LONDON MARKET OPEN: Lloyds Falls While Ex-Dividends Drag Indices

LONDON (Alliance News) - Share prices in London opened lower Thursday, with ex-dividend stocks dragging down the FTSE 100 and the FTSE 250, while blue-chip lender Lloyds Banking Group was down after reporting its first-quarter pretax profit fell by almost half.

The FTSE 100 was down 0.6%, or 42.72 points, at 6,276.39. The FTSE 250 was down 0.2% at 17,046.31 and the AIM All-Share was up 0.1% at 729.69.

Lloyds said its first-quarter pretax profit fell by almost half, hit by market volatility and the cost of redeeming expensive debt with the aim of boosting interest margins. Pretax profit fell to GBP654 million in the three months ended March 31, Lloyds said in a statement, from GBP1.21 billion the corresponding quarter a year earlier.

Underlying profit, which excludes costs related to redeeming the so-called enhanced capital notes and market volatility, fell by 5.7% to GBP2.05 billion. Redeeming the enhanced capital notes costs the bank GBP790 million in the quarter, while market volatility and asset sales cost GBP203 million.

The FTSE 100 was being undermined by stocks going ex-dividend, meaning new buyers no longer qualify for the latest dividend payment. ITV was down 5.9%, Legal & General down 5.5%, RELX down 1.6%, Unilever down 1.8%, and Travis Perkins down 1.7%.

At the other end of the index, Anglo American was the best blue-chip performer, up 2.7%. The multi-commodity miner said it has struck a deal to sell its niobium and phosphates businesses to China Molybdenum Co for a total cash consideration of USD1.50 billion.

Anglo American is downsizing its business and offloading its non-core business units, and the niobium and phosphates businesses were one of the first to be put up for sale as part of the company's restructuring programme.

Meanwhile, Intu Properties was up 1.2%, benefiting from an upgrade to Neutral from Sell by Goldman Sachs.

In the FTSE 250, industrial valve and pumps maker Weir Group was the biggest gainer, up 5.5%, after it said trading in the first quarter was slightly ahead of its expectations, boosted by cost cutting and a resilient performance from its minerals arm.

The company, which has been hit hard by the turmoil in the oil and gas and mining markets, said its like-for-like order input in the first quarter was down 22% year-on-year, with revenue declining by a broadly similar amount. Revenue in the Minerals division, however, was stable on a like-for-like basis in the quarter, with input falling 5.0% but original equipment input better than anticipated.

Victrex was the biggest mid-cap decliner, down 6.4%. The polymer products company said it has entered into a consent decree with the US Federal Trade Commission concerning the inquiry into the sale and marketing of implantable grade PEEK polymer in the US by the group's subsidiaries, Invibio Inc and Invibio Ltd.

The consent decree will apply to all of Invibio's existing and future customer contracts, Victrex said, and means Invibio is unable to enter agreements or engage in practices that require its customers to purchase PEEK, a colourless thermoplastic polymer, exclusively at or beyond the device level from Invibio.

Ex-dividends Elementis, down 3.8%, Cobham, down 3.5% and Tullett Prebon, down 3.3%, were also dragging on the FTSE 250.

In Paris, the CAC 40 index was down 0.8%, as well as the DAX 30 in Frankfurt.

Unexpectedly, the Bank of Japan policy board voted 8-1 to hold its target of raising the monetary base at an annual pace of about JPY80 trillion. Policymakers voted 7-2 to maintain -0.1% interest rate on current accounts that financial institutions maintain at the bank.

The central bank revised down its economic growth outlook to 1.2% for the current financial year from the 1.5% estimated three months ago. The banks also downgraded its inflation forecast for the year through March 2017, expecting the consumer price index to rise 0.5%, compared with the 0.8% increase predicted in January.

Following the BoJ announcement, the dollar hit a one-week low against the yen at JPY108.77 early Thursday, having stood before the decision at JPY111.64.

The Nikkei 225 index in Tokyo ended down 3.6%. In China, the Shanghai Composite ended down 0.3%, while the Hang Seng index in Hong Kong is flat.

Separately, Japan's consumer prices decreased unexpectedly in March, after rising in the previous month, the Ministry of Internal Affairs and Communications said. The overall consumer price index edged down 0.1% year-on-year in March, reversing a 0.3% increase in February. Economists had expected prices to remain flat during the month.

The country's unemployment rate decreased unexpectedly in March, though slightly, the Ministry of Communications & Internal Affairs said. The seasonally adjusted jobless rate dropped to 3.2% in March from 3.2% in prior month. Economists had expected the rate to remain stable at 3.3%.

UK house prices growth slowed more than expected in April, the Nationwide Building Society showed. House prices increased 4.9% year-on-year in April, slower than the 5.7% expansion seen in March and 5% rise forecast by economists. Month-on-month, house price growth eased to 0.2% from 0.7% in March. Economists had forecast a 0.4% rise for April.

Still in the economic calendar Thursday, the eurozone's consumer confidence data are at 1000 BST. Germany's consumer price index is due at 1300 BST. In the US, initial and continuing jobless claims and gross domestic product data are both due at 1330 BST, while the US Energy Information Association natural gas storage data are due at 1530 BST.

The US Federal Reserve on Wednesday left its benchmark interest rate unchanged after a two-day meeting in Washington.

The Federal Open Market Committee voted 9-1 to keep the rate at a range of 0.25 to 0.5%, according to a statement. The statement appeared to leave open the possibility that there might be a rise in interest rates in June. The FOMC reiterated its intention to raise rates at a gradual pace. The last time it raised rates was after its December meeting.

References in Wednesday's statement to the improvement in US unemployment coupled with the omission of language contained in previous statements referring to risks posed by global economic and financial developments has been interpreted as meaning a rate hike is coming in June.

By Daniel Ruiz; danielruiz@alliancenews.com

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