LONDON MARKET OPEN: Miners Support Early Gains But ITV Falls

LONDON (Alliance News) - UK stocks opened mostly higher Wednesday, with miners supporting the gains amid resilient commodity prices, while ITV was the worst blue-chip performer even though the television broadcaster said it expects "another good year" in 2016.

The FTSE 100 was up 0.3%, or 21.51 points, at 6,174.39.

The FTSE 250 was up 0.3% at 16.844.22, while the AIM All-Share was down 0.1% at 696.41. In Europe, the CAC 40 index in Paris was up 0.5% and the DAX 30 in Frankfurt was adding 0.7%.

Brent crude was flirting with the USD37 line early Wednesday, a level it hasn't touched since early January. The North Sea benchmark was at USD36.57 a barrel Wednesday after the London equities open, slightly higher than USD36.47 a barrel at the close Tuesday. Meanwhile, gold was quoted at USD1,229.42 an ounce, below its level of USD1,233.30 at the close on Tuesday, but still retaining much of the gains from its impressive 2016 rally.

"The recovery in copper, iron ore and oil prices has been a key arbiter in the rebound seen in mining and oil and gas stocks over the past few weeks, and the recent recognition by Chinese authorities that steps need to be taken to cut back on the overcapacity in the sector do appear to have also helped sentiment," said CMC Markets chief market analyst Michael Hewson.

The FTSE 350 Mining sector index was up 2.8% early Wednesday, the best performing sector index, having risen by 17% so far in 2016. Antofagasta was up 5.6%, Anglo American up 3.6%, BHP Billiton up 3.3% and Glencore up 3.3%.

Oil-related stocks also were higher, but not to the same extent, with Royal Dutch Shell 'A' shares up 0.6% and BP up 0.3%.

Shares in Schroders were up 1.6%. Michael Dobson is set to step down as the chief executive of blue-chip fund manager Schroders this week after more than 14 years running the business, the Financial Times reported.

Peter Harrison, the head of investment at Schroders, will take over from Dobson, according to people familiar with the matter. He had been widely-tipped as Dobson's heir after being appointed to the board in 2014, the FT said. Dobson's departure is expected to be announced on Thursday alongside Schroders' 2015 results.

At the other end of the index, ITV was down 3.1%, the worst blue-chip performer, even though it reported a rise in pretax profit for 2015, increased its regular dividend, and announced a bigger special dividend as well.

The broadcaster proposed a final dividend of 4.1 pence per share, taking its total dividend for 2015 to 6.0p, up from 4.7p in 2014. Additionally, it plans a 10.0p per share special dividend, ahead of the 6.25p special dividend it paid in 2014, which ITV said reflects its strong cash generation and confidence in its business.

ITV reported a pretax profit of GBP641 million in 2015, up from GBP605 million the year before, on revenue of GBP2.97 billion, up from GBP2.59 billion. This included 6% growth in net advertising revenue to GBP1.72 billion, up from GBP1.63 billion the year before, and ahead of the company's previous guidance of 5% growth.

It reported earnings per share, adjusted for exceptional costs, of 16.5p, up from 13.8p in 2014, and ahead of consensus expectations of 16.1p.

For the year ahead, ITV said it expects its net advertising revenue for the first quarter to be flat, marginally behind the market, compared to 12% growth in the first quarter of 2015.

Pearson was down 2.2% after Goldman Sachs downgraded the education and publishing group to Sell from Neutral.

Meanwhile, Intertek was down 0.4%. The company booked a big impairment charge in its 2015 results related to the weakness of the oil and gas industry, causing the testing, inspection and certification services company to swing to a significant loss.

Intertek said its pretax loss for the year to the end of December was GBP307.7 million, swung from a GBP252.2 million profit a year earlier. The loss was driven by a GBP577.0 million non-cash impairment charge Intertek booked on past acquisitions as a result of the continued difficulties facing its oil and gas-related businesses.

Revenue for the group rose to GBP2.17 billion from GBP2.09 billion and, stripping out the impairment charge, underlying pretax profit rose to GBP319.2 million from GBP300.2 million.

Intertek said it will pay a final dividend of 35.3 pence per share, up from 33.1p in 2014, taking its total dividend for 2015 up to 52.3p from 49.1p.

In the FTSE 250, Virgin Money was the best mid-cap performer, up 8.8%. The lender said its pretax profit surged in 2015 as it performed ahead of the wider market on core mortgages, savings and credit card growth.

In it first set of full-year results since floating in late 2014, the mortgage provider said its pretax profit for the year to the end of December increased to GBP138.0 million from GBP34.0 million a year earlier, helped by higher income and one-off costs it booked the year prior on its listing in London and the acquisition of mortgage lender Northern Rock.

Total income for Virgin Money hit GBP454.8 million in 2015, up from GBP367.3 million in 2014, accompanied by higher interest income but lower costs. Net interest income rose 25% to GBP456.1 million from GBP366.1 million, as its underlying net interest margin rose to 165 basis points from 150 points in 2014.

Virgin Money will pay a final dividend of 3.1 pence per share, taking its total dividend payout to 4.5p.

Entertainment One was down 4.7%, at the bottom of the FTSE 250, though it said trading was in line with expectations in the first nine months of its financial year.

The entertainment company, which produces television and film content said underlying earnings before interest, tax, depreciation and amortisation was 15% higher in the nine months to December 31, year-on-year, reflecting a strong performance in Television and from acquisitions, partly offset by weaker trading in Film.

In Asia on Wednesday, the Japanese Nikkei 225 index closed up 4.1%. In China, the Shanghai Composite ended up 4.2%, while the Hang Seng index in Hong Kong is up 3.1%.

Asian investors shrugged off the news that China's credit rating outlook was downgraded by Moody's, premised on weak fiscal metrics, a fall in reserve buffers and uncertainty about the government's ability to implement reforms. Moody's Investors Service lowered the outlook to 'negative' from 'stable', while affirming the government bond ratings.

The sizeable foreign exchange reserve buffers give the authorities time to implement reforms and gradually address imbalances in the economy. This underpins the decision to retain its Aa3 rating, Moody's said. Explaining the rationale for assigning a negative outlook, the agency said the fiscal strength is expected to diminish further, albeit from very high levels.

In the economic calendar Wednesday, UK construction Purchasing Manager's Index is due at 0930 GMT, eurozone producer price index is at 1000 GMT.

In the US, MBA mortgage applications are due at 1200 GMT, ADP employment change data are due at 1315 GMT. The Institute of Supply Management New York index is due at 1445 GMT and the Energy Information Agency crude oil stocks data are expected at 1530 GMT. The US Federal Reserve Beige Book is due at 1900 GMT.

FTSE Russell will release the result of its quarterly FTSE index review after the London equities close. Paddy Power Betfair and Mediclinic International are set to join the FTSE 100 after growing bigger from their recent mergers.

The betting firm and the hospital operator are expected to be joined by business-information publisher Informa and Wm Morrison Supermarkets, which bounces back into the blue-chip index having just been relegated in the last FTSE index review in December.

By Daniel Ruiz; danielruiz@alliancenews.com

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