LONDON MARKET OPEN: Airlines Up As Cobham Suffers From Profit Warning

Thu, 16th Feb 2017 08:41

LONDON (Alliance News) - Stocks in London opened slightly lower on Thursday, giving back some of the US-driven gains made on Wednesday, with airline stocks in favour and oil producers falling after amid soft crude prices.

The FTSE 100 index was down 0.2%, or 14.40 points, at 7,288.01. The FTSE 250 index was down 0.1% at 18,810.16, but the AIM All-Share was up 0.1% at 907.55.

Stocks going ex-dividend also were dragging on London's indices, with blue-chips Imperial Brands down 1.3% and AstraZeneza down 2.7%, among others.

Cobham was the worst FTSE 250 performer after announcing a further profit warning for 2016.

The BATS UK 100 index was down 0.3% at 12,337.13, and the BATS 250 was 0.1% lower at 17,112.36, but the BATS Small Companies index was up 0.1% at 10,988.67.

The US Energy Information Administration said on Wednesday that US stockpiles rose 9.5 million barrels in the week ended on February 10, confirming an industry report late Tuesday. Though this was below the 13.8 million barrels increase reported for the previous week, the EIA said total US inventories are at an all-time peak of 518.12 million barrels, while gasoline stocks also touched a record.

Oil prices have remained on the back foot so far this week, with Brent oil having reached USD56.79 on Monday but being quoted on Thursday morning at USD55.84. Nevertheless, the North Sea benchmark was firm against the level at the London equities close on Wednesday of USD55.75 a barrel.

Royal Dutch Shell 'A' shares were down 1.1%, while BP was down 0.8%.

Airline stocks were the main gainers in the FTSE 100, with British Airways-owner International Consolidated Airlines Group up 2.6% and easyJet up 1.4%. FTSE 250-listed Wizz Air Holdings was up 1.3%. Meanwhile, Ryanair Holdings was up 0.9%.

Airline stocks received a boost after Air France-KLM reported higher net profit in its fourth quarter, rising to EUR362 million from EUR276 million in the prior year. Paris-listed Air France-KLM shares were 7.8%.

Wizz Air also announced the opening of a new base at Luton airport, north of London.

The CAC 40 index in Paris and the DAX 30 in Frankfurt were both flat.

In Asia on Thursday, the Japanese Nikkei 225 index closed down 0.5%, retreating from a strong 1.0% gain on Wednesday. In China, the Shanghai Composite rose 0.5%, while the Hang Seng index in Hong Kong ended 0.5% higher.

In a thin economic calendar on Thursday, US initial and continuing jobless claims are at 1330 GMT, as is the Philadelphia Fed manufacturing survey.

But before that, the European Central Bank releases at 1230 GMT the accounts of its last monetary policy meeting held on January 19.

"The ECB minutes will likely show strong support for the need for a sustained adjustment of inflation. We will also be looking for further information on the implementation of purchases of bonds trading below the deposit rate," says Societe Generale analyst Michala Marcussen.

ECB President Mario Draghi struck a largely dovish tone in his press conference after the January meeting, as he said he is unconvinced by the recent rise in inflation.

Preliminary data from Eurostat released last month after the ECB meeting showed that eurozone inflation accelerated strongly in January, led by energy prices, while the core figure held steady. The eurozone consumer price index rose 1.8% year-on-year following 1.1% increase in December. Core inflation, which excludes energy, food, alcohol and tobacco prices, was 0.9% in January, unchanged from December.

In January, the ECB left its key interest rates unchanged and retained its asset purchases of EUR80 billion a month till March. Thereafter, asset purchases will be reduced to EUR60 billion a month until December 2017. Asset purchases can be extended beyond December if necessary, the ECB added.

Elsewhere in London, Lancashire Holdings was up 7.1% despite saying its profit and premiums written dropped in 2016 amid pressure on prices. The specialist insurer reported a pretax profit of USD150.4 million for 2016, down 12% from USD171.7 million the prior year.

Aldermore Group and Shawbrook were up 3.7% and 2.9%, respectively, after Panmure Gordon initiated both challenger banks with a Buy recommendation.

Cobham was down 21%. The firm announced a further profit warning for 2016 and said meeting expectations in 2017 will be challenging, as it booked a series of new writedowns following a review of the business.

Cobham had already in January warned on its 2016 results, its third downgrade for the year, and it added a fourth warning on Thursday. The defence and aerospace engineer said its underlying trading profit will be around GBP225.0 million, compared to the GBP245.0 million to which it had already cut its guidance back in January.

In addition, Cobham said it feels delivering a performance in 2017 in line with 2016 may prove "challenging". It said the woes it has suffered in 2016 have been caused by a number of operational issues across the business. While measures are being taken to remedy these problems, they are at an early stage and won't provide an immediate improvement.

By Daniel Ruiz; danielruiz@alliancenews.com