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LONDON MARKET MIDDAY: Stocks Lower And Pound Flat After UK Rate Hike

LONDON (Alliance News) - Stock prices in London were lower midday Thursday amid renewed trade ...

Alliance News 2 August, 2018 | 12:09PM
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LONDON (Alliance News) - Stock prices in London were lower midday Thursday amid renewed trade tensions between the US and China, while the pound was soft after Bank of England policy makers voted unanimously to raise UK interest rates, as expected.

The Monetary Policy Committee voted 9-0 to raise the Bank Rate to 0.75% from 0.50%, while maintaining the central bank's stock of purchased assets.

The pound was quoted at USD1.3104, compared to USD1.3117 at the same time at the London equities close Wednesday, in the immediate aftermath of the interest rate decision.

BoE Governor Mark Carney will hold a press conference at 1230 BST.

In domestic economic news prior to the BoE announcement, the UK construction sector logged stronger growth in July underpinned by the fastest increase in residential work for just over two-and-a-half years, survey data from IHS Markit showed Thursday.

The IHS Markit/Chartered Institute of Procurement & Supply Purchasing Managers' Index rose unexpectedly to 55.8 in July from 53.1 in the previous month. The score was forecast to fall to 52.8.

The FTSE 100 index was down 1.3%, or 98.58 points, at 7,553.78. The FTSE 250 was down 1.0% at 20,584.60 and the AIM All-Share was down 0.6% at 1,086.28.

The large cap index had hit an intraday low of 7,553.64 in mid-morning trade - its lowest level in three weeks.

The Cboe UK 100 was down 1.3% at 12,807.73, the Cboe UK 250 was down 0.9% at 18,725.67, and the Cboe UK Small Companies was down 0.5% at 12,308.87.

"The FTSE 100 is among stand outs on the downside again. Its idiosyncratic mix of oil and minerals is close to the worst possible set of assets with China the biggest consumer of the world's industrial metals," said City Index analyst Ken Odeluga.

Among FTSE 100 stocks, London Stock Exchange Group was the best performer, up 2.8% after the stock exchange operator turned in a "strong financial performance" in the first half of 2018, with profit and revenue increases prompting a significant dividend hike.

In the six months ended June, LSE said pretax profit increased 30% to GBP360 million from GBP277 million. Revenue increased 12% to GBP953 million from GBP853 million the year before.

The company raised its interim dividend by 19% to 17.2 pence per share from 14.4p per share a year before.

Rolls-Royce was up 2.7% after the jet engine maker upgraded its annual earnings outlook as it presses ahead with its restructuring drive.

Rolls-Royce said it now expects 2018 free cash flow to come in between GBP450 million and GBP550 million, compared to previous guidance for GBP350 million to GBP550 million. Operating profit is expected to come in between GBP400 million and GBP500 million, up from GBP300 million to GBP500 million previously guided.

Conversely miners were weighing on the large cap index amid trade fears as US President Donald Trump escalated his trade war with China, ordering his administration to consider raising the proposed tariff on USD200 billion worth of Chinese imports to 25% from the 10% announced earlier.

A spokesperson for China's Foreign Ministry accused the US of "blackmail" and warned of inevitable countermeasures if the US takes further escalatory steps.

Rio Tinto was down 3.9%, Fresnillo down 4.1%, Antofagasta down 3.8%, Glencore down 3.7%, and BHP Billiton down 3.6%.

Barclays shares were down 2.2% after the lender reported a sharp drop in its first half profit, due to a conduct charge paid to the US Department of Justice and payment protection insurance claim provisions.

The bank's pretax profit for the six months ended June decreased 29% to GBP1.66 billion from GBP2.34 billion a year before. Barclays attributed its dramatic decline in profit to its GBP1.42 billion settlement to resolve the civil complaint brought by the US Department of Justice in December 2016 regarding residential mortgage-backed securities sold by the lender between 2005 and 2007.

In the FTSE 250, ConvaTec Group was the best performer, up 2.9% after the wound dressings maker said it almost doubled its interim profit, as revenue spiked 11%.

For the six months to June 30, ConvaTec reported pretax profit up 95% to USD88.5 million compared to USD45.5 recorded in the comparative year ago period. Revenue increased 11% to USD921.3 million from USD831.3 million year-on-year.

At the other end of the midcap index, KAZ Minerals was down 20% - with around GBP729 million wiped off its total market value in the process - after the miner said it will acquire the Baimskaya copper project in the Chukotka region of Russia in a cash and stock deal worth USD900 million.

The deal consideration includes an initial consideration of USD675 million and deferred consideration of USD225 million. The initial consideration will be for 75% interest in the Baimskaya project and will comprise of USD436 million in cash and 22.3 million Kaz Minerals shares, representing 5.0% of current share capital of the company valued at USD239 million.

Ferrexpo was down 17%, after the iron pellet producer suffered double-digit drop in profit in the first six months of the year, resulting from increasing costs and declining iron ore prices.

In first half of 2018, the company recorded a USD202.9 million profit, down 23% from USD262.2 million the year before. The benchmark 62% iron ore fine price was 6% lower than in 2017, averaging USD69.7 per tonne with lower-quality iron ore prices "heavily discounted". Commodity and local cost inflation had the most significant impact on costs.

In mainland Europe, the CAC 40 in Paris was down 0.9% while the DAX 30 in Frankfurt was down 1.8% at midday Thursday.

BMW shares were down 2.4% after the luxury German carmaker posted a fall in profit amid the fallout from the global trade conflict unleashed by Trump's tariffs on imports. China responded to tariffs imposed on its goods by Washington by slapping duties on US car imports, which in turn have hit BMW imports to China from its plant in South Carolina.

The euro was marginally lower quoted at USD1.1620 at the European equities close, from USD1.1662 at the European equities close Wednesday.

In economic news from the continent, eurozone producer prices climbed at a faster pace on energy prices in June, figures from Eurostat showed.

Producer prices advanced 3.6% annually in June, faster than the 3% rise in May. This was also faster than the expected 3.5%. On a monthly basis, producer price inflation halved to 0.4% from 0.8%. Economists had forecast a 0.3% rise.

Excluding energy, producer price growth increased to 1.6% from 1.4% a month ago.

Stocks in New York were set for a lower open, tracking European counterparts lower. In the US earnings calendar breakfast cereal maker Kellogg Co, casino operator MGM Resorts, and KFC owner Yum! Brands report earnings before the US market open.

The DJIA was called down 0.6%, the S&P 500 index down 0.6% and the Nasdaq Composite down 0.7%.

Late on Wednesday, the Federal Reserve said the US economy is strong enough to bear tighter monetary policy on the horizon, as the central bank left its benchmark interest rate unchanged in a target range of 1.75% to 2.00%.

The Fed's monetary policy committee said it expects that "further gradual increases" in the target range will be "consistent with sustained expansion of economic activity, strong labour market conditions and inflation near the committee's symmetric 2% objective over the medium term."

In a statement, the Fed said that risks to the outlook for the US economy seem "roughly balanced".

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2018 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rolls-Royce Holdings PLC 703.40 GBX 0.34
ConvaTec Group PLC 186.85 GBX -1.19
Ferrexpo PLC 145.20 GBX 0.45 -
Antofagasta PLC 913.80 GBX 1.22 -
KAZ Minerals PLC 510.00 GBX 2.16 -
Glencore PLC 218.70 GBX 0.76
Fresnillo PLC 581.60 GBX 4.91 -
Barclays PLC 168.68 GBX -0.86
Rio Tinto PLC 4,318.00 GBX 1.44
London Stock Exchange Group PLC 6,898.00 GBX 1.47
BHP Billiton PLC 1,729.00 GBX 1.08

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