LONDON MARKET OPEN: Oil Price Decline And Miners Weigh On FTSE 100

LONDON (Alliance News) - A decline in oil prices just before the open left stocks in London trading lower early Tuesday, with Antofagasta the biggest blue-chip faller after it skipped its final dividend and reported much lower earnings.

The Chilean copper miner reported net earnings from continuing operations of only USD5.5 million in 2015, a dramatic fall from the USD422.4 million reported in 2014, as revenue dropped 34% to USD3.39 billion as a result of weaker copper prices and lower production.

Pretax profit followed suit, falling to USD259.4 million from USD1.51 billion the year earlier.

As a result, Antofagasta said it will not pay a final dividend for the year, leaving shareholders with the 3.1 pence interim dividend paid for the first half. That is a huge drop from the 21.5 cents full-year dividend paid in 2014.

The stock was cut to Underperform from Neutral by Macquarie and traded down 7.9%. Fellow miners Anglo American, down 6.7%, BHP Billiton, down 5.6% and Glencore, down 4.9% were also amongst the worst performers in the blue-chip index.

Macquarie also cut BHP to Underperform from Neutral, while traders said Morgan Stanley cut Rio Tinto to Equalweight and Anglo American to Underweight.

The FTSE 100 itself was down 0.8%, or points, to 6,127.34.

The index was being weighed down by an early fall in the oil price. Just after the open, Brent crude was quoted at USD38.66 a barrel, versus USD39.11 a barrel at the London stock market close on Monday.

The FTSE 250 index was down 0.3% to 16,638.81 and the AIM All-Share was down 0.1% at 712.46. In Europe, the French CAC 40 and the German DAX 30 indices were both down 0.6%.

In Asia on Tuesday, the Nikkei 225 index in Tokyo closed down 0.7%. The Shanghai Composite ended up 0.2% and the Hang Seng in Hong Kong fell 0.7%.

The Bank of Japan on Tuesday refrained from expanding its monetary stimulus as policymakers await to see the impact of the negative interest rate which it set in January.

Governor Haruhiko Kuroda and his board members decided by an 8-1 majority vote to hold its target of raising the monetary base at an annual pace of about JPY80 trillion. Policymakers voted 7-2 to maintain the -0.1% interest rate on current accounts that financial institutions maintain at the bank.

The Japanese central bank had introduced negative interest rate in January in order to achieve its 2% inflation at the earliest possible time. It said it would take additional easing measures if needed for achieving the price stability target.

Currency analysts at Commerzbank said the Bank of Japan should have gone much further with its easing measures and is being punished by the market as the Japanese yen rose against the dollar.

"The BoJ does not have the guts to grab the bull by the horns and to step up its measures right away so as to show the world that it really is totally determined to use all means in its fight for inflation," Commerzbank said.

"For the market that means that its inflation target has become even further removed to cloud cuckoo land, and that the economy and inflation ? and in the end the BoJ ? will come under even stronger pressure. The Japanese central bankers have wasted precious time. And the market is unlikely to show any mercy," the German bank added.

Elsewhere in London, Legal & General Group, the FTSE 100 life insurer and investment manager, said profit and cash generation improved in 2015, prompting an increased dividend.

Pretax profit rose to GBP1.36 billion in 2015 from GBP1.24 billion in 2014, slightly ahead of company-supplied analyst consensus of GBP1.34 billion. Net cash generation grew by 14% to GBP1.26 billion, ahead of the GBP1.22 billion expected by analysts.

Legal & General lifted its total dividend per share for the year to 13.40 pence from 11.25p in 2014, beating the 13.34p expected by analysts, and it committed to a "progressive" dividend policy. However, the stock was down 5.0%.

Royal Bank of Scotland Group was the biggest of the few gainers in the FTSE 100, up 1.4% after Goldman Sachs added the bank to its Conviction Buy list, having previously had it at Neutral.

Hastings Group Holdings was the best mid-cap performer, up 4.8%. The motor insurer which went public in October, declared its first dividend since listing on the London Stock Exchange.

Operating profit rose to GBP126.1 million in 2015, up from GBP103.5 million in 2014, as net earned premiums increased to GBP255.9 million from GBP199.1 million. Other revenue, for example generated from fees and commission rather than through insurance premiums, rose to GBP219.8 million from GBP180.2 million. Net claims were up to GBP192.9 million from GBP149.7 million.

Pretax profit, which took into account amortisation and depreciation of GBP27.6 million and finance costs of GBP91.1 million, amounted to GBP5.0 million in 2015, versus a pretax loss of GBP1.4 million in 2014. Hastings declared a dividend of 2.2 pence per share.

Cairn Energy said Senegal will be its key focus in 2016 and reiterated that its two large development projects in the North Sea remain on track as the company reported a narrower loss in 2015.

The FTSE 250-listed exploration company, which does not currently generate any revenue, said its pretax loss narrowed to USD497.8 million in 2015 from the USD559.1 million loss reported in 2014.

That was the result of unsuccessful exploration costs dropping during the year to USD97.4 million compared to USD208.4 million a year earlier, impairments falling to USD17.9 million from USD46.9 million, and lower pre-award costs and operating expenses.

The stock was down 3.5% in early trade.

In the economic calendar, Italian inflation is at 0900 GMT and employment changes for the eurozone are reported at 1000 GMT.

In the afternoon, the New York State manufacturing index is at 1230 GMT, as are US retail sales and producer price index. US business inventories and the National Association of Home Builders' housing markets index are both at 1400 GMT.

The US Federal Reserve begins its two-day policy meeting later Tuesday, before it announces its policy decision on Wednesday at 1800 GMT.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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