Wednesday, 22 February: FTSE indices were unanimously higher at the open, along with major European indices as the Nikkei 225 shed -1.57% overnight. The FTSE 100 was set to close +0.38%, as the FTSE 250(-0.50%) was the only index in London in the red. The Primary index was lifted by Unilever and a flurry of banking and consumer stocks, as the secondary index came under pressure from Serco(-18.85%), and a clutch of mining and oil services stocks.
Unilever(+5.25%) traded higher after announcing a review after rejecting a Kraft Heinz takeover bid at the weekend. The strategic review will tackle how to accelerate the delivery of value to shareholders. Lloyds Banking Group(+3.64%) was also firmly in the green as it issued a full year net profit which has quadrupled to £2bn, on the back of successful cost take-out initiatives and no repeat of customer provisions for customer compensation. The bank, which is two years into a three year turnaround plan, announced it will also pay an ordinary dividend of 2.55p per share, a 13% increase on the prior year.
Serco plunged after announcing it met guidance for underlying trading profit in 2016, and maintained its view on the year ahead. The support services business which runs prison and rail services among others on behalf of public sector clients said it made an underlying trading profit of £82.1m in 2016, a fall from £95.9m in the prior year but in line with guidance. Serco has been booking one-off charges for onerous contracts and other restructuring charges in the business. It seems the results came in weaker than expected, and a possible Brexit-induced slowdown in public sector contract awards has scared investors who aren’t willing to wait for the turnaround story to play out.
The UK economy was recorded as growing at a faster rate than previously estimated in the final quarter of 2016, as resilient consumer spending and buoyant exports offset a fall in business investment. Post-Brexit, economic growth relied on continued domestic demand, which many economist believe will slow as inflation accelerates. Fourth quarter GDP was revised upwards to 0.7%(+0.6%) on a quarter-on-quarter basis, whilst the 2016 figure was revised 0.2% lower for an annual read of 2.0%.
On the continent, new hit the wires that for the first time in almost four years, none of the eurozone’s 19 members were in deflation in January. The EU’s statistics agency confirmed an earlier estimate that showed consumer prices in the currency area were 1.8% higher than a year earlier, a jump from the 1.1% inflation rate recorded in December 2016 and closing in on the ECB’s target of close to, but below 2%.