UK MIDDAY BRIEFING: Stocks Falling Again, Vodafone, BG Group Lead Way

LONDON (Alliance News) - The global equities sell-off has continued Monday ahead of the Federal Reserve's next decision on whether to knock a further slice off its economic stimulus package, while negative news about Vodafone and BG Group are also weighing heavily on the blue-chip index in London.

Investors continue to fear that if the US Central Bank continues to reel back its stimulus spending, then that will impact emerging markets. The flow of money out of those markets is continuing, weighing on global sentiment.

The FTSE100 is not being helped by steep falls in the share prices of both Vodafone and BG Group.

Vodafone is down about 5% after AT&T said it would not be making a takeover offer for the British mobile phone company, responding to speculation that it was mulling an approach. That announcement came after several media reported that Vodafone was seeking to acquire Spanish cable operator Grupo Corporativo ONO SA.

BG Group, meanwhile, is down about 15% after it cut its production guidance for 2014 and 2015 after
issuing force majeure notices under its liquefied natural gas agreements in Egypt due to the ongoing political problems there. It said volumes ill be down in Egypt and the US this year and next. It warned that it expects to book about USD2.4 billion in impairments, mainly due to the Egypt situation.

BG Group said that it remains committed to the Egyptian LNG Project and will continue to negotiate with the Egyptian authorities and other stakeholders to seek a long-term solution.

"The contribution from our key growth projects in Brazil and Australia, which remain on budget and schedule, is increasing, but the growing asset base and higher royalties, combined with the decline in production, are leading to higher unit operating costs in 2014," Chief Executive Chris Finlayson also warned.

Premier Foods, meanwhile, has finally met investor demands by spinning off its bread business into a new joint venture with Us investment firm The Gores Group, and will use the GBP28 million in cash inflows it receives to invest in its grocery business.

In monetary news, Bank of England policymaker Martin Weale has warned that reducing the central bank's unemployment rate threshold of 7% to 6.5% may not achieve the purpose of forward guidance as that level could also be quickly overtaken by events. "I do not feel terribly enthusiastic about a reduction from 7% to 6.5%," Weale said in an interview to the East Anglian Daily Times. "The purpose of Forward Guidance was to create greater certainty."

Over at the European Central Bank, President Mario Draghi attempted to damp worries of deflation in the EU in a speech to the World Economic Forum, saying that currently low inflation was a by-product of economic reforms.

Price adjustments in the four eurozone countries that were bailed out after the financial crisis - Greece, Ireland, Portugal and Spain - are partly the reason for slowing inflation, Draghi said on the third and final day of this year's meeting of business and political leaders in the Swiss town of Davos.

"In the medium term we believe inflation will go up to a level that is close to 2%," Draghi said, arguing that the price adjustment factor would disappear once economic recovery accelerates.

Over in Japan, the members of the Bank of Japan's Monetary Policy Board said that the Japanese economy is experiencing a modest recovery, and that recovery is expected to continue, minutes from the bank's December 19-20 meeting revealed. The members also stated that the central bank is finally starting to make some headway against the deflationary pressures that have plagued the nation for more than a decade as inflation appears to be rising.

In political news, Ukrainian opposition leader Vitali Klitschko has so far failed to convince protesters who seized the country's Justice Ministry to give up the building. "Klitschko came to the ministry and asked activists to leave the building. However, the protesters did not follow (Klitschko's) orders," Oleksandr Danylyuk, the leader of the Spilna Sprava (common cause) movement, said on Facebook. Danylyuk said the seizure was part of a wider plan to occupy government buildings.

Thailand's Election Commission will urge Prime Minister Yingluck Shinawatra to delay national elections scheduled for February 2 by four to five months, officials said. The commission will propose the rescheduling during a planned meeting with Yingluck on Tuesday, commissioner Somchai Srisuthiyakorn told Spring News TV. The commission and government have been at loggerheads for weeks over whether or not to postpone the election, which anti-government protesters have blocked and the main opposition party has boycotted.

Negotiations between the Syrian government and opposition reached an impasse Sunday in Geneva, as Damascus insisted on a deal on humanitarian aid before it discusses the issue of prisoners. The delegations moved into separate rooms for consultations with UN-Arab League envoy Lakhdar Brahimi after face-to-face meetings failed to produce an agreement, sources at the talks said. Government delegates called for agreement on providing increased access for international relief agencies to besieged cities and towns before it negotiates the release of prisoners.

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FTSE 100: down 1.2% at 6,583.04
FTSE 250: down 0.8% at 15,573.47
AIM ALL-SHARE: down 1.3% at 850.79
GBP-USD: 1.6559
EUR-USD: 1.3666
GOLD: USD1,264.06 an ounce
OIL (Brent): USD107.22 a barrel

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KEY UK CORPORATE NEWS:

FTSE 100: ARM Holdings Chairman John Buchanan is stepping down due to a medical condition and will be succeeded by Stuart Chambers, currently chairman of Rexam. Randgold Resources says efficiency projects at its Tongon Gold Mine in the Ivory Coast have boosted its performance significantly but the recovery rate is still struggling, and the mine will miss management expectations for 2014. United Utilities and Severn Trent are doing well after regulator Ofwat's latest proposals to limit company returns proved less restrictive than expected. Diageo has acquired the super-premium tequila brand Peligroso.

FTSE 250: AVEVA Group said it continued to perform well and saw solid cash generation in its third quarter, but became the latest company to caution that the strength of sterling might hurt its full-year results. LondonMetric Property has exchanged contracts on the sale of the Odeon Multiplex Cinema in Dudley for GBP7.7 million to clients of Aberdeen Asset Management. It said the price reflects a net initial yield of 5.95%, falling to about 5.8% in June when a further top-up is due. Elementis has appointed Andrew Duff as deputy chairman ahead of his move into the Chairman role after the April 24 annual general meeting. IP Group has extended its commercialisation agreement with The University of Manchester to include funding for graphene projects.

AIM: Nova Resources is a big riser after Enersty Co Ltd secured an offtake contract with Hansung Industries Co Ltd. Nova has a 23.72% holding in Enerstry Group, which has a 93.33% holding in Enersty Co Ltd. Oilex is up after it said all of the drilling services tenders are complete for the Cambay-77H site in India, and successful contractors are preparing to mobilise. The company said the assembly of parts for its Essar LR-4 rig has commenced as components continue to arrive from Mumbai. Sirius Minerals is another gainer after further positive results from its POLY4 fertilizer crop studies. ServicePower Technologies is up after it won two contract extensions for a total of USD750,000 with two existing customers. Albemarle & Bond is a big faller after the struggling pawnbroking business warned its shareholders that there may be little residual value left in its shares, after it terminated its formal sale process, claiming none of the proposals it had received represented a fair value for the company. It said its lenders have extended the deferral of its banking covenants until the end of March while it looks at other options for the business. Baron Oil is also down 14% after it said terrorist attacks at its Nancy Burdine Maxine Fields in Colombia have affected production.

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AFTERNOON WATCHLIST: Eurogroup Meeting, US New Home Sales, US Preliminary PMI.

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Tuesday's Key UK Corporate Events

Afren Trading Statement
Fresnillo Q4 Production Report
Filtronic Interim Results
British Land Co Interim Management Statement
Carpetright Interim Management Statement
Crest Nicholson Preliminary results
Greencore Interim Management Statement
Globo Trading Statement

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Tuesday's Key Economic Events

07:45 France Consumer Confidence
09:00 Italy Consumer Confidence
09:30 UK Gross Domestic Product
10:00 Italy Wage Inflation
13:30 US Durable Goods Orders
13:55 US Redbook index
14:00 US S&P/Case-Shiller Home Price Indices
15:00 US Consumer Confidence

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By Steve McGrath; steve.mcgrath@alliancenews.com; @stevemcgrath1

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