London close: Defensives lead gains ahead of Fed meeting
Equity markets bounced back ahead of the policy announcement due out from the US Federal Reserve later on Wednesday, as investors waited for more clarity from the central bank before making any moves.
Most analysts seemed to be on board with the notion that if the Fed was planning to raise rates in September then they would ‘tweak’ their post-meeting statement. Hence, too, a decision not to 'tweak' the statement might be expected to be positive for risk sentiment.
On the other hand, Bill Hubard, chief economist at Bankor, pointed out that “if the market saw a September rate hike as a more than 50% risk, we estimate the [US Treasury] two-year yield should be over 0.90% and not at 0.69%.” That mirrored other analysts’ views that as the market was not yet pricing in an interest hike then the US dollar might yet strengthen further should the Fed move.
Ahead of the policy announcement the FTSE 100 finished the session higher by 75.72 points to reach 6,631.00.
Making the US central bank’s task more difficult, the recent slump in commodity prices was set to weigh on consumer price inflation.
Further dollar strength and the risk of the negative impact that might have on emerging markets were also factors to take into account it was widely considered.
Global deal-making among companies or so-called M&A activity was set to beat its previous record, set in the summer of 2007, when $944.3bn of transactions were proposed, according to Bloomberg data.
Defensive stocks lead gains
Top of the leaderboard mid-afternoon were a pair of drug companies. GlaxoSmithKline's shares rallied after the big pharma company posted better-than-expected earnings and operating profits for the second quarter, and said it expected to see a significant recovery in core earnings per share next year.
Sector peer Hikma Pharmaceuticals was given a shot in the arm by an upgraded recommendation from Jefferies. The broker raised its price target to 2,615p from 2,134p as it made references to lyrics in The Police's hit song and integrated the company’s “transformational” deal with Roxane Laboratories, saying it gave the "green light" for a 'buy' rating.
Quintain Estates surged 22% after the company confirmed that it was in talks with Bidco – an investment vehicle directly controlled by Lone Star Real Estate Fund – over a takeover deal. Under the terms of the offer, Quintain shareholders will receive 131p in cash for each Quintain share, which values the entire issued, and to be issued, share capital of the company on a fully-diluted basis at around £700m.
Barclays first half results showed an 11% increase in adjusted profit before tax as it set aside a further £1.6bn provision for further litigation and mis-selling after paying £1.6bn in the period. The bank's Tier 1 capital stood at 11.1% with risk weighted assets decreasing to £57bn from £75bn.
British American Tobacco posted a rise in first-half profit, although revenue for the period was dented by currency moves. The company, which owns Dunhill and Lucky Stripe, said net profit for the year to 30 June came in at £2.65bn, up from £1.75bn and better than consensus expectations for £2.44bn. Cigarette volume was down 2.9%.
Capita posted an 11% rise in underlying first-half pre-tax profit as most of it divisions performed well, with particularly strong growth in Asset Services Solutions and a pleasing initial contribution from Capita Europe. For the six months ended 30 June, underlying pre-tax profit came in at £264.9m, up from £238m in the same period last year, on revenue of £2.28bn, up 10% from £2.07bn.
Housebuilder Taylor Wimpey said it will return £300m in dividends to shareholders, as it posted a 33.4% rise in pre-tax profit following a strong selling season in spring and early summer. For the period ended 28 June, profit before tax and exceptional items came in at £238m from £178.4m in the first half of last year, on revenue of £1.34bn, up 12.2% from £1.19bn. Analysts had been expecting the company to post a pre-tax profit of around £221m.
Market Movers
techMARK 3,176.87 +1.11%
FTSE 100 6,631.00 +1.16%
FTSE 250 17,512.81 +0.72%
FTSE 100 - Risers
Hikma Pharmaceuticals (HIK) 2,407.00p +3.71%
British American Tobacco (BATS) 3,680.50p +3.63%
GlaxoSmithKline (GSK) 1,374.50p +3.46%
Fresnillo (FRES) 646.00p +2.54%
Relx plc (REL) 1,101.00p +2.51%
Imperial Tobacco Group (IMT) 3,365.00p +2.40%
Vodafone Group (VOD) 240.95p +2.34%
ITV (ITV) 276.20p +2.22%
Experian (EXPN) 1,180.00p +2.16%
BHP Billiton (BLT) 1,168.00p +2.14%
FTSE 100 - Fallers
Compass Group (CPG) 1,028.00p -5.34%
Smiths Group (SMIN) 1,123.00p -1.49%
Capita (CPI) 1,271.00p -1.17%
Sage Group (SGE) 514.50p -1.06%
International Consolidated Airlines Group SA (CDI) (IAG) 551.00p -0.90%
Rolls-Royce Holdings (RR.) 730.50p -0.61%
Prudential (PRU) 1,501.50p -0.33%
Admiral Group (ADM) 1,491.00p -0.33%
Reckitt Benckiser Group (RB.) 6,093.00p -0.26%
London Stock Exchange Group (LSE) 2,573.00p -0.23%
FTSE 250 - Risers
Greggs (GRG) 1,285.00p +8.53%
Rathbone Brothers (RAT) 2,277.00p +7.71%
Man Group (EMG) 162.40p +7.55%
Foxtons Group (FOXT) 239.40p +7.35%
Renishaw (RSW) 2,100.00p +6.92%
Tate & Lyle (TATE) 544.50p +6.56%
Premier Oil (PMO) 135.40p +5.78%
Rightmove (RMV) 3,574.00p +5.43%
Ophir Energy (OPHR) 110.40p +5.34%
Evraz (EVR) 101.50p +4.96%
FTSE 250 - Fallers
Premier Farnell (PFL) 140.00p -15.97%
Lonmin (LMI) 55.60p -5.92%
Pets at Home Group (PETS) 274.10p -4.83%
Lancashire Holdings Limited (LRE) 644.00p -4.02%
Ladbrokes (LAD) 114.10p -2.81%
Allied Minds (ALM) 469.30p -2.76%
Redefine International (RDI) 52.10p -2.53%
Fisher (James) & Sons (FSJ) 1,125.00p -2.51%
Polymetal International (POLY) 447.90p -2.14%
Brown (N.) Group (BWNG) 321.90p -1.71%