LONDON MARKET OPEN: FTSE 100 Slips But HSBC, Aviva And RSA Gain

Tue, 03rd May 2016 07:35

LONDON (Alliance News) - UK stocks were lower soon after the open Tuesday and ahead of a UK manufacturing Purchasing Manager's Index reading at 0930 BST, with financial stocks RSA Insurance Group, HSBC Holdings and Aviva among the best blue-chip performers.

The FTSE 100 was down 0.2%, or 11.74 points, at 6,230.15. The FTSE 250 was up 0.3% at 16,847.77, and the AIM All-Share up 0.2% at 729.45.

In Europe, the CAC 40 index in Paris was down 0.4% and the DAX 30 in Frankfurt down 1.1%.

RSA Insurance shares rose 3.7% after Barclays upgraded the FTSE 100 insurer to Overweight from Equal Weight.

HSBC was another blue-chip gainer, up 2.8%. The lender reported a 14% fall in its first-quarter pretax profit amid tough conditions in the banking sector at the start of 2016.

HSBC said pretax profit fell to USD6.11 billion in the three months ended March 31, from USD7.06 billion the corresponding quarter a year earlier. A 3.8% reduction in adjusted revenue to USD13.91 billion was partly offset as adjusted operating expenses fell by 1.0% to USD7.87 billion.

Investec analyst Ian Gordon was positive on the update from HSBC, saying that the size of the decline in revenue was "much better than expected", and "is really quite creditable", compared to the figures reported last week by some of its peers in the banking sector.

Loan impairment charges, adjusted for currency translation, jumped to USD1.16 billion from USD469 million, with HSBC citing "higher specific charges across a number of countries". There were additional charges related to the oil and gas, and metals and mining sectors, according to the bank, which said credit quality remains robust.

"Our first quarter performance was resilient in tough market conditions that affected the entire banking sector," Chief Executive Stuart Gulliver said in a statement.

Investec put its 455 pence price target and forecasts Under Review, keeping a Hold recommendation on HSBC shares.

FTSE 100-listed Aviva was up 1.2% after saying it completed the acquisition of an additional 23% stake in its Indian life insurance joint venture from partner Dabur Invest, taking the blue-chip life insurer's holding up to 49%.

The move follows regulatory changes allowing Aviva to take a stake of up to 49%, the maximum allowed under India's foreign direct investment limits. The joint venture, formed in 2001, contributed GBP36 million to Aviva's net assets in 2015, and the transaction with Dabur is expected to have a "neutral impact" on Aviva's net assets.

Blue-chips United Utilities and Severn Trent were up 0.5% and down 0.2%, respectively. The UK Competition & Markets Authority approved the joint venture between the two companies for their non-household water and waste-water retail businesses.

The blue-chip utilities struck the agreement in March, with the combined business to primarily comprise of billing and customer service activities and located in Stoke-on-Trent. The joint venture will be called Water Plus.

In the FTSE 250, Just Eat was the best performer, up 7.8%, after it raised its guidance for full-year revenue and earnings following a successful first quarter.

The online takeaway delivery company said it achieved 57% growth in orders in the first quarter of 2016 year-on-year to 31.5 million, up 41% on a like-for-like basis. It said each of its segments delivered strong growth, particularly in the UK which saw a 40% increase in orders.

Centamin was another mid-cap gainer, up 3.6%. The gold miner said gold production in the first quarter grew sequentially and year-on-year, resulting in the company leaving its guidance for the year unchanged. Gold production in the quarter to the end of March was 125,268 ounces, up 6.0% on the fourth quarter of 2015 and 16% higher year-on-year.

At the other end of the index, Aberdeen Asset Management was down 4.6%. The asset manager said first-half pretax profit almost halved amid fragile investor sentiment towards emerging markets, although the "strength" of the group's balance sheet allowed for investments such as bolt-on acquisitions.

Pretax profit fell to GBP98.8 million in the six months ended March 31, Aberdeen said in a statement, from GBP185.4 million in the corresponding half a year earlier. Aberdeen's interim dividend of 7.5 pence per share was unchanged.

In the economic calendar Tuesday, the UK Markit manufacturing PMI reading is due at 0930 BST. Lloyds economist Rhys Herbert expects to see in April a second consecutive rise in the headline index to 51.3, from a 51.0 reading in March.

"That would still leave it significantly below the levels seen in January [51.9] and much of last year and modestly below the long run level of 51.5," Herbert said. "Also of interest will be the detail of the survey, particularly orders. These rose sharply in March, potentially signalling stronger activity ahead. A repeat in April would be a positive indicator for output gains in the second half of the year."

Meanwhile, the eurozone producer price index is set for 1000 BST. Also Tuesday, the European Commission releases its economic growth forecasts for the eurozone. In the US, the Redbook index is due at 1355 BST, while the ISM New York index is at 1445 BST. The American Petroleum Association weekly crude oil stocks data are due at 2130 BST.

In Asia on Tuesday, the Shanghai Composite ended up 1.9%, while the Hang Seng index in Hong Kong is down 1.2%. The Tokyo equity market was closed Tuesday for the Constitution Day holiday.

The manufacturing sector in China remained in contraction in April, the latest survey from Caixin revealed, with a Purchasing Manager's Index score of 49.4. That missed forecasts for 49.8, and it was down from 49.7 in March. It also moved further beneath the line of 50 that separates expansion from contraction.

The Reserve Bank of Australia lowered its key rate unexpectedly by 25 basis points, saying inflationary pressures were weaker than projected. The RBA reduced its benchmark cash rate to 1.75% from 2.00%, effective May 4. This was the first reduction since May 2015, when the bank cut it by a quarter point.

By Daniel Ruiz; danielruiz@alliancenews.com