Cobham Share News (COB)

LONDON (Alliance News) - UK stocks are trading lower mid-morning Thursday, while the pound dipped following the report of a fall in UK industrial production and ahead of the much-anticipated Bank of England monetary policy decision, minutes and inflation report.

The FTSE 100 index trades down 0.5% at 6,720.76, the FTSE 250 is down 0.4% at 17,706.53, and the AIM All-Share is down 0.4% at 753.08.

In Europe, the French CAC 40 index is down 0.2% and the German DAX 30 is down 0.1%.

UK industrial production declined unexpectedly in June, while manufacturing output recovered from the prior month, data from the Office for National Statistics revealed. Industrial output dropped 0.4% in June from May, when it was up 0.3%. This was the first fall in five months. Production was forecast to rise marginally by 0.1%. On a yearly basis, industrial production growth eased to 1.5% from 1.9%, below expectations to improve to 2.2%.

Meanwhile, manufacturing output grew 0.2%, reversing a 0.6% drop in May. Economists had forecast 0.1% rise. On an annual basis, growth in manufacturing halved to 0.5% from 1.0% in May.

The pound fell against the dollar, reaching a low of USD1.5596 before rebounding to trade at USD1.5621.

Elsewhere in the UK economy, house prices dropped unexpectedly in July from June, data from Lloyds Banking Group's Halifax division revealed. House prices decreased 0.6% from June, which was the first fall in five months and confounding expectations for a 0.4% rise. Prices had increased 1.6% in June. The annual house price growth eased for three months to July, to 7.9% from 9.6% in June and was at its lowest since December 2014. Prices were expected to rise 8.3%.

Market focus is firmly fixed on the Bank of England, which at noon London time will release its monetary policy decision, minutes and inflation report on the same day for the first time, followed by a press conference by Governor Mark Carney at 1245 BST. Investors largely expect the central bank to maintain its interest rate at 0.5% and assets purchase target at GBP375 billion, but will be looking at the voting by Monetary Policy Committee members.

"Since the beginning of the year, the MPC members have unanimously voted for keeping the Bank Rate unchanged, some of them – in fact, two – are likely to have deviated from the consensus now," say analysts at Commerzbank, referring to hawks Ian McCafferty and Martin Weale.

"While McCafferty's and Weale's support for a rate hike is all well and good, it is the majority which will carry the day. And there are still some factors which might pull down the pound sterling today. Two key drags on inflation – oil prices and the appreciation of the pound – have become even more powerful since the preceding meeting," the analysts say, adding that this may cause the Bank of England to revise its inflation forecasts downwards.

On the London Stock Exchange, Inmarsat is the best performer in the FTSE 100, trading up 3.7%. The satellite communications company said its pretax profit declined in the first half of 2015 following a sluggish second quarter, which was hit by delays to the launch of its third Global Xpress satellite and to the launch of its GX global commercial service.

The company said its pretax profit was USD165.9 million in the first half, down from USD168.3 million a year before, as revenue fell to USD616.2 million from USD652.3 million. Inmarsat did sweeten the message for investors, however, with a 5% hike to its interim dividend to 19.61 US cents from 18.68 cents a year earlier.

Anglo-South African financial services company Old Mutual is up 3.4% after it reported a 19% increase in adjusted operating profit for the first half of 2015, and increased its interim dividend by 8%.

It said its adjusted operating profit amounted to GBP904 million in the six months to the end of June, a 20% increase at constant currency. Old Mutual increased its interim dividend to 2.65 pence from 2.45p. Funds under management increased to GBP335.7 billion, up 5% on a reported basis and by 7% at constant currency.

BP is amongst the worst performers in the FTSE 100, trading down 3.3% after going ex-dividend, meaning new buyers no longer qualify for the latest dividend payout. The stock also has been hit by another fall in oil price, with Brent hitting a low of USD49.33 a barrel, while US benchmark West Texas Intermediate set a new four month low of USD44.80 a barrel.

Defence manufacturer Cobham is the best performer in the FTSE 250, trading up 7.0%. It said its reported pretax profit was dragged lower by the acquisition of telecommunications equipment maker Aeroflex in the first half, though the same acquisition meant its revenue jumped higher and sent its underlying pretax profit up.

Cobham said its pretax profit for the six months to the end of June was down to GBP4.0 million from GBP54.0 million a year earlier, entirely due to a surge in administrative expenses and financing costs in the half related to the Aeroflex deal. Stripping out the effects of the Aeroflex acquisition, and other exceptional costs, pretax profit for the group rose to GBP135.0 million from GBP118.0 million.

But while the deal had a one-off impact on Cobham's profit for the half, it boosted its revenue to GBP1.05 billion from GBP834.0 million and pushed its order intake for the period up to GBP960.0 million from GBP728.0 million, a 32% rise.

The company also was boosted by Inmarsat's update, in which it said it will launch its I-5 F3 satellite at the end of August.

Pub company Enterprise Inns said its trading performance remains encouraging and said it remains on track with its substantial restructuring plan.

The FTSE 250-listed company said its like-for-like net income growth from its leased and tenanted estate in the 44 weeks to August 1 was 0.6%. It said it was particularly encouraged by the growth it saw in the third quarter to June 27, when like-for-like net income was up by 0.4% despite the tough comparative caused by the FIFA World Cup falling the year earlier. The company trades up 4.7%.

Aside from the Bank of England releases, there are US initial and continuing jobless claims at 1330 BST, and the National Institute of Economic and Social Research's UK GDP estimate at 1500 BST.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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