MARKET COMMENT: Stocks End Higher, Bank Changes In Focus

LONDON (Alliance News) - London's main stock indices closed higher Thursday, with the focus again on full-year results from a large number of companies including Royal Bank of Scotland Group, RSA Insurance Group and publisher Reed Elsevier.

The FTSE 100 closed up 0.2% at 6,949.73 points, the FTSE 250 up 0.4% at 17,249.80, another new record closing high, and the AIM-All Share index ended up 0.5% at 712.83.

Standard Chartered was among the best performers in the bluechip index, closing up 3.3%, after it announced a plan to replace Chairman John Peace and Chief Executive Peter Sands.

The emerging markets bank's two largest shareholders welcomed the plan, which will see Sands replaced by Bill Winters, the former JPMorgan Chase & Co investmemt bank co-chief executive who has long been linked with a new top banking role, in the summer. Peace will follow Sands through exit in 2016.

"Bill Winters is an inspired choice and his experience with JP Morgan will be invaluable in building on Standard Chartered's strong foundations. At its core it is a very good bank with a presence in some of the fastest growing parts of the world," Aberdeen Asset Management Chief Executive Martin Gilbert said in a statement.

"This on-going process for board renewal must continue as the requirements and challenges facing the banking and financial sector across the world have become much more complex and onerous," Singapore investment company Temasek said separately.

Royal Bank of Scotland ended down 4.1% after saying it no longer plans to operate a standalone global investment bank, as pressure from poor returns, increasingly strict regulations and operating losses saw the division weigh on group operating results in 2014. RBS had already planned to turn the corporate and institutional banking division into a business focused on clients primarily in the UK and Western Europe, and the bank's annual earnings statement for 2014 detailed plans to intensify the restructuring, with the aim of going "further, faster" in reshaping parts of that business.

The group swung to an operating profit of GBP3.50 billion in 2014, compared with an operating loss of GBP7.50 billion in 2013, aided by impairment releases in its Ulster Bank and RBS Capital Resolution, although an array of costs from writedowns, restructuring, and litigation and conduct issues meant that RBS reported a GBP3.47 billion net loss in 2014, albeit an improvement on the GBP9.0 billion net loss reported in 2013.

It confirmed that former City regulator Howard Davies will become its chairman from September 1, with Philip Hampton departing for GlaxoSmithKline.

The main indices in continental Europe also ended higher, with the French CAC 40 up 0.6%, and the German DAX 30 up 1.0% at a new record high.

Economic data was supportive for the equity markets.

The German index was supported by a slightly better than expected unemployment numbers in Germany. The jobless rate came in at seasonally adjusted 6.5% in February, the same rate as seen in January and in line with economists' expectations.

The UK economy expanded in line with estimates in the fourth quarter, according to the Office for National Statistics. Gross domestic product grew 0.5% sequentially in the fourth quarter, the same as the estimate released on January 27. The rate of quarter-on-quarter growth eased from 0.7% in the third quarter. In the fourth quarter, GDP was up 2.7% from a year before, unrevised from the previous estimate, while in 2014 as a whole, UK GDP advanced 2.6% from the prior year. The full-year growth figure was also left unrevised.

Another report from the ONS showed that the index of services increased 3.6% in December from last year. All the four main components of services increased from the prior year. On a monthly basis, services output climbed 0.6% in December.

In the US, with energy prices showing another substantial decrease, the Labor Department said US consumer prices fell by slightly more than expected in January. The Labor Department said its consumer price index tumbled by 0.7% in January after falling by 0.3% in each of the two previous months. Economists had expected the index to drop by 0.6%.

Meanwhile, the Commerce Department said US durable goods orders increased by more than expected in January, reflecting a notable rebound in orders for transportation equipment. The report said durable goods orders surged up by 2.8% in January after tumbling by a revised 3.7% in December. Economists had expected durable goods orders to jump by 1.7% compared to the 3.4% drop that had been reported for the previous month.

Still, US indices were mixed at London close, with the DJIA flat, the S&P 500 down 0.1%, and the Nasdaq Composite up 0.3%.

In London, RSA Insurance Group was the worst performing stock in the FTSE 100, closing down 5.1%, even though it swung to pretax profit in its last financial year and resumed dividend payments, which had been put on hold as part of a broad restructuring aimed at getting the insurer back on track. RSA, which was hit by an accounting scandal in its Ireland operations in 2013, said it made a GBP60 million pretax profit in 2014, compared with a GBP203 million pretax loss in the prior year. RSA said it will pay a 2 pence final dividend.

Analysts were not impressed, with Deutsche Bank's Oliver Steel disappointed with RSA's cautious outlook for 2015. Nomura said it still prefers peer Aviva, while Panmure Gordon analyst Barrie Cornes also thinks there are better investment opportunities elsewhere in the short to medium term, saying that RSA remains a "work in progress".

Anglo-Dutch publisher Reed Elsevier, down 5.0%, also was among the biggest fallers in the blue-chip index after it announced plans to transfer the assets of its UK and Dutch parent companies into a single entity in an effort to simplify its corporate structure and "increase transparency" for shareholders. The company, which posted a rise in adjusted pretax profit for 2014, is transferring ownership of all of its businesses and its two listed parent companies Reed Elsevier and Reed Elsevier into a new single group entity, named RELX Group, although it will not change its brand or name for customer-facing products and business units.

British American Tobacco, up 1.7%, was among the biggest gainers in the FTSE 100. The tobacco giant reported a drop in 2014 profit and revenue, hit by the strength of the pound, although revenue increased at constant exchange rates as price rises and market share gains offset a fall in volumes. The group said the market as a whole is experiencing volume declines and tough competition, and although it is doing better than the market, it expects the trading environment to remain difficult in 2015.

In the FTSE 250, RPS Group was the second best performer, up 8.5%. The energy consultancy reported a rise in pretax profit in 2014 to GBP46.3 million, from GBP43.6 million in 2013, and raised its dividend to 8.47 pence as its revenue held up in spite of the falling oil price and turmoil in the Middle East. The payout includes a 4.42 pence final dividend.

Domestic appliances retailer AO World dropped another 1.5% after falling 32% on Wednesday in the wake of a profit warning. JP Morgan cut its rating on the stock to Neutral from Overweight, and its price target to 250p from 400p.

In the AIM All-Share index, Digital Barriers, down 20%, was among the biggest fallers after the surveillance technology firm warned it will post a wider-than-expected loss for the year to end-March 2015 after two contract awards were delayed, although it still expects to post a narrowed loss compared with the GBP12.0 million pretax loss it posted in the previous year.

In the corporate calendar Friday, International Consolidated Airlines, Lloyds Banking Group, Old Mutual, UBM, Berendsen, IMI, William Hill, INTU Properties, Rightmove, Restaurant Group and Rentokil Initial will report full year results. Pearson and Waterman Group will issue half year results, while Harvey Nash Group will release a trading update.

In the economic calendar Friday, the German Import Prices Index is due at 0700 GMT and German Consumer Price Index is at 1300 GMT, while French Consumer spending and Produces Prices are at 0745 GMT. In the US, fourth quarter GDP price index flash reading is at 1330 GMT, Chicago Purchasing Managers' Index is at 1445 GMT, and Pending homes sales is at 1500 GMT.

By Daniel Ruiz; danielruiz@alliancenews.com

Copyright 2015 Alliance News Limited. All Rights Reserved.