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LONDON (Alliance News) – Stocks in London ended significantly higher on Wednesday boosted by a surge in heavyweight mining shares, as the pound dropped sharply after UK inflation fell to a one-year low.
The FTSE 100 index closed up 1.3%, or 91.29 points at 7,317.34. The large cap index hit an intraday high of 7,325.59 in afternoon trade – its highest level since late February.
The FTSE 250 ended up 0.9%, or 182.62 points, at 20,012.01, and the AIM All-Share closed up 0.2%, or 1.81 points, at 1,031.06.
The BATS UK 100 ended up 1.2% at 12,416.72, the BATS 250 closed up 0.8% at 16,342.86, and the BATS Small Companies ended 0.4% higher at 12,263.42.
In Paris the CAC 40 ended up 0.5%, while the DAX 30 in Frankfurt ended flat.
“The FTSE 100 is being helped by the sell-off in sterling. The dip in the pound has made the internationally-exposed index more attractive to investors. Sterling slipped on the back of the fall in the inflation rate in the UK. Adding to the FTSE’s gains are higher metal prices, thanks to the London index’s relatively high proportion of natural resources stocks,” said David Madden, market analyst at CMC Markets.
On the London Stock Exchange, Mediclinic International ended as the best blue chip performer up 9.2% after the private healthcare provider said it expects full year revenue to be “marginally” ahead of expectations.
The positive outlook came after a strong second half performance from its Middle East business and its South African unit producing results ahead of original forecasts.
For the year to the end of March, Mediclinic expects adjusted earnings before interest, taxes, depreciation and amortisation to grow around 3.0% from the GBP501 million the year prior, implying around GBP516 million. Revenue is expected to increase around 4.0% to GBP2.90 billion from GBP2.75 billion the year before.
Miners also drove the large cap index to significant gains, with Glencore as second best, closing up 7.7%, Anglo American in third up 6.2%, BHP Billiton, up 5.5% and Rio Tinto, up 5.4%.
Moreover, Russian steelmaker Evraz closed up 3.4%.
“Base metals such as aluminium and nickel continue to rally, with fear of further sanctions cutting out Russian supplies from global markets. Miners have been a prime target for selling in recent weeks on fears of global growth being hit hard by trade wars, and while sanctions might not be the most enticing prospect, higher prices will at least give mining firms further reason to be optimistic,” said IG chief market analyst Chris Beauchamp.
The FTSE 350 mining sector index closed as the best performing sector, up 6.8%.
In the FTSE 250, Polymetal International ended as the best performer up 12% after the Russian miner said volume growth, higher commodity prices, and lesser impact from seasonal refinery closures led to a 19% rise in revenue and 8% rise in gold production for the first three months of the current year.
The precious metals mining company recorded revenue of USD354 million for the three months to March-end. It produced 295,000 ounces of gold equivalent, up 5% from the same period last year. Gold production was up 8% to 214,000 ounces while silver production was down 3% to 6,000 ounces from the previous quarter.
At the other end of the midcap index, CYBG closed as the second worst performer, down 5.0% after the lender said it will increase its provision for payment protection insurance claims by GBP350 million due to the increased level of complaints and certain time consuming and more complicated cases.
The increased PPI provision will cover costs for closing out final cases, additional new customer complaints, and costs for administering redress programmes.
CYBG, which owns Clydesdale Bank and Yorkshire Bank, intends to recognise a pretax charge of GBP202 million in the six month period ended March due to the additional PPI provision. The charge is expected to result in a pro forma reduction in Common Equity Tier 1 ratio of 100 basis points, bringing it below the company’s guidance range of 12% to 13%.
Intu Properties closed down 4.1% after the shopping mall operator said it regarded the explanation that peer Hammerson gave for backing out of its GBP3.40 billion acquisition for Intu as “unsatisfactory”.
Intu emphasised Hammerson had reaffirmed its intention to proceed with the acquisition in mid-March. At the time, Hammerson said it was “fully committed” to the deal which it believed would “deliver significant value for Hammerson shareholders”.
Hammerson said that despite the “strategic rationale” of the deal as announced in December “the board has now concluded the proposed Intu acquisition is no longer in the best interests of shareholders”.
The Bullring shopping centre operator said it took the decision due to a deterioration in the perception of the UK retail property market dynamics prospects since the deal was announced. Hammerson closed up 4.2%.
“Intu’s shares slipped on the news of the withdrawn bid although shares in its former suitor Hammerson are up, to show just how wary investors were of the would-be buyer’s plan to double down on its exposure to British shopping centres,” said AJ Bell’s Russ Mould.
The pound was down quoted at USD1.4215 at the London equities close, compared to USD1.4303 at the same time on Tuesday, after a sharp deterioration in the UK inflation readings for March.
Consumer prices climbed 2.5% year-on-year in March, slower than the 2.7% increase posted in February. Inflation was forecast to remain unchanged at 2.7%. This was the weakest rate since March 2017, when prices gained 2.3%.
Month-on-month, consumer prices edged up 0.1% in March, slower than the expected 0.3%. Core inflation that excludes energy, food, alcoholic beverages and tobacco, slowed to 2.3% from 2.4% a month ago.
Another report from ONS showed that output price inflation came in at 2.4% in March, down from 2.6% in February. Nonetheless, this was faster than the forecast of 2.3%.
“Today’s weaker-than-expected UK inflation figures follow the slightly disappointing wages data we saw yesterday and as a result, the pound is falling for a second consecutive day. As we had suspected, the FTSE’s selling on Monday saw no further follow-through and the index has now hit a new high on the week, no doubt supported by the weaker pound. Investors are probably wondering whether the Bank of England will still hike interest rates next month,” said Forex.com analyst Fawad Razaqzada.
The euro was firm at USD1.2377 at the European equities close, against USD1.2342 the prior day.
In European economic news, annual inflation in the eurozone rose to 1.3% in March, ending several months of decline, according to the EU’s statistics agency, Eurostat. The European Central Bank’s annual inflation target is just below 2%.
Stocks in New York were higher at the London equities close, as investment bank Morgan Stanley reported a record rise in net income and revenue in the first quarter. The DJIA was flat, the S&P 500 index up 0.3% and the Nasdaq Composite up 0.3%
The financial services giant reported first-quarter net income applicable to company of USD2.70 billion, or USD1.45 per share, compared to net income of USD1.90 billion, or USD1.00 per share, a year ago.
Earnings per share excluding intermittent net discrete tax provision/benefit was USD1.45 compared to USD1.01, last year. On average, 21 analysts polled by Thomson Reuters expected the company to report profit per share of USD1.25 for the quarter. Analysts’ estimates typically exclude special items.
First-quarter net revenue was USD11.10 billion, compared to USD9.70 billion, a year ago. Analysts expected revenue of USD10.36 billion for the quarter. Moreover, income from continuing operations before tax increased 22% year-on-year to USD3.42 billion.
In addition, credit card company American Express and equipment rentals firm United Rentals will also report earnings after the New York close.
Brent oil was sharply higher quoted at USD72.78 a barrel at the equities close from USD71.39 at the London equities close Tuesday. The North Sea benchmark hit its highest level since November 2014 of USD73.37 in afternoon trade after the energy information administration reported that US crude inventories declined by 1.1 million barrels last week.
“WTI and Brent Crude oil reached fresh 41 month highs after the latest energy information administration figures showed a drop in US oil and gasoline stockpiles. The energy market is already strained by uncertainty in the Middle East, and the EIA report just adds to the upward pressure,” said Madden.
Gold was up quoted at USD1,350.81 an ounce at the London equities close against USD1,344.26 late on Tuesday.
The economic events calendar on Friday has UK retail sales data at 0930 BST and US initial jobless claims and Philadelphia Federal Reserve manufacturing survey at 1330 BST. In addition, Deputy Governor for Financial Stability Jon Cunliffe will speak at the FIA Global Finance Forum, in Washington DC, at around 1730 BST.
The UK corporate calendar on Friday has first quarter results from consumer goods giant Unilever, pest control company Rentokil Initial and gold miner Acacia Mining and third quarter results from pay-TV operator Sky. There are also half year results from department store chain Debenhams.
By Arvind Bhunjun; [email protected]
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