LONDON MARKET OPEN: GKN, Johnson Matthey Still Being Hit By VW Scandal

LONDON (Alliance News) - London share prices opened mixed Wednesday, with the FTSE 100 rebounding somewhat from Tuesday's decline and shrugging off the market losses seen in the US and China.

The FTSE 100 was up 0.5% at 5,964.0, but still below the 6,000 line, while the FTSE 250 was flat at 16,523.78 and the AIM All-Share was down 0.1% at 729.52.

In Europe, the CAC 40 in Paris was up down 0.6%, while the DAX 30 in Frankfurt was off 0.8%.

FTSE 100 engineer Smiths Group led the blue-chip risers, up 2.5%, after it said an improvement in margins helped its profit to edge higher in the year to the end of July, despite revenue falling, though it said its results for the current financial year will be more second-half weighed than normal.

The group said its Smiths Medical business delivered its highest revenue growth in more than a decade, while its John Crane energy services unit proved resilient, as challenges posed by the tough conditions in the oil and gas market were offset by its high exposure to aftermarket services in its revenue mix.

Smiths will pay a final dividend of 28.0 pence per share, meaning its total dividend increased by 2% to 41.0 pence.

London-listed oil-related stocks were taking back some of the losses seen on Tuesday, as oil prices rose overnight.

Brent crude price was at USD49.26 a barrel on Wednesday, standing at USD47.85 a barrel at the London close Tuesday. West Texas Intermediate was also higher at USD46.72 a barrel. At the London close Tuesday, WTI stood at USD45.62 a barrel.

As a result, BG Group was up 0.5%, Royal Dutch Shell 'B' shares up 0.5% and BP up 0.6%.

Among fallers, engineering company GKN, down 1.8%, and platinum group metals company Johnson Matthey, off 2.5%, are again in the red, hit by the news coming from German carmarker Volkswagen.

Volkswagen Chief Executive Martin Winterkorn vowed Tuesday to get to the bottom of an emissions-cheating scandal and said he intends to keep his job amid mounting pressure on Europe's biggest carmaker. Shares in the German carmaker crashed a further 26% Tuesday - beyond Monday's loss of 19% - after it issued a profit warning and admitted that emissions tests might have been manipulated for about 11 million cars worldwide.

VW said it was setting aside EUR6.5 billion in the third quarter to address possible costs. The company could face US government fines of more than USD18 billion, plus customer compensation claims and recall expenses.

Following Volkswagen's emissions scandal and profit warning, Societe Generale downgraded the automobile sector from Overweight to Neutral, warning that "investors are likely to stay away from this sector for a while (as they could be wondering which company might be next)."

Meanwhile, Deutsche Bank cut its recommendation on the German carmaker to Hold from Buy.

In the FTSE 250, Premier Oil was the best mid-cap performer, up 10%. The oil and gas producer said production is currently running above its full-year guidance, as it continues to focus on lowering costs and using its substantial hedging programme to battle the downturn in oil prices.

It said production since the start of 2015 has averaged 57,100 barrels of oil equivalent per day after the company completed its summer maintenance activities.

The current production rate is above the company's full-year production guidance to average 55,000 barrels of oil equivalent per day, which excludes any production that may come from the Solan field in the UK North Sea, which is expected to begin producing later in 2015.

There was economic data from China, where manufacturing activity contracted the most in six-and-a-half years in September, as orders and production declined at faster rates.

The flash manufacturing PMI fell to 47 in September from 47.3 in August, survey data from Caixin Insight Group and Markit showed Wednesday. This was the lowest score in 78 months and was below the consensus estimate of 47.5. A reading below 50 indicates contraction by the sector.

Stocks in China are lower, with the Hang Seng in Hong Kong down 2.6% and the Shanghai Composite closed off 2.2%. The Japanese market remained closed for holiday until Thursday.

Meanwhile, Wall Street ended lower Tuesday. The DJIA closed down 1.1%, the S&P 500 ended down 1.2% and the Nasdaq Composite finished down 1.5%.

In the US economic calendar, the Markit manufacturing PMI is due at 1445 BST, while Energy Information Administration crude oil stocks are at 1530 BST. Atlanta Federal Reserve President Dennis Lockhart is expected to speak at 1730 BST before the Columbus Rotary Club in the state of Georgia.

By Daniel Ruiz; danielruiz@alliancenews.com

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