By This Is Money Reporters
17.30 (CLOSE): Aviva boss Mark Wilson received the thumbs up from investors for his turnaround efforts today as better-than-expected results sparked an 8 per cent shares rally.
The stock hit its highest level for more than five years after Aviva posted a profits haul of 2.2billion, which compared with a loss of 2.9billion a year earlier.
London’s wider FTSE 100 Index edged 13.1 points higher to 6788.5 in a session when European markets showed more signs of settling down after the shock of the Ukraine crisis earlier in the week.
Thumbs up: Aviva shares rallied after a better than expected set of results.
The pound weakened against the euro after European Central Bank president Mario Draghi struck a positive tone on the region’s economic prospects in a press conference after rates were left unchanged.
Sterling fell a cent to just under 1.21 euros, while it held firm at 1.67 US dollars, with little reaction from the Bank of England’s decision also to keep UK interest rates on hold, at 0.5 per cent.
The announcement was expected, but a flurry of recent comments from members of the Bank’s monetary policy committee has signalled that rates may rise next year as the economic recovery picks up pace.
The biggest movement in London’s top flight came from Aviva, with its recovery since Mr Wilson’s appointment a year ago taking centre stage.
Figures improved as operating expenses fell 7 per cent and the value of new business rose 13 per cent after a drive to exit low-margin, under-performing businesses.
Panmure Gordon stockbrokers placed a buy rating on the stock although Mr Wilson told investors there was still more work to do and that he had not yet unlocked the full potential of the group. Shares were 37.9p higher at 504p.
Other big risers included temporary power supply firm Aggreko after it said it will return 200 million to shareholders and raise its dividend by 10%.
The pay-out, which followed a 7 per cent fall in profits for last year, will help offset the disappointment felt by shareholders over the departure of chief executive Rupert Soames to Serco. Shares were 3 per cent higher, up 55p to 1628p.
In other corporate news, engineering group IMI was the biggest FTSE 100 faller after a 21 per cent rise in operating profits for last year failed to meet City expectations.
Looking ahead, the group expects modest revenues growth in the first half with margins slightly lower than the same period a year earlier. Shares fell 67p to 1481p, a drop of 4 per cent.
Outside the top flight, construction firm Balfour Beatty was 7 per cent or 23.8p lower at 297.6p as it blamed operational issues in UK construction and a downturn in the Australian mining sector for a disappointing financial performance, with profits down 32 per cent to 187million last year.
The biggest FTSE 100 risers were Aviva up 37.9p to 504p, Schroders ahead 137p to 2727p, Fresnillo 35p stronger at 948p and Aggreko 55p higher at 1628p.
The biggest FTSE 100 fallers were IMI down 67p to 1481p, Shire off 77p to 3290p, easyJet 28p lower at 1711p and Meggitt 7.4p weaker at 479.2p.
15.30: The Footsie maintained its modest gains in late afternoon trade, supported by early strength on Wall Street and by the continuation of diplomatic efforts to cool the crisis in Ukraine.
With an hour of trading to go, the FTSE 100 index was 14.0 points higher at 6,789.4, albeit easing back from the session peak at 6,806.6.
The gains were capped after comments from European Central Bank president Mario Draghi which dashed hopes of any economic stimulus measures for the euro zone, Britain’s biggest trading partner which is dogged by the threat of deflation.
Draghi drags: Comments from ECB boss Mario Draghi dashing hopes for any euro zone economic stimulus measures dented the stocks market’s enthusiasm
In his press conference after today’s ECB council meeting, Draghi only said he would be willing to ‘take further decisive action if required’ to prop up the euro zone economy.
Both the ECB and the Bank of England today kept their interest rates on hold at record lows of 0.25 per cent and 0.5 per cent respectively.
European stock markets were unsettled by Draghi’s comments, with Germany’s Dax 30 index cutting its earlier gains to just 0.1 per cent, although France’s CAC 30 index maintained its 0.6 per cent advance.
Craig Erlam, market analyst at Alpari (UK) said: ‘Mario Draghi delivered another hawkish press conference this afternoon that once again sent the euro through the roof and knocked European indices off their daily highs.
‘With a new set of growth and inflation forecasts to hand, many had once again expected to ECB to, at the very least, hint at some form of stimulus in the coming months. Based on the positioning ahead of the meeting, plenty had already priced in stimulus today.
‘That was not to be and it looks like it won’t come any time soon. Draghi effectively dismissed the idea of de-sterilisation of bond purchases, claiming it would be too short term due to the length of the maturities on the bonds, being one to three years.
‘Of the more conservative options remaining, that only leaves a small rate cut to 0.1 per cent and I have the feeling, with little room to manoeuvre, that option may be kept for a rainy day.’
US stocks started strongly again today, with the Dow Jones Industrial Average up 80.5 points at 16,440.7 in early deals buoyed by a larger-than-expected drop in weekly jobless claim which boded well for tomorrow’s key official February jobs data report.
US jobless claims last week declined by 26,000 to 323,000, beating the 336,000 expected to hit their lowest level in three months, a sign companies are holding on to their staff even as severe weather this winter threatens to slow the world’s largest economy.
13.15: London shares held modest gains at lunchtime, bouncing back again following falls yesterday as sentiment in global markets ebbs and flows as world leaders continue efforts to resolve the crisis between Russia and Ukraine.
The FTSE 100 Index was 11.7 points higher at 6,787.1, showing little reaction to the Bank of England’s midday decision to keep interest rates at 0.5 per cent – five years to the week after they were first slashed to their all-time low.
On currency markets, the pound was flat against the US dollar and euro following the widely expected decision.
Rates pegged: The Bank of England Monetary Policy Committee again decided to leave UK interest rates steady at record lows
The Bank of England’s policymakers surprised no one by holding rates once again although speculation has been mounting over when the burgeoning recovery will force the monetary policy committee into making the first hike, although that is not expected until next year.
David Kern, chief economist at the British Chambers of Commerce (BCC) said: ‘At a time when inflation is below target and is expected to remain stable, the recent strength of sterling will help to dampen any new inflationary pressures, and should reinforce the case against interest rate increases.
‘Maintaining low rates underpins economic stability, enabling businesses to proceed with much needed investment – in the interests of growth and jobs.’
The European Central Bank also left its interest rates unchanged today, holding its nerve in the face of uncomfortably low inflation though it may unleash other measures to pep up a fragile euro zone recovery.
European stocks markets were firmer too, with Germany’s Dax 30 index up 0.2 per cent, and France’s CAC 40 index ahead 0.6 per cent.
The biggest gainer in London’s top flight was insurer Aviva after it announced a better-than-expected profits haul of 2.2billion, which compared with a loss of 2.9billion a year earlier.
Mark Wilson’s progress as Aviva’s new chief executive got the backing of investors with the results triggering a 10 per cent surge in its shares, up 48.0p to 510.5p.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers said: ‘Aviva remains a recovery story which offers the potential of both income and growth. Whilst the stock is a fair way off its historic highs, it appears that the travails of more recent times have been parked for now.
‘The shares have had a good run to reflect the progress which has been made, having risen 31 per cent over the last year, as compared to a 5 per cent hike for the wider FTSE100 and even though the market consensus has thawed slightly of late, the general view is that the shares are a cautious buy.’
Engineering group IMI topped the FTSE 100 fallers board after a 21 per cent rise in operating profits for last year failed to meet City expectations. Looking ahead, the group expects modest revenues growth in the first half with margins slightly lower than the same period a year earlier.
IMI shares fell 76.5p to 1471.5p, a drop of 5 per cent.
On the second line, Stobart Group was lower, losing 10.2p at 139.3p after the firm sold a majority stake in Eddie Stobart, Britain’s best known trucking business to investors in a deal worth 280million.
The business, which employs around 5,000 people and operates 2,300 vehicles, will be led by the founder’s youngest son William Stobart.
Stobart Group, which is retaining a 49 per cent stake in the truck company as well as the rights to the Eddie Stobart name, said the sale will enable it to almost wipe out debt and focus on its operations in the energy, air and rail markets.
9.35: The FTSE 100 has made modest gains in early trading, moving 28.7 points higher to 6,804.2.
Aviva shares rose sharply as chief executive Mark Wilson highlighted the insurer’s potential following a big turnaround in its full-year performance. He told investors there was still more to work to do and that he had not yet unlocked the full potential of the group.
Panmure Gordon stockbrokers placed a buy rating on the stock after the better-than-expected profits haul of 2.2billion, which compared with a loss of 2.9billion a year earlier. Shares rose 8 per cent or 36.4p to 502.5p.
Ukraine crisis: Russian Foreign Minister Sergei Lavrov , far left, and US secretary of state John Kerry, far right, and met in Paris on a day of high-stakes diplomacy
Other big risers included temporary power supply firm Aggreko after it said it will return 200million to shareholders and raise its dividend by 10 per cent.
The pay-out, which followed a 7 per cent fall in profits for last year, will help offset the disappointment felt by shareholders over the departure of chief executive Rupert Soames to Serco. Shares were 9 per cent higher, up 143p to 1,716p.
Outside the top flight, construction firm Balfour Beatty was 18.75p lower at 302.7p as it blamed operational issues in UK construction and a downturn in the Australian mining sector for a disappointing financial performance, with profits down 32 per cent to 187million last year.
The FTSE 100 has opened 22.2 points higher at 6,797.6 higher as world leaders continue diplomatic efforts to resolve the crisis in Ukraine.
Financial markets have suffered upheaval this week after Russia’s bloodless seizure of the Crimea peninsula in Ukraine prompted threats of retaliatory economic sanctions by US-led Western countries.
A stock rout on Monday was followed by a rebound in the next market session, but the FTSE 100 finished down 48.35 points to 6,775.42 again yesterday.
After a meeting in Paris that made little apparent headway, US secretary of state John Kerry said discussions about Ukraine would continue in coming days, and he expected to meet Russian foreign minister Sergei Lavrov again in Rome today.
‘With discussion in the West now centering around possible sanctions on Russia we could see markets start to panic,’ warned James Hughes of Alpari.
‘The safe havens will likely be back in focus yet again today but with so much uncertainty, and Russia’s refusal to discuss a possible resolution the nerves will start to return to a market that had just begun to shift its focus to the big economic releases of the next couple of days.’
There is speculation that the European Central Bank could unveil further action to combat the threat of deflation and support the eurozone’s economic recovery later today.
Speaking to European politicians on Monday, ECB president Mario Draghi said inflation in the eurozone was ‘way below’ the ECB’s goal.
A minority of economists polled by Reuters last week said the ECB may be forced to print money this year to fight off deflation risks and boost fragile growth.
A third – 26 out of 78 economists polled – also predicted a cut in the ECB’s key interest rate from the current 0.25 per cent, with most expecting a reduction of 5 to 15 basis points (0.05 to 0.15 percentage points).
The Bank of England’s policy decision will be announced at noon but analysts expect no change in interest rates or in its quantitative easing programme.
Stocks to watch today include:
AVIVA: The insurer has unveiled a 6 per cent increase in operating profit for 2013, one year into a financial spring clean of the company’s businesses.
BHP BILLITON: South African state power utility Eskom declared a new power emergency. BHP Billiton is Eskom’s single biggest customer.
IMI: The engineering firm said adjusted pre-tax profit for the full year rose 8 per cent, boosted by a surge in orders in its severe service division which delivers valve solutions and caters mainly to the energy market.
AGGREKO: The world’s biggest temporary power provider said it would return 200million of cash to shareholders, as it posted an expected 8 per cent fall in full-year results.
SCHRODERS: Fund manager Schroders posted higher-than-expected pre-tax profit growth before exceptional items of 41 per cent for 2013, helped by acquisitions and flows of new money.
ST JAMES’S PLACE, BARRATT DEVELOPMENTS: Wealth manager St James’s Place and housebuilder Barratt Developments will be promoted to the blue-chip index of top British companies from the FTSE 250 index later this month, the FTSE Group said late yesterday.
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