ADVFN Morning London Market Report: Monday 15 Feb 2016

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London open: Stocks jump after China sets higher value for the yuan

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Stocks jumped out of the gate after China’s central bank set a higher daily reference value for the country’s currency and after that country’s central bank chief, Zhou Xiaochuan, talked about the need for patience in balancing reform, growth and stability, as well as China’s need to remain a responsible economic power.

The People’s Bank of China set the daily fixing for the country’s currency, the yuan, 0.3% higher at 6.5118 – its loftiest level since November.

On the back of Xiaochuan’s remarks, Deutsche Bank’s chief economist Zhiwei Zhang lowered his estimate on the odds for a large renminbi devaluation from 15% to 10%.

As of 09:04 Britain’s top flight index was 96.32 points higher at 5,803.46 but Shanghai Stock Exchange’s Composite Index closed 0.63% lower to 2,746.20.

Japan’s Nikkei-225 on the other hand rocketed 7.16% to 16,022 as weaker than expected data on gross domestic product stoked weakness in the Japanese yen, in turn buoying the country’s stockmarkets.

US equity markets were scheduled to remain closed on Monday in observance of Presidents’ Day.

Weak data out of Asia

Chinese exports and imports weakened substantially in January, with exports 11.2% weaker year-on-year in US dollar terms (consensus: -1.8%) and imports off by 18.8% (consensus: -3.6%).

However, economists cautioned the data had likely been distorted by the impact of the Lunar New Year holidays.

“It is arguably too early to jump to conclusions and we’ll have to wait until we get the February data and can iron out some of the seasonal volatility before we can get a clearer idea of how trade is performing,” Capital Economics wrote in a research note sent to clients on Monday morning.

Japanese gross domestic product shrank by 0.4% quarter-on-quarter in the last three months of 2015 (consensus: -0.2%).

All eyes will now turn to European Central Bank president Mario Draghi’s quarterly testimony before the European Parliament, at 14:00GMT.

Citing conversations with policymakers, Reuters reported on 12 February there was “firm support” within the governing council for a deposit rate cut at the ECB’s next meeting, in March.

Nonetheless, “appetite for more radical action is still limited” the newswire said.

HSBC to stay put in London

Banking giant HSBC said it had decided to retain its headquarters in the UK, adding that it was dropping its three-yearly review of where it is based. The bank said the board’s decision was unanimous and comes after HSBC had threatened to move to Hong Kong in retaliation for stricter UK regulation. In a statement, HSBC said the UK was “an important and globally connected economy. It has an internationally respected regulatory framework and legal system, and immense experience in handling complex international affairs,” HSBC said.

Reckitt Benckiser saw broad growth in the year to 31 December, despite a year of mixed market conditions, with the company reporting its full year results on Monday. The FTSE 100 consumer goods giant saw total net revenue grow 5% on a constant currency basis to £8.87bn, and like-for-like revenue grow 6%, which exceeded company targets. Reckitt’s gross margin expanded during the year by 140 basis points to 59.1%, which the company’s board said was driven by mix, commodity costs and cost optimisation initiatives.

Defence group BAE Systems has appointed Charles Woodburn to the newly-created role of chief operating officer. Woodburn will report to chief executive Ian King, and will be appointed to the BAE Systems board as an executive director in the second quarter of this year. King said: “As a highly qualified engineer with considerable international business experience, Charles will strengthen and broaden the strategic and operational capabilities of the business as a welcome and valuable addition to the leadership team.”

Fidessa confirmed its dividends as it posted flat pre-tax profit but a rise in revenue, as it continues with its investment programme. In its preliminary results for the year to the end of December, Fidessa reported flat pre-tax profit of £39.1m, although revenue rose 7% to £295.5m, beating consensus expectations of £290m.

Acacia Mining remained confident in a low gold price environment at the end of 2015, with the company reporting muted full year numbers on Monday, but an ongoing cost cutting plan to ensure sustainability. The FTSE 250 mining firm saw revenue dip 7% in the 12 months to 31 December to $868m (£597.71m), which it blamed on the 8% lower average gold price during the year.

United Arab Emirates-based healthcare provider Al Noor Hospitals’ merger with South Africa’s Mediclinic has been completed.

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