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LONDON MARKET CLOSE: London Stocks Close Higher On ECB Rate Decision

[ 14 Jun 2018 17:06 ]

LONDON (Alliance News) - Stocks in London closed higher as the European Central Bank's decision on interest rates brought both the euro and the pound down, sparking off a rally in Europe.

The FTSE 100 index closed up 0.8%, or 62.08 points at 7,765.79. The FTSE 250 ended up 0.4%, or 91.15 points, at 21,324.02, and the AIM All-Share closed up 0.3%, or 3.67 points, at 1,105.34.

The Cboe UK 100 ended up 1.0% at 13,200.74, the Cboe UK 250 closed up 0.6% at 19,518.08, and the Cboe UK Small Companies closed flat at 12,921.51.

"Yesterday's FOMC driven losses have turned around heavily today, with the ECB helping spark off a sharp deterioration in EURUSD and rise across European indices. Amid expectations of a more hawkish ECB stance, Mario Draghi has once again managed to send the euro lower despite the committee setting out the end of their QE stimulus. With the euro and pound both in decline this afternoon, we are seeing significant outperformance in European stock markets over their US peers," said IG Market Analyst Joshua Mahony.

The euro was lower against the dollar quoted at USD1.1639 at the European equities close, against USD1.1773 at the close on Wednesday.

European Central Bank President Mario Draghi announced plans to exit its monthly bond-buying scheme by the end of the year as a sign of the bank's confidence in the economic and inflationary outlook for the 19-member eurozone.

In the meantime, the Frankfurt-based bank said it will halve its current bond purchases from their current level of EUR30 billion a month to EUR15 billion starting in October. The purchase will end entirely from January 1.

At his press conference following the decision, Draghi said the bank has cut its economic growth forecast for 2018. The ECB expects the eurozone to expand by 2.1% this year, down from its previous forecast of 2.4%.

The region's economy should expand by 2.1% in 2019 and 1.7% in 2020, the same as previous forecasts, with Draghi seeing "ongoing, broad-based growth" in the 19-member eurozone.

Annual inflation should edge up to 1.7% in 2018 and 2019. The bank had previous forecast 1.4% for both years.

Meanwhile, the ECB left interest rates unchanged and said it expects rates to remain at their present levels at least through the summer of 2019.

"The euro is under severe pressure in the wake of the ECB meeting. Going into the meeting there was a lot of talk about Mario Draghi laying the groundwork for the stimulus package to be wound down this year, and then to signal an interest-rate hike. Now it appears the ECB won't be increasing interest rates until at least the back end of 2019, and they might not even hike then. The solid US retail sales added to the euro's woes," said David Madden, chief market analyst at CMC Markets.

On the London Stock Exchange, Rolls Royce closed as the best blue-chip performer, up 6.3% as the jet engine maker said it would cut around 4,600 jobs as part of a business restructuring plan in order to save GBP400 million per annum by the end of 2020.

Under the restructuring programme, the company aims to remove corporate management layers, complexity and duplication, including within its core engineering division, and replace a centralised decision and control structure by empowered business units having clearer accountabilities, and decision-making powers.

The total cash cost of the restructuring programme is expected to be around GBP500 million, which will be incurred across 2018, 2019 and 2020.

GlaxoSmithKline was up 2.3% as it reported that its joint venture ViiV Healthcare reported positive results in its two-drug regimen for the treatment of HIV.

The GEMINI studies are part of ViiV Healthcare clinical trial for a two-drug regiment, involving the combination of dolutegravir and lamivudine medicines to treat HIV, as opposed to the standardised three-drug regimen.

The UK pharmaceutical giant said the studies met their primary endpoint demonstrating "the potency, safety and tolerability of the dolutegravir plus lamivudine combination" and showing similar efficacy to the three-drug regimen. The studies seek to address long-term toxicity in people living with HIV by reducing the number of medicines used in their treatment, the company said.

At the bottom of the FTSE 100 was Anglo-Dutch consumer goods firm Unilever, down 2.8% after Chief Financial Officer Graeme Pitkethly said at a Deutsche Bank conference it was "extremely unlikely" that Unilever will stay in London's FTSE 100 index after ending its current dual corporate structure.

In March, Unilever said it would simplify itself into a single legal entity incorporated in the Netherlands.

The company, which currently has headquarters in Rotterdam and London and two separately listed entities, a UK PLC and a Dutch NV, attributed the decision to the fact its Dutch NV shares account for 55% of the company's combined ordinary share capital and trade with greater liquidity than London-listed shares.

Separately, Unilever re-confirmed its full-year outlook with underlying sales growth in the range of 3% to 5%. The company expects to maintain a strong cash flow and said its underlying operating margin should continue to progress to 20%.

Also at the bottom was RELX, down 2.8% after UBS cut the Anglo-Dutch business information and events company to a Sell rating from Neutral.

In the FTSE 250, AVEVA closed comfortably at the top, up 12% as the electrical and industrial software provider reported a combined group pro forma pretax profit of GBP64.6 million for the year to the end of March, down from GBP98.3 million, on a revenue of GBP704.6 million and GBP648.7 million, respectively.

This followed the recent combination with the software arm of France's Schneider Electric SA. Group profit, before tax and adjustments and on pro forma basis grew to GBP162.8 million from GBP152.4 million.

The pro forma results include results for both heritage Schneider Electric Industrial Software Business and heritage AVEVA for the 12 months to March end, as well as for the comparative period.

The pound was marginally lower against the dollar quoted at USD1.3341 at the London equities close, compared to USD1.3370 at the same time on Wednesday.

Wealth and investment manager Rathbone Brothers closed up 5.1% on Thursday as it said will acquire Scottish wealth manager Speirs & Jeffrey Ltd and has successfully raised GBP60 million to part-fund the deal.

Rathbone Brothers said the acquisition of Speirs & Jeffrey will increase its funds under management by 18% to GBP44.5 billion. Speirs & Jeffrey currently manages GBP6.7 billion in funds, making it Scotland's largest independent wealth manager, according to Rathbone.

Rathbone will pay an initial GBP104 million, comprising GBP79 million in cash and 1.0 million new Rathbone shares worth GBP25 million.

The cash element will be funded by internal cash resources and the GBP60 million share placing.

On the other side of the mid-cap index, N Brown was the worst performer with shares down 7.5% as the fashion chain revealed it has entered consultations with staff on the closure of its 20 stores, which it said are loss-making, as it plans to become a "global online retailer". Already 75% of total revenue is generated online, N Brown said.

For the 13-week period to June 2, N Brown stores generated revenue of GBP15 million, representing just 2% of the group's revenue, and made an earnings before interest, taxes, depreciation and amortisation loss of GBP3 million.

The retailer said that, if the decision to close the store is taken, it will incur exceptional costs of around GBP18 million to GBP22 million.

"In line with our online strategy, and given continued weak high street footfall, we have today commenced a consultation process with colleagues over the future of our small store estate. This action has not been taken lightly and we will do all we can to support the colleagues affected during this process," Chief Executive Officer Angela Spindler said.

UK retail sales growth accelerated more than expected in May, figures from the Office for National Statistics revealed Thursday.

Retail sales volume including auto fuel, grew 1.3% month-on-month, following April's 1.8% increase. This was the second consecutive rise in sales and much bigger than the expected 0.5%.

Sales excluding auto fuel, climbed 1.3% versus 1.4% increase a month ago. Sales were expected to gain 0.3%.

In Paris the CAC 40 ended up 1.8%, while the DAX 30 in Frankfurt ended higher 1.6%.

In other European news, Germany will allow class-action lawsuits to be brought against big corporations, following a vote in the lower house of parliament on Thursday seen as a win for consumers in the wake of the Volkswagen AG emissions scandal.

The Bundestag passed the legislation to giving consumers the option of seeking damages without going it alone against major corporations. The complaints will be led in the courts by specially authorized consumer protection associations.

The legislation is set to come into effect on November 1, so that the owners of cars fitted with emissions-cheating software by Volkswagen can bring forward a complaint before their right to claim lapses in late 2018.

Stocks in New York were higher at the London equities close. The DJIA was flat, the S&P 500 index was up 0.2% and the Nasdaq Composite was up 0.7%.

The US Commerce Department said retail sales jumped by 0.8% in May after climbing by an upwardly revised 0.4% in April.

Economists had expected retail sales to rise by 0.4% compared to the 0.3% increase originally reported for the previous month.

Excluding sales by motor vehicle and parts dealers, retail sales still surged up by 0.9% in May following a 0.4% increase in April. Ex-auto sales had been expected to climb by 0.5%.

Brent oil was quoted lower at USD75.83 a barrel at the London equities close from USD76.50 at the same time the prior day.

Gold was higher quoted at USD1,305.40 an ounce at the London equities close against USD1,297.35 late Wednesday.

In the UK corporate calendar there are full year results from currency manager Record and trading statements from supermarket chain Tesco and recruiter Sthree.

In the economic events calendar there are inflation readings from Italy and the eurozone at 0900 BST and 1000 BST respectively.

By Dayo Laniyan; dayolaniyan@alliancenews.com

Copyright 2018 Alliance News Limited. All Rights Reserved.


LONDON MARKET CLOSE: London Stocks Close Higher On ECB Rate Decision - Alliance News

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