News Column

UK MORNING BRIEFING: Rolls-Royce Leads Strong Opening Gains

June 19, 2014

Tom Waite



LONDON (Alliance News) - UK shares have opened strongly higher Thursday, and the pound has broken above USD1.70, following a well-received US Federal Reserve meeting.



Rolls-Royce Holdings leads FTSE 100 gains after saying it will return cash to shareholders through a GBP1 billion share buyback once the planned sale of its energy gas turbine and compressor business to Siemens AG goes through. It said the cash return reflects its strong balance sheet and because it isn't planning any material acquisitions.



There was a series of significant downgrades early Thursday. Credit Suisse cut BG Group to Underperform from Neutral, while traders say Merrill Lynch cut Vodafone to Neutral from Buy and Societe Generale cutLegal & General to Sell from Hold.



BG Group is the second worst faller in the FTSE 100, after Shire, down 0.5%.



Meanwhile, Morgan Stanley has raisedGenel Energy to Overweight and has initiated Gulf Keystone with Underweight. Both Genel and Gulf Keystone operate in the far northern Kurdistan region of Iraq near the border with Turkey.



Here is what you need to know at the UK market open:

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MARKETS

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FTSE 100: up 0.8% at 6,829.52

FTSE 250: up 0.8% at 15,750.53

AIM ALL-SHARE: up 0.3% at 785.35

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Hang Seng: down 0.2% at 23,147.35

Nikkei 225: closed up 1.6% at 15,361.16

DJIA: closed up 0.6% at 16,906.62

S&P 500: closed up 0.8% at 1,956.98

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GBP-USD: up at USD1.7007

EUR-USD: up at USD1.3622



GOLD: up at USD1,280.10 per ounce

OIL (Brent): up at USD114.55 a barrel



(changes since end of previous GMT day)

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ECONOMICS AND GENERAL

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Thursday's Key Economic Events still to come

(all times British Summer Time)



All Day EU Eurogroup meeting

09:30 UK Retail Sales

11:00 UK CBI Industrial Trends Survey

13:30 US Jobless Claims

15:00 US Philadelphia Fed Manufacturing Survey

15:30 US EIA Natural Gas Storage

20:00 US American Petroleum Institute Monthly Report

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The Federal Open Market Committee on Wednesday reduced the pace of monthly asset purchases by USD10 billion to USD35 billion, as expected. The central bank will add to its holdings of agency mortgage-backed securities at a pace of USD15 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of USD20 billion per month. Additional tapering is likely if the labor market continues to show improvement and inflation picks up, the Fed said in a statement accompanying its decision. Fed Chair Janet Yellen said a post-decision press conference that the Fed will look at a "range of indicators" on jobs before deciding to raise rates.

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The Federal Reserve also cut its forecast for US growth to a range of 2.1-2.3% for this year, slashed from a March projection of 2.8-3% after an economic contraction in the first quarter at an annualized pace of 1%. The central bank's projections remain stable for outlying years. The Fed sees growth of 3-3.2% in 2015, 2.5-3% in 2016 and 2.1-2.3% in the longer run.

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US President Barack Obama huddled Wednesday with congressional leaders over the growing crisis in Iraq as the Sunni-led insurgency moved on Iraq's largest oil refinery. US defence officials confirmed that Iraq had asked Washington to mount airstrikes against the jihadist movement, the Islamic State in Iraq and the Levant (ISIL).

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Iraq has asked the US to mount airstrikes against militants, Iraqi Foreign Minister Hohyar Zebari was quoted as saying Wednesday as Sunni-led insurgents were pressing on with advances in the oil-rich country. "Iraq has formally asked for Washington's assistance under a security agreement to mount airstrikes against the terrorist groups," Dubai-based Al-Arabiya TV quoted Zebari as saying on the sidelines of an Islamic meeting in the Saudi city of Jeddah.

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Israeli war jets carried out several airstrikes early Thursday, targeting training facilities that belong to the Islamic Hamas movement in northern Gaza Strip and Gaza city, security officials said. Officials in Gaza said several explosions damaged northern and central Gaza Strip as well as eastern and western Gaza city. Israeli jets hovered over the coastal enclave before carrying out the strikes. Training camps and bases that belong to Islamic Hamas movement's armed wing al-Qassam Brigades were targeted, officials said. Ambulances and firefighters rushed to the scenes.

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Japan's all industry activity dropped more-than-expected in April as all four sub-sectors contracted from the prior month, official data revealed. The all industry activity index fell 4.3% a monthly basis in April, reversing the 1.5% gain in the previous month, the Ministry of Economy, Trade and Industry said. Economists had forecast a 4.1% decline for April.

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England captain Steven Gerrard believes the key to beating Uruguay in Sao Paulo on Thursday will be the team's ability to defend against the "genius" of Luis Suarez. The Liverpool midfielder faces his club team-mate in the must win second game of Group D and both he and England manager Roy Hodgson praised the attacking ability of the Uruguayan striker who is expected to start tomorrow's game after missing the team's opening defeat to Costa Rica.

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BROKER RATING CHANGES

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CREDIT SUISSE CUTS BG GROUP TO 'UNDERPERFORM' ('NEUTRAL') - PRICE TARGET1100 PENCE

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TRADERS: SOCGEN CUTS LEGAL & GENERAL TO 'SELL' ('HOLD')

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TRADERS: MERRILL LYNCH CUTS VODAFONE TO 'NEUTRAL' ('BUY')

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TRADERS: CANACCORD RAISES CHARLES STANLEY GROUP TO 'BUY' ('HOLD')

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TRADERS: CANACCORD RAISES VELOCYS TO 'SPECULATIVE BUY'

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TRADERS: MORGAN STANLEY RAISES GENEL ENERGY TO 'OVERWEIGHT'

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TRADERS: MORGAN STANLEY INITIATES GULF KEYSTONE WITH UNDERWEIGHT - TARGET 78 P

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COMPANIES - FTSE 100

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Rolls-Royce Holdings PLC moved to appease investors unhappy with the company's recent outlook downgrade, saying it will return cash to shareholders through a GBP1 billion share buyback once the planned sale of its energy gas turbine and compressor business to Siemens AG goes through. It said the cash return reflects its strong balance sheet and because it isn't planning any material acquisitions.

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Ofcom Proposes New Rules For BT To Promote Superfast Broadband Competition

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Lloyds BankingGroup PLC is set to value TSB BankingGroup PLC, the new bank it must divest to meet European conditions of its state bailout in 2009, at GBP1.3 billion when it prices the offer on Thursday, the Financial Times reported Wednesday, citing people familiar with the deal. The FT said that the order book was "well covered" at the midpoint of a 250p-270p per share price range. Lloyds is planning an initial sale of between 25% and 27.5% of TSB. Mark Carney's hint at an earlier interest rate rise than markets expected has served to buoy investor demand, the FT cited the people as saying. The paper added that Lloyds is now considering selling a bigger stake than first planned.

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COMPANIES - FTSE 250

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Micro FocusInternational PLC upped its total dividend for the year to end-April, as it saw pretax profit decline slightly despite revenue growth, hampered by higher operating costs. The software company proposed a total dividend per share of 44.0 cents, up 10% from 40.0 cents in the previous year. The company reiterated that its core objective is to deliver long-term consist returns to shareholders of at least 15% to 20% per year. Micro Focus posted a pretax profit of USD147.8 million, down slightly from a restated USD151.5 million in the previous year, despite seeing revenue rise to USD433.1 million from EUR412.2 million, damped by higher administrative expenses.

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KierGroup PLC said it has won a GBP140 million, four-year deal to do planned maintenance work on a portfolio of 33,000 properties in London and the East of England for Genesis Housing Association. In a statement, the company said the deal, which has the potential to be extended for a further six years, includes the provision of responsive repairs for over 10,000 homes. It will start getting ready to start work this month, and expects to be fully operational by October.

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ManGroup PLC said it has agreed to acquire Numeric Holdings LLC, a Boston quantitative equity manager that had USD14.7 billion in funds under management at the end of May, for up to USD494.0 million, as it looks to diversify its flagship AHL fund and expand in North America. News of the acquisition comes three weeks after Man Group confirmed it was in talks to buy Numeric from majority owners TA Associates and other shareholders, as well as from management and employees. Man Group has been seeking to diversify its AHL fund, which has suffered from investor outflows and weak performance in recent years.

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Carillion PLC, Balfour Beatty PLC, CostainGroup PLC and a joint venture includingMorgan SindallGroup PLC won a GBP184 million contract to upgrade the M60 and M62 motorways around Manchestet, as Carillion also said it has now signed a GBP200 million support services contract with Nottingham University Hospitals NHS Trust.

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COMPANIES - ALL-SHARE AND AIM

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Online sales retailer MySaleGroup PLC Thursday said it is open to creating a joint venture in Australasia and Asia with its new investor Sports DirectInternational PLC. The news comes just a day after Sports Direct, the UK's biggest sporting goods retailer by revenue, bought a 4.8% stake in MySale, and said it wants to work with the fledging online retailer on developing a Sports Direct offering in Australasia and Asia. Newly-listed online retailer MySale said in a short statement Thursday that it was "pleased to have the support of Sports Direct", adding: "The group looks forward to developing its relationship with Sports Direct, including the potential to co-operate on significant collaboration and joint venture opportunities in Australasia and Asia." Sports Direct founder and majority shareholder Mike Ashley joins UK retailer entrepreneur Philip Green on MySale's shareholder register. Green, through his wife, is the second biggest shareholder in MySale.

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Electrical products retailer Darty PLC posted a significantly higher profit for its last financial year, as the group shed its loss making businesses and revenues were boosted by market share gains. Darty posted a pretax profit of EUR25.3 million for the year ended April 30, up from only EUR4.0 million a year earlier, which it said was driven by market share gains, lower exceptional costs and revenues increasing to EUR3.58 billion, from EUR3.56 billion the prior year. Revenues were up 1.7% on a like-for-like basis. The company maintained its total dividend for the year just ended at 3.5 cents per share.

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PPHE HotelGroup Ltd said it has secured GBP80 million in funding to redevelop and build a new hotel in Waterloo, London. The hotel group, which operates under the brands Park Plaza Hotels & Resorts and art'otel, said it has now obtained planning permission for the development of the site located near Waterloo Station in London called Hercules House, which it acquired in June last year.

PPHE Hotel said that to fund the redevelopment, it has secured funding of GBP80 million from Banque Hapoalim Luxembourg SA.

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Publishing Technology Says 2014 Results To Be Below Market Expectations, In Line With 2013; Says New CEO To Present Findings Of Strategic Review At Time Of Interim Results; Says Design Problems In Software Being Addressed, Resulting In GBP1.0M Deferred Revenue, Added Costs

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GW Pharma Prices ADS Issue On Nasdaq At USD86.83 per ADS, Raising Gross Proceeds Of About USD104.2M

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Quindell To Appoint Robert Fielding As CEO; Fielding Is Current Services Division CEO; Robert Terry To Remain Chairman

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COMPANIES - OTHER

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Online retailer Amazon introduced its own smartphone for the first time Wednesday at the company's headquarters in Seattle, Washington. The so-called Fire Phone features a 4.7-inch screen, a 13-megapixel camera and optical image stabilization. One of the most anticipated features is the device's "dynamic perspective." The phone has four specialized cameras and a high-performing graphics rendering engine, which allow for a near-3D screen display, allowing users to look around objects on the screen. The phone tracks user's head movement, allowing the user to navigate with one-handed gestures. Another feature called Firefly functions almost like a real-world search engine. It recognizes printed texts, photographs, music being heard, art on the wall of a museum, or a TV show, and directs the users to websites without having to type.

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Thursday's Scheduled AGMs/EGMs



Jupiter Dividend & Growth Trust

Quindell

Puricore

Globo

Telit Communications

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Source: Alliance News


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