News Column

MARKET COMMENT: FTSE 100 Closes Higher, Whitbread Jumps

June 17, 2014

James Kemp

LONDON (Alliance News) - The FTSE 100 closed higher for the first time in three days Tuesday, having spent the day trading within a tight range, with hotels and coffee shops operator Whitbread one of the biggest gainers following an upbeat trading update.

Whitbread, which owns Premier Inn hotels and the Costa Coffee chain, saw its shares rise sharply after it reported strong sales growth for the first quarter of its new financial year. Its like-for-like sales grew 6.9% in the 13 weeks to May 29, but its heavy investment in its businesses meant new shop and hotel openings drove total sales up 13%.

"Whitbread is well positioned for another good year with our strong brands continuing to win market share, reinforced by ambitious organic network expansion," said Chief Executive Andy Harrison in a statement.

Whitbread, closing up 2.8%, ended the day as the second-biggest riser in the FTSE 100 Tuesday.

Overall, the FTSE 100 closed up 0.2% at 6,766.77, while the FTSE 250 closed down 0.8% at 15,585.46, and the AIM All-Share index closed down 0.1% at 785.8.

In Europe, the CAC 40 in Paris and DAX 30 in Frankfurt closed up 0.6% and 0.4%, respectively.

On Wall Street, at the UK equity market close, the DJIA and S&P 500 are almost perfectly flat, while the NASDAQ Composite is up 0.3%.

"Helping risk appetite today was news that inflation in the world's largest economy firmed up, helping underpin assets that are seen as offering a proxy to inflation, such as stocks," said David White, a financials trader at Spreadex.

The US Labor Department said that US consumer price inflation rose 0.4% in May, having risen 0.3% in April, beating economists' expectations for the index to edge up by about 0.2%. Year-on-year, CPI increased 2.1% in May, up from the 2.0% posted in April, and beating estimates of 2.0%.

The Federal Reserve's monthly two-day meeting of the FOMC policy committee got underway Tuesday, with its decisions due to be announced after the UK equity market close on Wednesday.

In the forex market, it was a volatile day for the pound. The currency fell against its major rivals after the headline rate in UK inflation fell to its lowest level for more than four-and-a-half years, before quickly recovering.

Headline UK consumer price inflation dropped to 1.5% year-on-year in May, from the 1.8% growth recorded in April, below economists' forecasts for 1.7% and the lowest level of price growth since October 2009. On a monthly basis, prices contracted by 0.1% in May, compared with the 0.4% growth seen in April, also below the 0.2% growth economists had been expecting. Core CPI, which excludes volatile items such as food and energy, fell to 1.6% year-on-year in May after reaching the Bank of England's 2.0% target in April. Economists had expected core CPI to moderate to 1.7%.

At the UK equity market close, the pound trades at USD1.6960, EUR1.2520, JPY173.240, and CHF1.5258. The euro trades at USD1.3544, the Swiss franc trades at USD1.1109, and the dollar trades at JPY102.169.

Shire was another big winner on the FTSE 100, closing up 3.4% amid on-going speculation that it could get a takeover offer at some point in coming months.

WM Morrison Supermarkets closed up 2.3% after it said it plans to cut around 2,600 management jobs as part of a plan to slim down its management structure across the business. It said its plans to cut the management jobs will modernise the way its stores are managed, with the aim of reducing in-store management tiers, simplifying responsibilities and improving customer service. It said some of its stores currently have seven tiers between the shop floor and the store manager.

"This is the right time to modernise the way our stores are managed. These changes will improve our focus on customers and lead to simpler, smarter ways of working," said Chief Executive Dalton Philips in a statement.

Ashtead Group, on the other hand, was the blue-chip index's biggest loser, ending the day down 6.3% even though it reported higher profit and revenue for the fourth quarter of its last financial year and for the year as a whole.

The company reported a pretax profit of GBP70.8 million for the three months to April 30, up from GBP50.0 million a year earlier, as revenue rose to GBP355.7 million, up from GBP306.8 million. For the year to end-April, pretax profit rose to GBP365.5 million, from GBP214,2 million, as revenue rose to GBP1.48 billion, from GBP1.21 billion. It said it will pay a final dividend of 9.25 pence a share, up from the 6.0p final dividend it paid for fiscal 2013, meaning the total dividend for the year will rise to 11.5p, from 7.5p.

Ashtead shares have been in an uptrend for about two years, although the stock has been volatile since the end of March this year. Investors may be disappointed that there was no real consensus shift after the latest strong results, said Andrew Gibb, an analyst at Investec Securities.

In the FTSE 250, Kazakhmys, closing up 3.9%, was the index's biggest riser. The miner said that the government of Kazakhstan has agreed to reduce mineral extraction tax rates at some of the company's mature assets, in a move worth about USD40 million a year at current metals prices. Kazakhmys said the lower tax rate will apply to its deposits in the Zhezkazgan region of Kazakhstan, excluding its Zhomart mine, and at the Konyrat mine in the central region. It said the new rates are effective retrospectively from January 1, 2014 and are applicable for a year, at which point a new application can be made. The assets are among the company's most challenging, and were earmarked for sale in a restructuring the company announced in February.

In a separate statement, Kazakhmys said it has completed the acquisition of the Koksay mine, which it had first announced in February, for USD260 million in cash including a deferred payment of USD65 million. Koksay has an estimated mine life of over 20 years with average annual production of around 80,000 tonnes of copper cathode equivalent, 60,000 ounces of gold, 400,000 ounces of silver and 1,000 tonnes of molybdenum in concentrate. The mine is expected to be one of its growth drivers going forward.

Crest Nicholson Holdings ended the day up 3.7% as the second biggest riser in the FTSE 250. The residential property developer's shares jumped after it said it will pay its first interim dividend since re-listing, as profit and revenue continued to rise on the back of the recovery in the UK housing market.

It said pretax profit jumped 37% to GBP38.4 million for the six months to end-April from GBP22.2 million a year earlier, as revenue rose 26% to GBP241.1 million thanks to an increase in sales, completions and average selling prices. On the back of its strong performance the company declared a interim dividend of 4.1 pence per share.

Xaar, closing down 23%, was by far the heaviest faller in the FTSE 250. The digital inkjet printing technology company's shares fell after it warned that its revenue will fall slightly in 2014 as it struggles to quickly expand the takeup of its technology outside ceramic tiles markets, and gross margins are expected to decline as it faces increased competition. It warned that it now expects revenue in 2014 to be about GBP130 million, down from GBP134.1 million in 2013, and its adjusted operating profit margin to drop to 28% to 29%, from 30%.

In the data calendar Wednesday, Japanese trade data are released at 0050 BST, with the Bank of Japan publishing the minutes from its latest monetary policy meeting at the same time. The Bank of England releases minutes from its latest interest rate meeting at 0930 BST, while construction output figures for the eurozone are released shortly after at 1000 BST.

In the US, the Mortgage Bankers Association releases its MBA mortgage applications data at 1200 GMT, ahead of the Federal Reserve's interest rate and asset purchasing programme decisions, and the Federal Open Market Committee's economic projections at 1900 BST. The Fed's monetary policy statement and press conference is due shortly after at 1930 BST.

Meanwhile, former Federal Reserve Chairman Ben Bernanke gives a speech at 1845 BST.

In the corporate calendar, FTSE 250-listed Berkeley Group releases full-year results, while N Brown provides a trading update.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Alliance News

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