LONDON MARKET MIDDAY: Resource Stocks Again Drive FTSE 100 Rally

LONDON (Alliance News) - The London stock market was telling a familiar story at midday Wednesday, with resource stocks leading a bargain-hunting rally, as they have done for most of this week, while investors shrugged off a downward revision to third quarter UK GDP.

The UK economy grew slightly less than initially estimated in the third quarter, the Office for National Statistics said Wednesday. Gross domestic product climbed 0.4% from the second quarter, which was revised down from 0.5% estimated at the end of November. On a yearly basis, growth was revised down to 2.1% from 2.3%.

"Although no reason for the Bank of England to be unduly worried, it does rather reduce the chances of [Governor] Mark Carney following [US Federal Reserve Chair] Janet Yellen's lead next year in raising rates," said IG market analyst Alastair McCaig.

In a separate release, the ONS said the UK current account deficit remained unchanged at GBP17.5 billion, but much higher than the expected deficit of GBP21.5 billion. The deficit equated 3.7% of GDP.

The pound dipped against the dollar after the economic data but recovered afterwards. At midday, the pound traded at USD1.4886, higher than the eight-month low of USD1.4803 it reached on Tuesday.

The FTSE 100 was reading up 2.1% at 6,208.06 points. The FTSE 250 was up 0.8% at 17,304.64 and the AIM All-Share was up 0.1% at 724.39. European stocks also joined in the rally, with the CAC 40 in Paris up 1.9% and the DAX 30 in Frankfurt was up 1.8%.

Wall Street was called for a modestly higher open after strong gains on Tuesday. Futures pointed the DJIA up 0.4%, the S&P 500 up 0.2% and the Nasdaq 100 up 0.3%.

Resource companies have struggled throughout 2015, with weaknesses in Chinese demand and excess market supply weighing on commodity prices, but at the tail-end of the year, stock market investors appear to be in the hunt for a bargain.

Miner Anglo American was the best performer in the FTSE 100, up 7.1%, and joined by peers BHP Billiton, up 5.7%, and Glencore, up 5.7%.

Oil and gas company BG Group was up 5.5%, Royal Dutch Shell 'B' shares traded up 4.1%, and BP was up 3.4%. The price of Brent oil remained stable, trading at USD36.60 a barrel, compared to USD36.39 a barrel at the close Monday. Brent hit parity with US benchmark West Texas Intermediate on Tuesday. WTI traded at USD36.65 a barrel midday Wednesday.

There could be some volatility for oil prices later when the US Energy Information Administration releases its crude oil stock at 1530 GMT.

In the FTSE 250, oil and gas companies dominated the risers, with Tullow Oil up 8.3%, Cairn Energy up 7.1% and Nostrum Oil & Gas up 7.0%.

GAME Digital was the worst performer in the FTSE All-Share, down 39% at 125.12 pence, having hit an all-time low of 119.88p earlier in the session. The gaming retailer issued a profit warning as it was hit by "disappointing" sales ahead of its key Christmas trading period and as it saw a bigger-than-expected drop-off in content sales for the previous generation of video games consoles.

The company reported a 57% decline in sales for content for the Xbox 360 and PlayStation 3 consoles in the 21 weeks to December 19, which it described "unexpectedly steep". This more than offset a 20% rise in sales of content for the new generation Xbox One and Playstation 4 systems, which were released towards the end of 2013.

Shares in Panmure Gordon were down 20%, making it one of the worst performers in the AIM All-Share index, after it said tough market conditions have continued into the second half of the year, leaving it looking robust going into 2016 but with revenue set to miss expectations in 2015.

The stockbroker and investment bank said a decline in capital market transactions has been seen in the second half of 2015, with a number of transactions pushed into 2016. Due to this, it will make a post-tax loss of GBP4.0 million to GBP4.5 million for all of 2015, which would compared to a GBP1.5 million profit a year earlier.

InterBulk said it will be acquired by Den Hartogh for 9.00 pence per share, more than double its closing price on Tuesday of 4.00p. The agreement values InterBulk at GBP42.1 million in total. On Wednesday morning, the company's share price rose to 8.99p.

InterBulk said its board of directors has unanimously recommended the takeover offer and expects the deal to complete in the first quarter of 2016.

Low-cost African carrier fastjet, up 23%, said it received clearance for and has started sales of flights between Kenya and Tanzania. The company said the flights will start on January 11 and will operate daily between Dar es Salaam in Tanzania and Nairobi in Kenya.

The company's shares had closed down 7.2% on Tuesday after it said challenging market conditions and currency headwinds will lead to lower than anticipated revenue in 2015 and 2016.

Still ahead in the economic calendar, US personal consumption expenditures, income and spending data at 1330 GMT and durable goods orders, also at 1330 GMT. The Reuters/Michigan Consumer Sentiment index is at 1500 GMT, the same time as new home sales, and Energy Information Administration's crude oil stocks are at 1530 GMT.

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

Copyright 2015 Alliance News Limited. All Rights Reserved.