LONDON (Alliance News) - UK shares have opened lower Wednesday despite positive leads from the US and Asia, as the announcement of fines for foreign exchange market manipulation hit sentiment toward banks, while leading supermarket Sainsbury's reported a swing to an interim loss.
Sainsbury shares are up 0.2% at the open despite its announcement, in which it also declared a maintained interim dividend.
Meanwhile, shares in security company G4S are up 1.1% after it said organic revenue rose 4.2% in the first nine months of the year.
Here is what you need to know at the UK market open:
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MARKETS
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FTSE 100: down 0.2% at 6,613.45
FTSE 250: down 0.1% at 15,608.31
AIM ALL-SHARE: down 0.1% at 720.63
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Hang Seng: closed up 0.6% at 23,938.18
Nikkei 225: closed up 0.4% at 17,197.05
DJIA: closed marginally higher at 17,614.90
S&P 500: closed up 0.1% at 2,039.68
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GBP-USD: up at USD1.5939
EUR-USD: up at USD1.2482
GOLD: up at USD1,165.32 per ounce
OIL (Brent): down at USD81.08 a barrel
(changes since end of previous GMT day)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
(all times in GMT)
09:30 UK ILO Unemployment Rate and Average Earnings
10:00 UK CB Leading Economic Index
10:00 EU Industrial Production
10:30 UK Bank of England Quarterly Inflation Report
12:00 US MBA Mortgage Applications
15:00 US Wholesale Inventories
17:00 US Fed Minneapolis's Narayana Kocherlakota speech
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Japanese Prime Minister Shinzo Abe is considering postponing a tax hike and dissolving the powerful lower house for a snap election in December, reports said. "The prime minister is considering various options, and one of them is a House of Representatives election by the end of the year," the Kyodo News agency reported, citing an unnamed government source.
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US President Barack Obama and Chinese President Xi Jinping announced new climate change targets at the end of their two-day talks in Beijing. Xi said China's CO2 emissions would peak around 2030, with non-fossil fuel sources making up 20% of energy sources by then. He did not put a target on emissions levels or reduction, but it was the first time China, which relies heavily on coal-powered electricity generation, has put a date on a CO2 peak. Obama announced a target for the US to cut its net greenhouse gas emissions to 26-28% below 2005 levels by 2025, compared with the previous target of a 17% cut by 2020.
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The United Nations envoy for Syria on Tuesday said that a proposal to "freeze" fighting in the key northern city of Aleppo could provide a model for progress in the war-torn country. The UN proposal was "a new way for approaching the de-escalation of violence in particular in one place to start with - Aleppo," Staffan de Mistura told journalists before leaving the Syrian capital, Damascus.
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BROKER RATING CHANGES
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UBS ADDS SCHRODERS TO 'MOST PREFERRED LIST' (DIVERSIFIED FINANCIAL)
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BARCLAYS CUTS ABERDEEN ASSET MANAGEMENT TO 'EQUAL WEIGHT' ('OVERWEIGHT') - TARGET 460 (500) P.
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UBS CUTS ABERDEEN ASSET MANAGEMENT TO 'NEUTRAL' ('BUY') - TARGET 450 (465) PENCE
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BARCLAYS CUTS ASHMORE TO 'UNDERWEIGHT' ('EQUAL WEIGHT') - TARGET 280 (300) PENCE
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BARCLAYS RAISES HENDERSON TO 'OVERWEIGHT' ('UNDERW.') - TARGET 250 (195) PENCE
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TRADERS: JPMORGAN INITIATES SENIOR PLC WITH 'OVERWEIGHT'
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COMPANIES - FTSE 100
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Regulators in the US, UK and Switzerland hit five banks, including HSBC Holdings and Royal Bank of Scotland, with more than USD3.2 billion in fines over foreign exchange failings and attempted manipulation of foreign exchange benchmark rates. The UK's Financial Conduct Authority imposed fines amounting to USD1.7 billion on the five banks, saying the banks failed to control business practices in their G10 spot foreign exchange trading operations, while the US Commodity Futures Trading Commission ordered the banks to pay more than USD1.4 billion in penalties. In Switzerland, regulator FINMA ordered UBS to disgorge a total of USD138 million. Barclays, which last month set aside GBP500 million in provisions in light of regulators' investigations into alleged foreign exchange manipulation, is yet to be fined. In a statement that could prove to be ominous, the FCA said it will continue to investigate.
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J Sainsbury said it will cut costs and capital expenditure so that it can invest more in pricing, as it swung to a pretax loss in the first half of the year and revealed the extent of its struggles with the price war engulfing the UK supermarket sector. Sainsbury's, the UK's third-largest supermarket chain by market share, reported a pretax loss of GBP290 million for the 28 weeks to September 27, compared with a pretax profit of GBP433 million in the same period the prior year. It also warned it expects profitability to be lower in the second half than the first half, and expects like-for-like sales to be negative for the next few year. The grocer maintained its interim dividend at 5.0 pence per share, the same as last year, and said it will fix its dividend cover at 2.0 times its underlying earnings for 2014/15 and the next three years.
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Security company G4S said organic revenue was up 4.2% in the first nine months of the year, and underlying profits up by even more, driven by its corporate revamp, strong sales growth in emerging markets and a return to strong growth in North America. The company also said it had agreed to sell its US government business for USD135 million in the third quarter, comprising USD80 million of cash and USD55 million of retained receivables. It expects to complete the sale by the end of the year.
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Outsourcing giant Capita said it is on track to meet market expectations for its 2014 results, after it won major deals like handling congestion charging in London and being made preferred bidder on a potential deal to handle The Co-operative Bank's mortgage servicing operation. It separately said that Finance Director Gordon Hurst will retire at the end of next February after 27 years with the company. Nick Greatorex, currently the executive director of Capita's insurance & benefits services division, will succeed Hurst as Finance Director from March 1.
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SSE said it has increased its interim dividend despite pretax profit falling during the first half of the year due to warmer weather, lower electricity output and weak gas prices. For the six months ended September 30, the company's pretax profit fell 6.2% to GBP316.6 million compared to GBP337.4 million a year earlier, mainly driven by a GBP22.1 million loss from its share of joint ventures and associate tax, compared to a GBP40.3 million profit in the first half of 2013 and warmer weather. SSE increased its interim dividend by 2.3% to 26.6 pence per share, compared to the 26.0 pence per share dividend paid in the previous year. SSE plans to deliver annual dividend increases at least in line with inflation over the coming years, it said in its statement.
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British luxury fashion retailer Burberry Group reported a drop in its pretax profit in the first half, after taking a big currency hit from the strength of sterling, and it again warned of pressure to its margins for the full year. On a reported basis, Burberry posted a pretax profit of GBP142 million for the six months to September 30, down from GBP159 million the prior year, after taking a GBP31 million hit from the strong pound. On an adjusted basis, its pretax profit was up 6% on an underlying basis, and down 12% at reported rates. Burberry upped its interim dividend by 10% to 9.7 pence per share, which it said reflects its intention to "move progressively to a 50% dividend payout ratio".
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AstraZeneca and Amgen said psoriasis treatment Brodalumab met all the primary endpoints and key secondary endpoints in a phase III study into its use in patients with moderate-to-sever plaque psoriasis. The trial evaluating two doses of brodalumab in more than 1,800 patients with moderate-to-severe plaque psoriasis, comparing it with both Stelara and placebo at week 12.
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Rolls-Royce Holdings said it has been awarded a contract worth more than USD100 million to supply spare engines and parts to the US Air Force for its C-130J fleet and to support Foreign Military Sales customers. Rolls-Royce AE 2100 engines power all C-130J aircraft in the US military and global fleets, while legacy C-130 aircraft are powered by Rolls-Royce T56 engines.
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Mining giant BHP Billiton announced Tuesday it has scrapped plans to sell its Western Australian Nickel West business following a review of the business. The company said it will only pursue options that maximize value for shareholders. "The focus of Nickel West will remain on delivering safe and efficient production whilst pursuing every opportunity to maximise productivity, to reduce operating costs and increase free cash flow," BHP's Nickel West Asset President Paul Harvey said in a statement. The company had announced the review of the business in mid-May. The review considered all options for the long-term future of Nickel West, including the potential sale of all or parts of the business.
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Tullow Oil said it must focus its capital expenditure on more commercially viable prospects in Africa such as its TEN development project, and away from exploration, due to weak oil prices and an under-par performance from its European projects. Tullow expects its pretax operating cash flow before working capital for the full year to reach around USD1.70 billion. Capital expenditure is expected to reach approximately USD2.10 billion by the end of the year, in line with expectations, said Tullow. Capital expenditure for 2015 has not been finalised, but the company is expecting it to be in the region of USD2.0 billion, with USD900 million of it being spent on its TEN development project in West Africa.
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InterContinental Hotels Group PLC late Tuesday again rejected calls by Marcato Capital Management LP, the San Francisco-based investment manager, to "explore the idea of a larger hotel group". Earlier Tuesday, Marcato Capital, which owns around 4% of IHG's shares, released a letter to IHG's shareholders outlining the results of an independent evaluation of "various potential strategic alternatives" conducted by Houlihan Lokey, Inc, which it said would create "significant, long-term shareholder value".
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COMPANIES - FTSE 250
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SEGRO said it has agreed a deal to sell a portfolio of six logistics properties and a smaller regional warehouse in the UK to Logicor. Logicor, the European logistics arm of US private equity group Blackstone Group LP, will pay GBP153.3 million for the portfolio, which includes logistics warehouses in Bardon, Bicester, Maidstone, Sheffield and Swindon and a smaller warehouse in Norfolk.
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Barratt Developments said it was on track to deliver a strong year of growth with market conditions remaining robust for the group across the country and its sales rate increasing in the period between the start of July and November 9. The FTSE 250-listed housebuilder said market conditions in the UK remain robust at present, with high customer interest levels and demand in all regions. The group said the more stable market gives it confidence in meeting its medium-term targets.
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EnQuest saw its shares rise early Wednesday after it reported a 19.2% increase in production for the first 10 months of the year, helped by acquisitions in Malaysia and Tunisia, and reiterated its guidance for the whole of 2014. The oil and gas producer said production in the 10 months to October 31 was 27,567 barrels of oil equivalent a day, buoyed by 2,688 barrels from its newly acquired assets in Malaysia and Tunisia, its first assets outside the North Sea. The company reiterated its 2014 production guidance of between 25,000 and 30,000 barrels of oil equivalent a day.
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WH Smith said its total group sales for the ten weeks to November 8 were flat year-on-year, with sales in its Travel business rising but High Street sales falling. On a like-for-like basis, sales in the ten-week period fell 1%, the FTSE 250 retailer said. Total Travel division sales increased 7% and were up 2% on a like-for-like basis. The gross margin in the business has increased in line with its expectations, WH Smith said, and it said it is making progress on new store openings in the UK and internationally.
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Essentra said it will buy the specialist packing arm of Clondalkin Group in a USD455 million deal and said it will issue shares to cover part of the consideration due. Essentra will place up to 9.99% of its existing ordinary share capital to cover part of the consideration on the deal. Under the programme, it will issue up to 23.7 million shares via an accelerated bookbuilding process. The placing is set to raise a total of GBP160 million, meaning the shares will be placed at around 675 pence per share.
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Diploma said Chairman John Rennocks is to step down from his role after Diploma's annual general meeting in January. The company said it will appoint John Nicholas, currently a senior independent director on Diploma's board, as its new chairman following Rennock's departure after the AGM on January 21, 2015.
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COMPANIES - INTERNATIONAL
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Spanish telecom group Telefónica said third-quarter net income dropped to EUR947 million from last year's EUR1.09 billion. Revenue declined to EUR13.02 billion from last year's EUR14.06 billion. Organic revenue grew 2.8% from last year. Telefónica reiterated all its operational targets set for 2014, such as the dividend promised in its shareholder remuneration policy.
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Chinese e-commerce giant Alibaba Group Holding, which completed an historic multi-billion-dollar US initial public offering in September, announced that its annual 11.11 shopping festival shattered all previous records to generate gross merchandise volume of RMB 57.1 billion or USD9.3 billion. The total amount was settled through Alipay on Alibaba's China and international retail marketplaces in Alibaba's annual shopping event known as 'Singles' Day' on November 11. Alibaba noted that mobile GMV settled through Alipay accounted for 42.6% of total GMV or RMB 24.3 billion or USD4.0 billion.
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US retail giant Wal-Mart Stores announced the "New Black Friday," with days of deep discounts on the hottest gifts kicking off online Thanksgiving morning and leading into the store's first event at 6 pm. The retailer's "New Black Friday" playbook for 2014 includes five days of deals with tailored events, the return of its industry exclusive 1-Hour Guarantee, its first-ever interactive circular and store-specific plans to help manage crowds and make the shopping experience easier.
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Yahoo on Tuesday said it has agreed to buy video-advertising service BrightRoll Inc. for about USD640 million in cash, as the tech giant continues in its efforts to improve its service offerings. The acquisition will accelerate Yahoo's strategy, which is focused on search, communications, and digital content through growth in mobile, social, native, and video advertising, the company said in a statement. BrightRoll is expected to report revenues of more than USD100 million this year.
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Wednesday's Scheduled AGMs/EGMs
Picton Property Income
Barratt Developments
Macau Property Opportunities Fund
Hays
Henderson Eurotrust
Johnston Press
Avingtrans
Digital Globe Services
Target Healthcare REIT
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By Tom Waite; thomaslwaite@alliancenews.com; @thomaslwaite
Copyright 2014 Alliance News Limited. All Rights Reserved.
13 Nov 2013 09:46
