LONDON MARKET CLOSE: Lufthansa Knocks Airlines But FTSE Ends In Green

(Alliance News) - Trade was lacklustre on Monday, with London stocks moving cautiously higher as ...

Alliance News 17 June, 2019 | 5:00PM
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(Alliance News) - Trade was lacklustre on Monday, with London stocks moving cautiously higher as markets await meetings from the US Federal Reserve and the Bank of England later in the week.

The FTSE 100 managed to inch into the green despite airlines being knocked following a profit warning from German flag carrier Lufthansa, and the FTSE 250 overcame sharp losses for Kier to also finish in positive territory.

The FTSE 100 index closed up 11.53 points, or 0.2%, at 7,357.31. The FTSE 250 ended up 39.27 points, or 0.2%, at 19,157.61, and the AIM All-Share closed up 0.25 points at 937.46.

The Cboe UK 100 ended up 0.2% at 12,487.12, the Cboe UK 250 closed up 0.2% at 17,177.66, and the Cboe Small Companies ended down 0.2% at 11,647.43.

In European equities on Monday, the CAC 40 in Paris ended up 0.4%, while the DAX 30 in Frankfurt closed down 0.1%.

"Monday was a day to forget trading-wise, investors firmly focused on the central bank-dominated second half of the week," said Connor Campbell at Spreadex.

"It is understandable that traders might be a bit reticent to show their hand this early on, given the uncertainty surrounding the Fed's meeting on Wednesday evening," continued Campbell. "With Jerome Powell and his FOMC peers creating a dovish din in the last couple of months, there is the expectation that the central bank will slash rates sooner rather than later. The big question is whether it will tee up a July rate cut or something a bit further down the line."

Stocks in New York were higher at the London equities close, with the DJIA up 0.2%, the S&P 500 index up 0.3%, and the Nasdaq Composite up 0.8%.

While stocks were lacking serious upwards momentum, the pound had "another miserable session", said Campbell, as the Conservative party leadership contest rumbles on.

Tory leadership hopefuls Rory Stewart and Sajid Javid believe they have the required number of supporters to survive Tuesday's second round of voting.

Stewart managed to secure just 19 votes in the first ballot and Javid had 23 – both short of the 33 required to stay in the race after the second vote. They are a long way short of frontrunner Boris Johnson, who picked up 114 votes last week and has since been boosted by the support of former leadership contender Matt Hancock.

Former foreign secretary Johnson did not appear at the hustings event for political journalists and was notably absent from the first TV debate on Channel 4 on Sunday.

The pound was quoted at USD1.2559 at the London equities close Monday, down from USD1.2604 at the close on Friday.

Meanwhile, the euro stood at USD1.1233 at the European equities close Monday, against USD1.1222 at the same time on Friday.

In an interview with the Financial Times, ECB Executive Board member Benoit Coeure said that the performance of the bloc's economy is not too bad, but signals from financial markets, especially from bonds, were "quite alarming."

"So, if the conclusion were that cutting rates is the best option, then we would have to consider the impact of negative rates on financial intermediation, especially for banks," he said, adding that: "We would have to consider whether a tiering system is needed."

In commodities, Brent oil was quoted at USD61.66 a barrel at the London equities close Monday from USD62.00 late Friday.

Gold, meanwhile, was quoted at USD1,340.19 an ounce at the London equities close Monday against USD1,349.52 at the close on Friday.

In London, Rolls-Royce Holdings closed up 2.0% after noting that Virgin Atlantic will introduce 14 new A330neo aircraft from Airbus SE into its fleet, which will all be powered by the jet engine maker's Trent 7000 engine.

"This fleet expansion is another great endorsement of both the A330neo and Trent 7000, our very latest version of the Trent. We are deeply grateful for the trust that Virgin Atlantic has placed in us – soon their entire fleet will be powered by Rolls-Royce," said Civil Aerospace President Chris Cholerton.

Royal Bank of Scotland gained 1.4% after it said the completion of a merger between two Saudi Arabia based banks will lead to a GBP700 million gain.

Saudi British Bank in October 2018 finalised an agreement to buy Alawwal Bank for USD5 billion, creating the kingdom's third-largest lender with USD71 billion in assets.

RBS, through its Dutch-domiciled investment bank NatWest Markets, was part of a consortium that held an aggregate 40% equity stake in Alawwal bank. The interest of RBS was equivalent to a 15.3% shareholding in Alawwal bank.

In total, RBS will record a GBP700 million profit attributable to shareholders as a result of the Saudi bank combination.

At the opposite end of the FTSE 100 were airlines, knocked in a negative read-across after a profit warning from German flag carrier Lufthansa.

Lufthansa, which shed 12% in Frankfurt, blamed "price deterioration in Europe" caused by market-wide overcapacity and "aggressively growing low cost competitors".

The German airline said it now expects adjusted earnings before interest and taxes of EUR2.0 billion to EUR2.4 billion in 2019, on the basis of low-single-digit revenue growth. In 2018, Lufthansa reported adjusted Ebit of EUR2.8 billion, which in turn was down from EUR3.0 billion in 2017.

Following this disappointing update from the German flag carrier, budget airline easyJet ended down 4.1% and British Airways owner International Consolidated Airlines down 2.3%. Ryanair shares sank 4.3%.

British American Tobacco dipped 1.3% after Morgan Stanley cut the Lucky Strike cigarette maker to Underweight from Equal Weight, with peer Imperial Brands suffering in a negative read-across, closing down 0.9%.

Power firm SSE ended down 1.1% after Macquarie started the stock with a Neutral recommendation.

Among FTSE 250 stocks, retail property investor Hammerson closed up 2.7% after Peel Hunt raised the owner of Birmingham's Bullring shopping centre to Add from Hold.

Babcock International gained 1.8% after confirming it rejected a takeover approach from outsourcing peer Serco Group in January.

The proposal was unsolicited and "highly preliminary", Babcock said, and involved an all-share merger. No further proposal has been received since January.

Serco shares closed up 0.5%.

Tumbling to the bottom of the index was Kier Group, which slumped 18% after suspending its dividend and putting several businesses up for sale in order to control debt.

The construction company has put Kier Living, its housebuilding business, up for sale as well as Kier Property. Kier also will be quitting the Management and Environmental Services businesses.

Further, Kier has suspended dividend payments for its year ending June, and the following financial year. This comes after Kier slashed its first half dividend 79% to 4.9 pence a share.

Amigo Holdings slid 9.2% after Shore Capital downgraded the guarantor loans firm to Sell from Hold.

On AIM, Staffline dived 44% as it skipped its annual dividend and set out plans for a GBP30 million share placing, as well as almost doubling its provision for liabilities associated with minimum wage regulations.

Staffline has made a final update to its national minimum wage compliance liabilities, raising the total amount to GBP15.1 million from GBP7.9 million including GBP500,000 of adviser costs, all of which is expected to be a cash cost in 2019.

In a bid to reduce its leverage at the end of 2019, Staffline is planning a GBP30 million share placing in order to cut its ratio of net debt to underlying earnings before interest, depreciation, taxation, and amortisation to below two times.

Staffline said it will not be recommending a final dividend for 2018 but did reiterate its guidance for an underlying 2018 performance "in line with expectations". Staffline has yet to publish its 2018 results due to an extensive audit but now expects to do next week.

In the UK corporate calendar on Tuesday, there are annual results from equipment rental firm Ashtead Group and utility firm Telecom Plus.

In the economic calendar on Tuesday, German producer prices are at 0700 BST followed by the ZEW economist sentiment survey at 1000 BST. The eurozone trade balance and consumer prices are at also 1000 BST.

In the US, housing starts are at 1330 BST followed by the Redbook index at 1355 BST. In addition, the Federal Open Market Committee's two-day meeting kicks off on Tuesday, and concludes on Wednesday when the US central bank's latest interest rate decision will be announced.

By Lucy Heming;

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Amigo Holdings PLC 19.14 GBX -8.87 -
Staffline Group PLC 29.90 GBX 3.11 -
Rolls-Royce Holdings PLC 278.10 GBX -12.82
Hammerson PLC 74.16 GBX -4.09 -
Kier Group PLC 82.98 GBX 1.69 -
SSE PLC 1,239.50 GBX 0.77
Babcock International Group PLC 388.10 GBX -4.39 -
Ryanair Holdings PLC 11.28 EUR -2.63 -
easyJet PLC 690.20 GBX -6.73 -
British American Tobacco PLC 3,184.50 GBX -2.72
Imperial Brands PLC 1,474.50 GBX -1.99
The Royal Bank of Scotland Group PLC 110.80 GBX -6.14
Serco Group PLC 128.10 GBX -0.31 -
International Consolidated Airlines Group SA 230.35 GBX -6.51 -

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