Thursday, 25 February: Strong equity news on Thursday lead to the FTSE 100 opening with more than 1% gains. Firstly to Lloyds Bank, where despite having to allocate a further £2.1bn to cover PPI mis-selling (for the last 3 months of 2015 – a total of £4bn had been set aside to compensate those customers who had been mis-sold PPI), the bank is making a £2bn dividend payout. £1.6bn of his will be a full-year dividend of 2.25p per share, an increase from 0.75p per share, but a “special dividend” has been unveiled, amounting to £400m as well. Lloyds has faced the largest amount of PPI compensation claims, and with these new provisions, the bank will have set aside a total of £16bn in compensation payments. The bank lead the FTSE during trading, moving higher than 13% during intra-day trading, ending the day +12.5%. RSA Insurance Group also drove the blue-chip index forward with double digit gains on the back of solid full year results. The general insurance company reported a 43% increase in operating profit whilst committing to pay a final dividend of 7p, taking its total payout to 10.5p, a 425% increase. The insurer ended the day +9.8%.
In China, the Shanghai Composite share index closed 6.4% lower, a 3-week low. The Shenzhen composite dropped 7.3%. The People’s Bank of China continues to set the yuan mid-point lower, and noticeably did so at a lower rate at 6.5273 to the dollar on Tuesday. There was no major news to justify the drop, with analysts suggesting the sharp fall is partly down to investors taking profits. In Hong Kong the Hang Seng closed -1.6%, whilst in Japan, the Nikkei 225 closed +1.4% with the Japanese yen weakening slightly against the US dollar to ¥112.5.
In UK data, Q4 GDP remains at an unrevised +0.5% for the final 3 months of 2015, as expected. The estimate of growth over the whole of 2015 has been left unchanged at 2.2% – the slowest pace of economic growth since 2012.
Merlin Entertainments, the parent company of Alton Towers, are to be prosecuted in relation to the “Smiler” crash that left five people seriously injured. Two women who were on the front row of the ride have since had leg amputations, while 16 people in total had some form of injury following the crash. Merlin Entertainments accepted responsibility for what happened, saying human error was the cause of the crash, and have continued to support those that were involved in the crash. Despite the Alton Towers tragedy, the amusement operator posted a strong set of final results as revenue grew notably higher, and net profit increased 4.9% to £170m provoking a 4.8% increase in the dividend – the shares were 4.3% up at the close.