LONDON MARKET OPEN: Weak China Inflation Offsets Higher Oil Price

Thu, 09th Jun 2016 07:37

LONDON (Alliance News) - London stocks opened lower Thursday, despite Brent crude getting closer to the USD53 per barrel mark, as data showed China's consumer inflation slowed for first time in seven months in May.

The FTSE 100 was down 0.6%, or 36.12 points, at 6,265.40. The FTSE 250 was down 0.6% at 17,081.04 and the AIM All-Share was flat at 744.61.

Consumer prices in China were up 2.0% year-on-year in May, the National Bureau of Statistics said, below forecasts for 2.3% inflation, which would have been unchanged from the April reading. Inflation continues to remain below the full-year target of 3.0%. Food prices were up 5.9% on year, much slower than April's 7.4% growth. At the same time, non-food price inflation held steady at 1.1%.

On a monthly basis, China's consumer prices slipped 0.5% after dipping 0.2% in April. This was the third consecutive decline in prices.

Another report from the NBS showed that producer prices fell 2.8% year-on-year versus expectations for a decline of 3.2% and after sliding 3.4% in the previous month.

The Shanghai and the Hong Kong markets are closed Thursday for the Dragon Boat Festival. The Shanghai market also will be closed on Friday. In Japan, the Nikkei 225 index fell 1.0%.

In Europe, the CAC 40 in Paris was down 0.4% and the DAX 30 in Frankfurt was off 0.6%.

On the London Stock Exchange, Vodafone Group was down 3.8%, the worst blue-chip performer, after going ex-dividend, meaning new buyers no longer qualify for the latest dividend payment. Also in the red due to the same reason were Johnson Matthey, down 3.0% and WPP, down 1.0%.

Vodafone also struck a deal to merge its New Zealand business with Sky Network Television, a New Zealand-based media group. Vodafone will have a 51% stake in the combined business.

Antofagasta was down 0.8% after Canaccord cut the blue-chip Chile-focused miner to Hold from Buy, according to traders.

Meanwhile, Royal Dutch Shell 'A' shares were up 0.4%, benefiting from a higher oil price. Brent crude was at USD52.60 a barrel shortly after the London equities open, having touched a new 2016 high of USD52.83 in early trade. The North Sea Benchmark was quoted at USD52.18 a barrel at the equities close Wednesday.

The rise in the oil price came after the US Energy Information Administration released a report Wednesday showing a bigger-than-expected decrease in crude oil inventories in the week ended June 3. The report said that crude oil stockpiles fell by 3.2 million barrels compared to economist estimates for a drop of 2.7 million barrels.

In the FTSE 250, automotive marketplace operator Auto Trader Group was up 2.4%. It said pretax profit for the financial year to March 27 was GBP155.0 million, a massive rise on the GBP10.9 million it made the year before due to costs booked that year on its listing in London and higher financing costs for the group's debt. Operating profit, before the one-offs and finance costs, grew to GBP169.6 million from GBP133.1 million, up 27%.

Auto Trader said its net external debt at the year-end fell to GBP392.6 million from GBP527.9 million, cutting its leverage and improving the group's financial position, in addition to trimming its finance costs substantially. The group also declared a final dividend of 1.0p per share, meaning its total annual payout will be 1.5p.

Thanks to that robust position, the group will start a rolling programme of share buyback with immediate effect, with the majority of the surplus cash left over after dividends have been paid to be returned to shareholders.

RPC Group was up 1.8% after the plastic products firm said it has agreed a deal to acquire fellow UK-listed firm British Polythene Industries and will launch a share placing to part-fund the deal. RPC will pay 470.00 pence per share in cash and 0.60141 of new RPC shares for British Polythene, valuing the group at a total of GBP261.0 million.

The total per share value of the deal will be around 940.00p per British Polythene share, a 30% premium to the stock's closing price of 725.00p per share on Wednesday, which had given the company a market capitalisation of GBP198.9 million. British Polythene shares were up 32% on the takeover news, the best performer in the FTSE All-Share.

Home Retail Group was up 0.6% after reporting growth in sales in the first quarter of its financial year and said its takeover by J Sainsbury remains on track to complete in the third quarter of 2016. Shares in Sainsbury were up 0.7% in the FTSE 100.

Home Retail said total sales at digital retail chain Argos grew by 2.6% year-on-year in the 13 weeks ended May 28 to GBP868 million, with like-for-like sales up by 0.1%. Net new space contributed 2.5% to total sales growth, as a result of store openings in the previous financial year.

At the other end of the mid-cap index, Essentra was down 27% after issuing a profit warning for 2016 following a deteriorating in trading in its filter products business. The group said it is "unlikely" to meet the trading expectations for the year to the end of December that it had set out in its annual results in February.

Due to this, Essentra said its total revenue for 2016 will be broadly flat on the GBP1.10 billion posted a year earlier, while adjusted operating profit will be GBP155.0 million to GBP165.0 million, down from GBP171.5 million the year earlier.

Still ahead in the economic calendar Thursday, UK's goods trade balance is at 0930 BST. In the US, initial and continuing jobless claims are at 1330 BST, while wholesale inventories are due at 1500 BST.

By Daniel Ruiz; danielruiz@alliancenews.com