LONDON MARKET MIDDAY: Resource Stocks Drag FTSE As Brent Rally Stalls

LONDON (Alliance News) - Shares in London were mixed Monday, with the heavyweight resource sector dragging on the FTSE 100, as investors await this week's monetary policy decisions from the US Federal Reserve and the Bank of Japan.

The FTSE 100 was down 0.2%, or 14.54 points, at 6,295.90 at midday. The blue-chip index is heading toward a third consecutive session in the red, following the 2016 high reached last week. It touched a peak of 6,427.32 on Thursday, its highest level since early December, but ended lower that day, as well as on Friday.

The FTSE 250 index of mid-caps was up 0.4% at 16,936.17 and the AIM All-Share was up 0.1% at 731.98.

"Equity markets have made a poor start to the week, still struggling to hold onto recent gains as bullish sentiment wanes and profit-taking continues ahead of central bank updates from the Fed and the BoJ," said Accendo Markets head of research Mike van Dulken.

The BoJ will announce its decision on Thursday, but before that the Fed's two-day monetary policy meeting is scheduled to finish on Wednesday.

Regarding the Fed, UBS analyst Drew Matus said the Swiss bank sees more "hawks", more dovish "doves" and a growing split even among members the bank would group as "neutral".

"The growing divisions are unlikely to drive policy decisions. However, they do suggest continued challenges to Fed communications as fewer members are likely to be giving a consensus view that would reflect the most likely course of action," said Matus.

Stocks in New York were expected to open lower, with the Dow 30, the S&P 500 and the Nasdaq 100 indices all pointed down 0.1%.

In the US corporate calendar, oil field services company Halliburton, private equity firm KKR and printer and copier maker Xerox release first-quarter updates ahead of the Wall Street open.

Still in the economic calendar, US new home sales are at 1500 BST, and the Dallas Federal Reserve manufacturing business index is at 1530 BST.

The FTSE 350 Mining sector index was by far the worst performing sector index in London, down 3.6%. The index had supported the FTSE 100 rally since the start of 2016, having reached its highest level since August 2015. However, the recent rally in miners appears to be running out of steam, accumulating three consecutive sessions of losses.

In the FTSE 100, Anglo American was down 6.1%, BHP Billiton down 4.8% and Rio Tinto down 3.1%. In the FTSE 250, Vedanta Resources was down 4.5%.

Vedanta's Cairn India subsidiary late Friday said its fourth-quarter net loss widened year on year, and it swung to a loss for the full financial year ended March 31. Vedanta holds a 59.8% stake in Cairn India.

Oil stocks also were among the biggest blue-chip decliners, with BP down 1.9% and Royal Dutch Shell 'A' shares down 1.8%.

Oil producers have benefited from an increase in crude prices, with Brent having recovered strongly from the multi-year lows around USD27 touched in January. However, the North Sea benchmark was taking taking a break from that rally Monday, with Brent standing at USD44.67 a barrel at midday in London, lower than the USD45.56 a barrel at the London equities close on Friday.

Among individual stocks in the FTSE 100, Imperial Brands, formerly Imperial Tobacco, was attracting investors attention following an upgrade to Buy from Neutral by Goldman Sachs. The stock was at the top of the blue-chip index, up 3.5%.

Meanwhile, Ted Baker was the best performer in the FTSE 250, up 5.4% also benefiting from a broker upgrade. Jefferies lifted its recommendation on the fashion retailer to Buy from Hold.

Mid-cap science and technology development group Allied Minds was the worst performer, down 7.2%. The company reported a widened pretax loss in what it called a "successful" 2015, as it increased investment in creating four new businesses and developing its existing businesses towards commercialisation.

It reported a pretax loss of USD98.0 million for 2015, widened from USD57.7 million in 2014, mostly as a result of higher selling, general and administrative expenses, and a big step up in research and development costs. Allied Minds said its group subsidiary ownership adjusted value, a key metric for the company, rose to USD535.8 million as at the end of 2015 from USD488.0 million at the end of 2014.

In Main Market, marketing services company St Ives was down 45% after saying it expects its underling pretax profit for its current financial year to be "materially below" its current expectations, and warned the following year would also be hit.

St Ives said its trading overall in the eight months to the beginning of April had continued to be "broadly in line" with its expectations, with revenue up 5% compared to the previous year. However, its outlook for the final quarter to end-July and following financial year has deteriorated. Global economic uncertainty has led to significant projects being deferred or cancelled, the group said.

European indices also were lower, with the CAC 40 in Paris down 0.5% and the DAX 30 in Frankfurt down 0.7%.

German business sentiment weakened slightly in April, survey results from the Ifo Institute showed. The Ifo Business Climate indicator dropped to 106.6 in April, while economists expected it to rise to 107.0 from the score of 106.7 in March. The current situation measure of the survey slid to 113.2 from 113.8. Economists had expected the score to remain at 113.8. Meanwhile, the expectations index of the survey rose to 100.4 in April from 100 in March. It was forecast to rise to 100.6.

In Asia on Monday, Tokyo's Nikkei 225 index closed down 0.8%, as did the Hang Seng in Hong Kong, whilst the Shanghai Composite slipped 0.4%.

By Daniel Ruiz; danielruiz@alliancenews.com

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