LONDON MARKET OPEN: Resilient Smiths Group Leads Early Gains

LONDON (Alliance News) - UK stocks have opened much higher Tuesday, following a strong performance on Wall Street on Monday, with Smiths Group leading the gainers in the FTSE 100.

The engineering company traded up 10% after it said it had a resilient first quarter, as the diversity of its operations helped to offset some tough trading in the oil and gas markets, which dragged on revenue in its John Crane energy services business.

The company, which has operations spanning energy services, medical devices and security sensors, said underlying, constant currency revenue declined 4.0% in the first quarter to the end of October, though its group operating margin was broadly flat year-on-year.

John Crane saw first quarter revenue fall in line with expectations, as it continues to contend with tough oil and gas markets. Smiths Medical, the medical devices arm, had a solid quarter, with underlying revenue broadly flat year-on-year.

The FTSE 100 index traded up 1.3% at 6,228.50 points, the FTSE 250 was up 1.0% at 17,020.21 and the AIM All-Share up 0.2% at 729.87.

European indices also joined the rally, with the CAC 40 in Paris trading up 1.2%, while the DAX 30 was up 1.2% as well.

Asian stocks ended largely higher. The Nikkei 225 in Tokyo closed up 1.2%, the Hang Seng in Hong Kong ended up 1.2%, while the Shanghai Composite closed down 0.1%.

Wall Street closed much higher on Monday. The DJIA closed up 1.4%, the S&P 500 up 1.5%, and the Nasdaq Composite up 1.2%.

Also in the London blue-chip index, easyJet was the worst performer, down 3.1% even though it reported growth in profit in its recently-ended financial year as revenue rose and it carried more passengers than the prior year, while it said the long-term outlook for the business is positive.

The low-cost airline said pretax profit in the year ended September 30 grew 18% to GBP686 million from GBP581 million the year before, as revenue rose 4% to GBP4.68 billion from GBP4.52 billion.

easyJet said passengers increased 6% in the year to 68.6 million, with a record load factor in August of 94.4%. Annual load factor increased by 0.9 percentage point to 91.5%.

It was a busy day in the FTSE 250 with a flurry of mid-cap stock news. Bodycote was by far the biggest gainer, trading up 11%. The specialty chemicals company maintained its full-year profit guidance but said its market remain challenging and are likely to stay that way in the near term.

Bodycote said group revenue was down 9.7% in the four months to the end of October, with revenue from its aerospace, defence and energy business declining 11% and automotive and general industrial revenue down 8.8%.

The company said it expects its headline operating profit, which strips out restructuring costs and amortisation charges, to be between GBP101.0 million and GBP106.0 million for 2015, in line with its previous guidance, though revenue visibility currently remains very low.

Cable & Wireless Communications was up 7.3% at 79.55 pence after it reached a deal to be acquired by US cable company Liberty Global late Monday. The pair said the deal values the London listed company at GBP3.60 billion, which takes into account a 3.0 pence special dividend to be paid to the company's shareholders. The deal, which comes after the two companies in October confirmed they were in takeover talks, values Cable & Wireless at 81.04p per share.

Copper miner Kaz Minerals said it has reached an agreement with its main construction contractor on the Atkogay project to defer payment of USD300.0 million. Under the revised terms of its agreement with Non Ferrous China, the USD300.0 million in construction costs had been due to be paid in 2016 and 2017 will now be settled in 2018. Kaz traded up 7.9%.

B&M European Value Retail said it swung to a profit in the first half of its financial year while growth in revenue was boosted by new store openings.

The value retailer said it made a GBP66.7 million pretax profit in the 26 weeks ended September 26, having suffered a GBP16.5 million pretax loss in the same period the year before as it was hit by higher finance costs which did not repeat in the current year. Revenue rose by more than a quarter to GBP930.3 million from GBP739.8 million.

However, B&M did warn that the "greater-than-budgeted" store opening level allied with the opening of two new UK distribution centres has brought some short-term operational challenges and therefore an effect on like-for-like sales performance in the build up the peak trading period, although it did say overall earnings growth and return on investment remains strong. The stock traded down 4.9%, making it the worst performer in the FTSE 250.

In the economic calendar, investors will be keeping a close eye on the UK's Treasury Committee inflation report hearings at 0900 GMT, with UK retail, producer and consumer price inflation data for October due out at 0930 GMT.

Shortly afterwards, November's ZEW economic sentiment surveys for Germany and the wider eurozone are scheduled to be released at 1000 GMT. In the US, consumer price inflation readings are expected at 1330 GMT, with industrial production and capacity utilization data at 1415 GMT.

Also of note, US Federal Reserve Governor Daniel Tarullo is scheduled to speak after the UK equity market close at 2030 GMT.

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

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