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FTSE100 closes up as Yellen signals rate rise caution

UK shares finished higher on Wednesday as European indices also rose and as Fed chair Janet Yellen outlined the Central Bank's take on the global economy. .

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Janet Yellen spoke at Congress today...

UK shares finished higher on Wednesday as European indices also rose and as Fed chair Janet Yellen outlined the Central Bank's take on the global economy.

FTSE100 closed the afternoon session 40 points higher at 5,672.

Yellen made her testimony before US Congress and made the point that US rate rise decisions would be linked to conditions globally and recent volatility had meant rates may stay lower...for longer.

Such words are closely listened to in the US and globally at a time when the US rate decisions set a precedent for other Central Bank decisions.

As the economy grows along with  the Labour market and inflation, the  US central bank has looked to tighten policy and the first rate rise was last year.

But Yellen said today: “Foreign economic developments, in particular, pose risks to US economic growth."

Referring to the slump in oil and commodities, she said this could spark financial stress in commodity-exporting economies, particularly in emerging markets, but conversely, could help economic growth as customers benefit from cheap energy.

The big loser on the day was chip designer and Apple supplier ARM Holdings (LON:ARM), which sank 4.26% to 900p  after it said explosive growth in demand for smartphones was tailing off.

On the winning front, the top spot belonged to WorldPay Group (LON:WPG), which added 5.8% to stand at 279.10p after three brokers rated shares a 'buy'.

Banks also appeared to put earlier fears over balance sheet strength behind them.

Lloyds Banking Group (LON:LLOY) put on 0.46% to 58.4p, HSBC (LON:HSBA) advanced 2.06% to 441.4p , Royal Bank of Scotland (LON:RBS) gained 3.28% to 233p and Barclays (LON:BARC) puffed out 1.76% to 159p.

In Germany, the DAX rose 161 to 9,040 as investors were reassured about Deutsche Bank's finances after a  troubled week.

UK industrial production dropped 1.1% month-to-month in December, well short of the consensus of a drop of 0.1% fuelling fears over how  "service- sector -weighted" the UK really is.

The biggest share gainer in London was junior 88 Energy (LON:88E) as it posted better-than-expected permeability test results, crossing off two of three potential ‘Achilles heels’ of its new shale play in Alaska.

Tangent Communications (LON:TNG) also raced up ober 63% after some members of the digital marketing firm's management made a £6.7mln bid for the company.

Shares in studio Pinewood (LON:PWS), an icon within British cinema, also shot up almost 18% after it said it could sell itself as part of a review of strategic options to boost growth.

But Hornby (LON:HRN) tanked 61% to 31p after the model railway maker warned that losses would hit £6mln following weak New Year sales.

Electronic invoicing company Tungsten (LON:TUNG) added 5% to 63p as it said trading in its fiscal third quarter was in line with market expectations.

Ahead of a presentation to investment analysts the company revealed that revenues for the full year are expected to be roughly in line with previous guidance.

The company continues to expect the loss before interest, tax, depreciation and amortisation for the full year will be no more than £15mln, or £19mln including one-off items.

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MID-SESSION

Banks boosted the Footsie on Wednesday but the index stayed in the shadow of its continental cousins after news of weak industrial output and oil losses.

The FTSE 100 Index climbed 60 points to 5692 as banks regained their poise following fears about the impact on their balance sheets of global economic volatility.

Lloyds Banking Group (LON:LLOY) put on 0.6p to 58.74p, HSBC (LON:HSBA) advanced 8.25p to 440.75p, Royal Bank of Scotland (LON:RBS) gained 9p to 234.6p and Barclays (LON:BARC) rose 4.5p to 160.8p.

But Germany's DAX rallied 220 points as reports that troubled Deutsche Bank could buy back debt reassured investors unsettled by concerns about the strength of its finances. France's CAC was also more than 2% up.

Back in London, figures showed UK industrial production dropping 1.1% month-to-month in December, well short of the consensus of -0.1%.

The decline in production in December left it 0.5% lower quarter-on-quarter in the fourth quarter, exceeding the 0.2% drop that underpinned the preliminary GDP estimate.

Connor Campbell at spread-betting firm Spreadex said the data continued to stoke fears about "just how services-weighted the country’s growth is."

Oil prices also lost some of their earlier gains as Africa-focused Tullow Oil (LON:TLW) announced revenues were some 27% lower in 2015, and losses for the year amounted to $1bn.

In the markets, shares in Tangent Communications (LON:TNG) soared 0.88p, or 63.6%, to 2.25p after some members of the digital marketing firm's management made a £6.7mln bid for the company.

Shares in film studio group Pinewood (LON:PWS) also shot up 90.5p, or 20%, to 540p after it said it could sell itself as part of a review of strategic options to boost growth.

But Hornby (LON:HRN) lost steam by 43p to 38p - more than half its value - after the model railway maker warned that losses would hit £6mln following weak New Year sales.

Magnolia Petroleum (LON:MAGP) spurted 0.02p, or 10.8%, to 0.2p after the US onshore oil & gas group added eight new wells to its portfolio in its latest quarter, taking the total in production where it has a stake to 210.

Investors powered up stakes in 88 Energy (LON:88E) as it told them that, with better-than-expected permeability test results, it has now crossed off two of three potential ‘Achilles heels’ of its new shale play in Alaska. Shares nearly tripled in value, up 0.62p at 0.96p.

Shares in Animalcare (LON:ANCR) were 4.5p less fluffy at 204p on news that the vet services group faced growing competition in the pet microchip market, although half-year sales rose.

LONDON OPEN

London shares bounced back from Tuesday's losses despite enduring economic worries and dismal UK industrial production data.

The FTSE 100 Index ticked up 62.77 points to 5694 in early trading, shrugging off fears about the potential impact of global economic volatility on banks that dragged it down in the previous session.

Markets also appeared to brush off bad news about UK industrial production, which dropped 1.1% month-to-month in December, well short of the consensus of -0.1%.

The decline in production in December left it 0.5% lower quarter-on-quarter in the fourth quarter, exceeding the 0.2% drop that underpinned the preliminary GDP estimate.

Samuel Tombs at Pantheon Macroeconomics said: "The chances that the headline GDP growth number will be revised down therefore have grown."

In the markets, shares in Tangent Communications (LON:TNG) soared 0.88p, or 63.6%, to 2.25p after some members of the digital marketing firm's management made a £6.7mln bid for the company.

Shares in film studio group Pinewood (LON:PNS) also shot up 66p, or nearly 15%, to 515.5p after it said it could sell itself as part of a review of strategic options to boost growth.

But Hornby (LON:HRN) lost steam by 38p to 43p - nearly half its value - after the model railway maker warned that losses would hit £6mln following weak New Year sales.

Magnolia Petroleum (LON:MAGP) spurted 0.02p, or 10.8%, to 0.2p after the US onshore oil & gas group added eight new wells to its portfolio in its latest quarter, taking the total in production where it has a stake to 210.

Investors powered up stakes in 88 Energy (LON:88E) as it told them that, with better-than-expected permeability test results, it has now crossed off two of three potential ‘Achilles heels’ of its new shale play in Alaska. Shares rose 58.8% to 0.54p.

MARKET PREVIEW

London was set for a nervy start after another bad night for Asian stock markets.

Financial spread bet firms see FTSE 100 opening flat at around the 5,632 mark, where it closed Tuesday, but the mood can change quickly.

This week so far London’s blue chips have shed around £50bn in value, with bank shares taking the brunt of the selling on worries of a new liquidity crunch.

Japanese markets, though, have fared much worse.

The Nikkei is now back to its levels of 2014 after days of heavy selling.

Tokyo lost 5.4% of its value on Tuesday and was heading for another heavy loss today.

Towards the end of trading, the index was off by some 2.3%.

US shares performed a little better though small gains in the afternoon session had given way to another decline by the close of trading.

The Dow Jones Industrial Average was 13 points lower to 16,014 with weak oil prices again a feature. Crude was down to around the US$28 per barrel. Nasdaq and the S&P 500 were also in the red.

Janet Yellen, the US Federal Reserve chair makes two speeches over the next two days.

UK company news sees Tullow Oil (LON:TLW), which operates in Africa and elsewhere, report and write-downs are likely to feature heavily.

Apple supplier ARM (LON:ARM) will also give a measure of how the smart phone market is holding up to the global uncertaintty currently.

BellwayElectrocomponents, Great Portland, brewer Greene King and Victrex also are due to issue updates.

 

 

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