17.10 (close): Lloyds Banking Group and BSkyB gave another boost to the FTSE 100 Index today in a session when the pound rose to a new four-year high.
Sterling’s latest milestone against the US dollar saw it move closer to the 1.70 barrier after better-than-expected manufacturing figures fuelled expectations that the Bank of England will increase interest rates early next year.
The FTSE 100 Index, which is trading at its best level in two months, rose another 28.8 points to 6808.9 on the back of strong trading updates.
US retreat: The Dow Jones Industrial Average fell back in early trade after hitting its first record close for 2014 yesterday.
BSkyB was two per cent or 20.5p higher at 900.5p as the pay-TV broadcaster addressed City concerns about the impact of competition from BT by revealing it added 74,000 new TV customers in the first three months of this year.
The company said this was more than double the growth rate seen in the same quarter a year earlier, while it sold a total of 764,000 subscription products in the period, bringing the figure to 2.4million for the year to date.
The third quarter update reassured the City following earlier fears that the number of TV subscribers was set to fall for the first time in a decade.
At Lloyds Banking Group, shares recovered from recent weakness to stand 4.1p higher at 79.5p, a rise of more than five per cent.
The rally came after chief executive Antonio Horta-Osorio revealed that underlying profits rose by 22 per cent to £1.8billion in the first quarter of 2014.
There were no additional charges to cover compensation for customers who were mis-sold payment protection insurance and the company said it was on course to restart dividend payments at the start of next year.
Supermarkets were again in the firing line after Morrisons announced another salvo in the industry’s ongoing price war.
The Bradford-based chain is cutting the price of 1,200 products in order to win back customers, but the impact of the strategy on margins meant shares in all the major listed players fell sharply.
Sainsbury’s was 10.6p lower at 325.1p, Tesco dropped 6.4p to 286.5p and Morrisons eased 3.4p to 197.5p.
Outside the top flight, shares in outsourcing firm Serco endured another rocky session after new boss Rupert Soames raised £160million from City investors in order to ensure the company remains within its debt limits.
The move came as Serco highlighted the scale of the challenge facing Mr Soames by making a sharp downgrade to its earnings guidance for 2014. It also announced the exit of long-standing finance director Andrew Jenner.
Serco’s troubles stem from a scandal-hit 2013 in which it was forced to refund the Government £68.5million for overcharging on criminal tagging contracts, as well as repay £2million of past profits from a prisoner escorting contract.
Shares have halved in value since the summer but were flat today at 340p after falling by as much as five per cent earlier in the day.
The biggest FTSE 100 risers were Lloyds Banking Group up 4.1p at 79.5p, Aggreko ahead 68p at 1645p, Hargreaves Lansdown up 45p at 1215p and BG Group ahead 39.5p at 1237.5p.
The biggest fallers were Sainsbury’s down 10.6p at 325.1p, Fresnillo off 21.5p at 830p, Tesco down 6.4p at 286.5p and Randgold Resources off 102p at 4678p.
15.30: The Footsie remained higher in late afternoon trading buoyed by some upbeat economic data and corporate results, notably from Lloyds Banking Group and BSkyB, but it eased off its best levels as US stocks put in a cautious early showing.
With an hour of trading to go, the FTSE 100 index was up 21.2 points at 6,801,1, just below the session peak of 6,807.27 – its best level since mid March.
In early trade on Wall Street, the Dow Jones Industrial Average shed 28.0 points to 16,552.9 as investors took a breather after a rally which saw the index yesterday post its first record close of 2014.
Wednesday’s gains came after the Federal Reserve gave an upbeat view of the US economy’s prospects after its latest policy meeting, though concerns remained after an initial reading for first quarter economic growth proved weaker than expected.
Today’s mixed US data saw the latest weekly jobless claims rise unexpectedly, although the underlying trend continued to point to improving labor market conditions, putting tomorrow’s April jobs report in focus.
Meanwhile, US consumer spending recorded its largest increase in more than four and a half years in March, while The Institute for Supply Management’s manufacturing index rose to 54.9 per cent in April, its highest level since December.
But March construction spending was weaker than expected, up 0.2 per cent, against expectations for a 0.6 per cent rise, and Markit’s US purchasing managers’ index manufacturing survey reading for April was unchanged at 55.4, down from 55.5 in March.
Today’s UK Market manufacturing PMI reading was better-than-expected at 57.3, up from 55.8 in March, with the 50 mark separating growth from contraction, propelling the pound up to a new five year high against the US dollar at 1,6918 on expectations that given such economic strength the Bank of England will increase interest rates early next year.
Corporate earnings in New York were also mixed, with above-forecasts quarterly results buoying the world’s biggest-listed oil firm Exxon Mobil, but cereals firm Kellogs seeing its numbers disappoint.
In London, Lloyds Banking Group was the top FTSE 100 gainer, jumping over 5 per cent, or 3.9p higher to 9.2p after its chief executive Antonio Horta-Osorio revealed that underlying profits rose by 22 per cent to £1.8billion in the first quarter of 2014.
Other banking stocks were also in demand, with tax-payer owned Royal Bank of Scotland – which issues its first quarter results tomorrow – up 9.7p to 308.5p, while Barclays gained 4.3p at 256.5p helped by an upgrade in rating to buy from broker UBS.
Barclays will report its Q1 results on May 6 ahead of a key strategic update two day’s later but UBS said risk into the earnings are minimised through their pre-announcement with last week’s AGM.
13.00: The Footsie held near its best levels for two months at lunchtime, while the pound reached a new five year high against the US dollar after strong manufacturing data added to the boost from another clutch of positive corporate trading updates.
The FTSE 100 index, which is trading at its best level since mid March, rose another 13.3 points to 6,793.2 on the back of the strong updates, notably from Lloyds Banking Group and BSkyB.
On currency markets, the pound hit a new five year high against the US dollar at 1,6918 today, edging closer to the 1.70 barrier after better-than-expected manufacturing figures fuelled expectations that the Bank of England will increase interest rates early next year.
Sky high: BSkyB enjoyed its highest ever audience on Sky Atlantic for the first episode of the new series of fantasy romp Game of Thrones.
The CIPS/Markit purchasing managers’ index manufacturing survey gave a better-than-expected reading of 57.3, up from 55.8 in March, with the 50 mark separating growth from contraction.
The survey added to hopes for the sector after official figures earlier this week showed manufacturing grew by 1.3 per cent over the first three months of 2014, its strongest quarterly performance in nearly four years, although it is still well off its pre-recession level.
Jonathan Loynes of Capital Economics said the Markit data was ‘encouraging evidence of a favourable rebalancing of the UK’s economic recovery’.
Lloyds Banking Group was the top FTSE 100 gainer, jumping over 5 per cent, or 4.1p after its chief executive Antonio Horta-Osorio revealed that underlying profits rose by 22 per cent to £1.8billion in the first quarter of 2014.
Insurers were also cheered by news that there were no additional charges to cover compensation for customers who were mis-sold payment protection insurance and the company said it was on course to restart dividend payments at the start of next year.
‘Lloyds came out with a solid set of numbers which confirmed a turnaround in their business,’ said Dafydd Davies, senior trader at Prime Wealth Group. Davies said the stock could rise to around the 90 pence level from current levels.
BSkyB was also a top riser, up nearly 3 per cent or 30.25p at 910.25p as the pay-TV broadcaster addressed City concerns about the impact of competition from BT by revealing it added 74,000 new TV customers in the first three months of this year, more than double the growth rate seen in the same quarter a year earlier.
The third quarter update reassured the City following earlier fears that the number of TV subscribers was set to fall for the first time in a decade.
Fund manager Schroders was also buoyed by an upbeat trading statement today, with the stock up 55.0p to 2,611p. as its assets under management hit a record high of £268billion in the first quarter, up 2 per cent from the end of December after strong retail demand helped it take in new money across a range of products.
And drug maker Shire added 86.0p at 3,462.0p beat City expectations with a 38 per cent leap in firsT quarter earnings, underlining its appeal as a bid target in the latest wave of deal making in the sector.
Press reports today said botox maker Allergan is preparing an approach for Dublin-based Shire as the US firm itself tries to fight off a takeover move.
Bid speculation in the drugs sector has been excited by confirmation at the start of this week that Pfizer had made two takeover approaches to Anglo-Swedish blue chip AstraZeneca, and been rebuffed in both.
Among the blue chip fallers, supermarkets were again in the firing line after William Morrison announced another phase in the industry’s ongoing price war.
The Bradford-based chain is cutting the price of 1,200 products in order to win back customers, but the impact of the strategy on margins meant shares in all the major listed players fell sharply.
Morrisons shares fell 2.4p to 198.5p, Tesco dropped 6.7p to 286.3p, and Sainsbury’s shed 14.7p to 321p – Bernstein reduced its price target on Sainsbury’s today.
Outside the top flight, shares in outsourcing firm Serco fell by another 3 per cent after new boss Rupert Soames moved to raise £165million from City investors in order to ensure the company remains within its debt limits.
Last night, Serco highlighted the scale of the challenge facing Mr Soames by making a sharp downgrade to its earnings guidance for 2014. It also announced the exit of long-standing finance director Andrew Jenner.
Serco’s troubles stem from a scandal-hit 2013 in which it was forced to refund the Government £68.5million for overcharging on criminal tagging contracts, as well as repay £2million of past profits from a prisoner escorting contract.
Serco shares were off another 10.8p at 329.3p and have now halved in value since the summer.
09.20: Healthy trading updates from Lloyds Banking Group and pay-TV firm BSkyB saw the pair set the pace at the top of the UK blue chip leader board today.
Their performances added to the positive mood for the London market as the FTSE 100 index continued its recent ascent to climb 24.8 points higher to 6,804.8 by early morning.
Lloyds Banking Group, shares recovered from recent weakness to push 2.7p higher to 78.1p, a rise of nearly 4 per cent.
Lloyds relief: Investors were particularly relived that the bank had not needed to add to the billions of pounds put by to cover compensation for customers who were mis-sold payment protection insurance
The rally came after chief executive Antonio Horta-Osorio revealed that underlying profits rose by 22 per cent to £1.8billion in the first quarter of 2014.
Investors were particularly relived that the bank had not needed to add to the billions of pounds put by to cover compensation for customers who were mis-sold payment protection insurance.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers said: ‘Lloyds is often seen as a proxy for the UK economy, and although they are inextricably linked, both are beginning to prosper after a long period of austerity.
‘The group remains on track to float TSB in the summer and has reiterated its intention to apply for a resumption of the dividend payment in the second half of this year Outlook comments are also upbeat, but not excessive given the fact that there remains some way to go.
‘The share price may have stuttered of late, having dipped 10 per cent over the last three months, but remains up 39 per cent over the last year, as compared to a 5 per cent hike for the wider FTSE 100,’ Hunter added.
The good news in the sector boosted tax-payer owned Royal Bank of Scotland – which issues its first quarter results tomorrow – up 6.3p to 305.1p, while Barclays gained 4.1p at 256.3p.
BSkyB was the top blue chip gainer, up 4 per cent, or 33.5p to 913.5p as the broadcaster addressed City concerns about the impact of competition from BT by announcing a strong quarter of growth, with revenues up 6.6 per cent to £5.7billion.
It reported 74,000 net new TV customers in the period, which was more than double the growth rate achieved a year earlier. It sold 764,000 subscription products in the quarter, taking the total to 2.4 million for the year to date.
Energy firm BG Group was also higher after first quarter results, adding 22.5p at 1,220.5p after it reported a smaller than expected 6 per cent fall in first quarter operating profit as it struggled with lower output, reassuring some investors after its chief executive resigned earlier this week.
08.20: The Footsie pushed higher in early deals this morning with the benefits of good gains overnight by US stocks following upbeat comments from the Federal Reserve countering some disappointing manufacturing data from China.
In opening deals, the FTSE 100 index was up 13.7 points at 6,793.7, having closed 10.12 points higher yesterday.
Trading is likely to be fairly subdued today as other stock markets in Europe are closed for the May Day holiday.
US boost: The Dow Jones Industrial Average reached its first record high of 2014 on Wednesday after the Federal Reserve gave an upbeat view of the US economy’s prospects
Investors also have another big batch of corporate updates to digest this morning, include first quarter results from part-taxpayer owned Lloyds Banking Group and energy firm BG Group.
Overnight on Wall Street, the Dow Jones Industrial Average closed at its first record high of 2014, up 45.47 points to 16,580.84 after the Federal Reserve gave an upbeat view of the economy’s prospects as it announced another cut to its massive bond-buying programme.
The Fed said in a statement it would reduce its monthly bond purchases to $ 45billion from $ 55billion, as expected. That will keep it on track to end the programme as soon as October.
Asian markets were mixed today after suffering a wobble following weaker than expected data on China’s vast manufacturing sector which just missed forecasts.
Beijing’s official manufacturing purchasing managers index (PMI) came in at 50.4 in April, up a tick from March but under forecasts of 50.5. The outcome was not enough to lessen concerns about the economy, but neither did it point to a deepening slowdown.
Manufacturing PMIs for April are due for both the UK and the US from compiler Markit today giving another indication of how the recovery is progressing for both economies.
In a further sign of strength in the booming UK housing market, house prices rose much faster than expected last month to record their biggest annual rise since the start of the financial crisis, data from mortgage lender Nationwide showed today.
House prices jumped 1.2 per cent last month alone, Nationwide said, up from an upwardly revised 0.5 per cent in March and far outstripping expectations for a 0.7 per cent increase.
The average price of a house in Britain now stands at £183,577, 10.9 per cent higher than a year ago and the biggest annual rise since June 2007.
Howard Archer, chief European and UK economist for IHS Global said: ‘While the housing market seemingly paused for breath around February/March, it does still seem to have got a lot of life in it still.
‘House prices look more likely than not to see further strong increases over the coming months. We expect house prices to increase by around 8-9 per cent in 2014 with gains across the country.’
Archer said ‘the risk of an overall housing market bubble developing remains very real as the strength in house prices is becoming more widespread.’
‘Consequently, policymakers need to keep a very close watch on how the housing market develops over the coming months and to be fully prepared to act,’ he added.
Stocks to Watch include:
LLOYDS BANKING GROUP – The part-taxpayer owned lender reported a 22 per cent increase in first quarter pretax profit and said it continued to expect to apply for permission in the second half of the year to restart dividend payments.
BG GROUP- Britain’s third-biggest oil and gas company reported a 6 per cent fall in first quarter operating profit as it struggled with lower output and continued troubles at its Egyptian liquefied natural gas plant.
ROLLS-ROYCE – The engineer said it was on track to report flat revenue and profit in 2014, in line with an earlier forecast, and said that a one-off charge in its marine unit meant that its performance would be weighted to the second half.
BSKYB – The pay-TV operator added 74,000 net new TV customers in the third quarter, more than double the growth it recorded last year, as it shrugged off the competition from BT.
SCHRODERS – The fund manager said assets under management rose to a record £268billion in the first quarter of 2014 after it took in new money across a range of products.
SMITH & NEPHEW – Europe’s largest maker of artificial joints posted a 5 per cent drop in underlying trading profit.
RECKITT BENCKISER – The company said it is no longer in active talks with Merck & Co about buying its consumer health business.
WEIR GROUP – The pumps manufacturer said it remained on track for a return to growth this year as demand for oil and gas equipment and services outstripped sluggish mining orders in the first quarter.