News Column

TOP NEWS: UK And Euro Area Service Sector PMI Growth Slows

July 3, 2014



LONDON (Alliance News) - The following is a summary of top news stories Thursday.

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COMPANIES

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Tullow Oil PLC said the Hanssen well in its production licence 537, offshore Norway, has found a 20- to 25-metre region of oil bearing sandstones at its main target, adding to the potential of the Wisting cluster area. The FTSE 100 oil and gas exploration company said the well found a good quality reservoir in the StØ Formation and also found poor-quality hydrocarbon bearing sandstones in the Late Triassic and Middle Triassic zones of the well. The company said coring and sampling has been carried out on all of the formations but the new discovery produced a maximum production rate of 2,006 barrels per day of oil and 325,000 standard cubic feet per day of gas after a short test at the site.

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RSA InsuranceGroup PLC said it has reached a deal to sell its China business to Swiss Re for about GBP71 million, as Chief Executive Stephen Hester continues to sell smaller businesses as part of his project to shore up the insurer's balance sheet and focus it on its bigger operations. In a statement, the insurer said the sale of Sun Alliance Insurance (China) Ltd is expected to result in a gain on the sale and addition to RSA's tangible net assets of about GBP26 million.

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Construction and infrastructure company Balfour Beatty PLC said it still expects its pretax profit to be between GBP145 million and GBP160 million in 2014, even though trading has worsened in the mechanical and electrical engineering part of its UK construction business. In a trading statement, Balfour said the deterioration amounts to a GBP35 million profit shortfall, but it expects to offset this from gains on disposals from its public-private partnerships portfolio in the second half of the year. The full-year pretax profit guidance remains the same as it gave when it put out a first quarter trading statement in early May.

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SercoGroup PLC's new chief executive, Rupert Soames, said the company's expectations remain unchanged from the lowered guidance it set out in late April, with first-half organic revenue set to be about flat on the year but margins to fall significantly, but it also expects to book new provisions on poorly-performing contracts. The company lowered its guidance in April, blaming the restructuring it was having to carry out in the wake of the fallout of its well-publicised difficulties with some UK government contracts, as well as a margin hit from some other poorly-performing contracts that it was having to invest in. In its trading update, the company reiterated that it expects to report adjusted revenue of about GBP2.4 billion for the six months to end-June, broadly flat on the year-earlier period excluding the impact of acquisitions and disposals and currency movements. However, as flagged, it expects margins to be "significantly" down on the year.

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Argos and Homebase owner Home Retail Group PLC said its general merchandise retailer Argos and online auction site eBay Inc have extended and expanded their UK collection service tie-up. Home Retail's Argos and eBay began trialling a UK collection service last September, which they said would last around six months and would enable shoppers to pick up products sold by about 50 eBay sellers at around 150 Argos stores throughout the UK. Home Retail said Thursday the two companies have now entered an agreement to extend the offering of click & collect services via Argos stores, which will enable shoppers to select products from a wider range of eBay merchants and now collect from around 650 its Argos stores.

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Ultra Electronics PLC said it has won a GBP64.4 million contract extension with the UK Ministry of Defence to provide in-service support for its Litening Pods. Ultra's support will provide advanced targeted and reconnaissance capability for the Royal Air Force's Eurofighter Typhoon and Tornado aircraft fleets, it said. Its Litening support centre will provide engineering support to the fleet as well as conducting test and repair of all Litening components. The Litening pod is a type of gun pod - a detachable pack mounted to aircraft containing weaponry - designed for precision targeting. The company originally won the contract in 2006, and combined with the outstanding amount of the original contract, the deal is worth GBP80.4 million.

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Building products supplier SIG PLC said it has bought Netherlands-based air handling products company Inatherm BV for up to EUR7.4 million in cash, a deal that will bolster its existing European air handling products division. In a statement, SIG said it will pay seller Triple R HoldingsEUR4.7 million up front, a deferred payment of EUR0.7 million in January 2016, and then up to EUR2.0 million depending on how Inatherm performs until the end of 2016.

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Bullabulling Gold Ltd caved into pressure from Norton Gold Fields Ltd and recommended that shareholders accept its increased takeover offer despite continuing to say it materially undervalues the company. Bullabulling, which mines for gold in Australia, said it sees the AUD0.08 a share offer as too low, but because Norton has already increased acceptances, including from Bullabulling's two major shareholders, to a 41.35% interest, the company's board bowed to pressure and unanimously resolved to recommend the offer. Norton Gold Fields made a cash offer of AUD0.07 a share for Bullabulling on April 17, but struggled to get many acceptances. In mid-June, it said it would raise the offer to AUD0.08 a share, but only if it got an interest of 30% or more of Bullabulling's shares by June 30.

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Discount retail chain PoundlandGroup PLC reported strong growth in sales in its last financial year boosted by new store openings, although the retailer said its profit for the year was held back by costs relating to its recent IPO. The discount retailer, which sells everything for GBP1 in its Poundland stores and the equivalent from its Dealz stores in Ireland, said the strong trading momentum has continued into the new financial year, with sales up 18% in the first three months of the new year to GBP262.6 million, as it said its retail proposition continues to gain traction.

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Ryanair Holdings PLC said it would fly two new routes between Scotland and London and one new route between Scotland and Dublin after setting up a new base at Glasgow International airport. In a statement, Europe's largest low-cost carrier said it has added routes between Edinburgh and Glasgow and London, and a three-times daily route between Glasgow and Dublin. It said its existing once-daily route between Glasgow Prestwick and Dublin will switch to Glasgow International as part of the new three-times-a-day timetable from that airport.

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MARKETS

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UK stocks are trading higher, following on from yet another record close by Wall Street on Wednesday, after US Central Bank Chair Janet Yellen reiterated her stance that ultra-accommodative monetary policy from the Federal Reserve can be expected for some time yet.

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FTSE 100: up 0.5% at 6847.19

FTSE 250: up 0.6% at 15986.86

AIM ALL-SHARE: up 0.3% at 786.31

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The pound touched a two-day low against the dollar after UK PMI data came in at a three-month low, contrary to analyst's expectations.

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GBP-USD: down at USD1.7146

EUR-USD: down at USD1.3654



GOLD: down at USD1322.9 per ounce

OIL (Brent): down at USD110.63 a barrel



(changes since end of previous GMT day)

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ECONOMICS AND GENERAL

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UK service sector activity continued to strengthen in June, albeit at a slower rate than expected, leading to record increase in employment, results of a survey by Markit Economics and the Chartered Institute of Purchasing and Supply, or CIPS, showed. The CIPS/Markit services purchasing managers' index, or PMI, came in at 57.7 in June, indicating strong growth though the index marked a three-month low. This was less than the score of 58.3 expected by economists and the 58.6 in May.

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Meanwhile, in the euro area, private sector growth slowed for the second consecutive month in June as estimated to its lowest in the year so far, survey data from Markit Economics showed. The final Markit composite output index fell to 52.8 in June from 53.5 in May. The score was unchanged from the flash estimate. Likewise, the services Purchasing Managers' Index dropped to 52.8, in line with flash reading, from 53.2 in May.

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UK regulators are under pressure to open an investigation into the suspected manipulation of the closing prices of ordinary shares traded in London after it was claimed in Parliament Wednesday that attempted market abuse was rife, The Times reports. The newspaper quotes Andrew Tyrie, the chairman of the Treasury select committee, saying that all committee members were "amazed" that no one at the Financial Conduct Authority appeared to have looked at the issue in spite of widespread rumours of manipulation. The focus of the lawmaker's concern is the closing auction process conducted for five minutes at 4.30pm each day by the London Stock Exchange, in which market traders put in "buy" and "sell" orders to a computer that crunches the numbers and spits out an official closing price for each stock.

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The European Central Bank is expected to decide against announcing any new action to help boost the struggling eurozone's economic fortunes as it sizes up the impact of sweeping measures it unveiled four weeks ago. Analysts said bank chief Mario Draghi could use his regular monthly press conference instead to unveil further details on the implementation of the complex battery of steps the bank set out in June.

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Interest rate adjustments are not the appropriate tool to stabilize financial markets, Federal Reserve Chairwoman Janet Yellen said late Wednesday. In a speech at the International Monetary Fund, Yellen urged central banks around the world to rely more on building resilience in their financial systems. "Monetary policy faces significant limitations as a tool to promote financial stability," Yellen said. "Its effects on financial vulnerabilities ... are less direct than a regulatory or supervisory approach."

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China allowed banks to set the exchange rate they offer customers between renminbi and the US dollar, a news report said, in the latest loosening of the controlled rate. The State Administration of Foreign Exchange said late Wednesday that banks can set their own rates for over-the-counter deals on the basis of market demand, Xinhua news agency reported. The rate range for interbank trading is limited to 2% on either side of a government-regulated parity rate. The band was set in March, at double the range of the previous restrictions.

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China's services sector grew at a faster pace in June, the latest survey from HSBC and Markit Economics revealed on Thursday - posting an index score of 53.1 and touching a 15-month high. That's up from 50.7 in May. That lifted China's composite PMI to 52.4 - up from 50.2 in the previous month.

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In a separate PMI reading Thursday, the National Bureau of Statistics said the services sector in China continued to expand in June, albeit at a slower pace - showing an index score of 55.0. That's down from 55.5 in May, which represented a six-month high.

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A stray grenade damaged a Russian post on the border with Ukraine Thursday, a day after the two countries agreed to begin talks this week on a long-term, mutual ceasefire. The blast, which occurred during fighting between Ukrainian government forces and pro-Russian separatists, shattered windows and caused other damage, officials in Rostov-on-Don told Russia's Interfax news agency. The damage followed the shelling of Russian border stations last week. Fighting has flared up in eastern Ukraine since Tuesday after the Ukraine government let a 10-day unilateral ceasefire expire.

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Russia and Ukraine agreed that negotiations on a long-lasting ceasefire in Ukraine would begin at the latest by Saturday, said mediator Frank-Walter Steinmeier, Germany's foreign minister. Russia, represented at the talks in Berlin by Foreign Minister Sergei Lavrov, also said it was prepared to take up joint border patrols with Ukrainian officials after the ceasefire takes effect.

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Israeli aircraft carried out several strikes in the Gaza Strip, an official and witnesses said, after Palestinians fired rockets into southern Israel. At least 10 civilians were injured in the northern Gaza Strip, including a woman in critical condition, Gaza emergency chief Ashraf al-Qedra told reporters. Witnesses reported hearing explosions in the northern Gaza Strip and Gaza city. Clashes intensified late Wednesday between Israeli police and Palestinians angry over the killing of a teenager near Jerusalem, two days after the bodies of three kidnapped Israeli teens were found.

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Iraqi soldiers were shown in a video saying they had been ordered to withdraw from along the Saudi Arabian and Syrian borders, with no reason given. The order came amid swift advances by Sunni-led insurgents. "We received orders to withdraw from the border and leave our weapons there," a person wearing a military uniform said in the video, aired on the Dubai-based broadcaster Al-Arabiya. "We didn't know why," he said, adding that another officer did not want to leave, but had to follow the military orders.

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Libya's acting Prime Minister Abdullah al-Thinni said the government had reached a deal with rebels and had reassumed control of the country's two eastern oil terminals, which were blocked by rebels a year ago, Libyan television reported Wednesday. Thinni confirmed that the government now controls the ports of Ras Lanuf and al-Sidra, which export about half of Libyan oil. He said the takeover came after an agreement with separatist rebel leader Ibrahim Jathran.

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