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London Stock Exchange jumps on Deutsche Boerse talks

Shares in London Stock Exchange jump to top of FTSE 100 as it talks with German peer Deutsche Boerse over a merger.

 
London Stock Exchange jumps on Deutsche Boerse talks

Update: Shares in London Stock Exchange (LSE) have jumped on news it is resurrecting attempts to merge with German peer Deutsche Boerse (DB1Gn.DE).

LSE raced to the top of the FTSE 100, up 12.3% at £26.00, as it said it was working on an all-share merger under a new holding company that would give its shareholders a 45.6% stake and Deutsche Boerse a 54.4% holding. The two exchanges previously attempted mergers in 2000 and 2004. 

'Since becoming publicly traded companies, most major stock exchanges have been trying to grow as fast as possible through acquisitions in order to attract the most trading volume,' said Jasper Lawler, market analyst at CMC Markets.

'Exchanges are paid on transaction and listing fees and want more trading volume to attract more fees. The bigger the exchange, the more trading volume and new listings, the greater the liquidity and that attracts more volume and listings.'

The surge in LSE shares, wasn't enough to lift the FTSE 100, which fell 70 points, or 1.2% to 5,967, with Standard Chartered (STAN) and miners extending their losses.

BHP Billiton slashes dividend

(10:12) BHP Billiton (BLT) has tumbled towards the bottom of the FTSE 100, after slashing its dividend as the commodities rout takes its toll on the miner.

Shares in the miner fell 3.4% to 767.8p and dragged down rivals. Antofagasta (ANTO) fell 3% to 502p, Anglo American (AAL) was down 2.4%at 472p, Glencore (GLEN) dropped 2.1% to 129.8p and Rio Tinto (RIO) traded 1.9% lower at £20.11. That weighed on the FTSE 100, which dropped 23 points, or 0.4%, to 6,013.

BHP Billiton slashed its interim dividend by 75% to 16 cents, a much bigger cut than investors had been expecting, as it fell to its first loss in more than 16 years in the second half of 2015. The cut marks the abandonment of the miner's progressive dividend policy, but it committed to paying a minimum of half of its profits in dividends.

'The changes to the dividend policy announced today reflect the board's assessment of the outlook for commodities and increased financial flexibility this demands,' said chairman Jac Nasser. 'While the continued development of emerging economies will underpin longer-term demand growth for commodities, we now believe the period of weaker prices and higher volatility will be prolonged.'

Steve Clayton, head of equity research at Hargreaves Lansdown said the change to BHP's dividend policy confirmed what the market already knew. 'A policy of paying continuously rising dividends only works for a commodity producer when the merry-go-round is spinning nicely,' he said. 'This policy is more realistic.'

He added that the new policy was likely to lead to less predictable dividends. 'Low production costs in the iron ore business should keep underlying cash flow positive, so there may be some scope to top up the base payout, as we saw at this interim stage,' he said.

'But earnings are likely to be under pressure for some time and we would not expect a return to historic rates of dividend payments for the foreseeable future.'

Shares in Standard Chartered (STAN) were hit even harder, down 5.8% at 410.9p, as the emerging markets-focused bank announced an 84% fall in profits last year, in its worst results since 1998.

Shore Capital analyst Gary Greenwood said the results were 'even worse than we had expected'.

'As anticipated, the outlook statement remains cautious with management noting that it expects financial performance during 2016 to remain subdued as it continues to execute on its turnaround strategy,' he said.

'Accurately forecasting the numbers is therefore difficult in the near term, albeit we suspect the direction of travel is likely to be on the path of further downgrades due to top line weakness.'

Persimmon (PSN) was the biggest riser on the index, up 4.5% at £20.62 after hiking the amount it plans to return to shareholders.

The house builder had planned to return £6.20 per share between 2012 and 2021, but has now raised that to £9, with a £1.10 payment scheduled for April.

'Persimmon's enhanced capital return plan is a measure of the group's confidence in the future, and the prodigious cash flows that are being generated by the business,' said Charles Huggins, investment analyst at Hargreaves Lansdown.

The news helped drag rival house builders higher. Barratt Developments (BDEV) was up 2.1% at 571.5p and Taylor Wimpey (TW) rose 1.1% to 177p.

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