MARKET COMMENT: UK Shares Catch Up With Gains After Bank Holiday

LONDON (Alliance News) - UK shares have started the shortened week strongly as they look to catch up on the gains made in Europe on Monday.

At mid-morning Tuesday, the FTSE 100 is trading up 0.2% at 6,790.10 points, the FTSE 250 is up 0.2% at 15,916.15 and the AIM All-Share is up 0.3% at 766.47.

European indices have slowed down after posting strong performances on Monday with the CAC 40 flat and the German DAX down 0.3%.

UK stock markets saw a sharp rise at open as investors finally got the opportunity to react to European Central Bank President Mario Draghi's doveish comments at the Jackson Hole symposium on Friday. Early trade saw the FTSE 100 touch an intraday high of 6,815.09 before it began to stabilise closer to 6,795.

The UK housing market showed more signs of slowing down Tuesday, as British Bankers' Association mortgage approvals fell to 42,800 in July, down from 43,300 in June and missing economists' estimate of 44,200.

On the London Stock Exchange, WPP is amongst the top gainers in the FTSE 100 after it reported that it is likely to achieve its targeted dividend pay-out ratio of 45% in 2014, a year ahead of schedule, as it saw pretax profit rise in the half-year to the end of June. The company proposed an interim dividend of 11.62 pence, up from 10.56 pence in the previous year while pretax profit rose to GBP491.1 million, up from GBP427.1 million in the previous year. WPP's shares are up 1.6%.

Bunzl raised its interim dividend by 10% after posting an uptick in profit for the first half of the year, boosted by organic growth and recent acquisitions. The company said it traded against a background of "mixed macroeconomic conditions" in the first half of 2014, with continued challenging market conditions in some of its sectors, but said it improved profitability in all its business areas. Bunzl shares are trading up 0.3%.

Antofagasta is the biggest faller on the blue-chip index after it reported a fall in pretax profit and revenue in the first half of 2014, as it said market conditions remained challenging and it was hit by the declining price of copper, despite production coming in ahead of expectations.

In it first-half results for the six months to June 30, 2014 the miner said pretax profit fell 13% to USD850.7 million from USD981.0 million last year. Revenue declined 4.2% to USD2.66 billion from USD2.78 billion in the first-half of 2013, said the company, after copper prices fell by 2.2% as prices "trended downwards during the period, as well as lower gold sales and realised prices." The company's shares are trading down 3.7%.

Petrofac is also amongst the top fallers in the FTSE 100 with its shares down 2.3% as the company said net profit for the six months to June 30 was USD136 million, sharply down from the USD243 million posted a year earlier. That came on the back of a fall in revenue in the period to USD2.5 billion from USD2.8 billion last year. However, the group said it remains on track to deliver net profit of USD580-600 million for the full year, in line with previous guidance.

Chief analyst at CMC markets, Michael Hewson, says Petrofac will also lose out because of its exposure to troubled regions in the Middle East.

"The ongoing unrest in the Middle East has focussed investor attention on companies which have significant exposure in that region, and Petrofac is one of these companies given its installations in Iraq, particularly the Rumaila and Majnoon oil fields where they have maintenance contracts with BP and Shell," Hewson comments.

By Neil Thakrar; neilthakrar@alliancenews.com

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