LONDON (Alliance News) - UK stocks are mixed Thursday, with banking stocks Barclays and Standard Chartered leading the FTSE 100 marginally lower.
By mid-morning, the FTSE 100 is down 0.1% at 6,730.43, while the FTSE 250 is up 0.2% at 15,481.12, and the AIM All-Share index is up 0.4% at 781.07.
London's major equity indices had opened slightly higher as investors took their cues from a strong session in both the US on Wednesday and in Asia overnight.
However, this positive sentiment was relatively short-lived, and the FTSE 100 edged lower in the immediate aftermath of a disappointing trading statement from Standard Chartered at 0915 BST.
The UK-based emerging markets-focused bank is down 6.4%, making it the biggest faller in the blue-chip index, after it said it expects its first-half income, excluding the UK bank levy, adjustments on its own credit, and goodwill impairment in Korea, to be down by a mid single-digit percentage from a year before, hit by an increase in loan impairments and after a tough time in India, Korea and Singapore.
Barclays, down 5.2%, is the index's second biggest loser. Shares in the bank have fallen after New York state's top law enforcer filed fraud charges against Barclays over its dark pool, LX Liquidity Cross, alleging that the bank has favoured high-frequency traders at the expense of other investors.
Eric Schneiderman, the state attorney-general, accused Barclays of demonstrating a "disturbing disregard" for its investors in a "systematic pattern of fraud and deceit". The complaint alleges that Barclays has actively sought to attract high-frequency traders by giving them "systematic advantages" over others trading in its own dark pool.
Heading in the other direction, the London Stock Exchange Group, up 5.9%, is the biggest riser in the FTSE 100 after it said it has agreed to acquire Russell Investments from Northern Mutual for USD2.70 billion in cash. The LSE said it intends to fund the acquisition with USD1.60 billion in net proceeds from a rights issue to take place in September, with the remaining USD1.10 billion through bank debt.
The news comes just over a month after the group said that it had entered exclusive discussions over a potential deal for Russell Investments. Northwestern Mutual had in January said it was exploring "strategic" alternatives for Russell Investments, including a possible sale.
In a statement, the stock exchange said that the acquisition will enable it to combine Russell's index business with FTSE, bringing together USD5.2 trillion of assets benchmarked to Russell and an estimated USD4.0 trillion of equities benchmarked to FTSE. The stock exchange said it expects the acquisition to add to its earnings from its first full year in total, with Russell's index business to add to earnings from the second year on a standalone basis.
In the FTSE 250, Bwin.Party Digital Entertainment, up 4.4%, is one of the biggest risers. The online gambling company has released a statement responding to press speculation that the company is considering selling some or all of the company as part of a strategic review, stating that it has no plans to break-up or sell the company.
The company released the statement after an article by Bloomberg stated that the firm is considering a sell-off of all or some of the company amid a firm-wide strategic review, citing two people familiar with the matter. According to the Bloomberg article, the company is considering its options and will decide within two months, citing one person.
Ophir Energy, on the other hand is among the mid-cap index's biggest losers, down 4.5%. The oil and gas exploration company's shares have fallen sharply after it said that it has concluded drilling operations on the Okala-1 well in the Mbeli Block offshore Gabon, but failed to find any significant oil.
DS Smith, down 4%, is another heavy faller in the FTSE 250. Shares in the company have dropped, even though it said that its full-year pretax profit jumped as revenues rose on organic growth and the first 12 month contribution from the legacy SCA Packaging business acquired in 2012.
The supplier of recycled packaging for consumer goods said that pretax profit more than doubled to GBP167 million from the GBP82 million reported in the previous year. Revenue rose 10% to GBP4.04 billion up from GBP3.67 billion the previous year. The company also increased its dividend per share by 25% to 10.0 pence per share, up from the 8.0 pence per share paid in 2013.
However, looking ahead, the company still expects a "difficult consumer economic environment to remain", and, when combined with negative forex impacts, this could potentially lead to 2015 full-year earnings per share downgrades of 1% to 3%, says Justin Jordan, an analyst at Jefferies. The analyst also points out that DS Smith currently trades on a price-to-earnings ratio of 13.1 times forecast 2014 calendar year earnings, which represents a 10% to 20% premium to its European packaging peers.
"The main event of the European session today is sure to be the financial stability report from the Bank of England," says Joshua Mahony, a research analyst at Alpari.
Bank of England Chief Mark Carney is scheduled to deliver the report at 1030 BST. It will be closely watched by investors for any mention of, or indeed recommendations to, contain house-price bubbles or other risks to the UK's economic recovery.
"With house prices in London having seen a markedly greater growth than elsewhere in the country, we are expecting to see some sort of plan to cool the potentially dangerous double figure rises in the house prices, without stifling nationwide values which in many cases are still trying regain the ground lost following the post-2008 crash," says Mahony
In the forex market, "sterling traders will be watching for the Bank of England?s Financial Stability Report for anything that could attempt to take the steam out of the housing market in the UK," says Richard Perry, a market analyst at Hantec Markets.
Ahead of the report, the pound trades at USD1.7018, EUR1.2490, JPY173.171, and CHF1.5198.
Also still ahead in the data calendar Thursday, US personal consumption and spending data are released at 1330 BST, at the same time as weekly initial jobless claims information. June's reading of the Kansas Fed manufacturing activity is due at 1600 BST.
Meanwhile, President of the Richmond Federal Reserve Bank Jeffrey Lacker gives a speech at 1330 BST, while President of the Federal Reserve Bank of St. Louis speaks at 1805 BST.
Ahead of the data, US futures trading currently indicates that Wall Street will open slightly lower, with the DJIA, S&P 500, and NASDAQ Composite all called to open down around 0.1%.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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Barclays (BARC)
Smith (DS) (SMDS)
Standard Chartered (STAN)