MARKET COMMENT: UK Shares Trade Flat To Lower Amid Company Reporting

Fri, 27th Feb 2015 10:33

LONDON (Alliance News) - UK shares are trading flat to lower mid-morning Friday, amid a focus on UK corporate news, with British Airways-owner IAG predicting strong growth for 2015 and Lloyds Banking Group paying a dividend for the first time since the financial crisis.

FTSE 100 is down 0.1% at 6,945,04, giving back some gains from a strong opening, while FTSE 250 is down 0.1% at 17,230,54, after reaching a new record closing high Thursday. Meanwhile, the AIM All-Share is flat at 712,93.

International Consolidated Airlines Group reported strong growth in 2014 operating profit as fuel costs fell and its Spanish airline Iberia swung to a profit, and said it expects its 2015 operating profit to grow to more than EUR2.2 billion.

The company, which also owns Spanish airlines Iberia and Vueling and is trying to acquire Irish flag carrier Aer Lingus, reported a closely-watched operating profit excluding exceptional items of EUR1.39 billion for 2014, up from EUR770 million a year earlier, as revenue rose 8.0% to EUR20.17 billion. Its net profit rose to EUR1.00 billion, from just EUR147 million in 2013.

Meanwhile, Lloyds Banking Group said it would return to paying dividends for the first time since it was rescued by UK taxpayers during the financial crisis, as further improvement in the lender's profit and capital position cemented the evidence that the government can continue to return the lender to full private ownership.

Lloyds said it will pay a symbolic dividend of 0.75 pence per share for 2014 after it made a GBP1.8 billion pretax profit in 2014, compared with a GBP415 million pretax profit in the prior year. The state-backed lender said it is aiming to move to a dividend payout ratio of at least 50% of sustainable earnings in the medium term.

However, the list of regulatory and conduct costs that have been a source of shame for Lloyds and the wider banking sector continued to hold back progress last year, with a further GBP700 million provision set aside in the fourth quarter for the expected costs of payment protection insurance compensation.

Also in the banking sector, Barclays is set to more than double its provision to cover allegations of foreign exchange market manipulation when it reports annual results next week, Sky News reported on Friday. According to the report, Barclays' current GBP500 million provision over the forex rigging scandal will be increased as a settlement with a number of US authorities draws nearer. Citing insiders, the report said that a settlement involving the Department of Justice, the New York State Department of Financial Services could arrive as early as the end of March.

The Royal Bank of Scotland Group's Coutts private banking business is being investigated by German authorities over allegations of aiding client tax evasion, Sky News reported on Thursday. Sky said Coutts has confirmed the investigation is focusing on its Swiss operation and was concentrating on both the wealth business and on current and former employees.

The news come after RBS said Thursday 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.

The European indices are trading down, with the French CAC 40 down 0.1% and the German DAX 30 down 0.2%.

Germany's import prices declined at a slower-than-expected pace in January, figures from Destatis showed Friday. The import price index fell 4.4% year-on-year in January, the sharpest drop since November 2009, faster than December's 3.7% decline. Economists had forecast a 4.6% fall for the month. On a monthly basis, import prices fell 0.8% in January, slower than December's 1.7% decline. It was the fourth consecutive monthly decrease.

Meanwhile, an overwhelming majority of German lawmakers are expected Friday to back an extension of Greece's rescue package, despite plans by a group of 22 members of Chancellor Angela Merkel's conservative political bloc to rebel against her government in the vote, while five will abstain in the Bundestag ballot. Still, Merkel's coalition commands a large majority in parliament holding about 80% of the seats in the 631-member Bundestag.

"Whilst Germany is likely to vote ?yes? to the extension, this process has revealed just how strained relationships are between the two countries, something that doesn?t bode well for when this issue inevitably arises once more in 4 months? time (or sooner)," says Spreadex analyst Connor Campbell.

Consumer confidence in the UK held fast in February, the latest survey from research firm GfK showed on Friday with an index score of +1. That was unchanged from the January reading, although it was shy of expectations for +2. The February score also matches the highest index reading since August.

Amid other corporate announcements Friday morning, publisher Pearson raised its dividend for 2014 as it posted earnings per share slightly ahead of its previous guidance, and announced that it will appoint Coram Williams, currently chief financial officer of its book publishing joint venture Penguin Random House, as its new chief financial officer.

Still in the economic calendar Friday, the 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.

US futures point to a broadly lower opening, with the DJIA down 0.1%, the S&P 500 down 0.2%, and the Nasdaq 100 down 0.2%.

By Daniel Ruiz; danielruiz@alliancenews.com