its Russian business.

Mondi said the Federal Antimonopoly Service of the Russian Federation said last week it had initiated an investigation into Mondi Syktyvkar for violating anti-monopoly laws in regards to pricing of offset paper.

On Friday, the Federal Antimonopoly Service said it had opened a case against Mondi's unit in the country. It said it had established the cost of offset paper for domestic customers had increased around 50%, which did not match the change in the cost of producing and selling the goods.

On the gainers side of the index, British Gas owner Centrica was up 1.3% after a report in the Sunday Times said the company is in early talks over a tie-up with the oil and gas production arm of Engie, the French state-backed energy giant.

The report said that Centrica is "understood" to have hired investment bank JP Morgan for advice. Engie and Centrica co-own Cygnus, one of the largest gas fields in the North Sea.

"A combination with Engie's oil and gas arm, perhaps under a new joint venture vehicle, would allow both companies to reduce costs by cutting overlap and extracting better terms from suppliers. It is unclear whether a deal will be struck," the report said.

There was a scarcity of news among mid-caps. Wealth manager Brewin Dolphin was up 3.0% after N+1 Singer upgraded it to Hold. The broker said the recent recovery in key benchmarks for Brewin Dolphin and the discount at which it traded to peers makes the stock look attractive.

The merger between Just Retirement Group and Partnership Assurance Group was completed, paving the way for the newly combined JRP Group PLC to begin its first day of trading on the London Stock Exchange on Monday.

The combined company, valued at GBP1.4 billion by market capitalisation and with GBP15 billion in assets under management, offers defined benefit pensions de-risking to corporate clients, individually underwritten retirement income products, care plans for people moving into residential care, and lifetime mortgages.

The stock was quoted at 151.50p per share at midday.

Sepura was the worst performer in the FTSE All-Share, down 29%. The critical communications provider said its earnings before interest, tax, depreciation and amortisation in its recently ended financial year will be lower than expected.

Adjusted Ebitda for the year ended April 1 will be between EUR16 million and EUR20 million, the company said, missing expectations for the year. It said this was due to two significant orders being delayed into the first quarter of the new financial year, as well as a EUR2.6 million hit from adverse foreign exchange rates.

Chemring Group was the best performer in the index, up 9.0% after it said the implementation of its ammunition contract with a customer in the Middle East has started, with a letter of credit in place and an advance payment now received.

The defence contractor said in-house and supply-chain production has started on the contract, with initial revenue to be recognised in the second quarter of its current financial year to the end of October. Chemring expects the deal to make a significant contribution to its results in the 2016 financial year.

In the AIM All-Share, Landore Resources saw its share prices surge, tripling from their closing price on Friday, after the company said it made a significant gold discovery at the Junior Lake project in Ontario, Canada.

Landore said follow-up drilling on the BAM East gold prospect at the project has established the presence of a significant gold discovery at the site, with gold mineralisation open along the east and west of the site.

Intersections of up to 5.74 grams per tonne of gold were seen in the drill holes, Landore said, adding current drilling indicates mineralisation may be increasing with depth.

Still ahead in the thin economic calendar, the ISM New York index is due at 1445 BST, while US labor market conditions and factory orders are both at 1500 BST.

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

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