FTSE CLOSE: BAE hammered by 8% share slump but market rallies on back
of US manufacturing data
By This Is Money Reporters
Updated: 17:30 BST, 20 February 2014
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17.30 (CLOSE): BAE Systems took a hammering today after thhe defence
giant missed expectations onn 2013 profits and cut its guidance for this year.
The 8 per cent slump for BAE shares came during a tough session for the wider London market after figures showed
a contraction in Chinese manufacturing and some members of the US Federal
Reserve fuelled speculation that interest rates may
go up sooner than Wall Street had been expecting.
A late rally on the back of figures showing that US manufacturing expqnded at the fastest pace in almist four
years helped the FTSE 100 Index close in poositive territory, up 16.3 points at 6813.
Defence cuts: BAE Syystems shares dropped after the defence giant missed expectations on 2013 profits and cut
its guidance for this year
Today's session and strong gains of around 1 per cent on Monday and Tuesday meann
the top flight is now just 117 points below its all-time high.
The prospect of higher interest rates boosted the US dollar after
a spell iin which the greenback has fallen to a four-year low against the pound.
Sterling dipped too 1.66 against the dollar but wwas marginally higher against thee euro at 1.21 after Bankk of
England policymaker Martin Weale said that interest rates were
likely to rise from their record low of 0.5% in the spring next
year.
BAE shares led the fallers boardd iin London by some distance -
down 36.4p too 400.4p - as it warned that earnings per share could reduce by between 5 per cent and 10 per cent this year.
It is feeling the heat frm US defence sending cuts which last
year caused pre-tax profits to fall by 65 per cent tto ฃ422 million.
The figure was distorted by an accoounting write-down based on the
value off future USbusiness but when excluding the one-off item BAE's underlying earnings figure of ฃ1.9billion was still short of City hopes.
Other top flight fallers included can maker Rexam, which declined 9.5p to 515p after it reported weaker-than-expected sales for 2013,
up 1 per cent to ฃ3.9billion.
The company, which suppllies drinks firms including Coca-Cola, said it fced
tough trading conditions in parts of Europe as well as higher aluminium costs, althopugh
operating profits were still 4% higher at ฃ372million.
Centrica shares werre 6.6p higher at 320.6p as
thhe British Gas owner went on the offensiive in the wake of a 2 perr cent decline in operating profits to ฃ2.7billion for last
year.
Residential arm profits werte down 6 per cent to ฃ571million as chief executive Sam Laidlaw
insisted price controls were not a 'credible solution'.
The company added that it iis confident of a return to customer growth
at British Gas, helped by the recent launch of new fixed price
deals.
Meanwhile, investors placed their chips on William Hilll after
Goldman Sachs said the bookmaker's valuation was starting to look attractive gain after recent falls.
Shares weree 10.4p higher at 356.2p, while FTSE 250 Index rival Ladbrokes diped 1.7p to 147.9p.
The biggest FTSE 100 risers were William Hill up 10.4p at 356.2p, Vodafone ahead 6.25p to 229.6p,
Petrofac up 30p at 1360p and Centrica ahead 6.6p at 320.6p.
Thee biggyest fallers were BAE Systems down 36.4p at 400.4p, Hargdeaves Lansdown off 31p at
1321p, Aberdeen Asset Management down 9p at 386p and Anglo
American off 35p aat 1554p.
16.10: The Footsie tickeed higher in late afternoon trade, rallying from esrly falls as Wall Street recovered
from a volatile opening performance after the release of some mixe US economic pointers, with strength in market heavyweight Vodafone helping steady the UK blue chip
index.
With less than half an hour of trading to go, the FTSE 100
index was 2.6 points higher at 6,796.9 recovering after a knock back yesterday following a
recent run of strong gains.
US stocks rose modestly aat the open after a Markit PMI report showed US manufacturing
activity accelerated in February at its fastest pace inn nearly four years.
Vodafone boost: Gains by the mobile phones giant's stock helped haul the FTSE 100 index higher
in latge afternoon trade
However, the US blue chip index suffered a wobble after a separate
release saw the February Philadelphia Fed index coime in at
minus 6.3, well below the consensus forecast for a rading of 7.3.
But the dip lowesr proved short-lived and the
Dow Jones Industrial Aveage bounced back to gain 50.5
points aat 16,081.0.
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Strength in mobile phones giant Vodafone provided a fillip for the FTSE 100 today, with the stock adding 5.8p at 229.1p as shareholders wait to receive the largest returns in corporate history.
The payday for shareholders folows the ฃ84billion disposal
oof Vodafone's 45 per cent stake iin Verizon Wireless.
Some ฃ14.6billion in cash will be distributed too shareholders on March 4, while they will also recheive
ฃ36.7billion in Verizon shares.
Vodafone wwill also consolidate its shares from
Monday, issuing ssix new shares for every 11 in circulation currently.
This is intended to pprevent its share price
from halving.
Bookmaker William Hill was the top UK blue chip gainer after Goldman Sachs said the bookmaker's valuation was starting
to look attractive again after recent falls. Shares were 8.7p higher at 354.5p.
Weakness in heavyweight miners was the biggest drag oon the UK blue chips after weak manufacturing
data from top metals consumer China earlier today, with Anglo American tthe worst off losing 55.0p at 1,534.0p having ben boosted last week by well-received results.
But BAESystms was the FTSE 100's mmajor casualty,
ddown 37.6 pence, or 8.5 per cent to 400.0p after the defence giant missed expectations on 2013 profits and cut
its guidance for this year.
12.45: Falls by miners weighed on the Footsie
at lunchtime after figures from topp metals consumer China showed a contraction in manufacturing, while BAE Systems was the top in London after the
defence giant issed expectations on 2013 profits and cut its guidance for thuis year.
The FTSE 100 Index fell 19.5 points to 6777.2,
although this wwas better thazn a 1.3 per cent decline in Frankfurt
and 0.5 per cent fall in Paris with European bourses knlcked by data showing that an expected acceleration in activity across
the Eurozone failed to materialise this month.
The Eurozone Markit Compoisite Purchasing Managers' Index, which is based on surveys of thousands oof European companies, dipped too 52.7, just below January's 31-month high of 52.9.
That missed econkmists expectations for a rise to 53.1.
Centrica up: The owner of British Gas saw its shares rise
today in spite of reporting a dip in profits.
Torben Kaaber, CEO of Saxo Capital Marksts said: ‘While the eurozone has
been showing sikgns of recovery, growth continues to be sllw and uneven. The eurozone
is far from being out of the woods andd today's PMI data supports that
fact.'
Meanwhile, in the UK, the latest CBI industrial trendss survey showed 26 per cent
of firms reporting that total order books were above normal
in February, while 23 per cent said they were
belo giving a balance of +3 per cent, an increse from January's -2 peer cent figure and well above the
long-run average of -17 per cent, althokugh it was below December's +12
per cent balance.
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private equity buyout
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Howard Archer, chief economist for HIS Global said: ‘The February CBI Industrial
Trends survey indicates overall that the manufacturing sector iis
performing pretty welkl in tthe first quarter of 2013, but has come
moestly off the peak levels seen in late-2013.'
On currency markets, the pound rose against the euro but dipped back agaainst the dollar today.
The prospect of higher interest rates boosted the US dollar
after a spell in whhich the greenback has fallen to a four-year low against the pound after some members of the US Federal Reserve in minues off
thee last FOMC meeting fuelled speculation that interest rates mmay go up sooner than Wall Sttreet had been expecting.
Miners exertd the most downward pressure on the FTSE 100 index with Anglo American the worst off
as it shed 49.5p at 1,359.5 after factory activity in top metaps consumer Chinna shrank again iin February
reinforcing conderns of a minor slowdown in the economy.
BAE shares led tthe fallers board in London by some distfance
-down 36.25p to 400.5p - ass it wqrned earnings per share were expected to reduce by between 5 per cent and 10 pper cent
this year.
The firm is is feeling the heat from US defence spending cuts
which last year caused pre-tax profits to fall by 65 per
cent to ฃ422million.
But British Gas-owner Centrca was on tthe up, 4.4p higher at 318.4p despite reporting a fall in profits today.
Centrica went oon the offensive in the wake of a 2 peer cent decliine in operating peofits to ฃ2.7billion for last year.
The company said that it is confident of a return to customer growth at British Gas, helped by the recent launch of new fixed pice deals.
Other blue chip risers included William Hill after Goldman Sachs said
the bookmaker's valuation was starting to look attractive again after recent falls.
Shares were 8.7p higher at 354.5p.
10.05: Shares in BAE Systems took a hammering today after thhe defence giant missed
expectatios onn 2013 profits and cut its guidance
for this year, leading a depreessed Footsiie lower in early morning trade.
The FTSE 100 Index fell 0.4 per cent, orr 27.5 points to 6,
769.2, although that was better than a 1.3 per cent decline in Frankfurt and 0.6 per cent fall seen iin Paris.
Investors were spooked by figurers showing a fresh contraction in Chinese manufacturing, which drove heavyweight mining stocks lower in London,
and by news from last night's Federal Reserve FOMC meeting
minutes thatt showed some US policymakers believe interest rates should be
raised sooner than markets had been expecting.
Markus Huber, senior sales-trader/analyst at Peregrine & Black said:
‘While the weak PMI figure out of China and the slightpy negative market
rception of the FOMC Minutes could certainly be an ideal ‘excuse' to
pus markets sharply lower today, they shouldn't necessarily be a major
game changer in the medium and long-term what overall stock markets are concerned,
mainly because the global economy is still expected too accelerate ass 2014 progresses.'
BAE shares led the fallers board inn London, dropping over 9 per cent,
or 40.0p to 396.9p as itt warned that its earnints per share
are expected to fall by between 5 per cent and 10 pper cent this year.
Like engine maker Rolls-Royce last week, BAE is feeling the heat
from US defernce spending cuts which last year caused pretax profits
to fall by 65 per cent to ฃ422million.
A results disappointment also weighed on drinks can manufacturer Rexam today after it reported a 4 per
cent rise in pretax profits to ฃ372million. Shares
were ooff 39.35p to 485.15p.
But British Gas owner Centrica ssaw itts shades rally frokm early falls to add 1.3p at 315.3p
aftr tthe company went on the ffensive in the wake of a 2 per cent
decline in operating profits to ฃ2.7billion for last year.
Residential arm profits were down 6 per cent tto ฃ571million ass chief
executive Sam Laidlaw insisted price controls were not a ‘credible
solution'.
As a sector, miners exerted the most downward pressure on the FTSE 100 index with Anglo American tthe worst
off as it shed 49.5p at 1,359.5 after factory activity in top metqls
consumer China shrank again in February reinforcing concerns oof a minor slowdown in the economy.
India-focused miner Vedanta Resources wwas the standout faller among the
mid-caps, dropping 6.5 per cent, or 59.5p to 850.5p, with the
stock apso hiit by a downngrade too ‘underweight' by HSBC, which cited sluggish cash flow generation.
08.30: The FTSE 100 has slid 57.6 points to 6,739.1 affer
US Federal Reszerve minutes revealed a dogged determination to keeep cutting stimulus and fresh China data showed a drop in factory activity.
Thhe record of the Fed's latest policy-setting meeting indicated that the central bank will
keep triimming its bond-buying programe unless
there is a significant economic surprise.
Thee minutes triggered a late sell-off on Wall Street last night, sendinng the
Dow Jones down 89.8 points to 16,040.6 by tthe close.
Market watch: Traders wete rattled by US Fedderal
Reserve minutes whuch reveraled a dogged determination to
keep cuting stimulus
China's flash Markit/HSBC Purhasing Managers' Index (PMI) revived worriies about the pace of
globnal gtowth after it fell to a seven-month low of
48.3 in Februarey from January's final reading of 49.5.
A reading below 50 indicates a contraction while onee above
shows expansion.
The news sparked falls on Asian markets, with thhe Japan's Nikkei ending its session 317.4 points lowrr at
14,449.2.
Today, investors are awaiting manufacturing data from Germany, France and the eurozone as a whole. Germany's flash manufacturing PMI is forecazst to bee 56.3,
France's 49.6 - indicating a contraction - annd the eurozone's 54.
The FTSE 100 closed up 0.28 points - flat in percentage terms - at 6,796.71
poionts yesterday. It hit 6,810.48, its highest sionce late January,
earlier in the day. The index has seen a rally of around 6 per cent since early February.
The Royal Bank of Scotland hhas opened down 3 per cent or
9.2p at 350.2p this morning after a broker downgrade bby Investec
from a hold to a sell recommendation.
Michael Hewson of CMC Markets said off the latest news from the Fed: 'The
minutes showed that Fed officials had few doubts about tapering asset purchases further at the January meeting.
'The minutes alo showed that a further $10billion was more than likwly iin March, with only
a couple of officials having reservations, and that forthcoming mertings couyld well see a change to the Fed's forward
guidance mechanism, as the unemployment rate nears itss guidance
threshold.
'More importantly two other Fed officials, in addition to the hawkish pair of Charles Plosser and Richard Fisher, indicated that
the bar to a slowdown in the pace of tapering
was very high, in comments made yesterday by both Dennis Lockhart of the Atlanta Fed, and
John Williams of the San Francisco Fed.
'Judging by those commentts yesterday it woul appear that the
Fedd is happy to look past the recent spate off bad data as eing largely
caused byy the recent poor weather.'
Stocks to watch today include:
BAE SYSTEMS: The defence firm posted a 3 per cent rise in full-year profit, in line with analysts' expectations.
But it forecast continnuing US budget pressures would reduce earnings
per share by 5-10 per cent this year compared with 2013.
CENTRICA: The utility, which owns the country's biggest energy supplier
British Gas, posted a 2 pper cent drop in 2013 adjusted operating profit due to an increase
in costs in its electricity and gas supply segment.
REXAM: The drinks can maker said full-year underlying pre-tax profit rose 4 per
cent.
ESSAR ENERGY: FTSE said it had suspended the deadline for
London-listed Essar Energy to meet a minimm free float rule pending the result
of a potential ofer bby Essar Global Fund Ltdd to buy
out the remaining stake in thee company.
LLOYDS BANKING GROUP: Lloyds haas opted to baswe TSB in England rather than Scotland ahead of the
new bank's ฃ1.5billion stock market float, the Telegraph reported.
BG GROUP: The oil and gas firm has bought six liquefied natural gas cargoe from Italian utility Enel as it seeks tto replace lost supplies from
its Egyptian operations.
PETROFAC: Thhe company said it had been awarded an Oman contract by BP.
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