LONDON MARKET OPEN: FTSE Edges Up As Smith & Nephew And Lloyds Gain

(Alliance News) - The FTSE 100 was hesitantly in the green early Thursday amid ongoing caution surrounding the coronavirus outbreak, though well-received results from Smith & Nephew and Lloyds Bank were helping to lift the index.

The FTSE 100 was up 3.32 points, or 0.1%, at 7,460.34 early Thursday. The mid-cap FTSE 250 index was up 75.95 points, or 0.4%, at 21,926.81. The AIM All-Share index was up 0.3% at 975.71.

The Cboe UK 100 index was up 0.1% at 12,641.25. The Cboe 250 was up 0.4% at 19,756.90, and the Cboe Small Companies flat at 12,482.35.

In mainland Europe, the CAC 40 in Paris and DAX 30 in Frankfurt both were own 0.1% early Thursday.

"European indices have opened on a slightly softer note, backtracking from a big up day. European shares had already been pricing in the extra Chinese stimulus efforts so are looking ahead to the release of accounts of the latest ECB meeting later," said Jasper Lawler at London Capital Group.

China announced it will cut interest rates in a bid to boost the economy, as it battles the economic fallout of the new coronavirus outbreak.

The reduction in the loan prime rate – one of the preferential rates commercial banks impose on their best customers and which serves as a reference for other lending rates - is the latest measure to help companies struggling through the epidemic.

The one-year LPR was lowered to 4.05% from 4.15%, the People's Bank of China said in a statement. The five-year LPR – on which many lenders base their mortgage rates - was also lowered to 4.75% from 4.8%.

The rate reduction comes as Beijing battles to control a virus epidemic that has infected over 74,500 people in the country.

China reported a big drop in new coronavirus cases on Thursday, fuelling hopes the epidemic is nearing its peak. More than 600 new infections were reported in Wuhan, ground zero of the virus, marking the lowest daily tally since late January, and well down from the 1,749 new cases the day before.

In Tokyo on Thursday, the Nikkei 225 index ended up 0.3%. In China, the Shanghai Composite closed up 1.8%, while the Hang Seng index in Hong Kong closed down 0.2%.

At the top of London's FTSE 100 was Smith & Nephew, the stock up 6.0% after the medical technology firm reported an improved rate of underlying revenue growth for 2019.

Revenue for 2019 amounted to USD5.14 billion, up 4.8% on the year before. Underlying revenue growth was 4.4%, a significant improvement on the 2% recorded for 2018.

Pretax profit was slightly lower at USD743 million versus USD781 million the year before, hampered by increases in selling, general & administrative expenses as well as research & development costs.

The medical technology business recorded a trading profit margin of 22.8%.

For 2020, Smith & Nephew expects underlying revenue growth around 3.5% to 4.5%, which equates to a range of 4.0% to 5.0% on a reported basis. The trading profit margin for 2020 should be at or "slightly above" that achieved in 2019.

Lloyds Banking shares were up 3.1% despite the lender taking a hit to 2019 from a hefty payment protection insurance charge.

Net interest income for 2019 amounted to GBP10.18 billion, down from GBP13.40 billion in 2018.

Pretax profit was down 26% to GBP4.39 billion from GBP5.96 billion a year ago, hurt by payment protection insurance provisions of GBP2.45 billion in the year, versus just GBP750 million in 2019.

"The upside to all of this is that at least the PPI saga looks to be finally behind them, with no further provisions made in this quarter, so there's a big silver lining there," said Michael Hewson at CMC Markets.

At the bottom of the FTSE 100 was Imperial Brands, down 4.1% as the tobacco major went ex-dividend, meaning new buyers no longer qualify for the latest payout. GlaxoSmithKline, down 1.5%, also was ex-dividend.

The economic events calendar on Thursday has UK retail sales figures at 0930 GMT, followed by Irish inflation at 1100 GMT and minutes from the European Central Bank's January meeting at midday.

Ahead of the retail sales data, sterling was quoted at USD1.2888 early Thursday, down from USD1.2947 at the London equities close on Wednesday.

"Today's UK data is likely to receive a lot of attention as markets look for indications that the post-election activity pickup is continuing," said Lloyds Bank.

The euro traded at USD1.0788 early Thursday, soft against USD1.0793 late Wednesday. Against the yen, the dollar was quoted at JPY111.67, up from JPY110.93.

Brent oil was trading at USD59.02 a barrel early Thursday, up from USD58.88 late Wednesday.

Gold was quoted at USD1,609.10 an ounce early Thursday, higher than USD1,605.82 on Wednesday.

"Our best assumption is that the [gold] breakout holds and that prices move in the direction of 1650 per oz in fairly short order," said LCG's Lawler.

By Lucy Heming; lucyheming@alliancenews.com

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