UK MIDDAY BRIEFING: FTSE 100 Threatens To Snap Winning Streak

LONDON (Alliance News) - The FTSE 100 is Tuesday threatening to snap the seven-day winning streak that took it to its highest close since 1999 Monday, hit by renewed concerns over growth in China.

The index, like European peers, is down as investors take profits out of the recent rally and after China's central bank again moved to tighten liquidity in the money markets by draining another 100 billion yuan via bond repurchases. Chinese shares fell sharply, led by property developers, as investors worried that tighter lending policies will weigh on economic growth. The yuan also fell for a sixth consecutive day.

That negativity carried over into European trade. The miners are leading fallers with Anglo American, Rio Tinto, Antofagasta, Fresnillo, and Randgold Resources all down.

However, the index losses were pared after the European Commission raised its growth forecasts for the euro zone, while US stock futures are currently pointing to a flat start on Wall Street.

Economic recovery in the euro area is set to continue, but unemployment is likely to remain high and inflation subdued, the European Commission said. In its winter forecast, the executive arm of the EU raised the euro area growth forecast for this year to 1.2%, from the 1.1% predicted in November. The projection for 2015 was lifted to 1.8% from 1.7%.

"The worst of the crisis may now be behind us, but this is not an invitation to be complacent, as the recovery is still modest," European Commissioner for Economic and Monetary Affairs Olli Rehn said. "To make the recovery stronger and create more jobs, we need to stay the course of economic reform."

On an individual stock level, Irish building-materials group CRH is the leading riser on the FTSE 100 after it said it swung to a loss in 2013, as bad weather hurt trading and added to the pressure on profit margins, but Chief Executive Albert Manifold said the year represented a "trough" in profits and it will return to growth this year.

The company, which has operations across Europe and the Americas, was hit hard by the financial crisis and ensuing economic downturn, which weighed heavily on construction markets. Last year, it emabarked on a review of its operations in an attempt to turn around its profit margins and deliver better returns. It has completed the first stage of the review and put businesses that don't meet its new returns criteria up for sale.

CRH said the businesses earmarked for disposal in the first part of its review account for about 10% of its total assets. It has identified a further group of businesses, worth about 20% of net assets, which require more detailed assessment in the second half of the review.

CEO Manifold is more positive about 2014 after the company's markets picked up in the second half of 2013 and have continued to improve so far this year.

In other economic news, UK mortgage approvals increased more than expected to the highest since September 2007, data from British Bankers' Association showed. The number of loans approved for house purchases increased to 49,972 in January, the highest since September 2007, from 47,086 in December. The expected level was 47,150.

That news came as Persimmon echoed the positive sentiment of peers as it cited the recovery in the UK housing market and government mortgage-financing initiatives for driving up profit in 2013. The housebuilder posted pretax profit of GBP337.1 million for the year, from GBP218.2 million a year earlier, as revenue rose 21% to GBP2.09 billion from GBP1.72 billion in 2012.

In political news, Russian Foreign Minister Sergei Lavrov has said that Ukraine should not hold presidential elections in May, arguing that this would violate an agreement between deposed President Viktor Yanukovych and opposition groups last week.

That agreement was rendered largely irrelevant when the opposition took power after Yanukovych fled Kiev, but Lavrov insisted that at least parts of it should be honoured. Meanwhile, British Foreign Secretary William Hague is to meet US Secretary of State John Kerry in Washington later for talks on offering emergency financial aid to Ukraine to prevent the country's bankruptcy.

In the US, the Pentagon has proposed spending reductions that would drop the US armed forces to pre-World War II troop levels and close bases at home and overseas, including in Europe. Secretary of Defence Chuck Hagel, who outlined the defence budget that President Barack Obama will submit next week to Congress, said the cutbacks were not without risk in a world that is "growing more volatile, more unpredictable and in some instances more threatening to the US."

He said the plan adjusts US military spending to current budget realities and reflects the scheduled end of Washington's combat commitment this year in Afghanistan, which leaves the Pentagon for the first time in 13 years without a "war footing."

Italy's new government won an overnight vote of confidence in the Senate, after Prime Minister Matteo Renzi presented highly ambitious reform plans that he said could unleash the country's potential. Renzi's executive was supported by 169 senators, clearing the majority threshold by 14 votes. There were 139 votes against and one abstention. The government was expected to win a more comfortable majority in the lower house of parliament, the Chamber of Deputies, in voting scheduled later Tuesday.

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FTSE 100: Down 0.7% at 6,819.15
FTSE 250: Down 0.4% at 16,475.80
AIM ALL-SHARE: Down 0.1% at 891.51
GBP-USD: 1.6710
EUR-USD: 1.3755
GOLD: USD1,335.20 an ounce
OIL (Brent): USD110.26 a barrel

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KEY UK CORPORATE NEWS:

FTSE 100: InterContinental Hotels Group has expanded its Holiday Inn brand in Brazil by adding two new 32 storey hotels. GKN reported a 15% decline in pretax profit in 2013, as it made smaller gains on its FX hedging contracts than in 2012. However, operating profit rose 20%, driven by a 10% rise in revenues and as trading margins increased significantly, buoyed by recent restructuring and efficiency gains. It said it expects further progress in 2014. Randgold Resources said commissioning of the sulphide circuit at the Kibali gold mine in the Democratic Republic of Congo is now underway, as Chief Executive Mark Bristow said the development of the mine was just one plank in the company's strategy that will see it come through the recent gold price falls in good shape. WPP said its wholly owned operating company JWT is acquiring creative digital marketing company Lemon Sky in Poland. Greencore Group has announced a number of strategic investments in the US, including the acquisition of Lettieri's, a US manufacturer of food to go products.

FTSE 250: Betting firm Ladbrokes has reported disappointing earnings, with a huge drop in profits and only a slight increase in revenues. However, shares are up as the weakness was expected, while it cash generation, debt reduction and current trading all came in better than hoped. Marketing, media and events company UBM has appointed Tim Cobbold as its new chief executive, following the departure of David Levin last September. Cobbold joins UBM from commercial banknote printer De La Rue, where he has held the position of chief executive since 2011. Investment manager St. James's Place confirmed that it is in "advanced talks" to acquire an adviser business in Asia, as it reported a 42% increase in annual profits. John Wood Group business, Wood Group PSN, has been awarded its first major UK contract of the year - a five year extension of a current contract with Talisman Sinopec Energy UK. The deal is valued at USD500 million and includes an option for two additional two-year extensions. Subprime lender Provident Financial said its annual pretax profits fell by 6.0%, hit by restructuring charges and after last year's results were lifted by pension scheme gains, but profits excluding the charges rose on a 10% increase in its revenues that was driven by strong trading at its Vanquis Bank. Specialty chemical company Elementis has reported higher profits and revenues for 2013, driven by strong growth in its specialty products division. Ashmore Group reported weak first-half results, with pretax profits down by a third and a USD2.9 billion net outflow, as emerging markets instability hurt the investment manager. Croda International said 2013 pretax profit rose 5% to GBP250.1 million, driven by higher revenues and as it sold more higher-value products. It raised its dividend. NMC Health has also raised its final dividend and expressed confidence for 2014, as it reported an increase in pretax profit for the full-year. Dechra Pharmaceuticals, meanwhile, raised its interim dividend and expressed confidence in meeting its full-year expectations, as it saw pretax profit rise in the half-year to end-December. Cobham said it has voluntarily informed the US Department of Justice of an internal investigation into potentially irregular sales practices at its TracStar Systems unit in Asia. Capital & Counties Properties has reported an increase in full-year profit, as it continued its strategy to grow the value of its Covent Garden and Earls Court estates. Animal genetics company Genus has reported a slight drop in profits for the first half of the year due to acquisition costs and investments it made in China, but revenues rose thanks to its recently acquired pork business in Brazil and a significant improvement in its cattle breeding business. It warned of a hit from the recent strength of sterling and a virus hitting pig herds in North America, but still raised its dividend as a sign of its confidence.

AIM: Stellar Resources shares have jumped after the mining company said it has bought up a fully integrated gold processing plant for its Clogau Gold Mine in North Wales. The company said the plant is capable of processing up to 2 tonnes of ore per hour, and will be used to process previously identified high grade areas that have been re-opened as part of the underground clean-up operations which have been ongoing over the past 18 months. Synety Group is also up after the cloud-based telephony company said it has secured a significant new customer win, as Peninsula Business Services, a UK employment law and health & safety services provider, agreed to integrate Synety's CloudCall software. Shares in Pan European Terminals have also risen as it said it would increase capacity at its Baltic Top subsidiary by a further 10%, after only just raising it by about 10% by extending its storage facilities to over 12,000 metric tonnes with the addition of new tanks.

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AFTERNOON WATCHLIST: US Redbook index, US Housing Price Index, US S&P/Case-Shiller Home Price Indices, US Consumer Confidence, US Richmond Fed Manufacturing Index, US Fed's Tarullo speech

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Wednesday's Key UK Corporate Events

Travis Perkins Preliminary Results
Clinigen Group Interim results
Henderson Group Full Year Results
Molins Preliminary Results
Petrofac Full Year Results
Segro Preliminary Results
Weir Group Full Year Results
Direct Line Insurance Group Full Year Results
ITV Full Year Results
Greggs Full Year Results
Hays Interim Results
The Vitec Group Preliminary Results
CSR Full Year Results
International Personal Finance Full Year Results
Taylor Wimpey Full Year Results
Avingtrans Interim Results
Microgen Full Year Results
Electrical Geodesics Full Year Results

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Wednesday's Key Economic Events

07:00 Germany Gfk Consumer Confidence Survey
09:25 UK MPC Member Broadbent Speech
09:30 UK Gross Domestic Product
09:30 UK Total Business Investment
15:00 US New Home Sales
15:30 US EIA Crude Oil Stocks change
23:50 Japan Foreign bond investment
23:50 Japan Foreign investment in Japan stocks

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By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1

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