LONDON MARKET MIDDAY: Wall Street To Follow Europe And China Gains

LONDON (Alliance News) - UK shares are higher Friday midday as Wall Street is expected to take a positive lead from European stocks, boosted by optimism for a deal between Greece and its creditors, and another positive session for Chinese stock markets.

The FTSE 100 index is up 1.3% at 6,667.00, with only three stocks in the red. The FTSE 250 is up 0.9% at 17,448.15, and the AIM All-Share is up 0.4% at 747.45.

European stocks are once again outperforming London, with the CAC 40 in Paris up 2.9% and the DAX 30 in Frankfurt up 2.1%.

Meanwhile, US futures point to a higher open, with the Dow Jones Industrial Average pointed up 1.0%, the S&P 500 up 1.1% and the Nasdaq 100 up 1.2%.

The most important event in the US will be later in the afternoon, as US Federal Reserve Chair Janet Yellen is due to speak about the economic outlook in Cleveland, Ohio, at 1730 BST. Before that, US wholesale inventories are expected 1500 BST.

"With tensions high over the possible approval of a Greek bailout over the weekend, Yellen will probably try not to signal any change to her economic outlook," says CMC Markets analyst Jasper Lawler. "She will receive questions though, so there is some scope for something unexpected."

Outside the US, attention is on Greece. In a move seen as the Mediterranean country's final bid to keep the euro, the government placed a cash-for-reforms proposal before creditors late Thursday. It comprises spending cuts and tax hikes in exchange for a third bailout, acceptance of which will pave the way for further negotiations between both sides.

Eurogroup President Jeroen Dijsselbloem received the proposal from Greece, his spokesman Michel Reijns said in a Twitter message. Eurozone finance ministers will meet on Saturday in Brussels to review the Greek request.

That was meant to be followed by a summit attended by 28 national leaders of the EU on Sunday to reach a final agreement. However an EU official said Friday morning that no EU summit will be held on Sunday if the Eurogroup of finance ministers agrees with the Greek offer on Saturday.

Prime Minister Alexis Tsipras' request for at least EUR53.5 billion in bailout funds for the next three years will be presented in the Greek parliament for approval on Friday. The new list of reforms makes concessions to creditors' demands in key areas including VAT and pension reform, according to a copy of the document seen by dpa.

The Greek program is "serious, credible" and shows "a determination to remain in the euro area", French President Francois Hollande said in a message on Twitter. Nothing is decided yet, everything can be done, he added.

However, IG Markets analyst Alastair McCaig says "there still remains the tricky issue of the Greek parliament approving this proposal, which was by and large rejected in a national referendum less than a week ago," he writes. "Assuming that the Greeks can all agree with themselves we would then need to see the creditors approve this proposal over the weekend. Of course the more cynical market observer will be asking themselves how reliable a Greek promise is anyway."

London and European stocks also are being supported by a second consecutive session of strong gains by Chinese stock markets following successive declines. The Hang Seng closed up 2.1% in Hong Kong and the Shanghai Composite rose 4.5%.

The gains came as China's securities regulator banned senior management and investors who own stakes in businesses exceeding 5% from selling their shares for next six months, and China's central bank injected CNY35 billion into the money market by buying bonds.

The recovery in Chinese equities also lifted metal prices, after they had fallen to multi-year lows earlier in the week.

"This quick recovery [in metal prices] supports our view of fundamentals having taken a backseat as markets were predominantly driven by concerns about Chinese growth and uncertainties related to the equity market correction," says Carsten Menke, commodities research analyst at Julius Baer.

"It remains to be seen whether the Chinese economy will escape unscathed from the equity market correction or whether it will weigh on consumption, e.g. purchases of jewellery and cars," the analyst adds.

The recovery has supported shares in London-listed miners, with BHP Billiton up 2.0%, Glencore up 1.2% and Anglo American up 1.0%.

Elsewhere on the corporate front, InterContinental Hotels Group is up 3.0% after it has agreed to sell its stake in the InterContinental Hong Kong to Supreme Key for USD938 million. Nomura says the value is at the top end of the broker's appraised value of USD783-940 million, and Numis says this looks like a "very acceptable price" and the achieved price is some USD150 million above its expectation.

IHG will retain a 37-year management contract for the hotel, with three ten-year extension rights. It expects to be paid management fees of around USD8 million a year, which will increase after the refurbishment is completed.

International Consolidated Airlines Group is up 2.6%, after Irish budget carrier Ryanair Holdings said its board has voted unanimously to accept IAG's offer for its stake in Aer Lingus Group, removing the final barrier in the way of IAG's takeover bid and paving the way for the protracted transaction to go through. Ryanair shares trade up 2.7%, and Aer Lingus is up 2.4%.

In the AIM All-Share, Aurasian Minerals shares are up 18%. The South-East Asian focused miner said it has appointed Peter Mullens as its new chief executive, and that Mullens has agreed to subscribe to new Aurasian shares alongside a new non-executive director to raise GBP207,500 for the company. The company said Mullens has over 30 years of experience in mining and exploration geology and is currently a director of Royal Road Minerals, which is listed on the Toronto Stock Exchange. Previously, he had held roles at Lydian International and Aquiline Resources.

Reneuron Group is up 16% at 5.66p. The stem-cell company posted a widened pretax loss for its 2015 financial year due to rises in research and development and administrative costs, but said it has placed 1.37 billion shares at 5 pence per share to raise GBP68.4 million to back its therapeutic programmes. Shares in the company closed at 4.875 pence on Thursday.

By Daniel Ruiz; danielruiz@alliancenews.com

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