MARKET COMMENT: Shell Overtakes BP Amid Mixed London Trading

LONDON (Alliance News) - UK stocks trade mixed Wednesday, as investors await a raft of releases from the US and after the preliminary reading of eurozone consumer price inflation accelerated from a more than four-year low, but still missed forecasts.

By mid-morning, the FTSE 100 is marginally higher at 6,773.55, the FTSE 250 is down 0.4% at 15,838.4, and the AIM All-Share is up 0.6% at 820.65.

It is a similar story in Europe, where the DAX 30 in Frankfurt is up 0.1%, while the CAC 40 in Paris is down 0.2%.

In data just released, consumer price inflation in the euro area increased to 0.7% in April from 0.5% in March. Although this meant CPI edged up from its 2009 lows, it fell short of the 0.8% that economists had been expecting.

"The ship is starting to sink and time is running out for the European Central Bank to divert a 1990s Japanese-style bout of deflation," says Dennis de Jong, managing director at UFXMarkets. "Inflation simply isn?t rising quick enough and stimulus is required, be it through the introduction of quantitative easing or negative interest rates. (ECB President) Mario Draghi has said that he is prepared to take emergency measures, but now is the time for action rather than words.

The euro dropped to a three-week low against the dollar in the aftermath of the data, before almost immediately regaining its losses, and then some. The single currency currently trades at USD1.3827, while the pound trades at USD1.6817.

Within UK equities, oil and gas producers are big risers, with the FTSE 350 sector up 2.3%.

Royal Dutch Shell is the biggest riser in the FTSE 100, up 4.4%. The oil and gas giant, which has now overtaken BP as the second largest company in the FTSE 100 by market capitalisation after HSBC Holdings, said its earnings almost halved in the first quarter of the year, as it wrote down some of the value of its refineries in Europe and Asia due to declining refining margins and as its production fell.

However, like its peer BP on Tuesday, Shell said it would pay a higher dividend for the quarter as it returns some of the funds from its asset sale programme to its shareholders.

Tullow Oil is another big blue-chip riser, up 3.2%. The company has pushed ahead with the sale of its UK gas assets in the southern North Sea, selling stakes in two assets to AIM-listed Faroe Petroleum for USD75.6 million plus a royalty on developments at one of the assets.

In the FTSE 250, Heritage Oil is the leading gainer. The firm's shares are up 22% after it said it had recommended shareholders accept a GBP924 million takeover offer from Al Mirqab Capital, an investment vehicle controlled by the royal family of Qatar.

Away from the oil and gas producers, Rolls-Royce is big winner Wednesday, up 2.6%. Shares in the company jumped after it said late on Tuesday that it is in talks with Germany's Siemens AG about a possible sale of its energy gas turbine and compressor business.

At the other end of the spectrum, Standard Life is one of the biggest fallers in the FTSE 100, currently down 1.7%. The Edinburgh-based long-term savings and investments provider said its assets under administration increased 1.5% in the first quarter driven by net inflows, but said recent changes to annuity regulations in the UK resulted in a reduction in UK annuity sales of around 50%.

However, the five heaviest fallers in the index are all companies that have gone ex-dividend Wednesday, meaning new buyers no longer qualify for the latest dividend payout from each of the companies. Tesco is down 3.5%, Admiral Group is down 3.4%, Reed Elsevier is down 3.1%, William Hill is down 2.8%, and Weir Group is down 1.9%

Still to come in the corporate calendar Wednesday, GlaxoSmithKline is due to release its first quarter results at 1100 GMT. Ahead of the release, the pharmaceutical giant's shares are down 1.3%.

In the data calendar, Italian produce price index numbers are released at 1000 GMT.

In the US, the Mortgage Bankers Association releases its MBA mortgages applications data at 1100 GMT. Shortly after, the ADP employment change figure for April, released at 1215 GMT, is expected to report that the world's largest economy added 210,000 new jobs in April, up from the 191,000 added in March. The preliminary reading of US first quarter GDP is published at 1230 GMT. Expectations are for US GDP to have decelerated to annualised reading of 1.2%, down from 2.6%. The Chicago purchasing managers' index is released at 1345 GMT.

Later in the day, the US Federal Open Market Committee publishes its latest interest rate and monetary policy decisions at 1800 GMT.

By James Kemp; jameskemp@alliancenews.com; @jamespkemp

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